New law denies homeowners access to legal representation

Posted on October 23, 2009. Filed under: Banking, Case Law, Foreclosure Defense, Housing, Legislation, Loan Modification, Mortgage Law, Politics | Tags: , , , , , , , , , , , , , , , , |

California has a new law on the books that bans collection of advance fees from firms that provide loan modification services to people struggling to avoid foreclosure.

Other real estate related bills signed into law this month by Gov. Arnold Schwarzenegger aim to crack down on abusive lending practices by mortgage brokers; provide more safeguards for seniors taking out reverse mortgages; and require lenders to provide a summary translation of loan papers to non-English speakers.

Effective Oct. 11, Senate Bill 94 made it illegal for anyone to collect advance fees from consumers seeking a loan modification. The legislation closed a loophole that previously allowed state- licensed real estate brokers and attorneys to collect advance payments for loan modification services provided a client signed off on forms approved by the state Department of Real Estate.

SB 94 was written by state Sen. Ron Calderon, D-Montebello.

“Over the past two years, unscrupulous attorneys and real estate brokers have abused their trusted roles and exploited desperate homeowners seeking to avoid foreclosure. The loophole that allowed this abusive practice has now been closed, and homeowners should avoid any person charging upfront fees for foreclosure relief services,” state Attorney General Jerry Brown said in a statement.

Advance payments previously collected before Oct. 11 are not impacted by the law but no additional fees can be collected going forward,

said Tom Pool, a Department spokesman.

About 1,000 real estate brokers had previously submitted the required paperwork to collect advance payments before the law became effective, he said. More than 1,300 consumers have contacted the department with complaints about foreclosure rescue firms, most of which involved paying advance fees and not getting the loan modification assistance that was promised, he said. In many cases, the fees were collected by people who were not even licensed to offer loan modifications.

SB 94 only allows fees to be collected after the promised services are provided. Consumers must also be told that similar services are available from nonprofit housing counseling agencies approved by the federal Department of Housing and Urban Development. Consumers must also be told they have the option of calling their lender directly to request a change in loan terms.

Effective Jan. 1, three other laws will kick in to provide more protections to consumer who take out home loans:

  • Assembly Bill 260, written by state Assemblyman Ted Lieu, D-Torrance, extends federal mortgage lending laws to state-regulated mortgage brokers. Among other things, mortgage brokers would be prohibited from steering borrowers into higher-priced, subprime loans in cases where they could qualify for a lower-interest, fixed-rate loan.AB 260 restricts the type of home loans that consumers have access to, said John Holmgren, an Oakland-based mortgage broker and spokesman for the California Association of Mortgage Brokers, which opposed the legislation.

    For now, subprime loans have pretty much gone away in response to tougher lending standards but Holmgren expects that demand for such products will eventually return when the economy improves.

    “It would be wonderful if every consumer had perfect credit” but that is not the case, Holmgren said. “It’s bad for those consumers (with poor credit scores) because it restricts their choice and that’s what this does … In this troubled economy, there is a number of people whose credit has suffered.”

    Mortgage brokers would also be banned from offering negative amortization loans, which results in a growing loan balance the longer the borrower holds the loan. Strict caps would also be placed on prepayment penalties.

  • Assembly Bill 329 adds existing consumer protections for reverse mortgages, which allow seniors to convert equity held in a home into tax-free income or a lump-sum payment while continuing to live in the home. Among other things, the law extends counseling requirements that apply to Federal Housing Administration-backed reverse mortgages to all lenders who offer reverse mortgages. The bill was written by state Assemblyman Mike Feuer, D-Los Angeles.n”‚Assembly Bill 1160 requires mortgage lenders to provide a translated summary document in the language in which it was originally verbally negotiated with a borrower whose primary language is not English. The translation requirement applies to Spanish, Chinese, Tagalog, Vietnamese and Korean languages. The law, written by state Assemblyman Paul Fong, D-Cupertino, extends translation requirements that already apply to mortgage brokers.

    Contra Costa Times

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    Loan modifications growing

    Posted on September 11, 2009. Filed under: Foreclosure Defense, Housing, Loan Modification, Mortgage Audit | Tags: , , , , , , , |

    The Obama administration said Wednesday it is on track to secure 500,000 trial loan modifications for struggling homeowners by Nov. 1, as both the number of participating mortgage companies and the number of offers extended under the Home Affordable Modification Program increased last month.The second report from the Treasury Department on its $75 billion mortgage relief program showed modest improvement, but officials said they planned more initiatives to increase the program’s success.The results: Nineteen percent of the almost 3 million eligible borrowers who were 60 days or more delinquent were offered three-month trial modifications and 12 percent of them, about 360,000 homeowners, have begun them.”We are certainly seeing more resolutions happening out in the field, and we are seeing it more routinely with the biggest servicers,” said Bruce Dorpalen, Acorn Housing Corp.’s national director of housing counseling.Some of the largest servicers say they continue to work on loan modifications through their own internal programs as well as the government’s effort.Two of the banks that did not fare well in last month’s report, Bank of America and Wells Fargo Bank, both reported improved results but still lagged behind other industry heavyweights like JPMorgan Chase Bank, CitiMortgage, Saxon Mortgage Servicing and Aurora Home Services.”HAMP is just a piece of the overall story,” said Mike Heid, co-president of Wells Fargo Home Mortgage. “We’re very pleased with a 64 percent increase” in modifications made during the past 30 days.The concern: Some consumers are being told to submit all their financial data again as the trial period ends and others aren’t because there’s no uniformity in how the different servicers administer the program, housing counselors say. Also, some homeowners are reluctant to sign trial modifications without knowing the terms of a permanent change that would take effect when the three-month trial period ends.


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    Slow Start to U.S. Plan for Modifying Mortgages

    Posted on May 15, 2009. Filed under: Foreclosure Defense, Loan Modification, Mortgage Audit | Tags: , , , , , , , |

    The Obama administration’s plan to help millions of troubled homeowners avoid foreclosure by reducing the size of their mortgage payments is just getting off the ground.

    Homeowners protested foreclosures in Elmont, N.Y., last month. The federal mortgage modification plan would help those who owe more on their homes than the homes are worth.

    So far, two months after the program went into effect, about 55,000 homeowners have been extended loan modification offers, according to a senior administration official. At the same time, foreclosures continue apace. RealtyTrac reported Wednesday that foreclosure filings reached 342,000 last month, up 32 percent from April 2008. Moody’s has estimated that more than 2.1 million homeowners will lose their homes this year.

    Because of the size and complexity of the modification program, the administration has only recently assembled most of the pieces. In late April, officials fleshed out their plan to modify or forgive second mortgages — one of the big stumbling blocks in modifying primary mortgages — and provided more details on the Hope for Homeowners program, for borrowers who owe more than their homes are worth. Congress is close to acting on legislation to protect mortgage servicers from potential lawsuits from investors, while also expanding the Federal Housing Administration’s ability to modify loans.

    The banks, too, are just now beginning to get their mortgage modification machines up and running.

    via Slow Start to U.S. Plan for Modifying Mortgages –

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    HUD Looking at Hefty Principal Balance Reductions

    Posted on April 2, 2009. Filed under: Banking, Finance, Foreclosure Defense, Housing, Loan Modification, Mortgage Audit | Tags: , , , , , , |

    The creators of the wildly-popular, one customer served, Hope for Homeowners program are reportedly looking to expand their stable of loss mitigation tools.

    The Department of Housing and Urban Development is considering principal balance reductions of up to 30 percent on FHA loans in an effort to keep homeowners afloat, according to National Mortgage News.

    Details are preliminary, but basically the FHA would pay a partial claim to the loan servicer or investor of the mortgage to cover the write-down and bring the loan current.

    Here’s the kicker though…eventually, the borrower would have to repay the forgiven balance, something I see as a deal killer.

    Hope for Homeowners had similar issues, with the whole forcing borrowers to split any future profits from the sale of the property with the government if they accepted a write-down.

    But as more FHA loans fall delinquent, it’s clear the agency will need some serious loss mitigation tools of its own unless it wants to meet a fate similar to that of Fannie and Freddie.

    FHA loans 90 days or more past due, including those in foreclosure, rose to 7.46 percent last month, up from 6.16 percent a year ago.

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    Executive Calls ’30s Housing Solutions Superior

    Posted on January 15, 2009. Filed under: Foreclosure Defense, Housing, Loan Modification, Mortgage Law | Tags: , , , , , |

    A former Fannie Mae executive has deemed Depression-era efforts to modify ailing mortgages more successful than those being used in the current housing crisis. The executive, Edward J. Pinto, who was Fannie’s chief credit officer in the late 1980s, argues in a paper prepared for a research group that current modification efforts by the government and banks are lagging because they typically include past-due payments in new loans and because homeowners are qualifying for new loans that are too big for them to handle. “We’re entering into this housing crisis in a much weaker position than we did during the Depression,” Mr. Pinto said in an interview.

    He is scheduled to deliver his paper, on which his remarks were based, to the American Enterprise Institute in Washington on Friday as part of a conference on the mortgage problems confronting the incoming Obama administration.

    Read more…

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    Maryland program to stave off foreclosures

    Posted on August 19, 2008. Filed under: Uncategorized | Tags: , , , , , , , , |

    Homeowners fearful of losing their homes because of looming defaults and foreclosures could get help through a new state initiative.

    Called Homeowners Preserving Equity, the HOPE program offers a commitment of $100 million in private capital to help about 500 homeowners to refinance and switch adjustable-rate mortgages to fixed-rate mortgages.

    The state also plans to use $10 million from the state’s mortgage insurance program as an incentive to encourage lenders to provide another $200 million to refinance another 1,000 homeowners.

    The goal is to prevent an expected wave of foreclosures due to the recent proliferation of “exotic” loans which include adjustable rate, balloon payment and negative amortization loans.

    “The HOPE initiative is an innovative package of foreclosure prevention measures, combining refinancing, mortgage insurance, incentives and homeownership counseling to make sure Maryland families can preserve the equity they have built up in their homes,” said Ray Skinner, secretary of the state Department of Housing and Community Development, in a statement after a June 13 press conference in Dundalk.

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