Mortgage Rates UP

Posted by kevin on November 26, 2016 under Foreclosure Blog | Be the First to Comment

Since the election, interest rates on residential mortgages are up by over 1/2 of 1 percent (0.005 or 50+ basis points, if my math is correct). As a result, refinancings are down significantly. Increased mortgage interest rates will make homes less affordable, so it is likely that home prices will not advance in 2017 like they have from 2012 to 2015.

A WSJ article indicates that since lenders are not going to be making as much money on re-fi’s, they are starting to push more risky adjustable rate mortgages and increasing loan to value ratios. Didn’t that lead to a meltdown in 2008?

At the same time, MHA or, more specifically, the HAMP mortgage modification program is phasing out as of 12-31-2016. With Trump being elected, it does not appear that this program will be renewed. Under HAMP I and HAMP II, interest rates can be reduced to 2%. What I have been seeing, however, is that servicers are trying to push my clients into so-called “proprietary modifications” which are not subject to MHA guidelines. With interest rates rising, the proprietaries are starting at 3% or more, usually, for 5 years, and then are being stepped up to over 5%.

At that rate, it would seem that many consumers will be priced out of mods.

There is still time to get a MHA/HAMP but time is running out

Modification Scam

Posted by kevin on September 8, 2016 under Foreclosure Blog | Be the First to Comment

If I had $10 for every client or potential client that told me that they sent $1500, $3000, $5000, as high as $8000 to a mortgage modifier in California or Florida or wherever and not only never got a mortgage modification but just got a run around by the company that was supposedly representing them. Needless to say, they never got their money back.

The National Mortgage News just ran a story about a man from California who was ordered to pay $2.4 million in restitution and sentenced to 52 months in federal prison over his role in an alleged mortgage modification scam. He operated a series of California based companies that claimed to provide home loan modifications and other debt services to consumers across the country. They would cold call consumers and offer modifications for $2500-4300. Then, after they got their money, they would tell the consumer that they were approved for a modification. That was a lie.

I am not saying that there are not reputable companies on the internet that are performing mortgage modifications. What I am saying is be guided by the old saying, “Let the buyer beware”. Make sure you check out the background of the person you hire to do your modification.

The MHA mortgage program, sometimes called the HAMP program, is due to expire at the end of this year. If you had problems but are back on your feet, you may want to consider looking into a mortgage modification or refinancing under HARP before the program expires.

Victory for Borrowers

Posted by kevin on January 28, 2015 under Foreclosure Blog | Comments are off for this article

I have had at least 100 clients or potential clients tell me that they have a great foreclosure defense because their mortgage servicer jerked them around unmercifully when they applied for a temporary modification, and refused to give them a permanent mod notwithstanding that they made three or more payments. Up to last week, the client or potential client in NJ was wrong.

Why? Because modifications are governed by the HAMP program (now MHA of which HAMP is one of the options). HAMP is based on a federal statute in which the federal government gives servicers money if they agree to modify mortgages generally in accord with the guidelines established under the statute. The parties to the agreement are the federal government and the sevicer. Even though borrowers are the reason for the statute and a beneficiary of the statute, they are not a party to the agreement. Federal courts held that borrowers cannot sue under HAMP or MHA (no private right of action).

In 2011 and 2012, certain federal courts got their “common sense” cap on, and concluded that notwithstanding that the borrower was not a party to the HAMP agreement, you cannot have servicers taking money with no intention of granting a permanent modification. One of those courts was the 7th Circuit Court of Appeals in the Wigod case.

Foreclosure defense attorneys in NJ have argued that Wigod is good law in NJ, and the failure to grant a permanent modification is tantamount to a violation of the Consumer Fraud Act or a breach of the implied covenant of fair dealing between parties.

Last week, in a published opinion, the Appellate Division in NJ adopted Wigod but limited the application. It held that if the servicer granted a temporary modification, and the borrower makes the required payments, turns over all required documentation, and his or her representations to the servicer are true and accurate, that borrower is entitled to a permanent modification. Failure to grant a permanent mod gives the borrower a cause of action.

Now, this ruling does not handle all cases involving a modification. If you apply for a mod, and send your documents in, but can never get someone on the phone, or your inquiries are pushed from one person to another none of which can make a decision, or your documents are lost three or four times, or the servicer claims that it never received your application notwithstanding that you have a Fed Ex proof of delivery, or you are asked for updated bank statement until or are pulling your hair out, then you get rejected- you are SOL. That stands for s&%! outta luck. Why, it is the temporary mod which establishes a contractual relationship between the borrower and the servicer which triggers Wigod.

The case in NJ is Arias v. Elite Mortgage Group. A victory in today’s foreclosure defense environment.

Happy Anniversary

Posted by kevin on November 27, 2014 under Foreclosure Blog | Comments are off for this article

I have been quite vocal concerning how the current Administration sold out the people by backing off on Chapter 13 cramdown in 2009. Instead, we got HAMP and MHA. The first few versions were just awful. Borrowers were routinely being ripped off by servicers on trial modifications;payments were made and glommed by the servicers; permanent mods were not given; and the borrower had no recourse because the courts said absent a permanent mod (and contractual relationship) the borrower had no standing to sue the servicer.

In late 2012, with HAMP version 4, I thought that we might have something. At least on paper, it seemed better than previous versions. Well, in real life, not the improvement that I expected. Why? The servicers still run the show. The government wags it finger at the servicers and tells them to fly right, but nothing substantive happens. Finally, the GSE’s, Fannie Mae and Freddie Mac, and the VA are not covered by the government program, MHA.

Why am I saying Happy Anniversary? I represent a elderly woman in a Chapter 13. As part of the Plan, we proposed a modification which called for capitalization of arrearages and a reduction in the interest rate to 4% escalating to 5% on the first mortgage loan to JP Morgan Chase . Junior encumbrances were to be stripped for lack of equity.

If you are familiar with HAMP Version 4, you know that the proposed mod is pretty much plain vanilla. On November 25, 2013, I sent a complete modification package to Chase to modify a note payable to JP Morgan Chase. In mid- February, 2014, the servicer (also Chase) called with good news and bad news- my application was deemed complete and was scheduled to go to underwriting, however, the servicing rights were being transferred to another servicer. I was assured that my file would be forthwith sent to the new servicer and I would have a decision right away. Guess what? I did not believe the Chase people.

It took a month to find the right servicer ( the new servicer assigned the loan to a subservicer). Then it took another month to find out who the point of contact person was. BTW, the point of contact person is very cordial and smart , but he is not running the show. By mid May, I was told that Chase had not yet sent the file to the new servicer so I had to start from scratch. I sent a complete, updated application with documents and proposal in late May.

In NJ, the Chapter 13 trustees will push to confirm plans with mods conditionally. The condition is that the debtor has to get the mod within 4 months of the confirmation or the case is dismissed. Because of the confusion with the new servicers, I was able to put the confirmation off until June. However, I had to make 3 appearances (no, they would not let me do it over the phone) to plead my case and get a lecture from the trustee for not having a mod in place. Every three weeks or so, my client gets a letter from the servicer asking for an updated whatever. Within a few days, we comply with the request(s). September comes and goes and the trustee files a notice that we are in default because we do not have a mod in place and requests that the case be dismissed. I am forced to file a written response. We have a hearing in mid-December.

The point of contact persons assured me that we would have a decision by the end of November, but nothing yet. He also tells me, for the first time, that the loan was sold to Freddie Mac so we are not operating under HAMP guidelines. In the meanwhile, the paralegal at the lender files a motion to vacate the stay because we do not have a mod as set forth in the confirmation order. Thank goodness, her boss pulled the motion.

You can’t make this shit up. To add insult to injury, I checked my time records last week to discover that I have spent more time on the modification than I did on the nuts and bolts Chapter 13 case including motions to strip. Go figure. To be continued.

CFPB Report

Posted by kevin on November 1, 2014 under Foreclosure Blog | Comments are off for this article

On October 28, 2014, the Consumer Financial Protection Bureau issued a report on mortgage servicers/servicing. It wasn’t pretty.

The report found that servicers are engaging in significant delays which lead to higher payments to the borrower. In addition, the servicers are not, for the most part, properly notifying credit reporting agencies that borrowers are no longer delinquent.

The problem has been exacerbated because major bank, which were subject to the $25 billion dollar settlement, are getting out of the servicing business and selling their portfolios to non-bank servicers such as Ocwen or Greentree.

Higher costs are incurred when servicers keep borrowers in trial modifications for more than three months at interest rates that are higher than the ultimate permanent mod. If the trial mod payment does not cover the fully amortized payment, then the difference is added on to the principal. More trial mod payment, the greater the amount that is added on to principal.

Recently, the CFPB fined Ocwen $2.1 billion for taking advantage of borrowers. The New York attorney general is investigating Ocwen for backdating letters.

I have always been leary about dealing with servicers on modifications, short sales and deeds in lieu. Back in 2011, most attorneys who brought the foreclosures actions would work with me on getting a resolution of the case. Not any more. I make proposals to my adversaries only to be told that I must deal with the servicers. Then, the games begin.

On paper, MHA (formerly called HAMP) has decent guidelines that seem to protect the consumer. However, you have no recourse if the servicer does not follow the guidelines. In addition, you are left swinging in the breeze when servicers sit on your file for 3-4 weeks, and then demand more or updated information, and then continue with this process for months. Currently, I have a modification that started last November and is still not into underwriting.

The CFPB is going in the right direction by holding the servicers’ feet to the fire. A change in the compostion of Congress, which looks likely, may have a negative impact on CFPB’s impact.

HAMP Basics

Posted by kevin on April 7, 2014 under Foreclosure Blog | Comments are off for this article

The first rule is that HAMP, the government program for mortgage modifications, does not apply to government loans. If FANNIE or FREDDIE bought the loan (whether for their own portfolio or sold to investors), HAMP does not apply. We will deal with this in later blogs.

Other basics:

2. HAMP applies to first lien mortgages originated on or before January 1, 2009.
3. HAMP applies to condo’s, coop’s and manufactured housing if state lien law makes mortgage a lien on real estate.
4. The property securing the mortgage loan has not been condemned and is habitable.
5. Borrower has a documented financial hardship and does not have sufficient other assets to pay mortgage as currently stated.
6. Borrower agrees to escrow for taxes and insurance (if not doing already) prior to any trial period.
7. The unpaid principal balance prior to capitalization is not greater than $729,750 for 1 Unit, $934,200 for 2 Unit, $1,129,250 for 3 Unit and $1,403,400 for 4 Unit.
8. The mortgage is secured by a one to four unit property.
9. The borrower has submitted an initial package for modification on or before December 31, 2015 and the modification effective date is on or before September 30, 2016.

If you have followed my blogs, you know that I believe that HAMP is not bad on paper, but problematic in its implementation. Servicers still jerk people around, and borrowers cannot look to the courts for help unless they have a temporary modification. But, with the courts clamping down on defenses and looking the other way on evidence issues, it may be the best game in town at this point. So, look into it. Time is running out.

Observations about Mods II

Posted by kevin on February 27, 2014 under Foreclosure Blog | Comments are off for this article

How can Homeowner A get a better deal? “A” is saving $1056 per month on principal and interest payments while “B” is saving only about $264 per month. So, from a cash flow basis, “A” is saving more. Moreover, without the suspense account of $200,000, “A” probably could not meet the monthly nut. It is almost impossible to scrap up another $1056 per month every month. An extra $264 per month is no piece of cake, but it is a lot more do-able than $1056. So, “A” is getting the better deal. Right?

But, let’s look at it another way. “A” has to come up with $200,000 at the end of the term while “B” only has to come up with $50,000. Advantage to “B” but that is potentially 25 years off. If the fair market value of the house is $300,000 and prices increase an average of 5% per year, at the end of 25 years, the house could be worth about a $1,000,000. “B” walks away with more money if he is still able to walk. But “A” still has a health chunk of change. In effect, neither A nor B are out there breaking their backs to earn money to make that balloon payment. Why? Because inflation pays the balloon.

What if prices never go up. Well, at the end of the term, you pay or don’t pay. If you do not pay, you get foreclosed. “A” saves $200,000, “B” saves $50,000 and both are looking for a small apartment in Florida.

How bout looking at it another way. “A” does not pay interest on $200,000 for 25 years at 4%. That is a savings of $116,000 while “B” saves only $29,000.

Enough already. There are many ways to analyse this mod scenario. Some ways seem jaded, but I am sure that the lenders, with the NPV calculations required under HAMP, are looking at your home in the same cold blooded way.

While all the above analyses should be considered by the homeowner who has been presented a modification with a balloon payment, any analysis should begin with same question. How long do I intend to live at my current house? Why? Because the balloon is due at the end of the term or when you sell. If your kids are in their late teens or early 20’s, chances are that they are going to move out in 5-8 years. Why keep a big house if there are only two of you. The problem is, however, how are you going to come up with $50,000 or $200,000 in 8 years. Maybe, the house may increase in value by $50,000 over 8 years, but you are going to need much more than a $50,000 increase because you have to cover the closing costs including the broker’s fee. $200,000, in most cases, is a “bridge too far”.

Bottomline, the longer you intend the stay, the less the balloon payment is an issue.

2014- NJ- Where We Are

Posted by kevin on January 2, 2014 under Foreclosure Blog | Comments are off for this article

For the US as a whole, foreclosures are at their lowest level in years. Nationwide, home prices are up 13.6% over the prior year. Unemployment is supposedly below 7% but those numbers are fudged so much that, frankly, I do not know what they mean.

New Jersey, however, is not faring as well as the rest of the US. Unemployment is at about 8.4%. Values of single family homes are up only 4.9% in north NJ. Price levels are comparable to those of 2004 and are 20% below the peaks reached in 2006. In Bergen County, prices rose only 3.6% while Passaic did a little better with 8.8% increases in single family residences.

Nearly 7% of NJ homes are slated for foreclosure according to CoreLogic. That is the second highest amount in the country. Only Florida at 7.1% is higher. In New Jersey, 10.6% of homeowners are at least 90 days behind on their mortgages.

New Jersey is a judicial foreclosure state. That means that a lender must file a complaint and then obtain a final judgment before it can schedule a foreclosure sale. This slows the process down considerable. Even in uncontested cases, it can take 180-200 days to get to sale (double that or more if aggressively contested). On the other hand, in non judicial foreclosure states, the process can be over in 45 days. The trustee of the deed of trust (the equivalent to a mortgage in NJ) sends the proper notices. If the loan is not brought current, the trustee can schedule a sale. Courts get involved only when the borrower files a complaint to stop the sale.

Because the process takes longer in judicial foreclosure states, there is a longer backlog. It is anticipated that in NJ foreclosures will continue at the 2013 pace until well into 2015.

What should you do if you are delinquent on your mortgage or on the brink of becoming delinquent. Time to take stock. If you are our of work, you have to get back into the game. No work, no history of income, no way you are going to be able to get a modification. However, a modification is not right for all people. If your house is still underwater, and comparable rental property is available for 60% of your current mortgage payment, well maybe it’s time to deed the property back to the lender. You will never recoup your money on that house.

Be wary of short sales. I rarely see a scenario where a short sale makes sense to a homeowner except in situations where association fees continue to mount. You do a lot of work on behalf or your lender and all you get in return is a 1099 for the shortfall which, in some cases, leads to a tax liability to Uncle Sam.

Finally, remember that although HAMP (actually MHA with HAMP being their modification alternative) is better- much better than it was a few years ago, you are still at the mercy of the servicer. Sometimes, I have seen really good mod offers; other times I just walk away shaking my head. However, just like the lottery, you gotta be in the game to win.

Feel free to contact our offices to discuss your situation.

Ocwen Settlement

Posted by kevin on December 24, 2013 under Foreclosure Blog | Comments are off for this article

The federal government and the AG’s from 49 states including NJ announced a $2.1 billion settlement with Ocwen Financial Services and Ocwen Loan Servicing. In New Jersey, Ocwen will provide troubled borrowers with an estimated $151 million in loan reductions. Moreover, over $2MM is being set aside for cash payments to borrowers who were already foreclosed on (great deal for Ocwen and its lenders- they get the house and the homeless borrower gets a whopping $1,000 or a little more if less homeowners sign up for the deal).

Among the charges against Ocwen Financial Corporation and its subsidiary, Ocwen Loan Servicing, were charging unauthorized fees, misleading borrowers about alternatives to foreclosure, providing false or misleading information about the status of accounts, denying loan modifications to eligible homeowners and filing robosigned documents with the courts (you mean those certifications filed with the courts by the servicers and the lender’s attorneys are fugazies ? I’m shocked.)

In addition, Ocwen will be subjected to the the so-called heightened standards of the Consumer Financial Protection Bureau.

As I have said in previous blogs, HAMP 4.1 is better than previous HAMP roll outs. I get a fair amount of decent modification offers, but I get some insulting offers as well and servicers still play games. With this settlement still fresh in Ocwen’s corporate mind, I would surmise that in the next few months anyway, Ocwen will probably be offering pretty decent modifications.

So, if your loan is serviced by Ocwen, you may want to look into this or retain counsel to look into it.

Merry Christmas to all.

BOA- Another Shoe Drops

Posted by kevin on August 14, 2013 under Foreclosure Blog | Comments are off for this article

Last week, I blogged about the lawsuit against Bank of America pending in Massachusetts. Within a few weeks of that suit, another group of homeowners in Colorado brought a lawsuit in the federal court alleging that BOA and its contractor, Urban Lending Solutions, ran a scheme to deny permanent modifications in contravention of the federal RICO Act.

The RICO Act was initially used to allow federal law enforcement more flexibility in going after organized crime. Over the years, however, its use has been extended to what would be considered business type activities. Moreover, the RICO statute provides for a private right of action (meaning individuals and not just the government can sue under the statute) and allows legal fees to a prevailing plaintiff.

Interestingly enough, the complaint filed in Colorado cites statements made by former BOA employees in the Massachusetts case. It alleges that BOA and Urban Lending Solutions conspired, in some cases, to push borrowers into more expensive “in house” mods rather than HAMP mods. It also alleges that in other cases, BOA advised borrowers to send their financial information to Urban Lending Solutions. Urban became the “black hole” for documents sent by homeowers. Ultimately, the mod applications were denied in a wholesale manner.

BOA and Urban Lending Solutions have denied any culpability. Notwithstanding with 2 federal lawsuits filed in the last two months both alleging widespread fraud in the modification area, regulators and members of Congress are taking notice.

Irrespective of the outcome of these specific cases, it is my opinion that if the courts in Colorado and Massachusetts rule unequivocally that borrowers have standing to sue in HAMP/mod situations, the defense bar (lawyers who represent homeowners) will have a big victory.

BOA – Shoe Drops

Posted by kevin on August 11, 2013 under Foreclosure Blog | Comments are off for this article

In mid June, 2013, it was reported in the financial news that a lawsuit had been brought against BOA in the US District Court in Massachusetts claiming that BOA routinely denied borrows permanent modifications under HAMP. So what else is new? Well, in this case, the borrowers enlisted the help of 5 former BOA employees who are providing testimony against their ex-employers. BTW BOA vigorously denies these allegations stating they are absurd and patently false. Having been in the trenches for the last 4 years, I wonder???

Now, a program that is basically run by the servicer, who is
1. the agent for the bank;
2. paid by the bank or the trustee in a securitized trust; and
3. in many instances, stands to make more from a foreclosure than a modification of the loan
would never jerk around a borrower. If you believe that, I have a bridge you may want to buy.

The allegations of borrowers echo what defense counsel has heard since HAMP was instituted. Documents are conveniently lost. The borrower cannot speak with the same person twice. Decisions are not made. Permanent mods are denied after the bank or trust has taken numerous trial mod payments.

What makes this Massachusetts lawsuit different is that the borrowers have statements from ex-employees who claim that:
1. they were instructed to inform homeowners that modification documents were not timely received, not received at all, or missing when they were, in fact, received and in a timely manner.
2. employees were rewarded with cash bonus or gift cards for meeting a quota for monthly foreclosures.
3. employees were encouraged to do anything they could to maximize fees to the bank including lying.
Moreover, the employees are from different BOA offices around the country.

Now, I do not know if these employees are telling the truth. However, can they all be lying? Especially in light of a rich history of borrower complaints all over the country. Even in NJ, judges comment about the problems that borrowers face in obtaining a modification.

I look forward to seeing how this litigation shakes out. I hope that the Judge in Massachusetts does not bounce the case on some procedural technicality, but decides it on the merits.

As I say on my website and blog, I believe that on paper, the new re-incarnation of HAMP is vastly better than previous versions. However, that pre-supposes that the servicer is going to play it straight. Unfortunately, the stories of many borrowers (including many of my clients) question that proposition. Maybe if BOA gets slammed for punitive damages in this lawsuit, servicers may think twice before they play it fast and loose.

HAMP EXTENDED

Posted by kevin on June 1, 2013 under Foreclosure Blog | Comments are off for this article

The Government’s Making Homes Affordable programs, including the much maligned HAMP modification program, were in effect through December 31, 2013. If you have read previous blogs, you know that I was not a fan of the prior versions of HAMP. Not the least of my criticisms was that HAMP does not apply to GSE loans; that is, Fannie Mae, Freddie Mac etc. However, the latest re-incarnation (which hit the public last fall with handbook at the end of 2012) has some good things to say about it. One major problem, however, was that since the program was ending at the end of 2013, many homeowners would not file in a timely manner.

On May 30, 2013, the feds took some of the pressure off. Jack Lew, the new Treasury Secretary, announced that the HAMP program (along with the short sale- deed in lieu program and the unemployment program, and others) will continue through December 31, 2015. A supplemental directory (gives us the details) is due to be published next week. In addition, on the same day, FHFA announced that the programs for Fannie Mae, Freddie Mac, VA and FHA will also continue through the end of 2015. Even though the GSE programs do not allow principal forgiveness at this time, they are worth looking into.

If you look at the Home Page of my foreclosure website, you will see that our main emphasis is on fighting foreclosure through the litigation process. That was because the Making Homes Affordable programs (including HAMP) stunk the place out. And our experience indicated that aggressive litigation was the best path to securing a respectable modification. Now, as the programs are getting better with age, I am reconsidering a limited change to our approach. Yes, we litigate when necessary. But if you are the proper candidate, we will assist with modification proposals even if no litigation is involved. Be on the lookout for changes to our HOME page.

Foreclosure Mediation Program

Posted by kevin on March 23, 2013 under Foreclosure Blog | Comments are off for this article

New Jersey instituted a mediation program a few years back. The Courts claim that around 40% of the people who apply for mediation get some type of resolution. Now, resolution is a vague term and I do not know whether resolution = modification or can include short sales or deeds in lieu of foreclosure. In other words, I cannot vouch for the purported success rates claimed by the program.

That being said, two recent events impact on the mediation program. First, effective March 1, 2013, the program was de-funded. NJ was using some of its money from the $25 billion settlement to fund the mediation program. Those moneys have been used up, and not replaced by the Christie Administration. HUD counselors and ‘Free” attorneys for borrowers are no longer being paid so they stopped taking on new clients as of 2/28. My understanding is that mediators are still getting paid but that will end also. The judiciary wants lawyers to volunteer to be advocates for borrowers or mediators. One of the judges at the last Bench-Bar conference questioned how long the program will be available.

The second event is that the courts are setting time limits on applying to the program. Before, you could apply anytime before final judgment was entered. That could extend the foreclosure process for months. Now, a homeowner has 60 days from the service of the summons and complaint to file for mediation. After the 60 day period, you can get mediation only upon court order. If you read the prior blog, you will note that courts are clamping down on borrowers who are trying to set aside default judgments. The later you file your motion, the less the chance that the court will set aside the default judgment. You should expect the same treatment with getting orders to allow mediation after the 60 day window closes. In other words, the later you wait, the less likely the court will allow you to take advantage of mediation

What has not changed is that the mediation program is available to only homeowners who reside at the premises which can contain no more than three units.

What is interesting is that the federal HAMP program, as a result of the $25 billion settlement, does not allow a lender/servicer to go forward with a sale or start a foreclosure if the borrower has asked for a modification until a decision has been reached as to whether a modification will be granted. That is called double tracking. However, NJ does not seem to have any problem with double tracking since the mediation notice specifically states that a request for mediation will not stop the progress of the foreclosure action.