FANNIE MAE IS BADLY IN NEED OF REFORM & NEW LEADERSHIP MINUS CONGRESS' INTERVENTION (NO BAIL OUT)

FANNIE MAE IS BADLY IN NEED OF REFORM & NEW LEADERSHIP MINUS CONGRESS' INTERVENTION (NO BAIL OUT):

WITHOUT CONGRESSIONAL INTERFERENCE, FANNIE MAE STAFF CAN NO LONGER USE POLITICS TO HURT HOMEOWNERS WHO VOTE OPPOSITE OF THEIR CHOSEN CANDIDATES.

WITHOUT CONGRESS' HELP, FANNIE MAE STAFF CAN NO LONGER STEAL HOMES WITH EQUITY FROM U.S. MILITARY VETERANS WHO VOTE OPPOSITE OF THEIR CHOSEN CANDIDATES.


Post Sources: American Banker, Forbes, Fox News, Youtube


********How next FHFA chief can reform Fannie, Freddie without Congress' help


The legislative stalemate over housing finance reform is likely to prolong the uncertain future for the government-sponsored enterprises. But it also illuminates the power of the next head of the Federal Housing Finance Agency.

With FHFA Director Mel Watt's term due to end in January, his successor — either a Senate-confirmed appointee or an interim chief — has substantial authority to set part of the path forward on GSE reform, including how far Fannie Mae and Freddie Mac expand their mission and the status of a common securitization platform shared by the two mortgage giants.

“Reforms can move forward without legislation,” said Anne Canfield, executive director of the Consumer Mortgage Coalition. “There are things that can be done administratively that would reduce the government’s exposure and risk to the GSEs and bring private capital into the marketplace, but in a little bit of a different way.”

That highlights the importance of whomever the Trump administration selects for the job. It could be someone who differs from Watt — an Obama appointee — in style and policy, who could opt to go as far as placing the mortgage giants into receivership.

“I don’t think we’re going to have legislative GSE reform anytime, but the day-to-day decisions they make, whether to approve a pilot or fund the Housing Trust Fund, these are significant decisions that will impact the trajectory of mortgage finance,” said Isaac Boltansky, the director of policy research at Compass Point.

During his tenure, Watt has appeared cautious about changing Fannie and Freddie's role in the absence of congressional reforms.

"I am well aware, and regularly express my belief, that conservatorship should never be viewed as permanent or as a desirable end state and that housing finance reform is necessary," Watt said in a 2014 policy speech early in his FHFA tenure. "However, Congress and the administration have the important job of deciding on housing finance reform legislation, not FHFA. Instead, our task is to continue to fulfill our statutory mandates, to execute our strategic plan and to manage the present status of Fannie Mae and Freddie Mac."

But observers said his successor could take advantage of the agency's powers to move in the direction of reducing the GSEs' role.

Before Watt arrived, the agency was run on an acting basis by Ed DeMarco, who had joined the agency in the Bush administration and was seen as more opposed to expanding Fannie and Freddie's reach.

“It depends on the person," said Canfield. "It really depends on who they select.”

Some candidates who have been mentioned as possible successors to Watt — including DeMarco himself along with retiring House Financial Services Chairman Jeb Hensarling — have been vocal about reducing the government’s role in the mortgage market.

In February, when Fannie requested a $3.7 billion draw from the Treasury, Hensarling harshly criticized giving the company any more bailout funds.

“Today’s announcement that Fannie Mae has once again run out of money to pay its own bills is the latest example of why we need to repeal the GSEs’ government charters once and for all," he said then in a statement, adding criticism later of Watt's handling of the companies' fiscal situation.

"The even more troubling aspect of the GSEs financial crisis is FHFA Director Mel Watt’s continued insistence to siphon taxpayer dollars to prop up payments to the Housing Trust Fund that the GSEs cannot afford to make," Hensarling said. "If the GSEs don’t have the money to pay their own bills, they should not be making optional payments to outside entities."

While Watt's term will end in early 2019, a pair of recent scandals facing the agency has led some to speculate he could leave sooner. Watt has been accused of sexually harassing an FHFA staffer and is reportedly under a separate investigation for attempting to weaken the oversight of the FHFA Office of Inspector General.

Before a new nominee is Senate-confirmed, the White House could appoint one of Watt’s three lieutenants to serve as acting director or appoint a temporary director under the Federal Vacancies Reform Act when Watt leaves.

“If there’s a prolonged period where we have an acting director … I think that it would be a slower decision-making process and more of a caretaker,” said Boltansky.

But Canfield disagreed, saying that the administrative decisions made by an acting director could depend on the person.

“I think the acting director can do quite a bit,” she said. “I would hope that they would get a permanent director in there but if they’re not able to do that, I think they can all move forward with an acting director.”

If the White House were to move quickly to nominate a successor to Watt, it would signal that the administration wants to move quickly to end conservatorship and implement reforms of the mortgage finance system, Keefe, Bruyette & Woods wrote in recent a research note.

“However, it is difficult to say what policy path the administration will pursue until we see what personnel it intends to insert at FHFA,” the company said.

Of all the actions a director could take, the most significant would be to put Fannie and Freddie into a receivership, which supporters claim would restructure the GSEs without burdening taxpayers.

Among the other decisions the next FHFA director could make would be to determine the courts of efforts to implement a common securitization platform, which would allow Fannie and Freddie to issue uniform mortgage-backed securities. The FHFA has pushed the second phase of the process to June 2019 — after Watt’s departure.

The director will also be at liberty to decide whether or not to continue Fannie's pilot Enterprise-Paid Mortgage Insurance program and Freddie's similar Integrated Mortgage Insurance pilot, which both debuted this year. Some have criticized the mortgage insurance programs as being too far outside the bounds of the GSEs’ mission.

An FHFA director with the view that the GSEs' footprint should be reduced could oppose the mortgage insurance pilots.

However, the pilot programs are too new to automatically write off, and the FHFA director could just as easily wait to see if the programs are effective before making a decision to implement them further, said Laurence Platt, an attorney at Mayer Brown.

“I don’t think this is an issue that will be dependent on who the new FHFA director is,” Platt said. “I don’t think there’s a partisan side to this, per se.”

To be sure, there are clear limits on what the next FHFA director can do administratively. Creating some new housing finance structure to replace the GSEs is the territory of Congress. Instituting an explicit government guarantee or changing the ownership charter or structure of the GSEs would need congressional approval, which is unlikely to happen in the short term.

Besides congressional reforms, there are other policy areas where the FHFA cannot move unilaterally. The FHFA would have to work with the Treasury Department to change the preferred stock purchase agreements, which require Fannie and Freddie to direct nearly all of their profit to Treasury. Investors have long claimed this is unfair, and have unsuccessfully challenged the legality of this agreement in court for several years.

Bank Of America Agrees To Slash Mortgages For 200,000 Borrowers! Principal Reduction!

BofA to slash mortgage balances by $100,000 or more


Bank of America will significantly slash mortgage balances for as many as 200,000 borrowers.

As part of the $26 billion settlement reached between the five major mortgage servicers, the federal government and the attorneys general of 49 states and District of Columbia last month, Bank of America (BAC, Fortune 500) customers who qualify could see their mortgages reduced by an average of $100,000 or more, according to bank spokesman Rick Simon.

Those principal reductions are much deeper than the ones originally announced as part of the robo-signing settlement deal.

When the settlement was first announced, the average principal reduction was expected to reduce mortgage balances by an average of about $20,000. Among the five biggest lenders, the reductions are expected to help roughly 1 million homeowners who owe more on their homes than they are worth.

Multi-million dollar foreclosures

The other four banks, JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Wells Fargo (WFC, Fortune 500) and Ally Financial, are expected to reduce qualified borrowers' principal to between 115% and 125% of the value of their homes. Bank of America, meanwhile, is aiming to reduce the amount owed on a home to 100% match the current market value.

Bank of America's deal only applies to the mortgages it owns and some that it services for private investors. Loans backed by government-controlled agencies like Fannie and Freddie or insured by the Federal Housing Administration are not eligible for the program.

Many of the mortgages Bank of America plans to refinance came to the bank through its 2008 acquisition of Countrywide Financial, which issued many high value loans called jumbo mortgages that exceeded the loan limits of Fannie Mae (FNMA, Fortune 500), Freddie Mac (FMCC, Fortune 500).

A large percentage of those loans were issued in some of the country's hardest hit housing markets, including California, leaving many of Bank of America's mortgage borrower's deeply underwater on their mortgages, said Simon.

The bank has already identified the 200,000 or so borrowers that it will offer modifications to and will start to reach out to them as soon as a D.C. federal court approves the settlement.

"We expect to get off to a fast start with this program," said Simon.

There are incentives to do that. If the bank is able to demonstrate that it faithfully carried out the provisions of the attorneys general's foreclosure settlement -- as well as a separate settlement in which it agreed to reimburse HUD $1 billion to cover problems originating FHA loans -- over the next three years, it can be forgiven $850 million in penalty payments, said Simon.

The bank has also agreed not to pursue foreclosures against any delinquent borrowers who might be eligible for a mortgage modification as part of the settlement.

It will also reform its foreclosure processing to avoid repeating robo-signing abuses, in which bank employees signed hundreds of documents a day, testifying to statements they had no knowledge of.

Million-dollar foreclosures rise as rich walk away

The deal is one of a series of government-led initiatives aimed at tackling the foreclosure crisis. The latest effort came on Tuesday when the Obama administration announced a plan to reduce refinancing costs for FHA-insured loans.

The U.S. Department of Housing and Urban Development (HUD) advises borrowers who believe they were subjected to foreclosure abuse and may be eligible for a mortgage modification under the settlement to call their servicers and ask for a review of their cases.

HUD said once the agreement was submitted to a court for approval, which was expected to happen on Friday, it would hold a press conference to go over the details.


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Sources: Bank Of America, CNN, Wikipedia, Google Maps

Housing Slump & Foreclosure Remedy? Section 8 Voucher Renters!

Housing vouchers a golden ticket to pricey suburbs

It was clear that Liza Jackson’s luck had changed when she drove her pearl-white Dodge sedan, the one with the huge pink plastic eyelashes over the headlights, into Pinebrook, an eight-year-old subdivision where residents tend to notice cars with huge pink eyelashes.

“There goes the neighborhood,” one homeowner said when she heard that her potential new neighbor had a federal housing voucher known as a Section 8.

But Jackson could well be Pinebrook’s salvation, a means by which landlords can rent an empty, crime-magnet of a house to a tenant with a steady, government-backed check.

From Jackson’s point of view, the dismal housing market appeared as a glorious reversal of fortune: Fresh swaths of suburbia were opening up to the very people it has so often excluded.

She had seen one house, and now she rolled up to another, a tan three-bedroom with red shutters. She got out and looked around, a vaguely glamorous vision crossing the grass in a long, leopard-print dress. She peeked into the windows, making out what appeared to be vaulted ceilings.

“Dang,” Jackson said approvingly.

She put the house, a foreclosure turned rental, on her list of possibilities.

The reasons for this irony are mostly familiar. A steadily dropping homeownership rate, 5 million to 11 million more foreclosures in the pipeline, and a raft of investors buying them up have led to a proliferation of rentals in the land of lawns and cul-de-sacs.

But as housing prices keep slipping and the economy remains shaky, there’s been another shift as more landlords view the approximately 2 million American families with a Section 8 voucher — which essentially subsidizes fair-market rent for people who can’t afford it — as among the best ways to fill an empty house.

“It’s guaranteed money,” said David Benham, who owns several rental properties and is a founder of the Benham REO Group, which sells bank foreclosures to investors in 35 states. “It has a great accountability program with the renters. I love Section 8. I wish every one of my properties was Section 8.”

So for a group of Americans previously blocked from certain neighborhoods by “not in my back yard” politics, high prices and a lack of rental options, this is a minor bonanza. Those with a Section 8 voucher, a key federal program for the poor, are a fraction of those who need it; waiting lists are full and years long. But they are a lucky fraction. In the recession-era economy, the voucher is becoming a golden ticket to almost anywhere, a point hardly lost on Liza Jackson, whose cellphone was now ringing Lil Wayne.

“Yes?” she said, answering in the prim manner she described as her “white voice.” “I had called about the four-bedroom, two-and-a-half bath? Yes. Liza. Like Minnelli.”


Jackson and her daughter Sheena, 24, were saying goodbye to a cramped two-bedroom townhouse in Honolulu, a city she described as “not all it’s cracked up to be, if you’re black,” and “all high maka maka,” which is Hawaiian slang for unduly expensive.

Jackson had planned the move for months, perusing rentals on Section 8 Web sites that offer everything from chic new condominiums in Miami to four-bedrooms in Phoenix, Las Vegas and Atlanta. Jackson decided on Charlotte, where she could get more square footage for her family, which included Sheena, Sheena’s 5-year-old son, Shamahrie, and her two dogs, Coco Chanel and Mamacita. She saved up from her job as a baker, shipped the car and booked a room at a cheap hotel off the Billy Graham Parkway.

Now it was early June, and she and Sheena were at a briefing at the Charlotte Housing Authority office, a normally dreary place that was bustling like a booming real estate firm.

By 8 a.m., more than two dozen hopeful people were streaming in, having taken overnight buses from New York, Baltimore, New Jersey and elsewhere, where they lived in public housing, or run-down neighborhoods, or places they hoped to escape.

“I want to be around all this fresh air,” said Evelyn Lifsey, who was moving from a Staten Island public housing project. “My moving truck is on standby.”

A housing counselor ended the briefing by handing out a list of Zip codes.

“These are areas with better amenities, more jobs, better schools,” she said, encouraging people to scout them.

Jackson received a folder with her voucher, a prized possession that people spend years on waiting lists to acquire. Jackson’s was $1,032, possibly more if utilities were included or if she found a place in a pricier Zip code. Her contribution was about $200 a month.

She looked over the list of houses she’d compiled: a few older homes and others in subdivisions such as Linda Vista, Running Deer and Pinebrook, a tidy if slightly fraying neighborhood where some homes once sold for $180,000.

“I don’t want to live in some ghetto,” Jackson said in the brawny tone of her native Boston, and it seemed she would not have to. Soon, she and Sheena were zipping down Interstate 85.

It was a sunny afternoon in Charlotte, an ambitious city of mirrored skyscrapers and green suburbs whose last big wave of house hunters was full of bank employees, high-tech workers and other professionals.

Now there was Jackson, who receives unemployment, and Sheena, who gets child support for Shamahrie. Riding along, they fielded calls from agents, some of whom seemed quite eager.

“Yes, hello, Debbie!” Jackson said into her phone.

“Yes, I did receive my voucher,” she said to another agent.

“Yes, I did get my voucher,” she said to another.

Their list of possibilities was growing.

“Just look at all these trees!” Sheena said as they sailed past a blur of highway forest.

“Here you can just drive and drive,” Jackson mused, imagining a better life.

If she was cramped in Honolulu, here she had higher standards. At least three bedrooms. Hardwood floors, preferably. An open kitchen.

They wound their way to the first address, which turned out to be the sort of Section 8 offering typical of the boom years: a small, 1970s-era brick number with dirt patches in the front yard.

“I’ll put ‘[Heck] no’ next to this one,” Jackson said, making a note.

She hit the gas, passing two young men in shorts and tank tops.

“Uh-oh, street punks,” Jackson said, further disqualifying the area.

She steered back onto the interstate, and after a while exited onto Sunset Road, a winding, semi-rural stretch with a run of white split-rail fencing.

“Oooh,” Sheena said, impressed.

They passed a couple of young men in shorts and T-shirts walking along the road.

“Uh-oh, street punks?” Jackson said, unsure which class distinction applied.

“Nah, they look like some going-to-school street punks,” said her daughter, who claimed a finer social radar.

They pulled into Linda Vista, a winding maze of 2,000-plus-square-foot homes.

“This is quiet livin’,” Jackson said, rolling along. “I’d hate to see something ghetto in here.”

Most yards were well kept, though a few were weedy, and here and there, vinyl siding was curling off houses. There was a Mercedes-Benz in one driveway, and old trucks and minivans in others. There were some vacant homes.

They pulled up to one, a gray three-bedroom with a white picket fence. They walked around the house, gold sandals in the clipped grass, and looked through the windows. Sheena was sure neighbors were staring.

Jackson knew that despite stereotypes people might have of Section 8 tenants, she would be an ideal neighbor for these economic times. She had cleared up her credit. She had savings, enough to pay her share of the rent in advance. She was upstanding, planning to attend school to become certified to draw blood. And once she moved, she would stay.

She was what Linda Vista needed, she realized: stability.

If Jackson decided to apply for it, she would contact the owner, Sabre Value Asset Management. The house, which the firm bought in a short sale for $90,000 last year, is one of about 150 it has acquired across Charlotte and Atlanta. All are rentals.

“Our goal is to try to provide a win for everybody,” said the firm’s president, Aaron Edelheit, describing the enterprise as a stabilizing force.

Jackson’s possible Linda Vista neighbors were warming up to that idea.

“I have nothing against Section 8,” said Cassandra Coleman, a homeowner. “Rich, poor, anyone can be a good or bad neighbor.”

She had been laid off from Bank of America for three years. Her mortgage was in trouble. She spoke with the sense that she could probably use a voucher herself.

Jackson realized that her own good fortune was partly due to such misery, but mostly, she and Sheena were thinking about a huge walk-in closet they’d seen.

“You know how many shoes you can put in there?” Sheena said. “I’m trippin’.”


After several days of looking, Jackson had seen at least a dozen houses that were supposed to represent the rewards of middle-class betterment but that were beginning to strike her as a bit shabby or “peasy.”

She did not want some of the peasy carpet she’d seen, or peasy refrigerators or dented, peasy front doors.

She drove again along Sunset Road, which she had decided was not peasy, at least not yet.

She drove by Elizabeth Oaks, one of the newest and most upscale subdivisions, where the builder had recently pulled out. The model home was now a rental.

She drove into Pinebrook, where one resident had dreaded the notion that a Section 8 tenant might move in. Others took a more practical view.

“If you don’t let go of your hang-ups, you’re going to be stuck with an empty house,” said Crystal Campbell, a homeowner who got laid off from Bank of America and recently found a job in the corporate offices of the Family Dollar discount chain.

By now, Campbell had accepted the revised facts of her existence. She could not move because her home’s value had dropped by half. Section 8 renters were not the enemy of Pinebrook but the friend. The house next door needed a tenant.

But Jackson was ever more discerning, and she wasn’t sure about Pinebrook. There were other places to consider. She had so many choices, including a renovated 2,500-square-foot “gem!” beyond I-485. With her Section 8 voucher in hand, she got in the sedan with the pink plastic eyelashes and headed there next.


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Sources: Washington Post, Youtube, Google Maps

Will.i.am Pays Off Mortgages For 2 Struggling Homeowners

Rapper Will.i.am Bails Out Struggling Homeowners



When all else fails, it's time to turn to Oprah.

Two families who were guests on "The Oprah Winfrey Show" this week thought they were getting help from a financial adviser after falling behind on their home mortgages. But instead, they got the gift of a lifetime.

After telling their tear-filled stories to the audience, Winfrey announced that she had a surprise for them in the form of Grammy Award-winning rapper and producer Will.i.am. From the show:

"will.i.am is paying off both of your mortgages!" Oprah says. "You will own your homes free and clear."

And the tears flowed on.

Instead of a financial adviser, the two struggling families had a visit from an angel who paid off the $250,000 owed by the the 10-member Eller family and $100,000 single mom Alycia Allgood was overdue on her home loan.

Like many Americans who have fallen behind on their mortgages, the Ellers and Allgood both were financially stable until losing their jobs.

John and Cheryl Eller, parents of eight children between the ages of 8 and 20, bought their home in 2001 and made the payments easily through John Eller's job as a chief executive. But after getting laid off, he's making a third of his previous salary:

"I went through my 401(k). I went through all my savings," he says. "I've been an executive in a major corporation, and I've also made doughnuts on a graveyard shift working in a bakery for $10 an hour. I've had to do whatever it takes."

Meanwhile, Allgood put herself through a master's program by working full time to get a well-paying job that helped her support her daughter, Asia, and buy their first home. But when her company downsized and she lost her job, she eventually fell eight months behind on her mortgage.

But because these stories aren't unique in these tough economic times, will.i.am isn't stopping with the Allgoods and the Ellers.

Also on the show, Will.i.am announced his plan to try to help Americans avoid foreclosure through the i.am home fund, which urges people to donate money to help struggling families keep their homes. His mission from the website:

"Growing up I dreamt that one day I'd be able to buy my mom a house and take care of my family. I realized that dream and experienced the positive effect giving back had on my family. Now I am compelled to help others who are in jeopardy of losing their homes and inspire others to join the movement.

The collapse of the housing market and the economic crisis has left millions in jeopardy of losing their homes. The crisis awakened a personal mission to create the i.am home fund to save people facing the very real problem of foreclosure and homelessness."


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Sources: Harpo Studios, Huffington Post, MSN, I.am home fund, Google Maps

Foreclosure Rate Is Highest In 5 Years, TARP Not Used To Help

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Foreclosure Rates Surge, Biggest Jump In 5 Years



A record number of U.S. homes were lost to foreclosure in the first three months of this year, a sign banks are starting to wade through the backlog of troubled home loans at a faster pace, according to a new report.

RealtyTrac Inc. said Thursday that the number of U.S. homes taken over by banks jumped 35 percent in the first quarter from a year ago.

In addition, households facing Foreclosure grew 16 percent in the same period and 7 percent from the last three months of 2009.

More homes were taken over by banks and scheduled for a foreclosure sale than in any quarter going back to at least January 2005, when RealtyTrac began reporting the data, the firm said.

"We're right now on pace to see more than 1 million bank repossessions this year," said Rick Sharga, a RealtyTrac senior vice president.

Foreclosures began to ease last year as banks came under pressure from the Obama administration to modify home loans for troubled borrowers. In addition, some states enacted foreclosure moratoriums in hopes of giving homeowners behind in payments time to catch up. And in many cases, banks have had trouble coping with how to handle the glut of problem loans.

These factors have helped slow the pace of Foreclosures, but now that trend appears to be reversing.

"We're finally seeing the banks start to process the inventory that has been in foreclosure, but delayed in processing," Sharga said. "We expect the pace to accelerate as the year goes on."

In all, more than 900,000 households, or one in every 138 homes, received a foreclosure-related notice, RealtyTrac said. The firm based in Irvine, Calif., tracks notices for defaults, scheduled home auctions and home repossessions.

Homeowners continue to fall behind on payments because they've lost their job or seen their mortgage payment rise due to an interest-rate reset. Many are unable to refinance because they now owe more on their loan than their home is worth.

The Obama administration's $75 billion foreclosure prevention program has only been able to help a small fraction of troubled homeowners.

About 231,000 homeowners have completed loan modifications as part of the Obama administration's flagship foreclosure prevention program through March. That's about 21 percent of the 1.2 million borrowers who began the program over the past year.

But another 158,000 homeowners who signed up have dropped out — either because they didn't make payments or failed to return the necessary documents. That's up from about 90,000 just a month earlier.

Last month, the administration expanded the program, launching a plan to reduce the amount some troubled borrowers owe on their home loans and give jobless homeowners a temporary break. But the details of those programs are expected to take months to work out.

The states with the highest Foreclosure rates in the first quarter were Nevada, Arizona, Florida and California, with Nevada leading the pack, RealtyTrac said.

Rising home prices and speculation fueled a wave of home construction there during the housing boom. But now the state, particularly around the Las Vegas metropolitan area, is saddled with a glut of unsold homes.

Still, the number of homes in Nevada that received a foreclosure filing dropped 16 percent from the first quarter last year.

All told, one in every 33 homes in Nevada was facing foreclosure, more than four times the national average, RealtyTrac said.

Foreclosure filings rose on an annual and quarterly basis in Arizona, however.

One in every 49 homes there received a foreclosure-related notice during the quarter.

Florida, meanwhile, posted the third-highest foreclosure rate with one out of every 57 properties receiving a foreclosure filing.

California accounted for the biggest slice overall of homes facing foreclosure — roughly 23 percent of the nation's total. One in every 62 properties received a foreclosure filing in the first quarter.


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Sources: CNBC, MSNBC, Rachel Maddow Show, Realty Trac, Red Tape Chronicles, Whitehouse.gov, Youtube, Google Maps

Obama's New Mortgage Relief Plan Prevents Deeper Recession

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Visit msnbc.com for breaking news, world news, and news about the economy

Obama's Latest Housing Plan Likely To Help Prevent Deeper Recession


Three years after the housing bust sent foreclosures rates soaring, the White House has gone back to the drawing board to try to keep another 8 million homeowners in their homes.

But a series of enhancements to the Obama administration's year-old foreclosure relief plan announced Friday does little to attack the fundamental logjams that have plagued a program designed to modify loans to create more affordable payments.

As a result, the latest changes likely will help relatively few borrowers, according to those briefed on the program.

“We continue to tinker around the edges of foreclosure prevention,” said John Taylor, president of the National Community Reinvestment Coalition, who testified Thursday on Capitol Hill about the program’s failings.

“We rush to give banks tax breaks, but we dawdle to help homeowners who through no fault of their own lost their jobs because of the economic crisis or bought defective loans that caused the economic crisis.”

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When the pace of U.S. foreclosures began rising in 2007, the hardest hit were borrowers who had been sold subprime loans that reset to unaffordable levels. As the housing market cratered and the recession deepened, the problem spread to other groups, including those who lost their jobs or saw the value of their homes fall below what they owed on their mortgage.

The changes announced Friday are intended to help those groups. Lenders and mortgage servicers will be required to offer three to six months of temporary relief for borrowers who have lost their jobs.

Mortgage companies participating in the existing Home Affordable Modification Program (HAMP), also will be required to consider cutting the amount borrowers owe, for which they would be paid an incentive from the $75 billion set aside to fund the HAMP program. "They’re trying,” said Helen Raynaud, vice president of national grants for the National Foundation for Credit Counseling. “But a lot of the aspects are still voluntary for the servicers to participate."

Additional incentives are being offered to lenders and servicers that cut payments or eliminate second mortgages — a key roadblock in many loan modifications. But unless lenders and servicers suddenly increase the pace of loan modifications, the cost of those incentives will likely remain small. So far, the government has paid out only about $50 million under the HAMP program.

Visit msnbc.com for breaking news, world news, and news about the economy

After the Bush administration’s first foreclosure relief plan, Hope Now, failed to make a dent in the rising foreclosure rate, the Obama administration a year ago announced the HAMP program to try to head off the widening crisis. The plan originally was expected to save between 3 million and 4 million homes. So far, of 1.1 million homeowners who have signed up, only 170,000 have won permanent loan modifications.

To be sure, the latest changes will help boost that number. But those who have looked at the new guidelines say the numbers helped likely will still be counted in the hundreds of thousands. As many as 8 million homeowners are at risk of losing their homes in the next two years.

"We remain dubious about government mortgage modification efforts," wrote Jaret Seiberg, an analyst with Concept Capital's Washington Research Group. "So far none have lived up to expectations, and we see little reason to believe the latest effort will turn out any different."

Part of the problem lies with the scope of the crisis. Three years after the housing bubble burst, the number of homeowners falling behind on their mortgages continues to rise. On Thursday, U.S. banking regulators reported that the number of seriously delinquent mortgages jumped in the fourth quarter, led by a sharp increase among the most creditworthy borrowers.

Some 13.6 percent of all homeowners with mortgages — more than one in seven — are behind in their payments, according to the Office of the Comptroller of the Currency. It was the seventh consecutive quarterly rise.

Meanwhile, millions of homeowners who were sold “pay-option” adjustable mortgages during the housing boom face the prospect of big jumps in monthly payments this year and next. Millions more are “underwater,” owing more than their home is worth.

The mortgage mess remains mired in the complex financial innovation that created the hundreds of billions of dollars of mortgage-backed bonds that financed the housing bubble. That has created an equally complex quagmire of multiple investors holding pieces of an individual homeowner's mortgage. Disagreements over how to value those investments, and how and when to book losses, have stymied the process from the beginning.

“We have to do a real reality check,” said David Berenbaum, chief program officer at the NCRC. “Until we address the underlying problems with this paper — who holds it, how it was originated, how people are accountable and how we can correct this epidemic of foreclosures — our communities' tax base, as well as the economic climate of the nation, is at risk.”

Rising unemployment has also expanded the crisis to a pool of borrowers who were once among the most creditworthy. But one of the nasty side effects of the loan modification has been that homeowners who see their payments reduced below the original amount can see their credit scores lowered.

“That can hurt them when they go looking for a job,” said Raynaud. “When you get a job offer, employers are looking at credit scores.”

It’s not clear whether Friday’s announcement addresses that problem, said Raynaud.

Homeowners who have applied for help with their mortgages report a blizzard of red tape when trying to deal with lenders and servicers. Many servicers have acknowledged the problem, but argue that they were never set up to deal with the historic wave of defaults and foreclosures.

But three years after the housing bust began, homeowners and housing counselors report that the process involves endless delays on hold, repeated redirection from one department to another, delayed or no response, lost paperwork and little or no explanations when applications are denied.

“These problems have not really been addressed yet,” said Raynaud “I have not heard from any counselors that it’s getting better.”


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Sources: MSNBC, CNBC, Google Maps

Obama To Launch Principal Reduction Program For Unemployed Homeowners

Mortgage Modification: Principal Reduction Program For Struggling Homeowners


After months of criticism that it hasn't done enough to prevent foreclosures, the Obama administration is expected to announce Friday a plan to reduce the amount some troubled borrowers owe on their home loans.

The effort will let people who owe more on their mortgages than their properties are worth get new loans backed by the Federal Housing Administration, people briefed on the plan said. It would be funded by $14 billion from the administration's existing $75 billion foreclosure-prevention program.

The people briefed on the plan asked Thursday that they not be identified because the details had not yet been announced.

The plan will also require the more than 100 mortgage companies participating in the administration's existing foreclosure prevention program to consider slashing the amount borrowers owe. They will get incentive payments if they do so.

It also will include three to six months of temporary aid for borrowers who have lost their jobs. And there will be additional payments designed to give banks an incentive to reduce payments or eliminate second mortgages such as home equity loans – a problem that has blocked many loan modifications.

The changes "will better assist responsible homeowners who have been affected by the economic crisis through no fault of their own," an administration official said.

To date, the administration's $75 billion foreclosure-prevention program has been a disappointment. Critics have complained the program does little to encourage banks to cut borrowers' principal balances on their primary loans. Nearly one in every three homeowners with a mortgage are "under water" – they owe more than their property is worth – according to Moody's Economy.com.

An expansion of the foreclosure-prevention program has long been expected because only 170,000 homeowners have completed the process out of 1.1 million who began it over the past year.

The program is designed to lower borrowers' monthly payments by reducing mortgage rates to as low as 2 percent for five years and extending loan terms up to 40 years. To complete the program, homeowners need to go through a three month trial period and provide proof of their income, plus a letter documenting their financial hardship.

Though $75 billion in funding is available to the more than 100 lenders who have signed up, only a tiny fraction has been spent. Lenders had received $58 million in incentive payments as of last month, according to the Government Accountability Office.

Meanwhile, one long-delayed piece of the government effort is getting off the ground.

Citigroup Inc. on Thursday joined the government's program to modify second mortgages such as home equity loans. With Citi on board, now four big owners of second mortgages have joined. The others are Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co.




Obama readies steps to fight foreclosures, particularly for unemployed


The Obama administration plans to overhaul how it is tackling the foreclosure crisis, in part by requiring lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed, senior officials said Thursday.

Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower's income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether.

The new push, which the White House is scheduled to announce Friday, takes direct aim at the major cause of the current wave of foreclosures: the spike in unemployment. While the initial mortgage crisis that erupted three years ago resulted from millions of risky home loans that went bad, more-recent defaults reflect the country's economic downturn and the inability of jobless borrowers to keep paying.

The administration's new push also seeks to more aggressively help borrowers who owe more on their mortgages than their properties are worth, offering financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners. Those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the Federal Housing Administration.

The problem of "underwater" borrowers has bedeviled earlier administration efforts to address the mortgage crisis as home prices plunged.

Officials said the new initiatives will take effect over the next six months and be funded out of $50 billion previously allocated for foreclosure relief in the emergency bailout program for the financial system. No new taxpayer funds will be needed, the officials said.

The measures have been in the works for weeks, but President Obama is finally to release the details days after his watershed victory on health-care legislation. Following that bruising battle on Capitol Hill, his administration is now welcoming a chance to change the subject and turn its attention to the economy and, in particular, the plight of the unemployed -- concerns that are paramount for many Americans.

The administration has been facing increasing pressure from lawmakers and housing advocates to overhaul its foreclosure prevention efforts. So far, fewer than 200,000 borrowers have received permanent loan modifications under its $75 billion marquee program, known as Making Home Affordable. In the meantime, there is a growing backlog of distressed borrowers awaiting help from their lenders, which threatens to undercut efforts to stabilize the housing market.

Challenges unmet

Assistant Treasury Secretary Herbert M. Allison Jr. told a House panel Thursday that "we did not fully envision the challenges that we would encounter" when the earlier program was launched.

The efforts have been hampered by the difficulty of helping unemployed homeowners, who struggled to qualify for the government's mortgage relief plan. In requiring temporary relief for jobless borrowers, known as forbearance, officials are hoping to give them time to find a new job. Some will still need more assistance after the six-month period while others will ultimately lose their homes, administration officials said.

"We certainly support a forbearance opportunity for unemployed borrowers," said John A. Courson, chief executive of the Mortgage Bankers Association. He said he had not seen full details of the program.

Four measures

In addition to mortgage relief for unemployed borrowers, the program features four other key elements, including several steps to address the growing population of borrowers who owe significantly more than their home is worth, according to officials who spoke on the condition of anonymity because the official announcement had not been made. Underwater borrowers now make up about a quarter of all homeowners, according to First American CoreLogic. Economists consider these homeowners at higher risk of default because they cannot sell or refinance their home when they run into financial troubles.

The first key element is that the government will provide financial incentives to lenders that cut the balance of a borrower's mortgage. Banks and other lenders will be asked to reduce the principal owed on a loan if the amount is 15 percent more than their home is worth. The reduced amount would be set aside and forgiven by the lender over three years, as long as the homeowner remained current on the loan.

Until recently, administration officials had been reluctant to encourage lenders to cut the principal balance, worrying that this would encourage borrowers to become delinquent. But as federal regulators have struggled to make an impact on the foreclosure crisis, those qualms have weakened.

"We would prefer to see a required principal forgiveness program. But this is helpful," said David Berenbaum, chief program officer for the National Community Reinvestment Coalition, a nonprofit housing group. "This is another tool that will help consumers weather the crisis."

Second, the government will double the amount it pays to lenders that help modify second mortgages, such as piggyback loans, which enabled home buyers to put little or no money down, and home equity lines of credit.

These second mortgages are an added burden on struggling homeowners, especially when their total debt, as a result, is greater than their home value.

Federal officials have estimated that about half of all troubled homeowners have a second mortgage and last year launched a program to encourage lenders to restructure them. That effort has struggled to get off the ground.

Third, the new effort also increases the incentives paid to those lenders that find a way to avoid foreclosing on delinquent borrowers even if they can't qualify for mortgage relief. For example, the administration is scheduled to launch a program next month encouraging lenders to have borrowers sell their homes for less than the mortgage balance in what is known as a short sale.

Fourth, the administration is increasingly turning to the Federal Housing Administration to help underwater borrowers who are still keeping up their payments. The aim is to help these borrowers refinance into a more affordable loan. The FHA will offer incentives to lenders that reduce the amount borrowers owe on their primary mortgages by at least 10 percent.

For those borrowers who have more than one mortgage on their house, the FHA will allow refinancing of the first loan only. The new loan and any second mortgage could not exceed 15 percent of the home's value. This approach is meant to benefit not only borrowers but also lenders by allowing them to offload mortgages that might otherwise fail.

Only homeowners who are refinancing their main residence, have a credit score above 500 and can document their income are eligible.

Administration official say this refinancing program should not strain the FHA's already weakened finances because the effort will be financed with up to $14 billion out of the federal bailout program.


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Sources: CBS News, Huffington Post, MSNBC, Youtube, Google Maps

Rep. Issa Says Obama Is Hiding HAMP Failures, Calls It A Hoax

The HAMP Hoax: How the Obama Administration is Hiding the Failures of a Disastrous Program



The centerpiece of the Obama administration's foreclosure mitigation policies is failing. Republicans and Democrats in Congress both readily acknowledge the effort, called the Home Affordable Modification Program (HAMP), is a boondoggle of a government program. The only entity that won't face the facts is the Department of the Treasury, which runs the program and has been desperate to hide the program's poor performance.

HAMP modifications start with a three-month trial, then -- if the program's one-size-fits-all conditions are met -- become permanent. The problem for Treasury is that more than two-thirds of homeowners in the program never make it into permanent modifications. Treasury initially promised that HAMP would "reach up to 3 to 4 million at-risk homeowners" and reduce their monthly payments to "sustainable" levels. But the most recent progress report, released last week, shows only 170,207 permanent modifications. At best, that's six percent of Treasury's goal.

By anyone's standard, a six percent success rate is a pathetic result, and only underscores that the reality of HAMP is far from the promise.

But instead of fixing its program, Treasury is trying to move the goal posts -- by counting the program's 1.3 million offers of temporary modifications as an indicator of success. At last month's hearing before our Committee, the head of Treasury's Homeownership Preservation Office, Phyllis Caldwell told skeptical members of Congress that "the program was designed to offer three to four [million] homeowners an opportunity for a mortgage modification - not a permanent modification, an opportunity."

Treasury's revisionism makes little sense, except as cover for another massively expensive, failing government program. It's clear that the initial promise of 3 to 4 million "sustainable" mortgage modifications was referring to permanent, not temporary, fixes -- to suggest otherwise is an assault on common sense and insults every American facing foreclosure and seeking permanent relief through this program. To pretend that temporary modifications count toward HAMP's target number glosses over the costly toll exacted on those who find false hope in the promise of HAMP.

These cash-strapped homeowners are sending mortgage payments to banks in a desperate effort to avoid foreclosure -- believing that temporary assistance will lead to permanent mortgage modifications to keep them in their homes. The sad fact is that the HAMP mortgage modification plan, in most cases, won't ultimately grant them the permanent modification enrollees believe they're on track to receive. This only delays foreclosure -- but doesn't prevent it -- and these homeowners wind up wasting their mortgage payments. It's cynical for Treasury to log progress toward its goal of preventing "3 to 4 million" foreclosures by counting homeowners who might actually be worse off, thanks to HAMP.

As a program, HAMP has chronically underperformed in almost every metric. The facts are clear, even if Treasury's report is not. The Obama administration needs to focus on helping families find ways to weather troubled times and stay in homes they can afford instead of finding ways to mask the program's failure.


Sources: Huffington Post, C-Span, Youtube

Congress Probes Obama's Failed HAMP Foreclosure Relief Program

Foreclosure Relief Plan Still Coming Up Short


The government’s foreclosure relief program just isn’t working.

That was the assessment Thursday of two reports from government watchdogs and a panel of witnesses at a congressional hearing trying to find out why the Obama administration is falling far short of its goal of preventing millions of Americans from losing their homes.

Treasury officials at the hearing acknowledged problems in the year-old mortgage-modification program and announced changes designed to address issues that have limited its effectiveness. Only 170,000 homeowners have completed the process to get their monthly payments reduced out of 1.1 million who began it over the past year.

A failure of the government's latest effort to stem the tide of foreclosures would threaten more than the roughly 8 million homeowners at risk of losing their homes in the next two years, according to John Taylor, president of the National Community Reinvestment Coalition.

"If we have another 8 million homes to go into foreclosure it will have a devastating effect on our economy, and job losses will continue to rise," Taylor told the House Committee of Government Oversight and Reform.

Three years after the housing bubble burst, the number of homeowners falling behind on their mortgages continues to rise. A separate report Thursday from U.S. banking regulators showed that the number of seriously delinquent mortgages jumped in the fourth quarter, led by a sharp increase among the most creditworthy borrowers. Some 13.6 percent of all homeowners with mortgages — more than one in seven — are behind in their payments, according to the Office of the Comptroller of the Currency. It was the seventh consecutive quarterly rise.

A Treasury official at Thursday's hearing acknowledged that the government's Home Affordable Modification Program had encountered a series of unforeseen roadblocks. But he also announced changes designed to speed the modification of loans to more affordable terms.

“We've been learning as we went along,” said Assistant Treasury Secretary Herbert Allison Jr. “We want to continue to improve this program."

The HAMP program is designed to head off foreclosures by lowering borrowers' monthly payments through a series of voluntary concessions from lenders. Guidelines call for cutting mortgage rates to as little as 2 percent for five years, with the difference subsidized by the government, and extending the loan’s term to 40 years. More than 100 lenders have agreed to follow the guidelines, but the decision to modify an individual loan is entirely up to the lender or investors holding the mortgage.

The program has been riddled with problems from the beginning, drawing fire from homeowners, housing counselors, consumer advocates and attorneys working with borrowers. Many report long wait times getting through to lenders, multiple requests for paperwork, lost documents and little or no explanation when applications are denied.



The Treasury also said it will make changes in response to one of the most frustrating complaints. In many cases, lenders are moving to foreclose on a property — even after homeowners get approved for loan modification.

"The new guidelines will make clear that if the homeowner enters into a fully verified modification plan, all pending foreclosure actions must be stopped," Allison told the congressional panel.

But such changes have been a major source of "confusion and delay," according to a report from Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, who testified Thursday. He criticized the Treasury for not setting clear targets for how many homeowners are expected to get help under the $75 billion program.

"We believe it is unacceptable that one year into the program Treasury has yet to identify its goals," he said.

The program also has yet to tackle the issue of millions of homeowners who have second mortgages that must also be modified to make their first mortgage affordable. A year into the program, those guidelines still have not been established, according to Gene Dodaro, acting comptroller general of the Government Accountability Office, which issued a report Thursday critical of HAMP.

"A lot of program details aren’t very clear yet,” Dodaro told the panel. “Until the details are established (mortgage) servicers are going to be reluctant, understandably, to sign up for the program.”

Housing counselors and attorneys say those servicers — companies that handle mortgage payments on behalf of lenders — have been slow to add enough staff to cope with the flood of calls and mail from distressed homeowners. Allison acknowledged the bottleneck.

“I’m not cutting them any slack but they’ve had to get up to speed and they’ve had teething problems along the way,” he said. “All of us know we have more to do, and they have more to do.”

Members of the panel told of constituents who have faced numerous hurdles trying to get their mortgages modified. Reps. William Lacy Clay, D-Mo., and Diane Watson, D-Calif., expressed concerns about what they said was a disproportionately higher foreclosure rate for African-Americans than for whites.

“We have a dual system of mortgage finance in this country — one for whites and one for blacks,” Taylor said. “Black and brown communities were targeted by subprime lenders after banks had closed their branches in those.”

Allison said the current disparity in foreclosure rates between blacks and whites is a reflection of “widespread predatory lending practices during the the mid-part of the decade.”

“The damage already exists," he said. "And we want to make sure that in our program there is no discrimination as people are considered for modifications."

Pressed for details about what measures are being taken, Allison said the Treasury is collecting data on the modification program and will “confront servicers" if they are discriminating against homeowners.

Despite the changes, Dodaro told the panel Congress should “explore some other alternatives.” But it will also have to consider how to continue to work with families who have already signed up with the HAMP program.

“You have 800,000 people in trial modifications that have to be dealt with equitably," Dodaro said.

But members of the the panel also noted the risk of continuing to promote a program that is falling short of its goals.

“We are ourselves setting up for failure,” said Rep. Jackie Speier, D-Calif. “The program doesn’t work.”


Sources: C-Span, MSNBC

BOFA Finally Offers Relief For Countrywide Mortgage Holders

Visit msnbc.com for breaking news, world news, and news about the economy

Bank Of America To Start Reducing Principal On Underwater Mortgages



Bank of America Corp. is giving some of its most troubled mortgage borrowers relief from the threat of foreclosure.

The bank, the largest mortgage servicer in the country, said Wednesday it will forgive up to 30 percent of some customers' total mortgage balances. The homeowners must have missed at least two months of mortgage payments and owe at least 20 percent more than their home is currently worth.

The plan is the newest provision of an agreement the Charlotte, N.C.-based bank reached 18 months ago with state attorneys general to settle charges over high-risk loans made by Countrywide Financial Corp.

The loans were made before Bank of America acquired the mortgage lender in mid-2008. The bank has since stopped making those loans.

Although the motivation for Bank of America's announcement was to resolve legal problems, it has the potential of putting pressure on other banks to also forgive principal on loans that are in danger of failing. Bank of America is the nation's largest bank, and it's among the first to take a systematic approach to reducing mortgage principal when home values drop well below the amount owed.

The Treasury Department, which already has a mortgage modification program, is developing similar plans for principal reductions at other mortgage servicers, according to industry officials speaking on condition of anonymity because they were not authorized to discuss the conversations. They said an announcement could come in the next few months.

"They're talking about doing something and talking seriously about it," Julia Gordon, senior policy counsel at the Center for Responsible Lending, a consumer group, said of Treasury officials. "I think the concern now is fairness and making sure that the public understands the importance of principal reductions toward stabilizing the housing market and helping everybody."

Bank of America estimates that about 45,000 customers will qualify for its plan. The offer will cut total reduced principal by about $3 billion.

Some banks said they have already reduced principal on some mortgages. Wells Fargo & Co. said Wednesday it has modified more than 52,000 adjustable-rate mortgages that it inherited through its acquisition of Wachovia Corp. in late 2008. As of the fourth quarter, the bank also had reduced the principal on those mortgages by more than $2.6 billion.

Citigroup Inc. would not say whether it planned a similar program, but it did issue a statement that said in part, "Citi does reduce principal for borrowers on a case-by-case basis after other options to address affordability are exhausted."

A spokeswoman from JPMorgan Chase & Co. declined to comment on whether it planned a similar program.

Bank of America's announcement came as another report pointed to continuing problems in the housing market. The government said new home sales dropped to a record low last month, a day after the National Association of Realtors said sales previously occupied homes also fell in February, the third straight monthly decline.

Millions of homes have gone into foreclosure since the housing market collapsed in late 2007. The loans affected by Bank of America's announcement include certain subprime and option adjustable rate mortgages. Option ARMs allow borrowers to start with minimal monthly payments that actually increase the loan's balance.

The borrowers who can take advantage of the Bank of America program must also qualify for the Obama administration's $75 billion mortgage loan modification program.

The program announced Wednesday could lower the bank's earnings, which have already been hurt by consumers' continuing defaults on mortgage and credit card loans. Bank of America was among the hardest hit by the credit crisis and recession.

It's not clear how big a financial hit Bank of America will take by reducing mortgages. But the move will likely be less costly than having homeowners walk out on their mortgages or opt to do a short sale, banking analyst Bert Ely said. A short sale happens when a seller owes more than the house is worth, and the lender is willing to accept less than the mortgage balance.

"This is about loss minimization," Ely said. "There's going to be losses (for Bank of America). The question is what's the easiest way out."

The plan does carry risks. For starters, borrowers who aren't 60 days behind on their mortgages may stop making payments so they can qualify. The more borrowers who try to qualify, the bigger the potential loss for Bank of America. The bank will also have to absorb the costs of renegotiating the loans.

Even so, "the move helps create the best prospect of avoiding a further downward home price spiral, which would result in even deeper losses" for the bank, said Howard Glaser, a mortgage industry consultant, in an e-mail.

Investors appeared pleased with the news, and sent Bank of America shares up 44 cents, or 2.6 percent, to close Wednesday at $17.57.

According to new plan, which begins in May, Bank of America will first offer to set aside a portion of the principal balance, interest free. That principal can be forgiven over five years, if homeowners don't miss any payments. The maximum decrease in principal will be 30 percent.

The forgiveness allows a homeowner to bring a mortgage balance back down to 100 percent of the home's value, the bank said.

Glaser said that if the Obama administration launches a similar effort for the entire industry, that would be a "major shift in loan modification efforts."

Lenders including Bank of America have been criticized for not helping enough borrowers to complete the Obama administration's $75 billion mortgage modification program, which is widely viewed as a disappointment. Only 170,000 homeowners have completed the program so far.

As of last month, Bank of America had completed modifications for about 22,000 homeowners, or about 8 percent of those signed up. That compares with about 12 percent for Wells Fargo and 11 percent for both JPMorgan Chase and Citigroup.

The mortgage modification program does not address the problems of borrowers who are considered underwater, or owing more than their homes are worth.

The Treasury Department estimates that 1.5 million to 2 million homeowners will complete the program by the end of 2012, about half of the original goal. A report issued late Tuesday by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, says numerous changes to government guidelines "caused confusion and delay" and said the government did not do enough to advertise the program.


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Sources: Bank of America, MSNBC, Huffington Post, Google Maps