Posted by kevin on May 6, 2016 under Foreclosure Blog | 
Seven years into the mortgage crisis, FHFA finally announced a program that could reduce principal on residential mortgage loans. This has been a political hot potato. After the bailout of FNMA (Fannie Mae) and FHLMC (Freddie Mac) (collectively known as the GSE’s), Director DeMarco was dead set against principal forgiveness. He was supported by Treasury Secretary Geithner. President Obama said that he was in favor of principal forgiveness but it took him about 6 years to get off the schneid. First, he had to replace DeMarco with a more sympathetic Director, Congressman Mel Watt. Two years later, a new program.
But, it is far from a uuuuge program. It affects about only 33,000 significantly underwater mortgages according to reports in Housingwire and National Mortgage News. That’s the bad news. The good news is that NJ has the highest share of properties eligible.
Here’s the deal. The property must be owner occupied, and you have to have been behind at least 90 days as of March 1, 2016. So, no strategic defaults. Fannie or Freddie have to either own the loan or have guaranteed it. The outstanding principal balance must be no more than $250,000 and the mark to market loan to value (MTMLTV) must exceed 115%.
You still capitalize earnings, reduce the interest rate and extend the loan. But the last step is that if the MTMLTV is greater than 115%, you reduce the MTMLTV to 115%. That amount according to one article is forgiven. According to another article, it is put in a suspense account at 0% interest, and if the borrower makes all required payments for a given amount of time, that amount is forgiven.
What the GSE’s had was a principal forbearance program. Same calculations which should lead to the same monthly payment. However, the lesser of 30% of the unpaid principal balance or amounts greater than 115% of MTMLTV is put in a suspense account with 0% interest. So, say that amount is $30,000. It stays in the suspense account until you pay off the loan, sell or refinance. Then, you have to pay back the $30,000 as a balloon payment.
Some may say, too little too late. But, I say it is worth looking into.
If you think you fit into this program or what like to see if you do (or if you are looking for a mortgage modification) contact us at kh@kevinhanlylaw.com.
Posted by kevin on May 1, 2016 under Foreclosure Blog |
The NJ Court Rules require that before an attorney submits a document to the court in any lawsuit, he or she must do a reasonable inquiry to ascertain that the factual allegations contained in the document have evidentiary support. In other words, you have to do your due diligence. The rules dealing with foreclosure complaints go a little further. The require the attorney to communicate with an employee of the lender or servicer who confirms that accuracy of the contents of the complaint, and, on top of that, the attorney must check the file to confirm that the employee is telling the truth. Sounds great on paper, but in practice in NJ, you have to wonder how seriously this obligation is taken.
The Consumer Financial Protection Bureau (CFPB) is an independent agency of the United States government responsible for consumer protection in the financial sector. Its jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, other financial companies operating in the United States. It appears that the CFPB takes the due diligence requirements seriously.
In its April 25, 2016 press release, the CFPB stated that it entered into a consent order with NJ debt collection law firm Pressler & Pressler, LLP, two of its principal partners, and New Century Financial Services, Inc., a NJ based debt buyer, to stop churning out unfair and deceptive debt collection lawsuits based on flimsy or nonexistent evidence. The consent orders bar the companies and individuals from illegal practices that can deceive or intimidate consumers, such as filing lawsuits without determining if debts in question are valid. The orders also require the firm and the named partners to pay $1 million, and New Century to pay $1.5 million to the Bureau’s Civil Penalty Fund.
More specifically, the CFPB alleged that Pressler & Pressler used an automated claim-preparation system and non-attorney support staff to determine which consumers to sue. Attorneys generally spent less than a few minutes, sometimes less than 30 seconds, reviewing each case before initiating a lawsuit. This process allowed the firm to generate and file hundreds of thousands of lawsuits against consumers in New Jersey, New York, and Pennsylvania between 2009 and 2014. The CFPB contend that the respondents violated the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits unfair and deceptive acts or practices in the consumer financial marketplace.
On the other side of the issue, insideARM.com defended vigorously the actions of the law firm and lender, and pointed out that the settlement ultimately involves no consumer redress, no invalidation of judgments and no findings of the use of improper affidavit practices. That article, however, forgot to mention the $2.5 million in penalty payments to the CFPB’s Civil Penalty Fund made by Pressler and Pressler and New Century. Oversight? Or just a puff piece for the so-called “industry”
Will the courts follow the ruling of the CFPB and allow meaningful discovery on due diligence, or just accept without scrutiny the word of lender’s counsel that they did everything according to Hoyle. We shall see.
