California Passes Comprehensive Regulations in Favor on Homeowners — But is it Enough?

It’s not often that we can say lawmakers actually did something to help homeowners, but here we are — California legislators passed a comprehensive bill that helps homeowners out when they’re facing off against their lenders, and Gov. Jerry Brown is expected to sign the bill into law.

It would allow lawsuits in the event the banks are caught robo-signing, or the mass approval of foreclosures without following proper procedures. (Banks have paid out $25 billion and reached agreements with 49 states because of past robo-signing grievances.) The bill also prevents banks from moving forward with foreclosures against borrowers while they’re trying to negotiate.

If negotiations are rejected, the bank will have to provide a reason in writing. Should the situation come to the point where foreclosure is inevitable, the banks need to verify all documents or face fines of up to $7,500.

Of course, the lenders have raised all sorts of reasons as to why anything that would help mortgage holders is a bad idea. A coalition of banks, some real estate professionals and mortgage companies are complaining that the new regulations places an “unnecessary burden” on them, and that these changes won’t prevent, only delay foreclosures. They even claim that all of these protections threaten to stall a housing and real estate recovery.

We applaud the state of California for finally doing something to make banks and lenders accountable for their actions. However, we question how effective these measures ultimately will be.

For all the fines and additional paperwork they need to be mindful of, never forget that banks are “where the money is,” as the saying goes. They can afford to be sloppy and they can afford the legal expertise to fight anyone they really want to foreclose on.

Ensuring the banks respect your rights and regulations they must abide by is more important than ever. If you feel your home may be in danger of foreclosure, contact the Real Estate Law Center, P.C.

Bank Asks for $500 More per Month For Loan Modification

The Consumerist offers a first person account of the attempts of a couple to initiate a loan modification with their lender, PNC Mortgage.

The married couple’s story is familiar since the mortgage meltdown: they found and fell in love with their first house, bought it, but the economy tanked. Despite their best efforts and using all the means of leverage at their disposal, from credit cards to savings, to stay in their home, they decided on a short sell. When they approached PNC Mortgage for the loan modification, the company came back with a rate $500 more than what they were paying. They put their home up for sale during the holiday season and moved into an apartment 600 square feet smaller than the house.

Despite their efforts at restructuring their loan, representatives from PNC Mortgage continued to call to see if they could work out a loan modification. They also called their relatives, many who had unlisted numbers.

“And often the departments within the mortgage company don’t know what other departments are doing,” they said. “You can get ping-ponged between departments six or seven times on a call before you get to one person who appears to know something – and two days later find out that they really had no idea at all. I’ve had to send in tax returns 9 or 10 times at 85 pages each, along with letters of hardship and bank statements. It’s humiliating — every day I’d do this at work I felt like I was doing the walk of shame and a part of my soul died inside.”

Unfortunately, the confusing and contradictory information the couple received seems to be the rule and not the exception. With other examples from the robo-signing scandal, banks often just do not have the resources or the incentive to properly modify loans for homeowners in need.

Contacting lawyers, like those at the Real Estate Law Center PC, ensures the banks will take notice of your case.

Housing Counselors Pessimistic that Bank Settlement will Help Homeowners

As part of the mortgage robo-signing scandal settlement against the nation’s five largest banks, $25 billion is set aside for reduced payments in homeowner principal write-downs and loan refinancing.

Housing and Urban Development Secretary Shaun Donovan expects 2 million homeowners to receive relief from the settlement. However, according to NPR, many housing counselors, who have seen other plans come and go, are not as optimistic.

Press conferences publicize when new programs and settlements are available for homeowners, but it takes a long time for the specifics and money to trickle down to the counselors.

“There’s so much confusion,” Counselor Pamela Stalling, who has yet to receive details about the settlement and who qualifies, said. “There’s a program here, this settlement, and then you hear about the bank settlement. Then you hear about the Obama plan, and that didn’t work. So the issue is just getting a clear message out to the consumer.”

The housing counselors, who operate as non-profit organizations or that are funded by the government, cite a lack of time and resources to properly handle the requests they receive. Counselors are frustrated that they can’t access the programs touted by the government to help homeowners.

A part of the settlement, $2.6 billion, was set aside to hire more counselors. However, states that received the money used it to make up for budget shortfalls rather than hire more people to help homeowners. The banks are also understaffed to handle the influx to renegotiated loans and write-downs — which led to the robo-signing scandal to begin with.

Homeowners interested in ensuring they receive a proper settlement for the improper actions undertaken by lenders and banks seemingly have only one course of action — contact a law firm. The Real Estate Law Center helps homeowners in these situations.

More than 85% of Loan Modifications Denied Because of Mortgage Lender’s Paperwork Blunders

With pressure from the government, consumer groups and desperate home owners, you’d think that mortgage lenders would be working as hard as they can to accommodate lenders who would rather modify their loans rather than foreclose.

You’d think that — but you’d be wrong.

A story posted on the website ProPublica quotes a former Litton Loan Servicing executive response team member describing their loan modification efforts as a “total disaster.” (Litton Loan Servicing is a subsidiary of, and services mortgages for, Wall Street trading powerhouse Goldman Sachs.)

Though tens of thousands of loans were modified on a trial basis in 2009, less than 12 percent were permanently changed. The reason wasn’t that the homeowners didn’t qualify or that Litton/Goldman Sachs was actively attempting to deny the changes — it was that the workflow to process the paperwork was that bad.

Paperwork submitted to Litton by homeowners were processed out of the country where it was scanned and supposedly organized. However, Chris Wyatt, the former employee at Litton, said the paperwork was often misfiled or just plain lost. Loan modifications were denied automatically on the basis of paperwork Litton claimed they hadn’t received when in fact, they had received it.

He added, “Had companies changed their philosophy and said, ‘You know what? We’re not going to beef up our collections staff; we’re going to beef up our loss mitigation staff.’ Had they done that and come up with loan modification scenarios that were reasonable and put people into more affordable payments early on, we wouldn’t be where we are now.”

The Litton/Goldman Sachs debacle is another example of why trusting a lender to make loan modifications is often at the homeowner’s peril. With the track record they’ve demonstrated, anyone interested in ensuring their loan modification will be properly reviewed should consult a law firm like the Real Estate Law Center.

Government to Side with Consumers on Mortgage Regulations — But it Still Won’t Help Many

The federal government’s Consumer Financial Protection Bureau is addressing the details that turned mortgage lenders into predatory lenders, the Los Angeles Times reports.

Changes the bureau is proposing the mortgage lenders:

  • Make a sincere effort to contact homeowners who’ve fallen behind and offer options to avoid foreclosure
  • Delay foreclosure if the homeowner is being considered for loan modification
  • Make monthly statements easier to read
  • Provide a single point of contact that consumers can get in touch with

“The mortgage-servicing rules we are considering reflect two basic, common-sense principles: no surprises and no runarounds,” Richard Cordray, director of the Consumer Financial Protection Bureau, said. “For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress.”

The proposals are similar to the changes the nation’s five largest mortgage lenders — Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. — have agreed to. The changes (and a $25 billion settlement) were part of an agreement reached by the Attorney Generals of California and 48 other states as a result of robo-signing and other lender abuses that occurred during the mortgage meltdown.

While these changes are welcome and long overdue, they are still just proposals. History shows that financial institutions will fight long and hard to prevent any consumer-friendly oversight and regulation.

More importantly, the proposals do not address the homeowners who currently have loans from those lenders. While new homeowners will potentially have the protection of the government, many more will be in the same situation they’re in now.

Homeowners in situations where mortgage lenders are moving to foreclose without offering alternatives should strongly consider speaking to a law firm experienced in dealing with loan modifications, like those at the Real Estate Law Center.

Meet the New Landlord. Same as the Old Lender.

Bank of America recently floated the idea that it will, in a limited test case of about 1,000 homes in Arizona, New York and Nevada, allow home owners in danger of foreclosure to sign their homes to BoA who then rent their homes back to them.

It won’t be available to all mortgage holders who are underwater. Details for qualification for the program include:

  • Loans are owned by the Bank of America
  • Loan modification solutions have been attempted and failed, or the homeowner did not respond to options other than foreclosure, such as deed-in-lieu or short sales
  • In imminent danger of foreclosure
  • Underwater in their mortgage
  • Able to show they have the income to make rent payments

If the potential renters qualify, they’ll transfer the title to the bank, which will forgive the outstanding debt and lease the property for three years. The rent will be set at market rates, less than the monthly mortgage bill. Bank of America will own the home, but will eventually sell them to investors. (Keep this detail in mind.)

If the program proves successful, it could be a template for larger lenders such as Freddie Mac and Fannie Mae.

Sounds great, right? A win-win for all involved… right?

Not exactly. When the lease expires, there’s no guarantee the renters will be able to repurchase the home. In fact, the Bank of America’s plans are to sell it to investors. Any improvements done will just be money in the pocket of the eventual owner, who ultimately may or may not allow the former homeowners to continue living on the property. It’s also not clear if the debt write-off will aversely affect one’s credit rating.

Banks, which have proved themselves to be predatory lenders, are now setting themselves up to be predatory landlords.

Though converting a mortgage to a rent might be attractive to homeowners in real danger of foreclosure, protecting the capital paid into the home means all options should be explored — including taking the banks to court to renegotiate the terms of the mortgage with the help of a firm like the Real Estate Law Center.