Florida Foreclosure Lawyer

An Ohio man says he bulldozed his $350,000 home to keep a bank from foreclosing on it.

Terry Hoskins says he has struggled with the RiverHills Bank over his home in Moscow for years and had problems with the Internal Revenue Service. He says the IRS placed liens on his carpet store and commercial property and the bank claimed his house as collateral.

Hoskins says he owes $160,000 on the house. He says he spent a lot of money on attorneys and finally had enough. About two weeks ago he bulldozed the home 25 miles southeast of Cincinnati.

Messages were left for the bank and its attorney.

IRS spokeswoman Jodie Reynolds said individual taxpayer information is private and federal law prevents her from commenting.”

Local TV station WLWT has an interesting video report about Hoskins’s plight here. Hoskins told WLWT: “When I see I owe $160,000 on a home valued at $350,000, and someone decides they want to take it – no, I wasn’t going to stand for that, so I took it down.”

POSTED BY GEORGE BECKUS ESQ
THE GOLIK LAW FIRM
904-448-5335

Brian Austin Green is more than $70,000 behind on mortgage payments for his home in the Hollywood Hills — but according to his rep, it’s all part of a calculated real estate

SunTrust Mortgage, INC has filed legal papers in Los Angeles which show Green owes $71,251.42 as of January 26, 2010. The docs show Green took out a $2,000,000 mortgage with the company in 2006.

According to the docs, SunTrust has begun the foreclosure process and has the right to put the house up for auction if Brian doesn’t fork over the green.

But Green’s rep says Brian has worked out a deal to get rid of the house in a “short sale” — which means SunTrust will allow Green to try and sell the house for less than he owes in order to recover as much money as it can … subject to the bank’s approval.

It’s unclear if the mortgage company imposed a deadline on the sale.

Posted by George Beckus Esq
The Golik Law Firm
904-448-5335

WASHINGTON – Citigroup Inc. plans to let homeowners on the verge of foreclosure stay in their homes for six months — if they turn over the deed to their property.

Citi said Thursday it is launching the pilot program, dubbed “Foreclosure Alternatives,” this week in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. Initially, about 1,000 homeowners are expected to participate. Citi may expand the program nationwide.

In a normal foreclosure, a lender assumes legal control of the property and evicts the homeowner. But Citi’s program, like other “deed in lieu of foreclosure” efforts, allows the homeowner to avoid a completed foreclosure. While the owner must still leave the home after six months, the program results in a less severe hit to the borrower’s credit score.

The policy is an attempt to deal with what lenders see as a growing phenomenon: borrowers who choose to default on their mortgages. Close to one in every three U.S. homeowners owe more on their mortgages than their homes are worth, according to Moody’s Economy.com.

Many housing analysts say these borrowers — particularly those who owe at least 20 percent more than their home’s current value — are choosing to walk away because they see little chance that home prices will come back.

Also, many states have lengthened the time it takes to complete a foreclosure, making the process more time-consuming and expensive for the lending industry.

“Why should we all go through the foreclosure process and evict people?” said Sanjiv Das, Citi’s top mortgage executive. Avoiding foreclosure, Das said, is “less painful for our borrowers as well as for us.”

Borrowers in Citi’s program will still need to pay their utility bills. But Citi will pay at least $1,000 in relocation costs and will consider helping out with other expenses. Citi also plans to provide relocation counseling.

The program is intended to help borrowers who don’t qualify for a mortgage modification or a short sale — one in which the lender agrees to sell a home for less than the total mortgage amount.

Citi’s policy is similar to one announced in November by Fannie Mae, the government-controlled mortgage finance company. Fannie is allowing homeowners to hand back the deed to their properties, then rent them back at market rates.

This is just another example of how the big banks who received a tax-payer bailout are not doing anything to deal with the foreclosure crisis.

What everyone needs to know is that with valid defenses most homeowners can stay in the home mortgage free for a year or two!

If a distressed homeowner choses to accept Citi’s offer then you also must insist that they sign a waiver of deficiency. You see after you walk away from your home and give up any and all defenses you may have to the foreclosure, the bank can still come after you for what you owe on your mortgage. That’s right, you just saved the bank the time, money and effort of foreclosing on your property, only to be sued for a deficiency judgment!

Once again if you want to give up your property and not fight the foreclosure that is your right, but if you do then insist on a signed waiver of deficiency. If Citi refuses to do this then drag out this process as long as you can, while living rent-mortgage free. They may also tell you that they never sign a waiver of deficiency but it is also not in their practice to go after defiency judgments. Don’t believe them. If they don’t sign, you don’t leave! Always seek the counsel of an experienced foreclosure defense attorney.

Posted By George Beckus Esq.
The Golik Law Firm
904-448-5335

Even as the Obama administration’s signature foreclosure-prevention program has foundered, Treasury Department officials have known that a key driver in keeping people in their homes in the long run is reducing mortgage principal, senior Treasury advisor Seth Wheeler told the Huffington Post. Wheeler is one of the architects of the administration’s housing plan.

But rather than pressure the mortgage companies to start reducing the amount mortgage-holders owe, the administration simply sat back and hoped servicers would do it on their own.

“When the administration came into office last year, from the get-go, it has certainly been aware of the link between negative equity and challenges in housing,” said Wheeler. “As the administration initially designed the modification program last year, it was aware of negative equity, was aware that some servicers were doing principal reductions.”

But the administration “specifically had designed the program to allow principal reductions without taking a position of where principal reductions would be most advantageous,” he said.

So for the past year, the administration had a policy of “rather than us endorsing a uniform approach to principal reductions, let’s give flexibility to servicers and hope that they do it on their own in the right circumstances,” Wheeler said.

Now that the program has been universally panned, the administration is working on ways to be more assertive on that point, he said.

In the meantime, mortgage delinquency rates and foreclosures have continued to rise. The number of homeowners “underwater” — those owing more on their mortgage than the home is worth — now stands at roughly 11 million, about a quarter of all mortgage holders, according to real estate research firm First American CoreLogic. It’s expected to increase.

“Negative equity is the single most important driver of defaults,” Laurie S. Goodman, senior managing director at Amherst Securities and a top mortgage bond analyst, said Tuesday during a panel discussion at the American Securitization Forum’s annual conference.

Wheeler, who was on the panel, listened for an hour as mortgage experts lambasted the administration’s foreclosure-prevention efforts, saying it’s been inadequate; will ultimately be ineffective in its current form; and doesn’t address the underlying causes driving foreclosures. In short, as it’s currently constructed, it’s destined to fail.

“Clearly negative equity creates — especially for borrowers that have a financial hardship and have a high LTV [loan-to-value ratio], a very high LTV — a complicating factor, and it certainly makes it more challenging to make a modification work for borrowers,” Wheeler told HuffPost.

In an interview, Wheeler said the administration is trying “to understand how to encourage more principal reductions.”

Less than 10 percent of permanent modifications under the administration’s Home Affordable Modification Program have involved principle reductions.

“I won’t take a position on whether there’s been too much or too little, but we are studying if it is being used as effectively as it should be,” Wheeler said. “There could be better outcomes.” Referencing those mortgages that have been sliced and diced and sold to investors, Wheeler said the administration “is encouraging more principal reductions in instances where we find that it would maximize recovery to investors.”

Simply reducing interest rates for five years, which the Obama administration’s program does for homeowners who transition out of three-month trial periods, is “a purely temporary modification [that] ultimately doesn’t solve the problem,” said Micah Green, a partner at Patton Boggs LLP, a Washington law firm that represents a mortgage-investor group of asset managers who hold more than $100 billion in residential mortgage-backed securities.

Without principal reductions, “there is a growing realization within the administration and on Capitol Hill that it’s very difficult to bottom out the housing market,” Green said.

“The interests of investors are totally aligned with those of homeowners,” he added. “Investors are willing to put money on the table and frankly take their losses, which they already have.”

Wheeler acknowledged that, from an economic perspective, principal cuts are the way to go.

“Certainly on both second [lien mortgages] and first [lien mortgages], principal reductions can actually reduce total losses from an economic perspective [and] from a finance perspective,” he said.

The administration is also under pressure because losses on AAA-rated subprime mortgage-backed securities are growing.

These securities were designed so that different classes of investors got different rates of return depending on the risk they were willing to take. Those who agreed to take on the first losses, for example, got higher rates of return.

But increasingly over the past few months, the amount owed to investors has begun to eclipse the value of the mortgage principal in the securities, said Alan M. White, a professor at Valparaiso University School of Law and an expert on mortgage-backed securities and housing issues. Those at the bottom rung — the ones who agreed to take first losses — had already taken their lumps as homeowners fell behind on payments or defaulted. Now it’s investors at the top of the food chain who are recording losses.

White said that is creating a growing sense of urgency among investors to do something now to keep homeowners in their homes so they can keep making their monthly payments, which go to investors.

Despite the fact that many experts — including some in the administration — agree that principal cuts are the best way to resolve the foreclosure crisis, there are impediments.

Wheeler said issues of fairness are complicating efforts. So is moral hazard, a theory that posits that when people enjoy the fruits of their actions without having to suffer any of the consequences they do it more. It’s something Treasury officials have repeated on conference calls with reporters when discussing the administration’s foreclosure-prevention efforts.

“Not just in a general sense,” Wheeler said. Specifically, he pointed out, “there are many analysts on Wall Street who say do not reduce principal because anything you do to encourage borrowers to behave differently, so as to obtain a certain outcome, that could actually encourage more delinquencies.”

But that’s not the real problem, said one mortgage expert. It’s politics.

“They’ve been preoccupied with this whole moral hazard idea. The administration has been obsessed with it,” White said. “It’s more of a political hazard issue.”

White argues that the administration is scared of the political fallout if some homeowners are seen as being bailed out by the government while their neighbors struggle. After hundreds of billions of taxpayer dollars were used to bail out banks and the financial system — a tab that could reach into the trillions — moral hazard should no longer be a concern, White says.

Asked if the housing situation has deteriorated to a point where moral hazard should no longer be an issue, Goodman of Amherst Securities said: “I think so.”

White points out there are ways to ensure only the most deserving homeowners catch a break. On that point, Wheeler agreed.

As White put it: “They’re going to lose the ability to be in denial very soon.”

POSTED BY GEORGE BECKUS ESQ
THE GOLIK LAW FIRM
904-448-5335

As terrible as it is to lose your house to foreclosure, at least it’s a relief to put your biggest financial headache behind you, right?

Wrong.

Former homeowners may still be on the hook if there’s a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these “deficiency judgments” are ticking time bombs that can explode years after borrowers lose their homes.

It can even happen to people who got their bank to approve them selling their home for less than it is worth.

Vanessa Corey, for example, short sold her Fredericksburg, Va., home in April 2008. She and her husband built the house in 2004, but setbacks, both personal (divorce) and professional (housing bust), made it impossible for the real estate agent to keep her home. So she negotiated the short sale and thought that was the end of it.

“My understanding was that the deficiency was negotiated away,” she said. “Then, last November, I got a letter from a lawyer telling me I owed my lender $65,000. I had to declare bankruptcy. There was no way I could pay it.”

Many homeowners are now in the same boat. And not just those who took out bigger loans than they could afford or who did so called “liar loans” where they didn’t have to verify their income.

Because of falling home prices, borrowers who always paid their mortgage but who have run into unforeseen circumstances — like unemployment or a job transfer — can no longer sell their homes for what they owe. As a result, they are being forced to short sell or foreclose and are getting caught up in deficiency judgments.

“After the banks foreclose, it’s very common now to have large deficiencies with houses not worth the balances owed,” said Don Lampe, a North Carolina real estate attorney.

Lenders mostly declined comment. Although Corey’s lender, BB&T did indicate it was pursuing more deficiency judgments.

“They follow the rise and fall of foreclosures,” said the spokeswoman, who would not discuss Corey’s account.

Can they come after you?

Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there’s a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them.

“Once they have a judgment, they can pursue you anywhere,” said Richard Zaretsky, a board-certified real estate attorney in West Palm Beach, Fla. “They can ask for financial records, have your wages garnished and, if you fail to respond, a judge can put you in jail.”

In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.

Some states, such as California, are “non-recourse” and don’t allow deficiency judgments. But, even there, if the if the original loan was refinanced, some or all of it may be subject to claims.

Deficiency judgments on short sales and deeds-in-lieu can happen in many more places. In these cases, extinguishing the debt is often a matter of negotiating with the bank.

But even when lenders are willing, many borrowers may not be aware that they have to ask for release. So, if you are pursuing a short sale, be sure your attorney asks the bank to release you from any further obligation.

“People shouldn’t have a false sense of security that a deficiency judgment may not be later sought,” Zaretsky said.

He expects many will be filed over the next few years, based on the fact that banks have sold many of these accounts to collection agencies and other third parties, at discount.

“The parties who bought those notes wouldn’t have paid money for them unless they had the intention of acting,” Zaretsky said.

Ticking time bomb

What can be scary is that the judgments don’t have to be obtained immediately. Lenders or collection agencies may wait until debtors have recovered financially before they swoop in. In Florida, the bank can wait up to five years to file. Once the court grants a judgment, the lender has 20 years there to collect, with interest.

It doesn’t have to be a large amount of debt for a lender or collection agency to come after borrowers. Richard Varno and his wife short sold their Nashville home back in 2004 after he lost his job.

It wasn’t until 2008, when the second lien holder asked him for $25,000, that he realized he still was liable.

“I told them, ‘Hey, you guys released the title,’” he said. “As far as I know, I’m off the hook.”

He wasn’t. Releasing title does not necessarily end the debt. It’s complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.

Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.

Zaretsky had one client who was so relieved to have arranged a short sale that he signed every paper his real estate agent shoved at him, even a confession that clearly stated he still owed the debt.

“He had no idea what he was doing,” said Zaretsky. “All the lender had to do was go to court to convert the confession into a deficiency judgment.”

Lenders are also very inconsistent. One of Zaretsky’s short-sale clients was ready, willing and able to pay, but the bank did not even ask; another lender always reserves the right to pursue the deficiency.

Strategic defaults

Sometimes lenders go after borrowers walking away from their homes if they have other assets, according to Florida real estate attorney Larry Tolchinsky.

“Banks are pulling credit reports to see if it’s a strategic default,” he said. “If you’re behind on all your other payments, you’re okay. But if you’re not, they’ll come after you.”

If borrowers have any doubts about their risks, they should seek legal advice. Or, at least, call non-profit organizations such as NeighborWorks for advice. According to Doug Robinson, a NeighborWorks spokesman, its counselors always try to negotiate away deficiencies when they facilitate short sales or deeds-in-lieu.

“We don’t favor any short-sale contracts that leave any deficiency that can be pursued,” he said.

Robinson himself knows what can happen. He paid off a deficiency after his own New Jersey house went through foreclosure 11 years ago.

POSTED BY GEORGE BECKUS ESQ
THE GOLIK LAW FIRM
904-448-5335

The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market’s recovery.

About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency’s figures show.

Although the FHA’s default rate has been climbing for months and eating into the agency’s cash, the latest figures show that the FHA’s woes are getting worse even as the housing market shows signs of improvement. The problems are rooted in FHA mortgages made in 2007 and 2008. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made.

If the trend continues and the FHA’s cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses — a first for the agency, which has always used the fees it charges borrowers to pay for its losses.

As these loans from 2007 and 2008 go bad and clear off of the FHA’s books, agency officials said, losses are expected to taper off, aided by the housing market’s anticipated recovery and an influx of more creditworthy borrowers, who have flocked to the FHA’s home-buying program in the past year.

Agency officials said they have cracked down on poorly performing lenders and announced higher qualifying fees for borrowers. On Monday, the agency projected that the fees should generate $5.8 billion in fiscal 2011, up from $2 billion this year. That would fatten the FHA’s cash cushion, used to cover unexpected losses.

Beleaguered books

For now, just about every major measure of the agency’s financial health is worsening.

The FHA does not make loans but insures lenders against losses. And claims have already spiked. The agency had to pay out on 47 percent more loans in October and November than in the corresponding period a year earlier, according to an FHA report.

The number of loans in foreclosure, including those that have not yet been billed to the agency, has also increased. They were up 26 percent in the last quarter from a year earlier.

FHA Commissioner David H. Stevens, who joined the agency in July, flagged his agency’s troubles with the 2007 and 2008 loans in October, when he told a House panel that “rogue players on the margin” immediately migrated to the world of FHA lending after the subprime mortgage market collapsed.

Their aggressive lending tactics attracted borrowers with unusually poor credit profiles to the FHA. “That clearly impacted the books of business in 2007 and 2008, and that performance data is showing up very clearly in today’s balance sheet,” Stevens said at the time.

Plunging home prices have exacerbated matters by leaving some FHA borrowers unable to sell or refinance their homes because they owe more than their homes are worth. Yet with unemployment running high, many borrowers can’t afford to keep up their payments.

Adding to the trouble was a now-defunct FHA program that enabled sellers to cover the down payments of buyers. This meant many borrowers had no skin in the game and were more likely to walk away at early signs of trouble. The program resulted in excessive defaults before it was ended in late 2008, and it is projected to cost FHA an additional $10.5 billion in losses, Stevens said.

For all these reasons, the FHA projects that it will pay out claims to lenders on one out of every four loans made in 2007 — the worst rate in at least three decades. The claim rate should be nearly the same on the vastly larger volume of loans made in 2008.

Better borrowers

But agency officials said they have reasons to be optimistic.

The FHA-backed loans made in 2009 tended to go to borrowers with higher credit scores than in previous years. These borrowers turned to the FHA when the mortgage market collapsed and other lending sources dried up. By then, reputable lenders doing business with the agency were already imposing tougher restrictions on FHA borrowers, further boosting the credit profile of those loans. The average credit score of an FHA borrower is now 690, up from 630 only two years ago, agency officials said.

These higher-quality loans are expected to result in lower losses, so the agency should make money on loans issued this year and over the next few years, according to an independent audit designed to gauge the agency’s health.

The audit, released in November, found that the cash the FHA set aside to pay for unexpected losses had dipped to historic lows, well below the level required by law. As of Sept. 30, those reserves were estimated at $3.6 billion, down from nearly $13 billion a year earlier. The most recent figure represents 0.53 percent of the value of all FHA single-family-home loans — far lower than the 2 percent required by Congress.

But Ann Schnare, a former Freddie Mac official, said the situation could be even worse. She said the audit underestimates future losses because it does not take into account all loans that are now overdue, only those that the FHA has paid claims on.

Stevens said his agency has pored over its data to analyze risk and is taking steps to shore up its financial health. “You have a limited set of options under these circumstances: Raise fees [for borrowers] or make policy changes,” Stevens said in an interview. “We’ve done both.”

The agency banned 268 lenders from making FHA loans last year, more than double the total terminated in the previous eight years. The FHA suspended six other firms. Among them were some of the largest FHA lenders — Taylor, Bean & Whitaker and Lend America, both of which shut their doors soon thereafter.

The agency also proposed a rule that would require banks to hold up to $2.5 million in capital that they can use to repay the agency for losses if they were involved in fraud. Banks are now required to hold only $250,000.

Borrowers are also facing tougher scrutiny from the agency. People taking out FHA loans will have to pay higher upfront fees, perhaps as early as this spring. Those with especially weak credit scores will also have to put down at least 10 percent instead of the usual 3.5 percent down payment. The amount of money sellers can kick in toward closing costs and other fees will also be limited.

POSTED BY GEORGE BECKUS ESQ
THE GOLIK LAW FIRM
904-448-5335

Cities in the so-called Sand States dominated the foreclosure rankings in 2009, with the 20 worst-hit metro areas residing in Nevada, Florida, California and Arizona.

Las Vegas had the largest number of foreclosure filings of any city last year, with 12% of its households receiving at least one during the year, according to RealtyTrac, the online marketer of foreclosed homes. That was more than five times the national average.

Cape Coral, Fla., was a close second with 11.9% of its households; Merced, Calif., was third with 10.1%.

The good news is that all top 20 cities recorded declines in foreclosure filings in the last three months of the year.

The bad news is that the foreclosure plague is spreading beyond these usual trouble spots, according to RealtyTrac’s CEO, James Saccacio. And, nationwide, foreclosures grew 21.2% during the year.

“Areas like Provo, Utah, Fayetteville, Ark., Portland, Ore., and Rockford, Ill., all posted foreclosure rates above the U.S. average in 2009,” he said. “And markets like Honolulu, Minneapolis and Seattle saw foreclosure activity increase at more than twice the national pace over the past 12 months.”

He added that the new foreclosure wave seems more grounded in traditional foreclosure causes, such as job losses, than those recorded in the Sand States, where they were much more “bubble related.”

In cities such as Las Vegas, Phoenix, Miami and Bakersfield, Calif., soaring home prices of the mid 2000s drove homebuyers to desperate measures, such as taking on hybrid adjustable rate mortgages, also called toxic ARMS. These products only remained affordable as long as home prices grew; once prices stopped rising, borrowers began to default.

New hotspots

Some cites that had escaped the worst of the default demon in prior years saw foreclosure filings — default notices, auction sales and bank repossessions — soar. The Gulfport area of Mississippi recorded a year-over-year spike of 784%. Houma, La., recorded a 379% gain, and Roanoke, Va., filings jumped 352%.

Despite the big increases, however, the foreclosure rates for those cities ranked in the bottom third of the nation. For example, Gulfport was number 180 out of 203 metro areas listed.

Filings in Boise, Idaho, on the other hand, grew 103% but that was enough to put it 24th among cites, the highest ranking of any place outside the Sand States.

In contrast to the boom areas, cities where home prices never soared have endured far fewer foreclosures. The lowest rate of filings for any of the cities covered in the RealtyTrac report were found in Burlington, Vt., and Utica, N.Y, each of which had a miniscule 0.05% filing rate.

The housing boom, with its annual double-digit price increases, mostly bypassed areas like those, enabling buyers to escape the necessity of stretching their incomes to cover high housing costs.

In Burlington, the median home price has stayed under $230,000, and median home prices in Utica have been very cheap, not more than $120,000 at any time.

For cities like that, few foreclosures are caused by mortgage related issues and, as long as the local economies don’t crash, defaults should remain well under national averages.

POSTED BY GEORGE BECKUS ESQ
THE GOLIK LAW FIRM
904-448-5335

The Obama administration plans next week to revamp its $75 billion program aimed at sparing homeowners from foreclosure, streamlining the documents required of borrowers seeking lowered payments, according to financial industry executives and others who have met in recent days with Treasury officials.

Homeowners looking for help with loan modifications flocked to an assistance program last month at the Jacob K. Javits Convention Center in Manhattan.

Those seeking help with their mortgages had to wait for hours to see a counselor at the Javits Convention Center last month.

The latest effort to accelerate the Making Home Affordable program — now widely viewed as a disappointment — comes as the administration faces growing pressure to do less for banks and more for households struggling with double-digit unemployment.

The changes by the Treasury Department are expected to include greater assistance for homeowners no longer able to make mortgage payments because their paychecks have shrunk, said banking industry representatives privy to the department’s deliberations who spoke on condition of anonymity for fear of alienating government officials.

The Treasury was still debating the method, these banking representatives said, looking at either direct cash assistance or a grace period in which borrowers could postpone payments. That component may not be announced next week, but would follow soon after.

Housing experts said the anticipated changes would probably cause mortgage companies to move more quickly to lower payments for borrowers, though perhaps at the cost of prolonging the foreclosure crisis. Requiring less documentation of borrowers’ incomes carries a risk of lending to people who simply cannot afford their homes, increasing the likelihood of subsequent delinquency.

“They are turning this from a legitimate program to try to save people who have the ability to hang on their homes into one that says, forget the willingness and ability to pay, let’s just postpone foreclosures,” said Edward Pinto, a mortgage industry consultant who served as chief credit officer at Fannie Mae in the late 1980s.

While declining to provide details, the Treasury confirmed its plans to alter the program at a meeting next week with mortgage companies — servicers, in industry parlance.

“We expect to issue guidance to servicers next week to expedite conversions of current trial modifications and provide guidance on documentation,” the Treasury’s assistant secretary for financial institutions, Michael S. Barr, wrote in response to a reporter’s questions. “We are continually reviewing our housing plan to ensure that it promotes stability.”

The changes to be introduced next week are unlikely to address what has emerged as a potent factor propelling a wave of foreclosures: the roughly 15 million borrowers who are said to be underwater, meaning that they owe more than their homes are worth. But the Treasury is actively considering ways to attack this problem, financial industry representatives said.

Many economists and mortgage experts have concluded that banks must ultimately forgive loan balances to restore equity to underwater borrowers. Otherwise, growing numbers will walk away from their homes and accept foreclosure rather than make payments on properties in which they no longer own a stake.

The Treasury has resisted calls to push lenders to write off loan balances, concerned that such a course would either threaten the health of banks by forcing them to swallow billions of dollars in write-offs or cost taxpayers additional money.

The administration has instead focused on ramping up its existing program, which pays mortgage companies that lower mortgage payments. The vast majority of loan modifications to date have lowered payments by dropping interest rates while leaving balances untouched.

When President Obama outlined the program nearly a year ago, he said it would prevent three million to four million foreclosures by 2012. As of December, mortgage companies had modified 759,000 loans on a trial basis, typically lasting three to five months. But only about 31,000 homeowners had received so-called permanent loan modifications, which lower payments for five years.

“There’s a great degree of frustration about how this has been going,” said Alan M. White, a professor at Valparaiso University Law School.

The changes expected next week are intended to alleviate one roadblock: the voluminous paperwork mortgage companies must process to qualify borrowers for lower payments.

Homeowners complain that mortgage companies routinely lose their documents, forcing them to repeatedly resend files. Mortgage companies have acknowledged problems, while also blaming homeowners for failing to provide required documents.

The Treasury is likely to alter the program by making pay stubs an acceptable means of verifying income, rather than requiring tax documents, said the people close to the deliberations.

One reason that mortgage companies are having such difficulty processing paperwork, they acknowledge, is that they lack adequate experience. During the housing boom, major institutions like Countrywide (now part of Bank of America) and Washington Mutual (since folded into JPMorgan Chase) marketed themselves as easy lenders motivated to approve mortgages with little fuss. They specialized in mortgages that required little or no documentation, sometimes called liar loans, which led borrowers and mortgage brokers to exaggerate incomes and assets.

Some experts fear that the Obama administration is now so eager to slow foreclosures that it is willing to employ the same sorts of loose lending standards that delivered the crisis.

“It definitely does lead to the question, are they substituting liar loan modifications for liar loans?” Mr. Pinto said.

Consumer advocates welcomed the prospect of a new effort aimed at accelerating loan modifications, while questioning whether the proposed changes would be significant.

“The results are dismal so far,” said Julia R. Gordon, senior policy counsel for the Center for Responsible Lending in Washington. “We need a game changer.”

Throughout the financial system and within government, a sense is taking hold that the only effective way to stem foreclosures is to write off loan balances.

“We realized early on that if we don’t include principal treatment, you just don’t get the buy-in from the borrower to stay with it,” said Paul A. Koches, general counsel for Ocwen Financial, a major mortgage company that claims conspicuous success in converting trial loan modifications to permanent arrangements.

As of mid-December, Ocwen had turned about 40 percent of its trial modifications into permanent arrangements, according to the Treasury. By comparison, JPMorgan Chase had converted only 4 percent of its trial loan modifications into permanent status; the rate was less than 2 percent at Bank of America.

Servicers merely collect mortgage bills for a fee. Most loans are owned by investors. They are increasingly inclined to accept losses by writing down loan balances in exchange for greater assurance that borrowers will be able to make payments.

“Investors are willing to put real money on the table toward refinancing borrowers from bad mortgages into good mortgages,” said Micah S. Green, a partner based in Washington at the law firm Patton Boggs, who represents a consortium of institutional mortgage holders.

The Obama administration has begun to consider a new push to reduce loan balances, while debating the proper mechanism, according to banking officials.

“They are looking at equity forgiveness,” said a financial industry executive who speaks regularly with Treasury officials. “There have been a lot of meetings on that.”

But the details are messy, requiring a complex balancing of competing interests. Not least, the owners of first mortgages are unwilling to accept losses by writing down loan balances unless the pain is shared by the owners of second mortgages.

Many second mortgages, including home equity loans, are owned by the very banks that are in the middle of determining whether and how to modify first mortgages — servicers like Bank of America and Chase. For them, taking losses on second mortgages would entail stripping away billions of dollars in assets from their balance sheets.

“The banks are kind of in denial that second mortgages aren’t going to get paid in full,” said Professor White of Valparaiso. “Treasury has to find a way to compel the banks to take a hit.”

POSTED BY GEORGE BECKUS ESQ
THE GOLIK LAW FIRM
904-448-5335

More and more renters across the state of New York are being forced out of foreclosed homes. One of these is Lisa Brown, a 44-year-old single mother of three young girls on Long Island, who has been paying her rent faithfully for the last six months, but who was suddenly given notice to vacate her place within ten days because the property has been foreclosed.

Brown is just one of many low-income renters being given only a few days to vacate foreclosed homes by mortgage lenders. Brown also represents the demography of families caught in the swirl of foreclosed homes nationwide. Many renters of foreclosed homes are single mothers with several very young children, just like Brown.

It is cases like Brown’s that New York State Senator Jeff Klein is trying to address with the law that he has proposed to mitigate the effects of foreclosed homes. Klein proposed that renters caught up in foreclosure filings are given at least another 30 days to find another housing and move their belongings. Current legislation allows lenders to force out renters of foreclosed homes in ten days.

Klein’s proposal requires mortgage banks or homebuyers to notify renters about the foreclosure within 30 days of the foreclosure filing. Moreover, lenders or new owners must also notify renters about any eviction proceeding 30 days before the actual eviction.

Klein argued that tenants should not become victims of the mortgage lending crisis, especially so that most renters of properties that usually become foreclosed homes are low-income families and families consisting of single mothers and very young children. Housing advocates also say that some landlords have not been paying utility bills, putting tenants in difficult situations of either moving out to the streets and shelters or putting up with cold water and lack of heat.

Manhattan real estate lawyer Lisa Urban said more than 500 renters in December 2008 and more renters in January have faced evictions and related difficulties because of the problem of foreclosed homes. Because of the prevalence of the problem, the Legal Aid Society has established a special program in Queens that focus on helping both homeowners and renters affected by foreclosed homes.

According to Urban, renters occupying rent-stabilized homes and rent-controlled apartments are luckier because there is already a law protecting them from the effects of foreclosed homes. But for Brown, the single mother who has no relatives in the community and who has no money to pay the deposit for a new housing if she is lucky to find one, the only alternative aside from the streets is a shelter. Under current law, she has to be out of the foreclosed property within 10 days, not enough time to find another affordable rental property in an area full of renters.

POSTED BY GEORGE BECKUS ESQ
THE GOLIK LAW FIRM
904-448-5335

In December, more than 349,000 households, or one in 366 homes, were hit with a foreclosure-related notice. That represents a 14 percent spike from November and a 15 percent jump from December 2008.

Banks repossessed more than 92,000 homes, up 19 percent from November. That increase was likely due to lenders working to clear their books at the end of the year, RealtyTrac said.

Stemming the tide of foreclosures is an important step for the real estate market and the economy to recover. Because foreclosures are usually sold at heavy discounts they can lower the value of surrounding properties. Cities lose property tax dollars from empty foreclosures and declining home values, straining local economies. Home prices have stabilized in some cities, but are still down 30 percent nationally from mid-2006.

The foreclosure crisis isn’t letting up. Between 3 and 3.5 million homes are expected to enter some phase of foreclosure this year, said Rick Sharga, senior vice president of Irvine, Calif.-based RealtyTrac, which began tracking the data five years ago.

High foreclosures forced the federal government and several states to come up with plans to prevent or delay foreclosures to help troubled borrowers.

“It was bad, but it could have been much worse, and it probably should have been worse,” Sharga said.

One plan intended to help homeowners is the Obama administration’s loan modification program known as Making Home Affordable. Lenders participating in the program have offered trial loan modifications to 760,000 eligible borrowers since it was launched in March. A loan modification changes the terms of the loan, such as lowering the interest rate, to make the monthly payments more affordable.

As of November, just 31,000 of them had been made permanent. Nearly the same number had dropped out of the program or were found to be ineligible. The Treasury Department will release updated figures Friday.

Economic issues, such as unemployment or reduced income, are expected to be the main catalysts for foreclosures this year. Homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

The Mortgage Bankers Association on Wednesday recommended changes to the government’s program to account for borrowers who’ve lost their jobs. The program, for example, should include a suspension of payments as the first step for borrowers with a temporary loss of income.

The government also should refrain from “endless incremental program changes,” the trade association said.

Since April 2009, there have been nine instances where new program requirements were released, and more than 90 clarifications for new or revised forms, reporting changes and policies. The changes forced mortgage companies to implement new procedures and retrain employees, taking away time that could be spent helping borrowers.

The same three states that led the nation in foreclosure rate in December also posted the highest rates for the entire year: Nevada, Arizona and Florida. More than 10 percent of Nevada housing units received at least one foreclosure filing in 2009, with Florida and Arizona following with about 6 percent each.

The other states ranked in the top 10 for the year were California, Utah, Idaho, Georgia, Michigan, Illinois, and Colorado.

POSTED BY GEORGE BECKUS
THE GOLIK LAW FIRM
904-448-5335