“Shadow Foreclosures” 8 Million More Foreclosures May Be Waiting: ABC NEWS

Boy have these Banks really shot themselves! This is what WILL destroy AMERICA!

Foreclosure Glut: Is ‘Shadow Inventory’ Really a Threat?

Millions of New Foreclosures Will Stifle, Not Crush Housing Market, Say Economists

June 7, 2010

Every once in a while, the term “shadow inventory” makes it into the business headlines. Invariably, stories warn of a looming flood of foreclosures that will drag the housing market down as soon as homeowners begin to feel optimistic again.

But what is shadow inventory — and is it really such a big threat?

Different experts have different definitions. Some only include homes that have already been repossessed by banks and are awaiting distressed sales. Others include those whose owners are long-overdue on mortgage payments, while others still count homes whose owners would like to sell but are waiting for conditions to improve.

8 Million More Foreclosures May Be Waiting

“The definition of shadow inventory has gotten out of control,” says Rick Sharga, senior vice president at RealtyTrac, an online market for distressed homes.

As a result, estimates of homes in the shadows vary widely between 2 million and 8 million. By comparison, approximately 5.5 million homes are expected to change hands this year, of which about a third are in some kind of distress.

High estimates usually include include repossessed homes that have not yet been listed for sale, homes that have been moved from the delinquent bucket and into foreclosure, and homes that are more than 60 days delinquent.

“Theoretically you could say up to 7 million homes are in the pipeline, but not all of them will go into the market and if even if they do, not all of them will hit at once,” says Sharga. Given the current pace of sales, Sharga believes shadow inventory could be cleared by the end of 2013, at which point the housing market can begin a real recovery.

Shadow Inventory Can Be Lethal

The problem with shadow inventory is that it does not simply represent additional supply. It’s supply of the worst kind: distressed homes that are often in hard-hit regions, often in a state of disrepair. Homes in foreclosure have more power to drag down real estate prices and keep them depressed for years to come.

“If you can buy a cheap foreclosed home next door to a normal home, many people will choose to buy the discounted home,” says Celia Chen, housing analyst at Moody’s Economy.com. She estimates that 4.6 million homes are currently waiting in the shadows, almost a whole year’s worth of housing supply.

Shadow Inventory Stuck In Limbo

Like many other analysts, Chen believes we still have a long way to go before real estate prices begin recovering. Some expect a recovery to begin in the middle of next year, others don’t see it coming for several more years.

There are many reasons that shadow inventory is so difficult to gauge.

For one thing, financial institutions that own distressed mortgages are not saying exactly how many homes they hold. Firms have generally been releasing their supply of distressed homes slowly into the market for fear of crushing prices.

Another problem is that nobody knows exactly how many homes will make it out of the government’s “Home Affordable Modification Program.” Chen estimates that only 45 percent of the 1.2 million loans that are aiming for a modification will actually succeed, while the rest will likely end up in foreclosure.

While these numbers certainly are cause for concern, the good news is that this shadow inventory is unlikely to cause a shock to the system similar to the initial crash.

No Nuclear Event in Housing

“Much as during the arms building between the U.S. and the Soviet Union, neither one ever launched a nuclear attack for fear of causing complete destruction,” says RealtyTrac’s Sharga. “You’re not going to see a nuclear event happen in the housing market either.”

Esmael Adibi, economics professor at Chapman University says shadow inventory is actually a good thing bcause it means that financial institutions – primarily lenders and investors who own the delinquent mortgages – are holding on to the inventory instead of dumping it into the market.

Adibi says financial institutions are not only holding on to their inventory in order to avoid crushing the market, but also because they believe they might get a better deal once prices have recovered slightly.

“Can you imagine if all those homes ended up in the market now?” he says. “Things would be much worse.”

POCKET CHANGE!! BofA’s Countrywide settles with FTC for $108 million

(Reuters) – Bank of America Corp has agreed to pay $108 million to settle government charges that its Countrywide unit, the mortgage lender that became synonymous with risky lending practices, bilked borrowers with misleading and excessive fees.

Housing Market

The Federal Trade Commission said two Countrywide mortgage servicing units deceived cash-strapped homeowners by overcharging them by hundreds or thousands of dollars, sometimes when they were already in bankruptcy.

The alleged activity took place before Bank of America acquired the distressed lender in 2008.

The settlement is a small win for regulators trying to hold to account those who contributed to the deep financial crisis.

The agency called the $108 million settlement one of the largest in an FTC case and the largest in a mortgage servicing case. The FTC has no jurisdiction over banks but does have jurisdiction over deceptive practices by non-bank financial services and products firms.

Countrywide, which was once the nation’s top mortgage lender, “profited from making risky loans to homeowners during the boom years, and then profited again when the loans failed,” said FTC Chairman Jon Leibowitz, noting that some fees during the foreclosure process were marked up more than 400 percent.

Bank of America said in a statement that it agreed to the settlement to void the expense and distraction of litigating the case. There was no admission of wrongdoing.

The FTC said the $108 million, which represents the amount consumers were overcharged, would be used to repay borrowers but could take months to sort out.

“The record-keeping of Countrywide was abysmal,” said Leibowitz. “Most frat houses have better record-keeping than Countrywide.”

In May, Countrywide agreed to a $624 million settlement of a class action lawsuit accusing it of misleading investors about its lending practices. The case was led by several pension funds, including the New York State Common Retirement Fund, that state’s $129.4 billion public pension fund, and five New York City pension funds.

Once the largest U.S. mortgage lender, Countrywide and its long-time chief executive, Angelo Mozilo, became known for risky lending practices that helped fuel the U.S. housing boom and subsequent bust.

Countrywide nearly collapsed as credit markets tightened, before Bank of America agreed to buy it in January 2008 in a stock deal valued at about $4 billion.

Mozilo and two other former Countrywide executives remain defendants in a U.S. Securities and Exchange Commission civil fraud lawsuit.

The SEC alleges that Mozilo hid from investors the deteriorating prospects of Countrywide, and conducted insider trading by entering a systematic stock selling plan in late 2006, knowing that the mortgage lender’s prospects would worsen.

The SEC claimed Mozilo violated insider trading rules in generating a $139 million profit by exercising stock options in 2006 and 2007.

It said the exercises came after he admitted in an email to colleagues that Countrywide was “flying blind” as to the quality of its loans.

Sen. Charles Schumer, a New York Democrat and a member of the panel working out final wording on a comprehensive overhaul of Wall Street, called the FTC settlement “a major breakthrough that closes one of the ugliest chapters of the entire subprime mortgage crisis.”

“Anyone who believes the blame for the housing crisis rests with borrowers should read this settlement and learn just how shameless these lenders were during these years,” Schumer said.

(Additional reporting by Diane Bartz in Washington and by Joe Rauch in Charlotte; editing by John Wallace and Gerald E. McCormick)

BOMBSHELL – JUDGE ORDERS INJUNCTION STOPPING ALL FORECLOSURE PROCEEDINGS BY BANK OF AMERICA; RECONTRUST; HOME LOAN SERVICING; MERS ET AL

Atomic Bomb

Via: 4ClosureFraud

(St. George, UT) June 5, 2010 – A court order issued by Fifth District Court Judge James L. Shumate May 22, 2010 in St. George, Utah has stopped all foreclosure proceedings in the State of Utah by Bank of America Corporation, ;

Judge James L. Shumate

Recontrust Company, N.A; Home Loans Servicing, LP; Bank of America, FSB;http://www.envisionlawfirm.com. The Court Order if allowed to become permanent will force Bank of America and other mortgage companies with home loans in Utah to adhere to the Utah laws requiring lenders to register in the state and have offices where home owners can negotiate face-to-face with their lenders as the state lawmakers intended (Utah Code ‘ 57-1-21(1)(a)(i).). Telephone calls by KCSG News for comment to the law office of Bank of America counsel Sean D. Muntz and attorney Amir Shlesinger of Reed Smith, LLP, Los Angeles, CA and Richard Ensor, Esq. of Vantus Law Group, Salt Lake City, UT were not returned.

The lawsuit filed by John Christian Barlow, a former Weber State University student who graduated from Loyola University of Chicago and receive his law degree from one of the most distinguished private a law colleges in the nation, Willamette University founded in 1883 at Salem, Oregon has drawn the ire of the high brow B of A attorney and those on the case in the law firm of Reed Smith, LLP, the 15th largest law firm in the world.

Barlow said Bank of America claims because it’s a national chartered institution, state laws are trumped, or not applicable to the bank. That was before the case was brought before Judge Shumate who read the petition, supporting case history and the state statute asking for an injunctive relief hearing filed by Barlow. The Judge felt so strong about the case before him, he issued the preliminary injunction order without a hearing halting the foreclosure process. The attorney’s for Bank of America promptly filed to move the case to federal court to avoid having to deal with the Judge who is not unaccustomed to high profile cases and has a history of watching out for the “little people” and citizen’s rights.

The legal gamesmanship has begun with the case moved to federal court and Barlow’s motion filed to remand the case to Fifth District Court. Barlow said is only seems fair the Bank be required to play by the rules that every mortgage lender in Utah is required to adhere; Barlow said, “can you imagine the audacity of the Bank of America and other big mortgage lenders that took billions in bailout funds to help resolve the mortgage mess and the financial institutions now are profiting by kicking people out of them homes without due process under the law of the State of Utah.

Barlow said he believes his client’s rights to remedies were taken away from her by faceless lenders who continue to overwhelm home owners and the judicial system with motions and petitions as remedies instead of actually making a good-faith effort in face-to-face negotiations to help homeowners. “The law is clear in Utah,” said Barlow, “and Judge Shumate saw it clearly too. Mortgage lender are required by law to be registered and have offices in the State of Utah to do business, that is unless you’re the Bank of America or one of their subsidiary company’s who are above the law in Utah.”

Barlow said the Bank of America attorneys are working overtime filing motions to overwhelm him and the court. “They simply have no answer for violating the state statutes and they don’t want to incur the wrath of Judge Shumate because of the serious ramifications his finding could have on lenders in Utah and across the nation where Bank of America and other financial institutions, under the guise of a mortgage lender have trampled the rights of citizens,” he said.

“Bank of America took over the bankrupt Countrywide Home Loan portfolio June 3, 2009 in a stock deal that has over 1100 home owners in foreclosure in Utah this month alone, and the numbers keep growing,” Barlow said.

The second part of the motion, Barlow filed, claims that neither the lender, nor MERS*, nor Bank of America, nor any other Defendant, has any remaining interest in the mortgage Promissory Note. The note has been bundled with other notes and sold as mortgage-backed securities or otherwise assigned and split from the Trust Deed. When the note is split from the trust deed, “the note becomes, as a practical matter, unsecured.” Restatement (Third) of Property (Mortgages) § 5.4 cmt. a (1997). A person or entity only holding the trust deed suffers no default because only the Note holder is entitled to payment. Basically, “[t]he security is worthless in the hands of anyone except a person who has the right to enforce the obligation; it cannot be foreclosed or otherwise enforced.” Real Estate Finance Law (Fourth) § 5.27 (2002).

*MERS is a process that is designed to simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans. www.mersinc.org

Fannie Mae to Start Foreclosure Process on Reverse Mortgage Defaults

…are you sure about that?

June 6th, 2010  |  by Neil Published in Reverse Mortgage Daily

Against the backdrop of a recent New York Times story about borrowers in the forward mortgage world electing to stop paying their debt – and living sometimes for years cost-free – concerns in the reverse world about prolonged defaults is drawing more attention, and some official government action.

To wit: Fannie Mae (NYSE:FNM) reportedly has been reminding reverse servicers they must follow HUD guidelines regarding tax and insurance defaults for HECM customers. In the past, Fannie has elected not to have servicers follow these established guidelines – that is, beginning foreclosure when taxes, insurance or maintenance are not current – because of so-called “headline risk.”

 Now, however, servicers have been instructed to submit troubled loans to HUD to get approval to start the foreclosure process. Once approved, a demand letter is sent to the borrower(s) who has six months to cure the default. After that, the servicer must start the foreclosure process – one exception is when a borrower refuses to take necessary curative action, at which time the foreclosure process begins immediately.

“Tax and insurance defaults have gone up dramatically in the last few years,” says one servicer, who believes reactive changes now “would turn us into collection agencies.”

At the moment, the industry is waiting for HUD to issue a promised Mortgagee Letter regarding tax and insurance (T&I) defaults. An agency spokesman told RMD: “FHA is working closely with Fannie Mae and servicers of reverse mortgages to develop a plan to notify seniors of the delinquency and provide the necessary support and outreach to these seniors to find solutions to bring delinquent taxes and insurance current.”

Considering low default balances

According to Ryan LaRose, chief operating officer of Celink – a reverse mortgage servicer – an industry committee “presented HUD with a white paper awhile back that included industry recommendations for how to deal with the existing T&I default population. It included an analysis of the loan’s LTV [loan-to-value] and took into consideration those borrowers with a low default balance and put them into a ‘monitoring’ program,” according to LaRose, who is a member of that committee.

“If FHA is smart,” says another servicer, “they will approve foreclosing on high claim amounts because [if they don’t] the situation will come back to haunt us,” he warns, adding: “Fannie wants more loans assigned to HUD.” What’s missing in all this, he says, “is that the industry has no real loss mit program for seniors.”

In the aggregate, T&I defaults are relatively small. HUD’s Erica Jessup puts the current number at less than 2 percent of all reverse mortgages extant. Cheryl MacNally, national sales manager, senior products group, Wells Fargo Home Mortgage, puts a finer point on those numbers: “If we have someone in T&I default for only $500, we don’t want to foreclose [especially] if they have a 700 FICO score – we don’t torture them” with foreclosure threats. However, MacNally predicted that as more full draws are taken on reverse mortgage balances, “T&I defaults will increase.”

As to the aforementioned headline risk, John LaRose, CEO of Celink, expresses concern “over the possibility of thousands of senior homeowners being placed into foreclosure by the end of the year. The timing could not be worse,” he declared, because “those who have a proclivity for making negative comments about our industry could be energized to be even more aggressive in their attacks on us,” said LaRose.

Written by Neil Morse

CALIFORNIA: NEW BILL SB 1275 May allow homeowners to REVERSE FORECLOSURE SALES due to SERVICER’S ERRORS

Carrie Bay 6/4/2010 DSNEWS

The California Senate approved a new foreclosure bill on Thursday with a 21 to 12 vote and sent it on to the Assembly for review. The legislation lays out two major provisions intended to deter lax behavior on the part of servicers and prevent avoidable foreclosures in the state, which continues to post one of the nation’s highest foreclosure rates.

The bill would provide a means of recourse to homeowners whose homes were lost to foreclosure due to serious servicer errors, and it would prohibit servicers from starting the foreclosure process until a homeowner has received a final decision on their modification.

According to a statement from the Center for Responsible Lending (CRL), confusion and errors that cost Californians their homes, are devastating to the state’s housing market, but are avoidable.

If a borrower’s home is sold in foreclosure due to servicer error, there is currently no means by which to seek recourse. The bill, SB 1275, authored by Sen. Mark Leno (D-San Francisco) and Senate President Pro Tem Darrell Steinberg (D-Sacramento), seeks to change this by providing recourse through what is known as a private right of action.

This would allow eligible homeowners to seek limited damages which are directly related to the severity of the servicer’s errors, or, in some cases, would allow the homeowner to reverse the foreclosure sale.

During earlier committee hearings for SB 1275, servicers acknowledged that confusion and errors are commonplace. According to CRL, Bank of America executive Jack Schackett even admitted during a conference call that they “have not handled [their] customers to the standards Bank of America is accustomed to.”

“It’s unacceptable that when servicers lose faxes and lose payments, some Californians lose their homes,” said Caryn Becker, policy counsel with the CRL California office. “At nearly 1 million foreclosures and counting, we need to prevent every unnecessary foreclosure we can.”

Speaking in support of the bill’s passage, CRL said homeowners who have been wronged deserve the opportunity to make it right, but the organization says the legislation continues to face some opposition from Assembly members who oppose allowing California homeowners to pursue claims against their lenders and servicers.

SB 1275 would also prohibit servicers from foreclosing on homeowners who have requested modifications until a decision has been made, and the homeowner has been notified.

CRL says currently, servicers are initiating the foreclosure process even when borrowers are working to reach a resolution, including when homeowners are following all the rules to seek a loan modification, or are already making payments on a trial modification.

“Simple fairness dictates that no one should lose their home while they are in the middle of trying to save it,” said Paul Leonard, director of the California office of the Center for Responsible Lending. “A foreclosure that starts because a servicer’s left hand doesn’t know what the right hand is doing is the most preventable foreclosure of all.”

SB 1275 will be heard by the Assembly Banking Committee before it goes to the full Assembly for a vote. Assembly members are currently considering a separate bill, AB 1639, that would mandate foreclosure mediation through a new Facilitated Mortgage Workout (FMW) program, which would require lenders to meet with delinquent borrowers to try and devise an alternative plan of action before proceeding with foreclosure.

U.S. Banks’ Foreclosure Holdings Increased 12.5% in Q1: Report

BY: CARRIE BAY 6/4/2010 DSNEWS

Foreclosed property held by U.S. banks increased 12.5 percent to $41.5 billion during the first quarter of this year, according to a recent analysis by SNL Financial, a financial market research firm out of Charlottesville, Virginia.

The company says banks’ aggregate foreclosed inventory is up from $36.9 billion at year-end 2009, and $11.7 billion in the first quarter of 2008.

SNL data shows that other real estate owned, or OREO(which essentially means the same as REO and is defined as real property owned by a banking institution, most frequently the result of a borrower’s default and foreclosure), represented 0.3 percent of banks’ assets in the first quarter of 2010, up from 0.1 percent in the comparable period of 2008.

According to SNL analyst Andrew Schukman, during the first three months of this year, one-to-four unit family properties in the process of foreclosure but not yet to OREO, or REO, status increased 9.1 percent to $78.6 billion. With these repossessions coming down the pipeline, Schukman says OREO as a percentage of banks’ assets will likely continue to grow as additional properties complete foreclosure.

While properties continue to grow on banks’ balance sheets, the type of real estate being reclaimed has changed. According to SNL data, construction and land development properties represented nearly 40 percent of total OREO in the United States as of March 31, up from 24.3 percent in the first quarter of 2008.

Meanwhile, one-to-four family OREO fell to 28.4 percent of total OREO as of March 31, compared to 44.5 percent in the first quarter of 2008.

Other types of OREO include commercial real estate, which made up 18 percent of OREO in the first quarter; foreclosed Ginnie Mae property, which comprised 6.4 percent; multifamily, making up 6.1 percent; and farmland and foreign office, each comprising less than 1.0 percent.

FREDDIE MAC WARNS ABOUT SHORT SALE FRAUD PARTICIPATION

Attorneys & Realtors especially need to listen up to this…

For a perfect example of this, here is a story about the Short Sale Kid in Florida who has raised many questions.

What is a short payoff?

A short payoff occurs when a borrower cannot pay the mortgage on his or her property and is permitted to sell the property for less than the total amount due, at a loss to the lender, investor and/or insurer. All parties consent to the mortgage being paid “short,” primarily because the property does not need to go through foreclosure. Please note that many legitimate short payoffs take place in the real estate market.

What is short payoff fraud?

According to a member of Freddie Mac’s Fraud Investigation Unit, a slight variation of our general definition of mortgage fraud also defines short payoff fraud – “Any misrepresentation or deliberate omission of fact that would induce the lender, investor or insurer to agree to the terms of a short payoff that it would not approve had all facts been known.” Misrepresentations in these schemes may include the buyer of the short payoff property, a subsequent transaction at a higher price, and/or the selling borrower’s hardship reason used to qualify for the short payoff. In many instances, the short payoff fraud will involve a “facilitator,” engaged by either the listing agent or the selling borrower, to assist with negotiating the transaction.

How is short payoff fraud committed?

There are many variations of short payoff fraud. The example below is just one way this type of mortgage fraud can occur.

  • A seller (delinquent borrower) owes $100,000 on a property that is worth $80,000.
  • The short payoff facilitator negotiates with the bank to accept a $70,000 offer to purchase the property. In several instances, Freddie Mac has seen that this offer will be made directly by the facilitator or through an entity under his/her control.
  • The lender/investor accepts the offer for $70,000.
  • The facilitator neglects to disclose to the lender/investor that there is an outstanding offer between the facilitator and a second end-buyer for $95,000.
  • Both transactions close on the same day with the net difference being pocketed by the facilitator and increasing the lender/investor’s net losses.

At first glance, this may look like a legitimate short payoff. However, in this example, the fraud is the failure to disclose the second, higher offer. The facilitator is willfully withholding important information the same way a scam artist would, and the lender does not realize they are walking into a premeditated short payoff fraud scheme. Because the facilitator is deliberately withholding the higher offer, Freddie Mac also experiences a larger than necessary loss on this sale.

Short Payoff Fraud Prevention Red Flags

Remain alert to the following flags, which may suggest short payoff fraud:

  • Sudden borrower default, with no prior delinquency history, and the borrower cannot adequately explain the sudden default.
  • The borrower is current on all other obligations.
  • The borrower’s financial information indicates conflicting spending, saving, and credit patterns that do not fit a delinquency profile.
  • The buyer of the property is an entity.
  • The purchase contract has an option clause to resell the property.

Short Payoff Fraud Prevention

The following protective measures are recommended in order to detect and mitigate the severity of short payoff fraud:

  • Review all short payoff documentation carefully, including the sale contract. This helps determine if there is an option clause to resell the property at a higher price without notifying the lender.
  • Draft a short payoff arm’s-length affidavit/disclosure notice for all parties involved in the short payoff to help avoid any hidden contracts, or side agreements. The parties involved should be, but are not limited to: the buyer, seller, listing agent, selling agent, short payoff negotiator(s)/facilitator(s), and closing agent.
  • Solicit information from your borrower.
  • Inquire if the borrower is aware of any other parties involved with the short payoff other than real estate professionals.
  • Is there a short payoff negotiator/facilitator involved?
  • Is the borrower aware of any other purchase contracts on the property?
  • Require an executed and signed IRS Form 4506-T, Request for Transcript of Tax Return,from each borrower and process the form to determine if the borrower’s qualifying income is accurate.
  • Order an interior Broker Price Opinion (BPO) and review all other BPOs that have been ordered on the property (drive-bys and full interiors) to establish a high/low value variance. The BPOs should include a past and present Multiple Listing Service (MLS) listing history, as this will determine if the property was relisted in MLS while the short payoff is being processed.
  • Review the Freddie Mac Exclusionary List to see if the parties to the short payoff are on the list. Seller/Servicers can access the Exclusionary List via the selling system, MIDANET®, MultiSuite®, and Loan Prospector®.
  • Immediately notify Freddie Mac if you are aware of a second purchase contract for a higher price.

Important Freddie Mac fraud prevention resources

Leverage the following resources for more information on dealing with fraud:

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