FDIC Says Mortgages Retain Risk-Weight After HAMP

Posted on November 13, 2009. Filed under: Bailout, Legislation, Loan Modification | Tags: , , |

The federal bank and thrift regulatory agencies issued a final rule that mortgage loans modified under the Home Affordable Modification Program (HAMP) retain the risk weight appropriate to the loan before modification.

Under HAMP, the US Treasury Department allocates funds to participating servicers for the modification of loans on the verge of foreclosure.

The final rule (available to download here) clarifies loans currently in the HAMP three-month trial period before reaching permanency qualify for the risk-based capital treatment.

Under the agencies’ general risk-based capital rules, loans that are fully secured by first liens and meet certain criteria are risk-weighted at 50%, referring to how much a risk a bank takes on and ultimately how much it could get back if the loan defaults.

After comments from banking organizations, the agencies modified the rule to specify that a mortgage originally risk weighted at 50% and has either entered a HAMP trial or even reached a permanent modification will keep the 50% risk weight.

And past due and nonaccrual loans that receive a 100% risk weight can return to a 50% risk weight if the borrower demonstrates he or she can make the new payments over a “sustained period of time.” However, the agencies have not established the specific time frame because of varying borrower characteristics.

via FDIC Says Mortgages Retain Risk-Weight After HAMP : HousingWire || financial news for the mortgage market.

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Massive Relief for Homeowners and Trouble for Banks

Posted on September 23, 2009. Filed under: Bailout, Banking, Case Law, Foreclosure Defense, Mortgage Audit, Mortgage Law, Predatory Lending | Tags: , , , , , , , , , , , , |

A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose — on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

Eliminating the “Straw Man” Shielding Lenders and Investors from Liability

The development of “electronic” mortgages managed by MERS went hand in hand with the “securitization” of mortgage loans — chopping them into pieces and selling them off to investors. In the heyday of mortgage securitizations, before investors got wise to their risks, lenders would slice up loans, bundle them into “financial products” called “collateralized debt obligations” (CDOs), ostensibly insure them against default by wrapping them in derivatives called “credit default swaps,” and sell them to pension funds, municipal funds, foreign investment funds, and so forth. There were many secured parties, and the pieces kept changing hands; but MERS supposedly kept track of all these changes electronically. MERS would register and record mortgage loans in its name, and it would bring foreclosure actions in its name. MERS not only facilitated the rapid turnover of mortgages and mortgage-backed securities, but it has served as a sort of “corporate shield” that protects investors from claims by borrowers concerning predatory lending practices. California attorney Timothy McCandless describes the problem like this:

via Ellen Brown: Landmark Decision Promises Massive Relief for Homeowners and Trouble for Banks.

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Obama’s Campaign Against Mortgage Modifications

Posted on April 13, 2009. Filed under: Bailout, Banking, Foreclosure Defense, Loan Modification, Mortgage Audit, Mortgage Law, Politics | Tags: , , , , , , , , , |

President Obama has apparently embarked upon a campaign to put all private sector loan modification firms out of business because some are apparently scams. It’s a curious approach when you consider that there have been and continue to be countless stock market related scams in this country, but I can’t remember a president telling me not to pay my financial advisor as a result.

Speaking on the subject of his housing rescue plan, which will, once it’s available, offer to modify certain mortgages, the president has said on several occasions: “If you have to pay, walk away.” So, the fact that they charge a fee makes them a scam? And here I always thought that it was charging a fee and not delivering a service that was a problem. Just the fact that a firm charges a fee… well, not so much, right?

If the president is right about the whole charging a fee issue, then why does the California Department of Real Estate tell homeowners that they should be sure to use a loan modification firm that uses its “Advance Fee Agreement”? I’m confused.

President Obama has also said that people don’t need to pay a fee to have their loan modified because they can simply call their banks directly. I was curious about this, so I went to IndyMac Federal’s Website that advertises their new streamlined loan modification service. Here’s what it says in the first three paragraphs:

“The goal of this streamlined loan modification program is to achieve improved value for IndyMac Federal. IndyMac Federal will only make modification offers to borrowers where doing so will achieve an improved value for IndyMac Federal.”

Unusually forthcoming, if you ask me. The bank is telling you right up front that they’re happy to negotiate a modification of your mortgage in their best interests, certainly not yours. And that’s what they should be doing, I suppose. But as a homeowner, don’t I want someone who knows mortgage modifications to be negotiating on my behalf?

Telling me I don’t need to pay an expert to represent me with my bank seems like the police telling me that I don’t need an attorney after I’ve been arrested because I can just ask the District Attorney any legal questions I might have. Gee, thanks for the advice, but I think I’ll go ahead and call my own lawyer anyway, okay?

via Obama’s Campaign Against Mortgage Modifications » Mandelman Matters.

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Gerald Celente: Sub-Prime was Peanuts Compared to the Coming Commercial Real Estate Collapse

Posted on April 6, 2009. Filed under: Bailout, Banking, bankruptcy, Finance, Housing | Tags: , , , , , |

Gerald Celente appears on Fox Business News to talk more about the collapse of ‘09, where he predicts more civil unrest, collapse of commercial real estate and the retail sector, and the new credit crisis. (video follows excerpts and comments)

Who’s going to rent all this vacant retail space? This country’s been way overbuilt for a long time. This is where the real credit crisis is. It’s going to make the sub-prime look like peanuts because no one is going to rent this empty vacant space. You’re going to see ghost malls start springing up all over America.

We may be seeing a rally on Wall Street, especially in the financial sector, but this simply cannot last. Even with the new mark-to-market accounting rules which allow banks to keep toxic assets off their balance sheets, there will be hell to pay once mall operators and other commercial real estate borrowers start defaulting on loans.

People are going to start refusing to pay [credit card payments]. They can’t pay. They have nothing left to lose by fighting it. We’re going to see revolution in this country. The riots that you’re seeing there [G20 Meeting in London] are going to happen here.

Will the American troops fire on their people if they protest?

Mr. Celente has been forecasting Civil unrest since August of 2008, and more recently, in February of this year. Do you still doubt he is on to something?

I don’t trust a thing that the government will do.

Does anyone really still that spending Trillions of dollars to fix a system broken by overspending is going to fix the problem? If so, put everything you have in the stock market today. If not, start taking steps to protect your wealth and your family. The worst is yet to come.

via Gerald Celente: Sub-Prime was Peanuts Compared to the Coming Commercial Real Estate Collapse.

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How Obama mortgage modification plan may help

Posted on March 10, 2009. Filed under: Bailout, Housing, Legislation, Loan Modification, Mortgage Audit, Mortgage Law | Tags: , , , , , , , , , , |

Will the Obama administration’s loan modification plan be a tourniquet or a Band-Aid? The $75 billion program seeks to stop the nation’s foreclosure hemorrhage by making home loans more affordable for 3 million to 4 million at-risk homeowners. It sets up incentives for loan servicers to modify mortgages, a way for them to assess borrowers’ situations, and a structured relief plan with lower monthly payments for five years and then a step-up to the current interest rate.

Previous loan modification programs lowered payments only briefly and minimally. Eight months after modification, 58 percent of loans were delinquent again, according to a report from the comptroller of the currency. Housing advocates hope this plan will prove more viable. “For the first time, the modification piece provides a consistent sense of standards with some transparency and some strong incentives to lead to long-term, affordable loan modifications,” said Paul Leonard, director of the Center for Responsible Lending office in Oakland. The plan pays servicers $1,000 to implement a modification and $1,000 annually for up to three years if it’s successful. There’s an extra $1,500 bonus for modifications made while the borrowers are still current on their mortgages. “Is it enough? I certainly hope so,” Leonard said.

Sheri Powers, director of the homeownership center at the Unity Council in Oakland, said she thinks the plan will help the struggling homeowners she counsels. “Most of our clients, maybe 65 percent, will be OK with an interest rate reduction to between 3 percent and 4 percent,” she said. The plan says interest rates can go as low as 2 percent if needed to get payments down to 31 percent of a borrower’s income. Terry Moore, managing director of the North American banking practice for consulting giant Accenture, works with most of the biggest banks in America. From the lenders’ perspective, the plan is positive also, he said.

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The Government’s New Loan Modification Plan

Posted on February 19, 2009. Filed under: Bailout, Banking, Finance, Loan Modification | Tags: , |

Feb. 18 (Bloomberg) — JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said the government’s new housing plan was “comprehensive” and would help the bank modify more loans.

“The plan is good and strong, comprehensive and thoughtful,” Dimon, 52, said in an interview today. “I think it will be successful in modifying mortgages in a way that’s good for homeowners.”

President Barack Obama today announced a $275 billion program that includes cutting mortgage payments for qualified borrowers and expanding the role of Fannie Mae and Freddie Mac in curbing foreclosures.

Dimon also said he’s “concerned” the bank may lose employees because of new U.S. restrictions on executive pay. He said he would like to see more details and clarifications about how the rules could apply.

via Worldwide.

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Obama to outline plan to stem home foreclosures

Posted on February 14, 2009. Filed under: Bailout, Foreclosure Defense, Mortgage Audit | Tags: , , , , , , |

WASHINGTON – The biggest players in the mortgage industry are halting home foreclosures while the Obama administration develops its plan to help struggling homeowners.

The White House said President Barack Obama on Wednesday will outline his much-anticipated plan to spend at least $50 billion to prevent foreclosures in a speech in Arizona, one of the states hardest hit by the foreclosure crisis.

“It’s not intended to be measured by one day’s market scorekeeping, but instead to ensure that the 10,000 Americans each day that have their homes foreclosed on, and the millions more that are barely getting by, are protected,” White House press secretary Robert Gibbs said Friday without providing other details.

Treasury Secretary Timothy Geithner announced a revised effort to stabilize the financial system on Tuesday. It contained outlines of a foreclosure-relief effort, but few details.

Though lenders have beefed up their efforts to aid borrowers over the past year, their action hasn’t kept up with the worst housing recession in decades.

More than 2.3 million homeowners faced foreclosure proceedings last year, an 81 percent increase from 2007, and analysts say that number could soar as high as 10 million in the coming years, depending on the severity of the recession.

Government-controlled mortgage finance companies Fannie Mae and Freddie Mac, and major banks JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp. said Friday they are halting foreclosures through March 6.

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The day the banks were just three hours from collapse

Posted on January 26, 2009. Filed under: Bailout, Banking, Finance, Fraud |

Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown’s Ministers has revealed.

City Minister Paul Myners disclosed that on Friday, October 10, the country was ‘very close’ to a complete banking collapse after ‘major depositors’ attempted to withdraw their money en masse.

The Mail on Sunday has been told that the Treasury was preparing for the banks to shut their doors to all customers, terminate electronic transfers and even block hole-in-the-wall cash withdrawals.

Only frantic behind-the-scenes efforts averted financial meltdown.

via Revealed: The day the banks were just three hours from collapse | Mail Online.

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U.S. Approves Plan to Help Citigroup Weather Losses

Posted on November 24, 2008. Filed under: Bailout | Tags: , |

Citigroup executives presented a plan to federal officials on Friday evening after a weeklong plunge in the company’s share price threatened to engulf other big banks. In tense, round-the-clock negotiations that stretched until almost midnight on Sunday, it became clear that the crisis of confidence had to be defused now or the financial markets could plunge further.

Whether this latest rescue plan will help calm the markets is uncertain, given the stress in the financial system caused by losses at Citigroup and other banks. Each previous government effort initially seemed to reassure investors, leading to optimism that the banking system had steadied. But those hopes faded as the economic outlook worsened, raising worries that more bank loans were turning sour.

President-elect Barack Obama was also working over the weekend to shore up confidence in the rapidly faltering economy. Mr. Obama signaled that he would pursue a far more ambitious plan of spending and tax cuts than he had outlined during his campaign and planned to announce his economic team on Monday. Some Democrats in Congress, meantime, were calling for the government to spend as much as $700 billion to stimulate the economy over the next two years. Federal Reserve Chairman Ben Bernanke was involved during the discussions.

Mr. Obama’s expected choice for Treasury secretary, Timothy F. Geithner, the president of the Federal Reserve Bank of New York, played a crucial role in the negotiations on Friday but took a less active role once news of his appointment was circulated. While the initial focus of government officials was to help the embattled company, they may also seek to draw up an industrywide plan that could help other banks.

The plan could herald another shift in the government’s financial rescue. The Treasury Department first proposed buying troubled assets from banks but then reversed course and began injecting capital directly into financial institutions. Neither plan, however, restored investors’ confidence for long.

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