by Adam
Smith | 29 Jul 2013

A bankrupt former mortgage giant will have to pay $230m to borrowers in an enforcement action by the Fed.

The Federal Reserve Board on Friday amended an enforcement action from earlier this year, announcing that it will require GMAC Mortgage, which entered bankruptcy last year, to make approximately $230m in cash payments to mortgage borrowers.  The Federal Reserve said the enforcement action was due to "deficient practices in mortgage loan servicing and foreclosure processing".

The amendment will see payouts to more than 232,000 borrowers whose homes were in any stage of foreclosure in 2009 and 2010 with GMAC. As a result of the amendment, which was approved by the bankruptcy court overseeing bankruptcy
proceedings involving GMAC, independent foreclosure reviews on GMAC borrowers will be halted.

The Federal Reserve Board said accepting a payment will not preclude borrowers from taking action related to their foreclosures, noting that servicers are not permitted to ask borrowers to sign a waiver of any legal claims they may have
against a servicer.

Well, I saw this article in the MPA by Kelli Rogers | 01 Jul 2013 and I thought it was interesting enough to repost.
                                       
Bank of America has joined the growing trend of financial institutions offshoring mortgage BPO to cut costs, according to a new report.

Bank of America has opened a unit in India to review home-valuation reports as it seeks to rebuild share in U.S. mortgages at a lower cost, according to Bloomberg reports.

Workers in the new Bangalore office follow checklists to determine if appraisals are complete, several people who requested anonymity told Bloomberg. The firm also eliminated jobs of licensed U.S. workers in its LandSafe business, the appraisal division of the Charlotte, North Carolina-based company, which made $78.7 billion in loans last year, the people said. 

In February, BofA cut about 5% of LandSafe employees, saying they weren’t needed as overdue loans fell. Licensed reviewers, who check the accuracy of appraisal valuations and can earn more than $100,000 a year, were among those who lost their jobs, according to reports.

The trend to move mortgage BPO offshore is largely driven by banks’ need to reduce costs, and the labor cost in India is, spending on skill level, approximately 50% less than in the U.S., according to Judy Wheatley, senior vice president of
compliance for Indecomm Global Services, a consulting and outsourcing company. 

Lenders are under greater pressure than ever to reduce costs because demand for refinancings, the biggest source of volume for the firms, is falling amid surging mortgage rates.

“The mortgage industry is cyclical with ups and downs, so what outsourcing allows companies to do is to staff internally at a certain level, and utilize outsourced resources to flex up their volume and meet consumer demand faster,” Wheatley said.

Bank of America, once the biggest U.S. mortgage lender, spent more than $45 billion to settle disputes tied to defective mortgages and foreclosures, so it may come as little surprise that the company has plans for an aggressive cost-cutting
scheme, with CEO Brian T. Moynihan planning to save $8 billion a year. 

Other firms have added staff in lower-cost cities. Goldman Sachs Group saw headcount in places including Bangalore and Salt Lake City almost double since 2007 to 22% of employees, CEO Lloyd Blankfein said in  November. 

This program has been around for a long time, but FHA has added some incentives.

The Federal Housing Administration has updated its guidance for  its long-running REO sales program that provides incentives for policeman, firefighters and teachers to purchase FHA-owned homes in designated revitalization areas.

The Department of Housing and Urban Development will sell FHA properties to municipal employees at 50% of the appraised value provided they agree to fix up and live in the home for at least three years.

The new mortgagee letter notes that eligible buyers can take out an FHA-insured mortgage with a $100 downpayment and
“you may finance closing costs,” according to mortgagee letter 2013-20.

“The mortgagee letter provides clarification that seemed to be needed based on input from the industry, and gives us an opportunity to remind lenders of the basic program requirements,” a HUD spokesman said.

An eligible buyer can also get an FHA 203(k) mortgage that provides financing for the purchase and renovation of the property.  Participants in the “Good Neighbor Next Door Sales Program” can also take out conventional or VA financing.

However, the borrower earns the 50% discount by living in the house for three years.

If the property has an appraised value of $100,000, the borrower must take out a second mortgage and a note on the
discounted amount, which is $50,000 in this example.

The mortgagee letter contains the note and second mortgages that the borrower must sign.

No interest or payments are required on this "silent second" mortgage if the borrower fulfills the obligation to live
in the home. However, they will be required to pay a pro-rata portion of the discount to HUD if they fail to live in the house for three
years.

A tax provision that spares underwater borrowers from being penalized when they agree to a short sale is due to expire at the end of this year.  But two senators want to extend the Mortgage Forgiveness Tax Relief Act through 2015. 

Senators Debbie Stabenow, D-Mich., and Dean Heller, R-Nev., introduced the extension bill Wednesday.

“It is bad enough that so many families are faced with mortgages that now exceed the value of their home. But
to add insult to injury, without this bipartisan bill, the IRS would once again require these families to pay hundreds or thousands of dollars in additional income tax when they sell or refinance their home. That’s just wrong,” Sen.
Stabenow said.

Congress has provided this tax relief for underwater homeowners since 2008.

If it isn’t extended, more distressed borrowers will choose do go through foreclosure as opposed to a short sale or
deed-in-lieu transaction. 

The Hope Now servicer alliance recently reported that 83,400 short sales were completed in the first quarter.

“If Congress does not act this year, then thousands of Nevadans who are underwater in their homes will be forced to
pay a tax at a time when what they need is some relief,” Sen. Heller said. “This legislation is a common sense approach that will prevent Nevadans from being
taxed on income they never
  received.”

Now if you can believe all the other past mystery happenings of Bank of AMERICA losing hundreds of millions of dollars without a full explanation  "Where did all that money really go?", then this should be easy.  How could a prestigious firm with the name of AMERICA in its title squeeze homeowners out of the last few nickels in their pockets?  Wasn't their tax dollars from the bank bailout sufficient for Bank of AMERICA?  Here's the story we are hearing.
                                                            
Former employees of Bank of AMERICA have claimed the bank routinely stalled the application process for the government’s Home Affordable Modification Program  (HAMP).
 
Several former Bank of America employees in customer service positions offered declarations in the case – Kamie Kahlko v. Bank of America – suggesting the bank was more interested in delaying HAMP applications and eventually steering
troubled borrowers into solutions or situations that were more profitable for the bank. 

The employee statements, filed in federal court in Boston as part of a multi-state class action, also pointed to the bank for encouraging the wrongful informing of homeowners about the status of documents already on file.

In several of the depositions, the former employees told the servicer routinely stalled and failed to timely process documents associated with the HAMP loan modification requests.
 
One woman working as a customer service representative said she "was instructed to inform every homeowner who called in that their file was under review – even when the computer system showed that the file had not been accessed in months or when the homeowner had already been rejected for a loan modification."

Bank of AMERICA has not had a chance to respond in court records but is expected to soon, according to reports. .


 

By Minda Zetlin

Losing your job and emptying your bank account won't directly affect your credit score. Neither will refusing to pay your rent. In fact, you could be in prison facing murder charges, but as long as your bills were paid on time, your credit  score wouldn't suffer a bit. 

Of course, it's always best to pay all your bills on time (and stay out of trouble with the law). Nevertheless, there are many things that you might think would affect your credit score but don't. For example, some quick thinking can prevent a late payment from lowering your score. Here's a closer look at six items that -- perhaps surprisingly -- won't harm your credit score: 
 
1.
Changes to your income or assets.
"People get concerned that if they are laid off or get part-time work, that will affect their credit score, and it doesn't, as long as they continue to pay their bills," says Becky Walzak, president of RJB Walzak Consulting, which assists
financial institutions with risk management, including assessing the creditworthiness of loan applicants. Of course, losing your job can affect your ability to qualify for new credit as financial institutions review income and  employment as well as credit scores. But receiving unemployment or even public assistance will not affect your credit score. 

2.
Not paying your rent.
Let's say you're withholding your rent because you're in a dispute with your landlord, or you've broken a lease. "That doesn't show up on your credit score unless your landlord takes you to court and a judgment is entered," says Kelley
Long, certified public accountant and a member of the American Institute of CPAs' Financial Literacy Commission. However, since landlords typically ask for references from prospective tenants, it may affect your ability to rent another place in the future. In fact, legal trouble of any sort will not affect your credit score, as long as you continue to pay any debts you've incurred. 

3.
Late payment of taxes -- up to a point.
"Paying your property taxes late will show up on your credit score if your county puts a lien on your home," Long says. Depending on your county's policies and practices, though, that will probably take a while. Likewise, problems with
the Internal Revenue Service won't immediately show up on your credit score. "If you don't pay your taxes and then enter an agreement with the IRS, that goes on your report as another loan," she says. 

4.
Late payments to small vendors who don't report to the credit bureaus.
In order for a debt to count toward your credit score, it needs to be reported to one of the big three credit bureaus: TransUnion, Experian or Equifax. "Small vendors typically don't report to credit bureaus, and some large companies don't
either," Walzak says. Once a vendor sends your account to a collections agency, however, it typically will be reported to the credit bureaus, but since collections agencies only pay a portion of what they collect to their clients, most small vendors won't take this step in a hurry. 

5.
Anything your creditor agrees not to report.
There's another reason creditors may not report your unpaid debt to a credit bureau: Because you asked them not to. 
"Often, with mortgages, people work out modifications," Walzak says. "Then people think, 'I've got some debt relief and my car is shot,' so they go apply for a  car loan and they're surprised to learn that their mortgage bank is reporting them delinquent. But it says in the mortgage agreement that if you pay anything less than the amount owed, you will be considered delinquent. So that's a question to ask when you're talking to a bank when reducing your debt or modifying your loan: 'Will you report me as delinquent?'" 
     
People get concerned that if they are laid off or get part-time work, that will affect their credit score, and  it doesn't, as long as they continue to pay their bills. 

And, she says, you can ask a credit card company not to report you, depending on the circumstances. "If you accidentally don't send a payment, or send it late one time, you should call the credit card company, let them know, and ask them not to report it. A lot of times they won't even mark it as late. What really hurts is paying late over and over." 

6.
Not carrying a balance.
"The question I get most often is, 'What balance do I need to carry on my credit card?'" Long says. "You don't have to carry a balance to show good credit." The confusion arises, she says, because many people understand that if they have a
credit card but never use it, it won't improve their credit score. That's because a credit score is supposed to show your ability to repay debt. You can't demonstrate your ability to repay debt if you never have any to repay. But using a credit card and paying it off each month is a great way to do this.  
 
On the other hand, you do risk hurting your credit score if you run up high credit card balances, even if you pay them in full each month -- a strategy many people adopt in order to capture credit card rewards. Since high utilization (using most or all of your available credit) negatively affects your score, it can have a negative impact if the credit card company happens to report to the credit card bureaus on a day when your balance is high. 

If you still want to chase those rewards points, though, there are strategies for avoiding this effect. "I use American
Express to pay for everything and then I pay it off," Walzak says. "The closing date is the 27th of the month, and they typically report to the credit bureaus on the first of the month. So I make sure to get my payment in between the 27th and the 30th." 

Remember that you don't actually have to wait till the closing date to make a payment, says Anthony Sprauve, director of communications for MyFico.com. "I use a credit card to make most purchases so as to accumulate airline miles," he says. "But I make multiple payments throughout the month." 

Whatever your approach, keep in mind that a credit score is only one piece of your financial picture, and that any prospective creditor will consider many other factors, Walzak says. Someone with a less-than-perfect credit score who has
extenuating circumstances may still get credit, while someone with a good credit score but a bad financial picture may not.  "I've seen so many people with good credit scores and then I look at the amount of debt they have and I think: 'These people can't manage their money,'" she says. 

The  Obama administration has extended its signature loan modification program for 
two years to help more families avoid foreclosure.

Launched in 2009, the Home Affordable Modification Program has assisted 1.6
million struggling borrowers through loan modifications, principal reductions,
short sales and deed-in-lieu transactions.

“The housing market is gaining steam, but many homeowners are still
struggling,” said Treasury Secretary Jacob Lew.  

The HAMP program forced servicers to significantly reduce monthly mortgage
payments by 20% or more so borrowers have a better chance of remaining in their
homes. This reduced redefault rates. Before HAMP, most modifications actually
increased the borrower’s monthly payments.   

“Extending the program for two years will benefit many additional families
while maintaining clear standards and accountability for an important part of
the mortgage industry,” said HUD Secretary Shaun Donovan.  

The HAMP program was due to expire at the end of this year. Earlier this
year, consumer groups and legal aid attorneys urged the Treasury secretary
extends the program that continues to provide modifications for around 15,000
delinquent homeowners a month.

“The foreclosure crisis is not yet over and we ask that the Treasury
Department prevent the HAMP program from ending in just nine months,” according
to a joint letter signed by 40  groups.

The letter points out that HAMP modifications provide deeper payment relief
and perform better than proprietary modifications. And HAMP mods also facilitate
principal reductions on non-Fannie Mae and Freddie Mac loans.

The Treasury Department uses the monies from the Troubled Asset Relief
Program to fund the HAMP program.

 by Rick Roque

They are young, tech-savvy, debt-burdened, and cash-strapped. The entire American housing market economy depends on their participation, but the credit markets see them with apprehension. They are the elusive first-time home buyers; the missing, yet uncertain element in a full-blown recovery of the real estate market in the United States. 

A generally accepted assumption of real estate macroeconomics estimates that 40 percent of housing market participants must be first-time home buyers so that the market can be efficient and beneficial for the overall economy. In early 2013, U.S. News and World Report cited statistics that placed the percentage of first-time home buyers at just 35 percent. An updated article, however, puts that estimate closer to 40 percent.

Has the participation level of first-time home buyers really increased five percent in just a few months? Probably not. What is changing, however, is the profiling of these newcomers to the housing market. Real estate and marketing analytics firm Doorsteps recently issued new information on first-time home buyers and their reasons for approaching the housing market with caution.

The Young Millennials

Generation X made it through the dot-com bubble, the housing bubble and the Great Recession. Many of them were first, second and even third-time home buyers during the housing bonanza of the early 21st century. The time is nigh for Generation Y to take their turn as the great hope of the housing economy. 

Married couples and single females in their early 30s are the most likely candidates to buy their first home under current market conditions. Their average income is a respectable $62,800 per year, but many of them are saddled with about $30,000 in student loan debt. Only about 11 percent of single millennial males are in the market for a new home. 

It is clear that Generation Y cares about location, but young house hunters are not too crazy about long commutes. More than 15 percent are not willing to compromise when it comes to driving a long distance to get to work. It is important to remember that Generation X and Generation Y have both migrated from the suburbs in the last few years to be closer to urban centers that present work opportunities. 

Financing and Down Payment

Good news for mortgage lenders: Millennials are in the market for a mortgage. The bad news is that most do not qualify. The issues of Qualified Mortgage (QM) and Qualified Residential Mortgage (QRM) are still wild cards at this time for first-time home buyers. More than 76 percent of millennials expect to tap into savings when it comes to down payments, and they are willing to sacrifice vacations and entertainment expenses to accomplish this. 

Banks with heavy real estate-owned (REO) portfolios should also take note that only 35 percent of the new first-time home buyers will shun a foreclosed home. The great majority will consider purchasing distressed and REO properties.

Not part of this article is my own observation the Real Estate Investment Trust, Hedge Funds and small private investors are purchasing as much housing inventory as possible because this segment of the market will rent, if they can not buy at this time, rather than move in with mom and dad.

Wells Fargo and Citigroup have halted the vast majority of their foreclosure sales in multiple states following the release of new guidance by the Office of the Comptroller of the Currency.

The abrupt slowdown came in response to the OCC's April release of minimum standards for foreclosure sales, which are usually the final act in the foreclosure process.

Within two weeks of the release of the guidance, Wells Fargo, Citi and JPMorgan Chase all but stopped foreclosure sales, which are usually the point of no return in the foreclosure process. JPMorgan has since resumed its normal volume.

The halt is most dramatic with Wells, the nation's largest mortgage originator. The bank's foreclosure sales in five Western states—California, Nevada, Arizona, Oregon and Washington—dropped from as many as 349 a day in April to fewer than 10 a day across the entire region, according to Foreclosure Radar, a California real estate monitoring firm.

"Wells Fargo has temporarily postponed certain foreclosure sales while we study the revised guidance from the OCC," a spokeswoman for the bank wrote in response to questions from American Banker. The bank expects the delay will be brief.

Citi did not immediately respond to a request for comment. JPMorgan acknowledged that it temporarily halted foreclosure sales "out of an abundance of caution," but says it has resumed them after validating that its processes comply with the OCC guidance.

The OCC acknowledged that some banks had drastically cut back on foreclosure sales. It declined to say if its April guidance was the result of new perceived shortcomings in the industry.

"The OCC did not direct a slow down or pausing," agency spokesman Bryan Hubbard says. "However, if servicers are not certain they are meeting these standards, pausing foreclosures is a responsible and productive step."

The significance of the banks' move is hard to gauge. New foreclosure filings continue unabated, searches of court records in California and Florida suggest.

It is not clear what—if any—specific concerns caused the banks to rein in sales. But the banks' steps are an echo of the 2010 foreclosure halt that kicked off several years of wrenching procedural scrutiny of the mortgage servicing industry.

"That [the robo-signing debacle] was the only other time we've had a similar event where a bank slowed down significantly," says Sean O' Toole, Foreclosure Radar's founder.

The OCC guidance is significant because it applies to all OCC-regulated bank servicing, rather than specific consent orders. Most of the requirements—presented in a list of 13 questions banks should ask themselves before selling a home—are remedial. Question No. 1, for example, is "Is the loan's default status accurate?" Question No. 5 asks whether borrowers are protected from foreclosure by bankruptcy. Question No. 7 asks if the borrower is in an "active trial loss mitigation plan," otherwise known as a modification.

"Failure to comply with this guidance may result in unsafe and unsound banking practices, noncompliance with foreclosure related consent orders, as applicable, and/or require rescission of completed foreclosures," the OCC warned.

Neither Wells nor the OCC identified specific areas of concern for the bank. But Wells has faced scrutiny of its foreclosure handling, most recently from New York Attorney General Eric Schneiderman. At a heavily publicized press conference earlier this month, Schneiderman alleged that Wells Fargo has "flagrantly violated" its obligations to homeowners under a 50 state mortgage servicing settlement.

"There have been problems with Wells' servicing for a long time," says Ira Rheingold, executive director of the National Association of Consumer Advocates. "Everybody focuses on Bank of America but Wells has just as much trouble and the OCC is obviously serious about having them comply with the consent orders."

Wells has been the target of intense criticism for several years from consumer advocates, who forced CEO John Stumpf off the stage during a speech in March, protested at his home and urged the OCC to give Wells a failing Community Reinvestment Act grade based on its foreclosure practices.

Wells also has invited criticism from consumer advocates for failing to provide principal reductions and to report data on loan modifications, short sales and foreclosures based on race and income.

Joseph Smith, the independent monitor of the national mortgage settlement, is expected to issue a report in June. Many consumer advocates have criticized the top five mortgage servicers—B of A, JPMorgan Chase, Citi, Wells Fargo and Ally—for claiming to have met 304 different servicing standards and reforms as part of the $25 billion national settlement with 49 state attorneys general and federal regulators.

"It's a safe assumption that they're not meeting all the requirements and this is likely a preview, an early signal of what Joe Smith is going to find," Rheingold says.

 

Question: In a short sale where the financing was insured
by the FHA is the borrower first required to miss three payments? This was the
advice given by a lender before it would allow a short sale to go forward.
Answer: We sent this question over to HUD and received
this response:


“The information is incorrect,” HUD told OurBroker.com. “Under the code of
federal regulations 24 CFR 203.370 (c) 2 and section 204 of the National Housing
Act the loan must be in default at the time the short sale transaction closes
for HUD to legally pay a claim (31+ days). This does not preclude the servicer
from processing the short sale request with the loan current if the borrower and
property meet all the short sale requirements and close the transaction with the
loan one month delinquent.”