Archive for June, 2011
Three bills in the Oregon Senate staunchly opposed by the mortgage industry failed to make it to the finish line as the session wound down this week.
The bills were aimed at providing foreclosure protections for Oregon homeowners, but mortgage industry officials pegged them as costly and unnecessary.
Senate Bill 826, which attempted to hold servicers more accountable with a "duty of good faith and fair dealing toward" the borrower, never made it to the Senate floor and died in committee.
The bill proposed several requirements servicers must follow, including crediting payments to a borrower's mortgage account on certain dates, and stopping late fees until the servicer credits payments to the account. Furthermore, the bill sought to provide a schedule of fees, information about mortgage loan modification options, and particular statements of account upon request.
Senate Bill 827 would have given the state's Department of Consumer and Business Services the ability to prosecute an unlawful lender. The bill passed the Senate but died in the House Rules Committee. The industry contended they would have faced prosecution for honest mistakes while proponents said only willful violations would have been subjected to enforcement.
Another bill, S.B. 484, clarified the recording law in the state, but that bill went nowhere.
Susan Bonamici, a Democrat, was the sponsor of all three bills and began working on foreclosure issues back in 2009 with the passage of a bill that set up some basic protections for homeowners.
Linda Navarro, president and CEO of the Oregon Bankers Association, recently said the bills "would do little to help those in foreclosure" in a response to a Statesman Journal editorial in support of the bills.
A group calling itself United Financial Lobby, which consists of several housing finance trade groups, said S.B. 826 would have created a costly new licensing program for community banks and would not have applied to national banks, which service a large number of mortgages. The group also contended that federal consent orders involving 14 major industry players more comprehensively addresses issues. The group said S.B. 827 would have added lengthy delays to the foreclosure process and would have actually codified the "dual track" of a foreclosure modification occurring while a foreclosure proceeding is also under way. The consent orders prohibit dual tracking, a controversial practice in the industry.
Proponents, meanwhile, said the legislation was sorely needed.
"The problem has not been addressed at the federal level. Consent orders issued by the Office of the Comptroller of Currency do not stop preventable foreclosures and do little to hold servicers accountable for illegal practices," according to a fact sheet put out by supporters of the bills. They contended S.B. 827 would have streamlined and clarified instructions that homeowners get from servicers regarding loan modifications and would have established a clear stopping point on the foreclosure about six weeks before the property sale if a modification was pending in order for the homeowner to get a final answer on the modification.
The current session is expected to adjourn Thursday.
Write to Matthew Torres or Kerry Curry.
Follow Kerry Curry on Twitter @communicatorKLC.
Tags: bill, House Rules Committee, loan modifications, loans, mortgage, Office of the Comptroller of Currency, Oregon, Oregon Bankers Association, Senate, Susan Bonamici, United Financial Lobby
Posted in Servicing/Default, Top Stories | 1 Comment »
Three-quarters of mortgage assignments issued to and from JPMorgan Chase (JPM: 37.27 -0.59%), Wells Fargo (WFC: 29.3629 +1.08%) and Bank of America (BAC: 7.22 -1.10%) during 2010 in Massachusetts are allegedly invalid, according to a mortgage forensics firm that reviewed a sampling of assignments in the Southern Essex Registry of Deeds.
McDonnell Property Analytics, a Massachusetts-based company that specializes in providing consumers with data to challenge the standing of banks and other entities during foreclosure, said that its own review of mortgage assignments in the Massachusetts county found that 75% of recent mortgage assignments are invalid. About 27% of invalid assignments are fraudulent, McDonnell claimed, while 35% are robo-signed and 10% violate the Massachusetts Mortgage Fraud Statute.
The firm did not detail how it determined that an assignment was valid or invalid, but said it could only determine the financial institution that owned the mortgage in 60% of the cases it reviewed. McDonnell said it found 683 missing assignments for the 287 mortgages it traced, representing about $180,000 in lost recording fees.
"What this means is that the degradation in standards of commerce by which the banks originated, sold and securitized these mortgages are so fatally flawed that the institutions, including many pension funds, that purchased these mortgages don’t actually own them," according to the firm. "The assignments of mortgage were never prepared, executed and delivered to them in the normal course of business at the time of the transaction."
John O'Brien, register of deeds for Essex County in the northeastern corner of Massachusetts, urged state attorneys general for a third time on Wednesday to cease settlement talks with the nation's largest servicers due to what he believes are widespread document problems.
In May, O'Brien sent a letter to Iowa Attorney General Tom Miller for this same purpose. He has been among the nation's most vocal public officials regarding alleged document signing abuses, included robo-signing; the Southern Essex County registrar's website, run by O'Brien's office and featuring his name on the homepage, offers users the ability to search what his office claims are 25,187 robo-signed documents.
"My registry is a crime scene as evidenced by this forensic examination," claimed O'Brien. "This evidence has made it clear to me that the only way we can ever determine the total economic loss and the amount damage done to the taxpayers is by conducting a full forensic audit of all registry of deeds in Massachusetts."
Write to Christine Ricciardi.
Tags: Bank of America, fraud, John O'Brien, JPMorgan Chase, McDonnell Property Analytics, Southern Essex Registry of Deeds, Wells Fargo
Posted in Servicing/Default, Top Stories | 1 Comment »
The Department of Housing and Urban Development issued a final rule Wednesday defining the role of a mortgage originator for the purpose of state compliance with federal licensing laws.
A mortgage originator is someone who "acts as a residential mortgage loan originator with respect to financing that is provided in a commercial context and with some degree of habitualness or repetition," according to the HUD rule.
HUD said this does not include employees of government agencies or employees at nonprofit organizations, who act as loan originators as part of their job description. These professionals do not need a state license.
The rule also excludes individuals who only work out loan modifications and third-party modifications specialists.
The rule ensures compliance with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, otherwise known as the SAFE Act. The act is part of the Housing and Economic Recovery Act of 2008 with the goal of protecting consumers and eliminating fraud.
"The SAFE Act sets nationwide standards for licensing of mortgage loan originators and is an important step in returning integrity and accountability to the residential mortgage loan market,” said Acting FHA Commissioner Bob Ryan. “All 50 states, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands have enacted legislation to support this law and our final rule provides clarification of the minimum standards against which each state’s laws and regulations will be evaluated.”
HUD currently handles enforcement, interpretation and implementation of the SAFE Act, but that duty will be transferred to the Consumer Financial Protection Bureau as of July 21.
The final HUD rule will be published in Thursday's Federal Register.
Write to Christine Ricciardi.
Tags: Consumer Financial Protection Bureau, Department of Housing and Urban Development, mortgage originator, SAFE Act, Secure and Fair Enforcement for mortgage Licensing Act of 2008
Posted in Origination/Lending, Top Stories | 1 Comment »
[[Update 1: Removes Citigroup reference]]
A Cleveland-area grand jury indicted nine former employees of subprime lender Argent Mortgage alleging the workers, which included managers and supervisors, played a role in approving fraudulent subprime home loans, according to the Cuyahoga County prosecutor's office.
The felony charges claim Argent employees and four others, including real estate appraisers, engaged in a pattern of corrupt activity, theft and tampering with records, according to the indictment.
Argent — formerly the wholesale lending arm of now defunct Ameriquest — was one of the biggest subprime lenders in the Cleveland area from 2003 to 2005, according to the Cleveland Plain-Dealer. No one connected with Argent could be located for comment.
Inner-city neighborhoods in Ohio's Cuyahoga and Summit counties, which are home to Cleveland and Akron, became the epicenter for the 2007 subprime crisis, that was attributed, in part, to predatory lending practices in poor, minority neighborhoods, and a frenzy in the mortgage industry to approve loans for anyone who had a pulse as housing heated up.
The indictments allege Argent account managers coached mortgage brokers on falsifying 100 loan applications with misstated information such as income level or the existence of a down payment. The loans were valued at $13 million.
“The securitization and selling of these fraudulent subprime loans on Wall Street typified the rampant greed of the industry that ultimately led to the financial crisis," said Bill Mason, Cuyahoga County prosecutor.
"The buyers and mortgage brokers, or loan officers signed these loan applications with the knowledge that this information was required to be true when in fact these applications were false," the indictment said.
Argent "approved the loans for funding knowing that the stipulations for such loan approval had not been met by falsely stating in mortgage loan documents that said stipulations had been satisfied by the buyer, broker or another person when in fact the stipulations had not been satisfied," according to the indictment.
The mortgages were later securitized and sold to unsuspecting investors, according to the prosecutor's office.
The investigation grew from a Cuyahoga County case recently prosecuted against Uri Gofman, a real estate investor and owner of Cleveland-based Real Asset Fund LLC, according to the Cleveland Plain-Dealer.
Gofman and 40 co-defendants were indicted in a $44 million mortgage fraud case in 2009. He was recently convicted in that case and was scheduled to be sentenced this week.
"To induce, encourage or promote the sale of the above properties Uri Gofman promised the buyers that there would be no down payment required to purchase property and the buyer would be receiving money back at closing," according to the indictment on the most recent case.
Besides the down payment scheme, the indictment also alleges appraisal fraud.
Write to Kerry Curry.
Follow her on Twitter @communicatorKLC.
Tags: ACC Capital Holdings, Ameriquest, Argent Mortgage, Bill Mason, Citigroup, Cleveland, Cuyahoga County, Real Asset Fund LLC, subprime, Uri Gofman
Posted in Origination/Lending, Top Stories | No Comments »
Federal regulators subpoenaed Ally Financial Inc. this month, asking the lender for documents tied to mortgage deals and information related to a Justice Department investigation.
Detroit-based Ally, a mortgage and auto lender, said in a Securities and Exchange Commission filing that it made payments of $152 million into a securitization trust during the second quarter to cover any losses related to mortgage insurance rescissions.
Ally said mortgage loan rescissions occur when mortgage insurers rescind a mortgage insurance contract after discovering misrepresentations were made during the securitization process. A rescission by a mortgage insurer essentially "triggers our obligation to repurchase the associated loans, or provide loss reimbursement to the securitization trust," Ally wrote in a public filing.
The firm said it expects to record a $100 million charge in the second quarter.
In June, the Securities and Exchange Commission asked Ally to submit documents related to some of the bulk settlements it made with loan originators over bad loans packed into securitization trusts. In some of the agreements, Ally said it received compensation in lieu of having the mortgage originators repurchase bad loans.
The Justice Department submitted a separate subpoena. Ally describes their filing as "a broad request for documentation and other information in connection with its investigation of potential fraud related to the origination and/or underwriting of mortgage loans."
Write to: Kerri Panchuk.
Tags: Ally Financial Corp., Department of Justice, loan rescissions, mortgage origination, representations and guarantees, SEC, Securities and Exchange Commission, securitization, securitization trust
Posted in Secondary Market/Investors, Slider, Top Stories | 1 Comment »
President Barack Obama told reporters Wednesday his administration is open to revamping rules or regulations that may be "preventing businesses from growing and expanding" in the tepid recovery, and called for a more bipartisan discussion on raising the debt ceiling.
The Obama administration has been criticized by the mortgage finance industry for failing to critically review Dodd-Frank proposals that are slowly moving through the rulemaking process, creating a sense of uncertainty in the housing sector.
While the president did not address the Dodd-Frank Act directly, he said the administration is discussing multiple regulations that may hinder American businesses from growing "as they should."
Republicans lawmakers have filed bills in the House and Senate to defund and disband the Consumer Financial Protection Bureau, created under Dodd-Frank financial reforms. The CFPB is set to oversee the mortgage finance industry when the new regulatory agency opens in less than one month.
The country faces a potential default on its sovereign debt, meanwhile, if it doesn't reach an accord on the debt ceiling by Aug. 2.
Obama called for an accord that would lower the budget deficit through a combination of spending cuts and tax increases for the nation's wealthiest citizens — a measure Republican lawmakers have been fighting.
He called Republican plans to only accept a budget without tax increases not sustainable. Obama said Democrats have taken on their "sacred cows" during the budget talks, and he suggested Republicans do the same, as Washington tries to hammer out a budget.
In April, Standard & Poor's warned of possible downgrades on U.S. sovereign debt if Congress is unable to pass a budget and reach an agreement on the nation's debt ceiling.
Write to: Kerri Panchuk.
Tags: CFPB, Consumer Financial Protection Bureau, Dodd-Frank, President Barack Obama, timothy geithner, Treasury
Posted in Servicing/Default, Top Stories | No Comments »
Green River Capital, a REO asset management and loss-mitigation provider based in Utah, named Lorenz Schwarz chief operating officer.
Schwarz replaces Stephen Sherman, who ascended to the operating chief post in early October, and also will lead the GR Financial and Infinity Valuation Services unit. Sherman joined Green River in 2008, holding several upper management positions, including senior vice president.
Schwarz brings more than 20 years of commercial and residential mortgage servicing experience to Green River.
He had been president of Phoenix Asset Management and held management positions for Select Portfolio Servicing, Wilshire Credit Corp, and J.E. Robert Co. prior to joining Green River.
Schwarz joins the company as it expands REO services to commercial properties. The company will be able to handle commercial property repossessed by client lenders through services such as disposition of assets, maintain properties, verification of leases, and property valuation.
Additionally, Green River plans to focus its REO efforts toward small-balance properties and add specialists to its nationwide agent network.
Write to Matthew Torres
Tags: chief operating officer, COO, GRC, Green River Capital, J.E. Robert Co., Phoenix Asset Management, REO, Select Portfolio, Wilshire Credit Corp.
Posted in Servicing/Default, Top Stories | No Comments »
The $8.5 billion Bank of America (BAC: 7.22 -1.10%) settlement with investors of residential mortgage-backed securities issued by Countrywide Financial Corp., which the banking giant acquired in 2008, will have positive ramifications for both creditors and investors, according to analysts throughout the industry.
Bank of America reached an agreement with Bank of New York Mellon (BK: 20.08 +0.40%), which served as trustee for 530 RMBS trust with a total balance of $424 billion, to reimburse investors who lost money on failed securities.
Barclays Capital analysts said Countrywide deals and other nonagency RMBS will now be more attractive to investors because of the potential return. For the most part, Barclays said, nonagency investors only assume small benefits from rep-and-warranty-related repurchases.
"A less negative (or positive) development on any of the (housing) issues could help alleviate price pressures," Barclays said. "We believe the headline housing data will improve in the coming months, roll rates will continue to improve and this news should help nonagency prices."
Barclays analysts expect cash flow from the settlement will most likely filter into the trusts that represent 226 deals involved in the complaint, thereby benefiting Countrywide cash flows, "as these effectively come in as faster prepays and reduce total losses." Cash flows on Alt-A securities might hit senior mezzanine and even junior mezzanine loans, Barclays said. Subprime bonds should also benefit.
"Deals as part of the settlement could see a direct benefit of 8 to 10 points of additional cash flow," analysts said. "Even if we assume that the settlement covers all of Countrywide outstanding ($285 billion), the benefit would be at least three to five points of additional cash flow."
The $8.5 billion settlement represents about 10.8% of the $79 billion outstanding on the list of Countrywide deals repurchased by BofA. The original balance of all these securities was $179 billion. BofA is paying about 4.8% of that original balance, Barclays said.
Moody's Investors Service said the settlement, alongside its $5.5 billion reps and warranties payout, reduces BofA's potential exposure to higher losses under a stress scenario. And while BofA's earnings will undoubtedly suffer in the second quarter, Moody's expects the bank's capital ratios to remain above the same period of 2010.
"The costs incurred are at the high end of the range that Moody's had previously estimated Bank of America might be required to pay to resolve these matters," said David Fanger, Moody's senior vice president. "However, following today's settlement and the announced addition to reserves, Moody's believes that (BofA's) remaining representation and warranty exposures are no longer a negative credit concern."
On June 2, Moody's placed the banking giant on review for possible downgrade, saying analysts will evaluate the bank's standalone financial strength to see if credit-risk improvements were made over the past few years. Moody's expects the settlement will have positive credit implications.
BofA's overall liability for Countrywide assets could reach $24 billion, according to Barclays based on the percentage of deals in the settlement. However, other securities could be concentrated in cleaner vintages, Barclays said.
Bank of America's stock closed at $10.82 Tuesday after word of the settlement leaked. Shares of the component of the Dow Jones Industrial Average opened at $11.15 Wednesday, and activity in BofA is helping push the DJIA toward three days of gains.
Write to Christine Ricciardi.
Tags: Bank of America, Bank of New York Mellon, Barclays Capital, Countrywide Financial Corp., DJIA, Moody's Investors Service, RMBS, settlement
Posted in Secondary Market/Investors, Top Stories | 1 Comment »
KB Home (KBH: 9.73 +0.31%) second-quarter loss widened as home sales declined and revenue fell during the three months ended May 31.
The Los Angeles-based home builder posted a second-quarter loss of $68.5 million, or 89 cents per share, compared to a loss of $30.7 million, or 40 cents per share, a year ago. The loss fell well below analysts' estimates, with Thomson Reuters expecting a loss of 31 cents a share.
Meanwhile, KB's revenue for the quarter declined 27% to $271.7 million from $374.1 million a year earlier hurt by lower home deliveries and sales.
Even though home prices rose 3% year-over-year, reaching an average selling price of $213,400 in the second quarter, KB delivered only 1,265 homes last period, down 29% from a year ago.
"Uncertainty and caution about the economy are keeping many qualified homebuyers from entering the market, even though historically high housing affordability makes this a good time to buy," said Jeffrey Mezger, president and CEO of KB. "We believe the current housing market conditions will likely continue until there are meaningful and sustained improvements in job growth and consumer confidence."
The company's second-quarter loss included charges on inventory impairments and abandoned land-option contracts, as well as losses tied to a loan guaranty of $14.6 million from the company's South Edge residential development venture.
Write to: Kerri Panchuk.
Tags: homeowners, KB Home, Thomson Reuters
Posted in Origination/Lending, Top Stories | 3 Comments »
A federal judge on Wednesday approved a $153.6 million settlement between JPMorgan Chase & Co. and the top U.S. market regulator over allegations a mortgage CDO product defrauded the bank's investors at the time of the housing market collapse.
The U.S. Securities and Exchange Commission and the second-largest U.S. bank announced the settlement on June 21 of civil charges over JPMorgan's collateralized debt obligation marketed as Squared CDO 2007-1.
Posted in Around the Web | No Comments »
