With millions of delinquent borrowers facing foreclosure, the death cries of so many desperate people was bound to have political ramifications. The unprecedented need to process tens of thousands of foreclosures spawned foreclosure mills like David Sterns law office and other who robo-signed documents. 
Such a process was bound to have a few errors. Although nobody who was making their payments faced foreclosure, the so-called robo-signer scandal prompted the major banks and services to negotiate a settlement agreement with the government to settle all claims and shield themselves from future litigation.
Related to this same scandal, the federal reserve also got involved:
Background
The Federal Reserve Board issued enforcement actions against four large mortgage servicers–GMAC Mortgage, HSBC Finance Corporation, SunTrust Mortgage, and EMC Mortgage Corporation–in April 2011. Under those actions, the four servicers were required to retain independent consultants to review foreclosures that were initiated, pending, or completed during 2009 or 2010. The review is intended to determine if borrowers suffered financial harm directly resulting from errors, misrepresentations, or other deficiencies that may have occurred during the foreclosure process. The servicers are required to compensate borrowers for financial injury resulting from deficiencies in their foreclosure processes.
If you had a mortgage loan on your primary residence and believe you were financially harmed during the mortgage foreclosure process by any of the four servicers in 2009 or 2010, you can request an independent review and potentially receive compensation. The four servicers are required to make the independent reviews available to borrowers as part of their compliance with the April 2011 enforcement actions. …
With something to gain and nothing to lose, many people should have signed up. That isn’t what’s happened.
A number of servicers supervised by the Office of the Comptroller of the Currency (OCC) are also required to conduct independent reviews. (See below for the full list of servicers.)
Eligibility for Review
Borrowers are eligible for an independent foreclosure review if they meet the following criteria:
- the property securing the loan was the borrower’s primary residence;
- the mortgage was in the foreclosure process (initiated, pending, or completed) at any time between January 1, 2009, and December 31, 2010; and
- the mortgage was serviced by one of the following mortgage servicers:
America’s Servicing Company Countrywide National City Mortgage Aurora Loan Services EMC Mortgage Corporation PNC Mortgage BAC Home Loans Servicing EverBank/EverHome Mortgage Company Sovereign Bank Bank of America Financial Freedom SunTrust Mortgage Beneficial GMAC Mortgage U.S. Bank Chase HFC Wachovia Mortgage Citibank HSBC Washington Mutual (WaMu) CitiFinancial IndyMac Mortgage Services Wells Fargo Bank, N.A. CitiMortgage MetLife Bank Wilshire Credit Corporation If you previously filed a complaint with these servicers about foreclosures pending during the review period, you may still seek an independent review of your foreclosure.
There are no costs associated with being included in the review; the review is a free program. Beware of anyone who wants payment to assist you in connection with the independent foreclosure review or any other foreclosure assistance program. …
Deadline to Request a Review
Requests for review by the servicers’ independent consultants must be postmarked or submitted online by September 30, 2012. Borrowers are encouraged to carefully consider the information about the review program to determine if they are eligible to participate.
The deadline has been extended twice, and they may extend it one more time, but eventually, the program will terminate.
Think about what this program is really for. This is providing closure for the banks on all past claims and insulating them from future lawsuits. Imagine a wrongful foreclosure lawsuit is filed next year. The attorneys for the banks will argue that the owner had an opportunity to file a grievance, and if they missed their chance, too bad. They would be right. This program has nothing to do with actually recovering any money for former owners. Very few claims will result in any financial compensation. I describe this as a gambit because the banks are taking a small risk today for a large advantage tomorrow. They may have to pay a few claims, but they get to avoid all claims in the future.
Few borrowers signing up for foreclosure review
Deadline for the government’s foreclosure review program has been extended to Sept. 30. Just 7.5% of the 4.5 million eligible borrowers have sought a review.
By Lew Sichelman – July 8, 2012
Deadlines are looming for anyone seeking a review of their foreclosure proceeding and for homeowners considering a short sale.
Few taking advantage of foreclosure review
Under the terms of an enforcement action between Uncle Sam and large mortgage servicers, you still have time to ask someone to ensure that you were treated fairly if you were involved in a foreclosure.
In February, the Office of the Comptroller of the Currency and the Federal Reserve Board extended the deadline for the “independent foreclosure review” to July 31 from April 30. Now the deadline has been extended again, to Sept. 30.
The extensions provide more time to publicize the enforcement action, which requires participating servicers to retain independent consultants to identify borrowers who may have been harmed during foreclosure proceedings in 2009 or 2010. So far, the response has been disappointing.
I suspect most people simply want to move on. Requesting a foreclosure review reopens old wounds. None or those people are going to get their old houses back, and very few will see any money. Knowing this, the pain of reliving the loss is not worth it.
As of this writing, just 196,000 borrowers had actually asked for a review. The servicers have selected 142,400 more cases for review on their own, for a total of 338,400. That number is expected to grow, says Bryan Hubbard, a spokesman for the Office of the Comptroller. But as of now, that’s just 7.5% of the estimated 4.5 million borrowers covered by the enforcement action.
Only 4% of the eligible foreclosures have begun a review on their own, and about 3.5% were initiated by services. It seems unlikely that services would pick the worst cases most likely to have substantive errors, so the entire program is very unlikely to turn anything up. It’s a whitewash.
The requirements for a review are simple: A borrower is eligible if the loan was serviced by a participating lender, if the house was the principal residence and if the loan was active in the foreclosure process from Jan. 1, 2009 to Dec. 31, 2010.
Interesting that the subprime people foreclosed on in 2007 and 2008 are not eligible. They have again been deemed subhuman slime unworthy of assistance.
You don’t need to have lost your house to be eligible. You also may be covered if you paid your way out of the foreclosure process by bringing your loan current, participated in a loan modification, sold the house for less than what you owed or simply handed the keys back to your lender.
Strategic defaulters are eligible? Wow!
When this program closes, the last of the claims from the dodgy loans of the housing bubble will be put to rest. Although future actions may arise, they will be beaten down with the combined force of the Robo-signer agreement and this last-chance program. The banks should be fully insulated from now on.
They needed $800,000
The former owners of today’s featured bank-owned property were not typical Ponzis. They were prudent through most of the bubble, but in 2005, they withdrew all their equity in one huge refinance. The obtained a new first mortgage for $892,500 and opened a $147,000 HELOC. Their previous first mortgage was only $217,000. What did they need $800,000 for?
Newport Beach Overview
Median home price is $1,027,000. Based on a rental parity value of $797,000, this market is over valued.
Monthly payment affordability has been worsening over the last 3 month(s). Momentum suggests unchanging affordability.
Resale prices on a $/SF basis increased to $517/SF to $528/SF.
Resale prices have been weak for 12 month(s). Price momentum suggests weak prices over the next three months.
Median rental rates declined $48 last month from $$3,302 to $$3,254.
Rents have been slowly rising for 12 month(s). Price momentum suggests slowly rising rents over the next three months.
Market rating = 2
Proprietary OC Housing News home purchase analysis 
6 RUE MONTREUX Newport Beach, CA 92660
$1,050,000 …….. Asking Price
$255,000 ………. Purchase Price
6/28/2001 ………. Purchase Date
$795,000 ………. Gross Gain (Loss)
($20,400) ………… Commissions and Costs at 8%
============================================
$774,600 ………. Net Gain (Loss)
============================================
311.8% ………. Gross Percent Change
303.8% ………. Net Percent Change
12.8% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$1,050,000 …….. Asking Price
$210,000 ………… 20% Down Conventional
4.12% …………. Mortgage Interest Rate
30 ……………… Number of Years
$840,000 …….. Mortgage
$218,211 ………. Income Requirement
$4,069 ………… Monthly Mortgage Payment
$910 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$263 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$396 ………… Homeowners Association Fees
============================================
$5,637 ………. Monthly Cash Outlays
($1,062) ………. Tax Savings
($1,185) ………. Equity Hidden in Payment
$306 ………….. Lost Income to Down Payment
$151 ………….. Maintenance and Replacement Reserves
============================================
$3,847 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$12,000 ………… Furnishing and Move In at 1% + $1,500
$12,000 ………… Closing Costs at 1% + $1,500
$8,400 ………… Interest Points
$210,000 ………… Down Payment
============================================
$242,400 ………. Total Cash Costs
$58,900 ………. Emergency Cash Reserves
============================================
$301,300 ………. Total Savings Needed
——————————————————————————————————————————————-
We're sorry, but we couldn't find MLS # P827739 in our database. This property may be a new listing or possibly taken off the market. Please check back again.
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$937,900 4 RUE CHAMONIX |
0.15 miles 2 bd / 2 ba 1,874 Sq. Ft. |
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$1,395,000 14 RUE BIARRITZ |
0.4 miles 2 bd / 2 ba 1,808 Sq. Ft. |
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$1,499,000 2 RUE BIARRITZ |
0.42 miles 2 bd / 1.75 ba 1,900 Sq. Ft. |
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$1,449,000 2233 ARBUTUS St |
0.67 miles 3 bd / 2.5 ba 2,115 Sq. Ft. |
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$1,369,000 2245 ARBUTUS St |
0.69 miles 3 bd / 2 ba 2,123 Sq. Ft. |
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$1,650,000 2232 ARBUTUS St |
0.7 miles 3 bd / 2.5 ba 2,500 Sq. Ft. |
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$798,000 2200 VISTA DORADO |
1.05 miles 3 bd / 2.5 ba 1,900 Sq. Ft. |
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$495,000 2220 VISTA DORADO |
1.09 miles 3 bd / 2.25 ba 1,881 Sq. Ft. |
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$1,650,000 2639 BLACKTHORN St |
1.12 miles 5 bd / 3 ba 2,500 Sq. Ft. |
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$749,000 464 VISTA ROMA |
1.24 miles 3 bd / 2.5 ba 1,860 Sq. Ft. |
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13 Responses to “Foreclosure reviews are a gambit few former owners sign up for”
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TRR July 5, 2012
Enjoy!
”You can’t spend your way to prosperity, but we are in an upside down world where spending and debt are considered to be “wealth”. People will look back on this period and wonder how they allowed themselves to become so deluded?”
”I think the crisis is going to result in the transition to a new financial system as
the current one implodes. Best guess is that it will be either happening, or perfectly obvious that it’s going to happen, within 6-12 months.”
http://www.scribd.com/doc/99238441/Tr-Report-27
Thanks for the link. I got sucked in and read the whole report.
Now, here goes FHA delinquencies.
Remember that rule they couldn’t enforce a few months back, the ruled required borrowers couldn’t have more that $1,000 of uncollected debt? Then FHA said they weren’t going to enforce the rule, because it reduced the number of potential borrowers. This is an tiny example why FHA such poor shape as it became the new subprime facilitator.
Happy 10% or 20% down payment everyone?
Closer to a bailout? FHA’s mortgage delinquencies soar
By Tami Luhby @CNNMoney July 9, 2012: 5:11 AM ET
NEW YORK (CNNMoney) — The mortgage market appears to finally be stabilizing — as long as you ignore loans backed by the Federal Housing Administration.
Increasingly, FHA-insured loans are falling into foreclosure or serious delinquency, moving in the opposite direction of loans guaranteed by Fannie Mae and Freddie Mac or those held by banks, which are all showing signs of improvement.
And taxpayers could ultimately be on the hook for FHA’s growing number of troubled mortgages. The agency’s finances are already on shaky ground, and additional losses from loans going sour could prompt the need for a federal bailout, experts said.
“We can’t escape this one,” said Joseph Gyourko, a real estate professor at the University of Pennsylvania’s Wharton School. “This is an arm of the U.S. government.”
The share of government-guaranteed loans, a majority of which are backed by FHA, that were 90 days or more delinquent soared nearly 27% during the year ending March 31. Foreclosures jumped nearly 17%, according to a report published recently by federal regulators.
At the same time, bank loans saw a dramatic improvement, with delinquencies shrinking by 39% and foreclosures declining by nearly 10%. Fannie and Freddie’s portfolio also improved as delinquencies dropped by nearly 15% and foreclosures slid by more than 6%, the quarterly report issued by the Office of the Comptroller of the Currency said.
FHA has also had a tougher time successfully modifying loans. More than 48% of government-guaranteed mortgages re-defaulted 12 months after modification, compared to 36.2% of loans overall, the report said.
FHA’s risky borrowers: FHA doesn’t make loans, but it backstops lenders if borrowers stop paying. With this guarantee in place, banks are more likely to offer mortgages to borrowers with lower credit scores or incomes.
Housing experts have been warning for years that many FHA-insured loans are not sustainable, especially in these troubled times. That’s particularly concerning because FHA’s share of the market has swelled in recent years as lenders pulled back on providing mortgages that weren’t backed by the government.
One of the main critiques of FHA loans is that they require very low downpayments — a minimum of 3.5%. In an environment where home prices are declining, borrowers can quickly slip underwater and owe more than their property is worth
Mike,
Why do you think that the FHA loans were designed to help the loan/house owners?
The FHA loans are working as intended–a temporary stabiliziation o the house prices while rewritting the loan and liabilities from the banks to the taxpayers. What the 2 parties (Dand R) need to do now is to transfer the liabilities from the Jumbo loans to the taxpayers, who will think that the program is to their benefit.
Honcho,
Does the statue of limitation apply to the date of filing for a review or the filing date of a lawsuit? If it’s the latter, filing for a review might just be false hope to run out the clock by delaying the lawsuit.
Re: Statute of Limitations (I’ll try to use as little legal lingo as possible)
From the post, it appears as if you must file your claim by September 30, 2012 if you entered/completed the foreclosure process beween January 1, 2009, and December 31, 2010.
Typically, the statue of limitations starts to run once you become aware or should have become aware of a problem, and you have 2 years (typically) to file a lawsuit from that point. So, if a Notice of Default was filed on January 1, 2009, you should have been aware of the issue at that point (“I’m current on my payments, why did I receive this Notice?”). With the 2 year limitation at work, you would have needed to file a lawsuit by January 1, 2011 or your claim would be forever gone. This new process gives you until September 30, 2012 (almost a full 2 years of additional exposure for the bank).
That is why I don’t think it was done to limit liability for the banks. This group has already seen their window for a lawsuit closed. If anything, it increased the potential exposure to the banks as they can now be liable where a court would have said that it is too late to file a lawsuit.
If you “wrongfully” entered the foreclosure process after the December 31, 2010 date listed in the program, you can still file a lawsuit that wouldn’t otherwise be time barred. The program simply wasn’t designed for your benefit because you still have a full array of rights and remedies available to you.
Honcho,
Thanks for the explanation. It seems like that question if one is current on an account is easily established by the paper trail of cancelled checks and money transfers. The waters get muddied when the collecting agency or address changes. I guess an owner who didn’t know of the FC and kept paying would also be in a special category.
I think local governments might try eminent domain powers on mortgages. Basically, a forced loan modification on Lender A by the County with funds from Lender B. That is one possible way it can spread to Jumbo loans. And knowing politicians they will all probably be in favor of this to get votes…and a little revenue. Only the courts could stop this from happening.
Also, FHA has a direct line of credit of the US Treasury. They don’t have ask Congress or the President for a bailout. They just get it. It’s “America’s HELOC”.
If the loan modification is forced and thus backed by the government, the loan is essentially rewritten and backed by the govt. The banks could suffer a small loss upon the taking (by must be at market value) and sue for more money from the taking. I see the banks really benefiting for your model. The banks would get almost fully value of the note, issue a new note with the governments backing, then a few years later collect from government for their good non-defective non=preforming loan. Sweet deals for the banks and the sharp pokes in the eye for the taxpayers, who will be stuck making good on the note. At that point, the banks would collect the money and buy the the houses at fire sale prices.
Wells Fargo Group Reports Housing Gains, Cautions Against Optimism
In a report released Thursday, Wells Fargo’s Economics Group cautioned that although the housing recovery is picking up steam, the good news needs to be placed in the larger context of a weakened market.
The group’s Housing Data Wrap-Up for June 2012 shows that even with the overall economy slowing, the recovery in the housing market seems to be picking up momentum. A mild winter boosted construction in the Northeast and Midwest during what is traditionally a slow season, giving builders more inventory to sell in the spring. In addition, the new construction during the first five months of the year showed modest gains in employment, increased household formations, and resurgent demand for apartments.
New home sales through May ran 18.2 percent above their pace from a year prior, and the Northeast saw a 30.7 percent boost in sales. New home construction has increased with demand-single-family starts are up 20.4 percent in the first five months of the year compared to 2011, and multi-family starts increased 44.6 percent.
Home prices also solidified, with the S&P/Case-Shiller 20-City Home Price Index—- increasing 0.7 percent in April and showing a revised gain of 0.7 percent in March. Prices have increased for three straight months and are up at a 6.2 percent annual rate over that period. While the S&P/Case-Shiller Index shows prices falling 1.9 percent over the past year, the group believes that prices have hit a bottom.
On a regional basis, prices increased in 17 out of 20 markets covered by S&P/Case-Shiller, and no markets hit new lows. Prices came back up fastest in some of the hardest-hit markets, including Phoenix and Miami. The report speculates that those areas probably saw prices overshoot to the downside and are now seeing them rise as investors pursue “bargain-priced” properties. Further evidence of this can be found in the CoreLogic Home Price Index, which shows a price increase of 0.4 percent in May, marking the fifth consecutive month of increases.
Median prices for new and existing homes also improved in recent months, though the group contributes the boost to a changing mix of sales.
With all the good news coming out, the group stressed the need to keep recent improvements in the housing market in perspective.
“Even with the recent gains, new home sales and residential construction remain shadows of their former selves. Residential construction currently accounts for just 2.3 percent of GDP, down from 6.3 percent at the peak and 4.5 percent for a more typical period. The tiny foundation from which the housing recovery is beginning means that even large percentage gains in housing starts will make only a modest contribution to real GDP growth,” the group wrote in its report.
I avoided this program because I thought the banks were collecting data on borroeers in order to pursue them later via lawsuits.
“Think about what this program is really for. This is providing closure for the banks on all past claims and insulating them from future lawsuits.”
I actually think this was designed to give everyone (banks and borrowers) a quick and efficient was to resolve “legitimate” claims.
Borrowers were going to be faced with a statute of limitations (time limit for filing their claim) problem in court regardless of the timeframe implemented in this procedure so I don’t think that this was done to cut off liability from that standpoint. If anything, it actually lengthened the time to file a claim that would otherwise have been cut off if relying on state or federal law.
It is very expensive for the banks/servicers to retain counsel to handle cases that are filed in either state or federal court. This procedure “should” help to resolve claims without the added expense of hiring counsel to navigate the court system.
Like you noted, I would be shocked if more than just a handful of claims result in any form of compensation. This just gives the banks a more efficient way to handle the process rather than be faced with substantial legal costs that would accompany mass lawsuits (most of which are completely without merit).
The appreciation on today’s featured property is utterly mind-boggling to me. I’m not expecting 2001-rollback’s on Newport Beach real estate, but it’s equally difficult for me to fathom a 400% increase in today’s marketplace.
Were Big Canyon properties ridiculously underpriced in the early 00′s? Would anyone with 1 million to spend on a house really consider this a target property? Is there anyone out there with more knowledge than me that can make sense of this?
It is possible that the reported sale price in 2000 was too low. I was suspect when I saw the number too, but that is what the public record shows.