Banks Have Recognized 60% of Expected Loan Charge-Offs: Moody’s

Gee, and here I thought that the Federal Reserve bought $1.4-$2 *trillion* of them! Let alone Lehman and its 50 billion in subprime mortgages that it “hid” (and what about all the other TARP/Federal Reserve member banks??)

BY: CARRIE BAY 6/3/2010 DSNEWS

n its latest quarterly report on credit conditions of the U.S. banking system, Moody’s Investors Service says banks’ asset quality issues are “past the peak” butcharge-offs and non-performers continue to eat away at profitability and sheer fundamentals.

Based on Moody’s market data, banks’ non-performing loans stood at 5.0 percent of total loan assets at March 31, 2010.

Moody’s says U.S. rated banks have already charged off or written-down $436 billion of loans in 2008, 2009, and the first quarter of 2010. That leaves another $307 billion to reach the rating agency’s full estimate of $744 billion of loan charge-offs from 2008 through 2011.

In aggregate, the banks have recognized 60 percent of Moody’s estimated total charge-offs and 65 percent of estimated residential mortgage losses, but only 45 percent of projected commercial real estate losses.

In the first quarter of this year, the banking industry’s collective annualized net charge-offs came to 3.3 percent of loans, versus 3.6 percent of loans in the fourth quarter

of 2009, Moody’s said. Despite two consecutive quarters of improvement in charge-offs, the ratings agency notes that the figures still remain near historic highs, dating back to the Great Depression.

According to Moody’s analysts, the decline in aggregate charge-offs was driven by commercial real estate improvement, which “we believe is likely to reverse in coming quarters,” they said in the report. A similar commercial real estate decline was experienced in the first quarter of 2009 before charge-offs accelerated through the rest of the year.

“The return to ‘normal’ levels of asset quality will be slow and uneven over the next 12 to 18 months,” said Moody’sSVP Craig Emrick.

But Emrick added that “Although remaining losses are sizable, they are beginning to look manageable in relation to bank’s loan loss allowances and tangible common equity.”

U.S. banks’ allowances for loan losses stood at $221 billion as of March 31, 2010, which is equal to 4.1 percent of loans, Moody’s reported. Although this can be used to offset a sizable portion of remaining charge-offs, banks will still require substantial provisions in 2010, the agency said.

Moody’s says its negative outlook for the U.S. banking system is driven by asset quality concerns and effects on profitability and capital. The agency’s ratings outlook is also influenced by the potential for a worse-than-expected macroeconomic environment, Moody’s said.

“More severe macroeconomic developments, the probability of which we place at 10 percent to 20 percent, would significantly strain U.S. bank fundamental credit quality,” Moody’s analysts wrote in their report.

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TRYING TO FORECLOSE on HOMEOWNER MORTGAGE with a “BORROWERS PROTECTION PLAN”: JONES v. BANK OF AMERICA, N.A.

JONES v. BANK OF AMERICA, N.A.

Kevin R. Jones, Plaintiff,

v.

Bank of America, N.A., Defendant.

No. CV-09-2129-PHX-JAT.

United States District Court, D. Arizona.

June 1, 2010.

ORDER

JAMES A. TEILBORG, District Judge.

Pending before the Court is Defendant Bank of America’s Partial Motion to Dismiss (Doc. #39). The Court has reviewed the parties’ filings and now rules on the Motion. For the reasons that follow, the Motion is denied as to Counts Three, Five, and Six, and granted as to Counts Two and Four. Count Four is dismissed without prejudice.

I. Background

Plaintiff alleges the following facts in support of his claims. In June and July 2006, Plaintiff Kevin Jones took out two mortgage loans on his residence located in Phoenix, Arizona. (Doc. #22, ¶¶7-8). At the time Plaintiff entered into the loan agreements with Defendant Bank of America, he also enrolled in the optional “Borrowers Protection Plan” (“the Plan”). (Id. at ¶9). The Plan provided that Defendant would cover Plaintiff’s monthly mortgage payments in the event that Plaintiff became disabled or involuntarily unemployed, in exchange for monthly premiums. (Id. at ¶10). On February 2, 2008, Plaintiff was in a car accident which caused him severe permanent injury and disability. (Id. at ¶13). As a result of his disability, Plaintiff was unable to continue working and making his mortgage payments. (Id. at ¶¶14-16). Plaintiff did, however, continue to make his premium payments and the Plan covered Plaintiff’s mortgage payments until “some point in the latter part of 2008 or in 2009.”1 ] (Id. at ¶¶17, 23). Defendant originally scheduled a Trustee sale for Plaintiff’s residence for November 9, 2009. (Id. at 1).

Plaintiff filed his First Amended Complaint on November 16, 2009, alleging breach of contract and tort claims. (Doc. #22). Defendant filed the instant motion on December 14, 2009, seeking to dismiss the tort claims pursuant to Fed. R. Civ. P. 12(b)(6). (Doc. #39).

II. Legal Standard

To survive a Rule 12(b)(6) motion for failure to state a claim, a complaint must meet the requirements of Fed. R. Civ. P. 8(a)(2). Rule 8(a)(2) requires a “short and plain statement of the claim showing that the pleader is entitled to relief,” so that the defendant has “fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). “Without some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirement of providing not only `fair notice’ of the nature of the claim, but also ‘grounds’ on which the claim rests.” Id. at 556, n.3 (citing 5 C. WRIGHT & A. MILLER, FEDERAL PRACTICE AND PROCEDURE §1202, at 94-95 (3d ed. 2004)).

“In determining the propriety of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint to a plaintiff’s moving papers, such as a memorandum in opposition to a defendant’s motion to dismiss.” Schneider v. Cal. Dept. Of Corrs., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998). “The focus of any Rule 12(b)(6) dismissal—both in the trial court and on appeal—is the complaint.” Id.

In deciding a motion to dismiss under Rule 12(b)(6), the Court must construe the facts alleged in the complaint in the light most favorable to the drafter of the complaint and the Court must accept all well-pleaded factual allegations as true. See Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000). Nonetheless, the Court does not have to accept as true a legal conclusion couched as a factual allegation. Papasan v. Allain, 478 U.S. 265, 286 (1986). Although a complaint attacked for failure to state a claim does not need detailed factual allegations, the pleader’s obligation to provide the grounds for relief requires “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (internal citations omitted). Dismissal is appropriate where the complaint lacks either a cognizable legal theory or facts sufficient to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988); Weisbuch v. County of L.A., 119 F.3d 778, 783 n.1 (9th Cir. 1997).

III. Count Two: Negligence

In Plaintiff’s Amended Complaint, Plaintiff alleges that Defendant owed a duty “to ensure that plaintiff’s contractual rights would be protected, and specifically that the Borrowers Protection Plan contractual benefits be honored.” (Doc. #22, ¶29). Plaintiff alleges that Defendant breached this duty and that Plaintiff was emotionally injured when the Defendant breached the Borrowers Protection Plan agreement. (Id. at ¶7). Plaintiff appears to be alleging that Defendant was negligent in breaching the contract. However, Plaintiff does not cite any legal authority indicating that Arizona recognizes a claim for negligent breach of contract, nor is the Court aware of any such authority. Seeing no cognizable legal theory to support this claim, the Motion to Dismiss Count two is granted.2 ] See Balistreri, 901 F.2d at 699; Weisbuch, 119 F.3d at 783 n.1.

IV. Count Three: “Bad Faith/Breach of Contract”

Plaintiff alleges that Defendant breached the duty of good faith and fair dealing (“bad faith”). “Arizona law implies a covenant of good faith and fair dealing in every contract.” Wells Fargo Bank v. Ariz. Laborers, Teamsters and Cement Masons Local No. 395 Pension Trust Fund, 38 P.3d 12, 28 (Ariz. 2020). In the context of insurance contracts, “the insurance company must act in good faith in dealing with its insured on a claim.” Noble v. Nat’l Amer. Life Ins. Co., 624 P.2d 866, 868 (Ariz. 1981). “The tort of bad faith can be alleged only if the facts pleaded would, on the basis of an objective standard, show the absence of a reasonable basis for denying the claim.” Id.

1. Defendant as Insurer

Defendant is an insurer with respect to the Borrowers Protection Plan. “Tort actions for breach of covenants implied in certain types of contractual relationships are most often recognized where the type of contract involved is one in which the plaintiff seeks something more than commercial advantage or profit from the defendant. When dealing with . . . an insurer, the client/customer seeks service, security, peace of mind, protection or some other intangible.” Rawlings v. Apodaca, 726 P.2d 565, 575 (Ariz. 1986).

Defendant argues that it is a lender and not an insurer. (Doc. #39, 6). This is true with respect to the mortgage loan agreements between Plaintiff and Defendant. However, Defendant created an insurer/insured relationship with Plaintiff, when the parties entered into the Borrowers Protection Plan agreements. Plaintiff alleges that in the Plan Defendant agreed, in exchange for premium payments, to indemnify Plaintiff by making his mortgage and interest payments in the event of certain covered events. (Doc. #22, ¶10). Defendant was thus offering precisely the type of protection and peace of mind described in Rawlings.3 ] Therefore, Defendant acted as an insurer and is subject to the duty of good faith and fair dealing imposed on insurers for purposes of the Borrowers Protection Plan.

2. Analysis of the Bad Faith Claim

Plaintiff has presented sufficient facts for his claim of bad faith to survive a Rule 12(b)(6) analysis. To state a claim for bad faith a plaintiff must offer facts to show “the absence of a reasonable basis for denying benefits of the policy and the defendant’s knowledge or reckless disregard of the lack of a reasonable basis for denying the claim.” Noble, 624 P.2d at 868.

In his Complaint, Plaintiff alleges that on or about June 15, 2006 and July 17, 2006, he and Defendant entered into the Borrowers Protection Plan agreements, which required him to pay monthly premiums in exchange for Defendant’s promise to pay his monthly loan and interest payments in the event of involuntary unemployment or disability. (Doc. #22, ¶¶7-11). Plaintiff further alleges that he made his premium payments as required and that he was in a car accident on February 2, 2008, which made him disabled and unable to work. (Id. at ¶11, 13-15). Plaintiff further alleges that Defendant stopped making his mortgage payments “[a]t some point in the latter part of 2008 or in 2009,” and that Defendant “should have used the Plan to pay all of the principal and interest payments from March, 2008 to the present pursuant to the contract.” (Id. at ¶¶17, 22).

Because Plaintiff alleges that he paid his premiums and became disabled while protected under the Plan, Plaintiff has met the requirement that he plead an absence of a reasonable basis for the denial of his benefits. Furthermore, because Plaintiff alleges that he initially received benefits under the Plan, he has shown that Defendant had knowledge of his disability and unemployment. These facts meet the threshold standard of giving the defendant “fair notice of what the . . . claim is and the grounds upon which it rests.”Twombly, 550 U.S. at 555. Therefore, Defendant’s Motion to Dismiss is denied as to Plaintiff’s bad faith claim.

V. Count Four: Wrongful Foreclosure

The Arizona state courts have not addressed whether they recognize the tort of wrongful foreclosure.4 ] Assuming for purposes of this Order that such a claim exists under Arizona law, for the claim to be ripe, a foreclosure sale must have occurred. See Standard Alaska Prod. Co. v. Schaible, 874 F.2d 624, 627 (9th Cir. 1989) (“A claim is fit for decision if the issues raised are primarily legal, do not require further factual development, and the challenged action is final.”). Here, no foreclosure sale has yet taken place. Therefore, this claim is not ripe for adjudication and Plaintiff’s claim for wrongful foreclosure is dismissed. Should the foreclosure sale occur, Plaintiff may move to amend the complaint to re-assert this claim.

VI. Count Five: Negligent Infliction of Mental Anguish

Arizona law recognizes two types of negligent infliction of emotional distress. The first type “requires plaintiff to: (1) witness an injury to a closely related person, (2) suffer mental anguish manifested as physical injury, and (3) be within the zone of danger so as to be subject to an unreasonable risk of bodily harm created by the defendant.” Pierce v. Casas Adobes Baptist Bhurch, 782 P.2d 1162, 1165 (Ariz. 1989) (en banc).

The second type of claim for negligent infliction of emotional distress arises when the distress results from an injury to the claimant themself. See Monaco v. HealthPartners of S. Arizona, 995 P.2d 735, 738-39 ¶¶ 7-8 (Ariz. App.1999) (holding negligent injection of radioactive material into plaintiff was sufficient to support a claim for negligent infliction of emotional distress). To sustain this type of negligent infliction of emotional distress claim, a plaintiff must show:

(a) [the tortfeasor] should have realized that his conduct involved an unreasonable risk of causing the distress . . ., and (b) from facts known to him should have realized that the distress, if it were caused, might result in illness or bodily harm. Restatement (Second) of Torts, §§ 313 (adopted by Ball v. Prentice, 162 Ariz. 150, 781 P.2d 628, 630 (Ariz. Ct. App.1989)).

Carboun v. City of Chandler, 2005 WL 2408294 at 12.

Moreover, “the Arizona cases and Restatement § 436A make clear that a physical injury, as well as a long-term physical illness or mental disturbance, constitutes sufficient bodily harm to support a claim of negligent infliction of emotional distress.” Monaco, 995 P.2d at 739.

Plaintiff has not alleged the first type of negligent infliction of emotional distress because he has not alleged that he witnessed the injury of another person. However, Plaintiff does allege that he “has been in a state of emotional panic for over one-half year” as a result of Defendant’s threats to foreclose on [his] home loan. (Doc. #22 at ¶41). Plaintiff further alleges facts that show Defendant knew of Plaintiff’s physical disability5 ] and was indifferent to Plaintiff’s “rights and peace of mind” (Id. at ¶50). Construing the facts pleaded in Plaintiff’s Amended Complaint liberally, this claim is sufficiently pleaded to survive a Rule 12(b)(6) motion to dismiss. Defendant’s Motion is thus denied as to Plaintiff’s claim of negligent infliction of emotional distress (labeled “mental anguish”).

VII. Count Six: Intentional Infliction of Mental Anguish

To prove a claim of intentional infliction of emotional distress under Arizona law, Plaintiff must show that: 1) Defendant engaged in extreme and outrageous conduct; 2) Defendant either intended to cause emotional distress or recklessly disregarded the near certainty that emotional distress would result from the conduct; and 3) Plaintiff actually suffered emotional distress because of Defendant’s conduct. Nelson v. Phoenix Resort Corp., 888 P.2d 1375, 1386 (Ariz. Ct. App. 1994).

Plaintiff has alleged that Defendant attempted to foreclose on his home after failing to honor its obligations under the Borrowers Protection Plan. (Doc. #22, ¶¶46-47). Plaintiff also claims that Defendant continued to contact Plaintiff through threatening letters and phone calls after Plaintiff’s counsel asked Defendant to direct communications to him instead. (Doc. #22, ¶¶41-42). Plaintiff asserts that these actions were in “conscious disregard of [his] rights and . . . peace of mind.” (Doc. #22, ¶50). Plaintiff further alleges that Defendant’s conduct has caused him to be “in a state of emotional panic for over one-half year.” (Doc. #22, ¶48). Since Plaintiff is only required to provide a “short and plain statement of the claim,” and need not provide detailed factual allegations, these facts are sufficient to give Defendant “fair notice of what the . . . claim is and the grounds upon which it rests.” See Twombly, 550 U.S. 544, 555 (2007). Defendant’s Motion to Dismiss is thus denied as to Plaintiff’s claim of intentional infliction of emotional distress (labeled “mental anguish”).

Accordingly,

IT IS ORDERED that Defendant’s Motion to Dismiss (Doc. #39) is GRANTED as to Counts Two and Four of the Complaint, and that Count Four is dismissed without prejudice.

IT IS FURTHER ORDERED that Defendant’s Motion to Dismiss (Doc. #39) is DENIED as to Counts Three, Five, and Six of the Complaint.

This copy provided by Leagle, Inc.

Foreclosure has oft-unforeseen risk: Lawsuits from Lenders

FORT LAUDERDALE, Fla. – June 3, 2010 – Before Larry Thomas unloaded his Pompano Beach, Fla., home last fall for a fraction of what he paid, he cut a deal that will keep him from worrying about a huge debt hanging over his head.

Thomas insisted that his lender, American Home Mortgage Servicing, agree not to come after him for the estimated $174,000 he still owed on his two mortgages. “I feel incredible relief,” the 32-year-old restaurant manager said last week. DinSFLA: (Note) The name of the “LENDER”… is actually the “SERVICER”. This is not good as they are NOT the “OWNER or the HOLDER” of this loan!!

Others may not be as fortunate.

Lenders will file a tidal wave of lawsuits against homeowners in the next few years as a way to recoup losses when home sales or foreclosure auctions don’t result in enough money to pay the mortgages in full, real estate and legal analysts say.

“It will be a dramatic problem because the borrowers will not know it’s coming,” said Frank Alexander, a law professor at Emory University in Atlanta.

Laws vary from state to state. In Florida, banks have five years from the date of the sale to file for so-called deficiency judgments and up to 20 years to collect. Lenders can garnish wages or make claims on borrowers’ assets.

Before the housing meltdown, few lenders filed these lawsuits. Foreclosures and short sales – selling for less than the mortgage amount – were relatively rare at the time, and many of the homeowners didn’t have sufficient assets to make it worth the banks’ time and expense.

But following the heady days of the housing boom that spawned millionaire investors seemingly overnight, it’s not uncommon for borrowers to default on mortgages while still holding lucrative investments.

As the next wave of the housing crisis plays out, those most in danger of getting slapped with lawsuits include angry homeowners who ransack properties they’re losing in foreclosure and borrowers who walk away from “underwater” mortgages. In both cases, analysts say, banks will want to discourage other people from such behavior.

More than four in 10 homeowners said they would consider abandoning properties that are underwater, or worth less than the mortgages, according to a national online survey released last week by real estate firms Trulia and RealtyTrac.

Mortgage companies typically won’t sue homeowners who negotiate in good faith or those who default on their loans because of job losses or other unforeseen circumstances, said Anthony Manno, an executive with Steelbridge Real Estate Services. The Miami-based company works with lenders on the resale of foreclosed homes.

Still, borrowers shouldn’t rely on a lender’s verbal commitment, Manno said. “Get something in writing.”

Critics insist that spite will play a role in some of these lawsuits. Lenders deny it.

“We certainly would not do that,” said Russell Greene, president of Grand Bank & Trust of Florida in West Palm Beach. “It’s a business decision – not an emotional decision. It’s very time-consuming to take someone to court.”

Even if lenders don’t pursue the judgments, they could sell mortgage debt to collection agencies at deep discounts. And it will be those debt collectors that will hound borrowers, said Shari Olefson, a Fort Lauderdale real estate lawyer.

“They paid money to be able to hassle you,” she said.

Thomas, the former Pompano Beach homeowner, said he didn’t have money for a downpayment but was approved for 100 percent financing on two loans in spring 2006. He bought a three-bedroom home for $245,000.

Thomas said he soon became responsible for the entire mortgage after his roommate lost his job. That became even more difficult after Thomas took a pay cut.

So he attempted a short sale, eventually finding plenty of prospective buyers interested in a property that had plummeted nearly 70 percent in value. He and American Home Mortgage accepted one offer for $80,000. After closing costs, the lender netted about $71,000, said his Fort Lauderdale lawyer, Joe Kohn.

But before the sale closed, Kohn had American Home Mortgage waive its right to collect on the remaining mortgage debt.

Christine Sullivan, a spokeswoman for the lender, wrote in an e-mail that she can’t discuss Thomas’ case because of privacy issues. But when homeowners seeking short sales demonstrate legitimate hardship, “we provide a full release of liability, and we do not pursue deficiency judgments.”

Some banks say they won’t file a lawsuit, though they aren’t willing to put that in writing, Kohn said.

“I have no choice but to accept that,” he said. “Even when you play by the rules, banks don’t always do what we’d like.”

Under new government guidelines for short sales that took effect this spring, lenders aren’t supposed to hold homeowners responsible for any remaining mortgage debt. But not all short sales fall under the guidelines, while some lenders choose not to implement them, Kohn said.

A forgiven mortgage balance through 2012 is not considered taxable income on a primary residence as long as the debt was used to buy or improve the house. But borrowers who walk away from investment properties risk having to pay federal income taxes on the forgiven amount.

Homeowners who hand their properties back to the bank through so-called deeds in lieu of foreclosure also should make sure they won’t be on the hook for any mortgage debt.

With friends facing deficiency judgments, Thomas said he’s grateful he sought legal advice on how to avoid a lawsuit. He now rents a home west of Boca Raton, but he just found out the owner is in foreclosure.

“I’ve escaped my own problem, only to inherit someone else’s,” Thomas said. “But this is nothing. It’s just a matter of picking up the pieces and moving on to the next rental.”

© 2010 Sun Sentinel, Paul Owers. Distributed by McClatchy-Tribune News Service.

FINALLY!!! Supreme Court of Florida DENIES FORECLOSURE MILLS Ben-Ezra and Katz, P.A.’s Motion for Rehearing and Shapiro and Fishman, LLP’s Motion for Rehearing

via 4ClosureFraud

RE: Verification of Complaints

NO MORE EXCUSES

Supreme Court of Florida

THURSDAY, JUNE 3, 2010
CASE NOS.: SC09-1460 AND SC09-1579
IN RE: AMENDMENTS TO THE FLORIDA RULES OF CIVIL PROCEDURE IN
RE: AMENDMENTS TO THE FLORIDA RULES OF CIVIL PROCEDURE – FORM 1.996
(FINAL JUDGMENT OF FORECLOSURE)

In light of the revised opinion, Ben-Ezra and Katz, P.A.’s Motion for Rehearing and Shapiro and Fishman, LLP’s Motion for Rehearing or Clarification are hereby

DENIED

IN RE: AMENDMENTS TO THE FLORIDA RULES OF CIVIL PROCEDURE

REVISED

MASSIVE RULING TO PROTECT CALIFORNIA HOMEOWNERS FROM NON JUDICIAL FORECLOSURE: MABRY v. THE SUPERIOR COURT OF ORANGE COUNTY‎ CODE 2923.5

From: b.daviesmd6605

PUBLISHED OPINION AT THE APPEALS LEVEL FOR CC 2923.5. IT IS THE LAW. THERE IS A FACT SPECIFIC CAUSE OF ACTION FOR THIS CALIFORNIA CODE. THIS IS A MASSIVE PROTECTION IN CALIFORNIA FOR THE DEVIL DEEDS OF CC2924, NON JUDICIAL FORECLOSURE. MASSIVE POSITIVE FINALLY FOR HOMEOWNERS IN CALIFORNIA.

DO YOU HAVE A FANNIE MAE LOAN?

Fannie Mae Announces its Own Foreclosure Prevention Plan Under HAFA

by AUSTIN KILGORE HousingWire

Tuesday, June 1st, 2010, 5:07 pm

[Update 1: Corrects current cash incentives for Treasury HAFA]

Fannie Mae (FNM: 0.94 -2.08%) announced its version of the Making Home Affordable Foreclosure Alternatives (HAFA) program Tuesday, implementing the program for all conventional mortgages that are held in Fannie’s portfolio, that are part of an mortgage-backed security (MBS) pool with a special servicing option, or that are part of a shared-risk MBS pool for which Fannie Mae markets the acquired property.

The Fannie Mae program takes effect August 1, 2010 and is designed to mitigate the impact of foreclosures on borrowers who are eligible for a loan modification under the Home Affordable Modification Program (HAMP) but were unsuccessful in obtaining one, Fannie said. Like the Treasury Department‘s HAFA program, servicers cannot consider a borrower for HAFA until the borrower is evaluated and eliminated from eligibility for a Making Home Affordable Modification Program (HAMP) workout plan.

Also like the Treasury program, Fannie Mae will offer servicers cash incentives for completed HAFA transactions, $2,200 for short sales and $1,200 for deed-in-lieu of foreclosure agreements. Borrowers are also eligible for $3,000 in incentives.

That’s more than in the Treasury’s HAFA program, where servicers are eligible for $1,500. Under the Treasury program, borrowers receive $3,000. In addition, the investor is also eligible for a maximum of $2,000 incentive.

Participating servicers will be required to report on their Fannie Mae HAFA activities to both Fannie and the Treasury and the program sunsets on December 31, 2012.

After announcing the program in October 2009, Treasury’s HAFA program began in April. The Fannie Mae HAFA program is the latest in a string of programs designed to help borrowers avoid foreclosure. In addition to HAFA and HAMP workouts, Fannie Mae is letting some distressed borrowers stay in their homes as renters, under the deed for lease (D4L) program.

Under D4L, the homeowner-turned-renter is required to pay fair market rent to stay in their home for up to 12 months. The renter must have enough income to sustain a 31% income-to-rent ratio and rental payments are not subsidized by Fannie Mae, but could include renters eligible for Section 8 payments.

Also, in March 2010, Fannie Mae instructed its servicers to consider an “alternative modifications” for all mortgages that did not qualify for a permanent conversion under HAMP. That “Alt Mod” program, which sunsets on August 31, 2010, is similar to HAFA.

Write to Austin Kilgore.

The author held no relevant investments.

Debt collectors can come calling years after a mortgage default

If Bankruptcy is in the future this is a good reason why to wait to file Last Minute!

IT IS IMPORTANT TO LIST THE “REAL” CREDITOR/LENDER/INVESTORS!

The banks have plans… YOU should too!

PIN THEM DOWN!

By Jim Wasserman The Washington Post
Saturday, March 27, 2010

Homeowners defaulting on mortgages today may be surprised to learn years from now that they still owe thousands of dollars — and that a collection agency is coming after them to get it.

That’s because lenders have been quietly selling second mortgages and home-equity lines left unpaid after foreclosures and short sales. The buyers: collection agencies, which in some states have years to make a claim.

If they win court judgments, these collectors could have years to pursue borrowers with repayment plans, and even to garnish their wages, said Scott CoBen, a Sacramento bankruptcy attorney.

“The only relief a consumer will have is entering into a debt-negotiating plan or filing for bankruptcy,” said Sylvia Alayon, a vice president with the Consumer Mortgage Audit Center. The firm provides mortgage analysis to lenders, advocacy groups and attorneys.

The phenomenon suggests an ominous, looming echo of the recent real estate collapse. As debt collectors seek at least partial repayment of millions of dollars in unpaid home loans, some say renewed financial stresses on tens of thousands of consumers could dampen economic recovery.

“I think there will be a lot of unhappy people when it hits,” said CoBen. “We saw this in the ’90s. This is not really new. Just when you think you’re back on your feet, you’re making money and the economy’s good, they hit you with this.”

Alayon said most people are so stressed out and exhausted by trying to save their homes now that they are unaware they could face another hit later. And many who are losing homes don’t get the advice necessary to prevent future fallout, say loan counselors at nonprofit organizations.

“You’ve got tens of thousands of people in California who have this hanging over their heads who don’t even know it,” said Scott Thompson, principal at for-profit Mortgage Resolution Services in California. He fears a new wave of bankruptcies might affect people just starting to recover from losing their homes.

“So many of these are people with 750 or 800 credit scores who made a bad decision,” said Thompson. “Or they’re people who suffered income cuts. These are people, in terms of the economy, whom we need to participate.” But an entire industry is gearing up to buy their debt at deep discounts and collect what it can, Alayon said.

“It’s a big business, and investors are coming out of the woodwork. It’s a very lucrative business,” she said. Real estate insiders and financial players know it as “scratch and dent.” One of the biggest players in the business, Texas-based Real Time Resolutions, did not respond to an inquiry on the subject from McClatchy Newspapers. Neither did Bank of America, which holds many defaulted loans made by its Countrywide affiliate during the real estate boom.

Banks made many “second-lien” loans, including those used to finance 20 percent down payments during the housing boom. A separate category of “seconds” includes home-equity loans and home-equity lines of credit. Nationally, about 3.4 percent of those loans are currently delinquent, according to Foresight.

Owners are generally, but not always, on the hook for the second loans left over from a foreclosure or short sale. Most investor mortgages, too, leave the borrower liable for potential unpaid debt.

In many short sales, experienced real estate agents or attorneys can negotiate away debt obligations for the second-lien loan. But many inexperienced borrowers don’t know that, and they sign final-hour agreements giving lenders the right to pursue them later.

“Seek advice,” counseled Doug Robinson, spokesman for national nonprofit mortgage counselor NeighborWorks America. He said nonprofit counselors can help.

“Often when you work with a real estate agent, they’re not really equipped to handle the repercussions. They’re set up to make the sale,” he said.

A new Obama administration short-sale program aims to prevent banks that hold second-lien loans from pursuing collections from homeowners after the short sale. It goes into effect April 5 and works this way: Sellers will receive notice that their servicer has steered part of the sales proceeds to secondary lien holders “in exchange for release and full satisfaction of their liens.” But this release would apply only to short sales done for people through the Home Affordable Foreclosure Alternatives program.