Jeff Sovern thinks the new CFPB mortgage disclosure forms will help prevent the next housing meltdown:
THIS month the Consumer Financial Protection Bureau proposed new rules to clarify the terms of housing loans for millions of homeowners. This sounds like a minor improvement, but in fact it’s a significant step toward preventing another subprime disaster.
Read Help for the Perplexed Home Buyer at the New York Times.
If you want a mortgage modification, most lenders will tell you to stop making mortgage payments before they will consider you for modification. Of course, if you stop making payments and you don’t get a mortgage modification, you will end up in foreclosure. Letting your loan go into default is a risky proposition because the downside is losing your home.
Once you stop making payments—even if you make reduced payments—you are in default on your loan, which means you will go through months of submitting paperwork, navigating phone trees and bank representatives, and re-submitting paperwork the bank lost. Then, one of two things will happen:
Today, the Massachusetts Supreme Court decided that if Wells Fargo and US Bank couldn’t keep track of their property, the court wasn’t going to help them take that property away from the consumers living in it. In other words, the “produce the note” strategy not only works, it is the law. At least in Massachusetts.
This decision could spill over into other states, since the foreclosure process in Massachusetts is similar to other states that permit non-judicial foreclosure. Besides, taking property without competent evidence kind of flies in the face of the Due Process Clause.
The Massachusetts court did point a way forward for the banks: valid assignments. Well, obviously. Unfortunately, the court also said the banks cannot go back and get retroactive assignments, so banks that kept similarly shoddy paperwork may be SOL for the mortgages they think they hold now.
Of course, my guess is that, rather than adopt the court’s reasonable, legal suggestion, the banks will spend millions of dollars lobbying Congress to overturn the Due Process Clause, or something.
The Indiana Court of Appeals have suggested that banks that do not comply with Fair Housing Act servicing guidelines may not be able to foreclose a property until they do. HAMP—the Home Affordable Modification Program—is not much different in character than the FHA servicing guidelines, so the Indiana court’s decision might provide a way to stop foreclosures, at least until banks and mortgage services give the homeowner an honest shot at a HAMP mortgage modification.
It turns out that using HAMP as a shield has been tried with some success, so it’s probably worth a try for frustrated homeowners facing foreclosure after a failed attempt at mortgage modification.
It turns out that a lot of mortgage servicers haven’t been taking legal process very seriously. Robo-signers are employees whose jobs are to sign their name to as many affidavits as possible without reading them, and robo-signing is all the rage among mortgage servicers these days.
Instead of acknowledging that the mortgage industry created this economic and legal disaster, Treasury Secretary Timothy Geithner wants to blame the Legal Aid attorneys who discovered it was happening.
Last week I wrote about the various ways that consumers can afford a foreclosure defense attorney. New York has passed a law allowing consumers to recoup attorney fees and at least one attorney in Florida is allowing clients, under certain conditions, to take a mortgage with his firm.
That practice might be short lived—he is now under investigation by the Florida bar.
Even before a number of big banks stopped foreclosure proceedings because of issues with robo-signers, consumers with money were fighting foreclosures across the nation. New York recently passed a law (effective next year) that allows consumers to recoup their attorney fees if they fight a foreclosure and win.
Not every state has a similar law, however. As a result, some consumers are agreeing to a new mortgages with their foreclosure attorneys.
Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.
It’s a pretty big difference. About 14% of people with mortgages over $1 million are seriously delinquent, while only about 8% of people with mortgages under $1 million are. Real estate firm CoreLogic, which came up with the numbers, thinks the rich simply dump bad homes like any other bad investment.
Apparently, the rest of us are suckers, dutifully paying down our under-water houses. New York Times writer David Streitfeld suggests that “the rich do not seem to have concerns about the civic good uppermost in their mind.”
(I think Streitfeld meant to write “the banks’ good.” The civic good seems to have already contributed all the bailout money it is going to.)
The good news is that Wells Fargo just settled a lawsuit with the NAACP based on alleged violations of the Fair Housing Act (FHA). The bad news is that two cities have now filed suit against Wells Fargo under the FHA. This comes on the heels of a class action lawsuit filed last summer for allegedly improperly lowering lines of home equity credit.
The two new suits were filed in Baltimore and Memphis, and both allege Wells Fargo discriminatorily steered African-American into expensive mortgages they could not afford. This causes a rise in defaults and then foreclosures, which then reduces tax revenue and increases the costs of municipal services.
Bank of America (BOA) has announced they will provide some relief to homeowners with underwater mortgages. BOA said it will forgive up to 30% of the total mortgage for homeowners who are at least 2 months behind in payments and owe at least 20% more than their home is worth.