Homes need to be occupied.

That is the bottom line.

Today’s housing market needs a dramatic overhaul and it’s been long overdue for a fix. So we don’t have the time to be contemplating moral hazards anymore.

So I’m OK with President Obama extending mortgage assistance to owners of multiple homes.

According to Bloomberg, the administration will open up the Home Affordable Modification Plan, or HAMP, to these additional borrowers starting in May.

Borrowers who qualify for HAMP can have their monthly payments reduced through lower interest rates, longer mortgage terms and forgiven principal.

Landlords can apply for loan modifications for up to 4 mortgages as long as they rent out the homes or plan fill them, according to Bloomberg, who says about 700,000 landlords might qualify.

This has angered some, who are saying the administration is rewarding speculators who may have caused the housing market to collapse, and should focus solely on those who haven’t been able to pay their mortgages because of financial hardship. In a dream world, they would be right.

The problem with that notion is while speculators may have played a role in the housing market collapse, I still lay most of the blame squarely on the banks. You might say a so called ‘house flipper’ was only buying homes to pad their bottom line, to which I respond, what exactly do you the banks were interested in?

They were the ones engaging in rampant fraud, not the speculators.

I must again go back to this 60 Minutes piece about abandoned homes rotting their neighborhoods from the inside out. Banks response to these vacant properties has been to walk away from homes and allow them to go to waste.

If that is the alternative, then I will gladly welcome a house-flipper into my neighborhood.

They still make better neighbors than the banks.

Besides, there are renters out there who need to stay in their homes, and just like many borrowers, they too have hard-luck stories that rival if not surpass those of people who have lost their homes to foreclosure.

And not every multiple property owner is a speculator. Many are also just regular working Joes or people who were using the real estate market as a source of retirement income.

The housing market is in real trouble, and it won’t turn around unless we stop looking concerning ouselves with the theoretical construct of moral hazard and start paying attention to the bottom line.

After all who got bailed out just a few short years ago? It wasn’t the homeowners but rather the banks.

If the possibility that a ‘buy and flip’ investor might get mortgage relief is the chance this government has to take in order to keep renters in their homes and get the housing market turned around, than I say it’s a chance worth taking.

From Urban Legend to Reality: Ocwen Offers Serious Principal Reduction

Meaningful principal reduction used to be an urban legend compounded by scamsters.

And until recently, Florida homeowners were probably more likely to spot Bigfoot than find a lender willing to forgive a significant portion of their residential first mortgage through a loan modification. But earlier this month, Ocwen Financial Corp. became one of the first private companies to initiate principal reduction without the prodding of a government agency.

Through the program called Shared Appreciation Modification (SAM), Ocwen is writing down qualified loans to 95% of the underlying property’s market value. The amount written down is forgiven in one-third increments over three years as long as the homeowner remains current. When the house is later sold or refinanced, the borrower will be required to share 25% of the appreciated value with the investor.

“Like all modifications, SAMs help homeowners avoid foreclosure. But they also restore equity,” said Ocwen CEO Ronald Faris. “That’s a significant benefit to the customer and, we believe, the economy and housing market. Psychologically, it’s important too. Our analytics tell us that an underwater mortgage is one-and-a-half to two-times more likely to default than one with at least some positive equity.”

Ocwen said 79% of the borrowers have accepted the offer with a re-default rate of 2.6%. Ocwen said it has regulatory clearance to push the program into 33 states. Since the start of the mortgage crisis, Ocwen has saved over 200,000 homes from foreclosure and produced 25 times as many modifications per loan serviced as the servicing industry overall, the company claims.

“The simplicity and rationale of the SAM is striking: the homeowner maintains the equity that would otherwise be lost in the foreclosure process, and servicers and investors maintain a performing asset,” John Taylor, President and CEO of the National Community Reinvestment Coalition, said. “Ocwen has found a way to align the interests of borrowers, servicers and investors, making the program a win-win for all involved.”

Oppenheim Law hopes this is the beginning of a trend that was supposed to start three years ago when the government promised that it would assist in modifying more than 4 million loans.

There are quite a few people who advocate principal reduction as the best way to get out of the housing crisis. Their arguments were succinctly laid out and analyzed in an Atlanta Federal Reserve white paper.

Advocates of such a policy argue that it would be cheaper for banks to reduce the principal of a loan to the current value of a house because people who have positive equity in their homes are much less likely to default on their loans. The policy would also help homeowners because they would get to stay in their homes. It seems like a win-win situation, except it isn’t.

As a recent New York Times article illustrates the difficulty with large scale restructuring programs is that banks don’t know who really needs the help and who is trying to take advantage of the situation.

Ms. Rula Giosmas was not one of the people who needed help, yet she got it anyway. For her lender, the modification amounts to an avoidable loss. The lack of knowledge in who can pay and who can’t is the reason why banks are wary of initiating large scale modification programs: not all underwater borrowers will default on their mortgages.

It still remains economically advantageous to foreclose on the defaulters and continue to collect the full loan amounts from the people who can and will pay. The banks also worry that if they do initiate large scale modification programs, it will encourage people who can pay to miss payments simply to qualify for the principal reduction. Such a problem is called moral hazard, where there are incentives to perform badly. The last thing that banks want is to encourage people to default.

Oppenheim Law warns you: don’t bet on a principal reduction. Banks are very wary of them and the Federal Reserve white paper is going to scare them off even further.

There are, however, other foreclosure defense solutions so don’t become a deer in the headlights. You must be proactive!

Check out a recent post about ‘how to pay off second mortgages at a discounted rate’.

Three cheers for Sheila Bair, the former head of the FDIC and a true advocate for the little guy, who resigned this week on July 8th. She fought for what is right for the homeowner, the depositor and the taxpayer.

Shelia was probably the only person in the Obama administration who really “got it.”

As a financial regulator, she understood the crisis as we do at Oppenheim Law, on the ground and in the trenches.

Truly the champion of the little guy, Sheila really understood that there were two sets of rules in this country:one set for big banks and another set for everyone else.

Her opinion was always dismissed and considered inferior to that of the Treasury and the Federal Reserve. She knew that the Obama Administration, while maybe understanding the plight of the little guy, always capitulated to the interests of big business, Wall Street and the banks.

Sheila understood that from Day One her responsibility was to protect the consumer, the depositor, the homeowner, and most importantly, the taxpayer. In a major piece written in the New York Times magazine this past weekend, she questioned why investment banks that were “counterparties” to AIG, like Goldman Sachs, received 100 cents on the dollar from the AIG bailout. Goldman, in fact, received over $12 billion from the bailout. As is well known, many people in the administration were in fact in some way connected to Goldman.

Before the crisis had truly descended upon our nation in 2007, Sheila understood that if banks were required to modify mortgages there was a possibility that the foreclosure crisis which led to the meltdown of the real estate market and subsequent destruction of the economy could possibly be contained.

No one listened to Sheila!

Shelia constantly tried to convince both the Bush and Obama Administrations that something needed to be done, however, her warnings were not heeded until it was too late.

Had the government listened to Shelia on early mortgage modification, it is possible “that the government could have prevented lots of pain and might have helped stabilize the economy a lot sooner,” according to the NYT.

However, Shelia states that maybe one of the reasons that mortgage modifications never really took off was that “maybe people thought that [she] was overstating the problem.” She added that in many cases regulators didn’t believe that borrowers were worth helping. The sense was that borrowers had probably overstated their income and assets and thus deserved to be thrown out of their homes.

Shelia also felt that the Treasury and the Federal Reserve did not lay the blame with overzealousness and greed on Wall Street but rather with a “system come undone.” We of course know that it was precisely greed on Wall Street that caused the crisis.

Needless to say, we here at Oppenheim Law will miss Sheila Bair and we hope, whatever she does, that she will not give up the good fight for what is right for the homeowner, the depositor and the taxpayer.

Three cheers for Sheila Bair!

From The Trenches,

Roy Oppenheim

It’s a case of: The Three Stooges and Mediation.

Roy Oppenheim and his client shared their recent story in this week’s Daily Business Review with an inside look at the trials and tribulations of a system where one asks: Who is on first?

Under a state Supreme Court order issued 18 months ago, banks have been paying third-party mediators to perform outreach and mediation in an effort to keep Floridians in their homes. But in spite of spending at least $750 per case, the lenders rarely get homeowners into mediation.

According to defense attorneys, lenders appear unprepared to mediation, only prolonging a foreclosure case. It took homeowner Juan Picasso, who went into default after his son was diagnosed with a rare cancer, 26 months to get a modification on his mortgage. Deciding to do the application for modification himself, Picasso’s application for modification was denied three times and it wasn’t until he sought foreclosure defense attorney Roy Oppenheim’s help, that the case was settled with the bank.

Picasso described a mediation session that could have been in a Three Stooges short film.
Oppenheim, a foreclosure defense attorney in Weston, produced the letters as proof and noted the bank kept losing its copies of Picasso’s financial information and the bank’s responses.

“They kept saying all kinds of different things. They force-placed insurance on the property. They said Mr. Picasso’s insurance ran out so they put a ridiculous insurance policy on the property, which quadrupled the cost of insurance. He was in default because they were not keeping track of the insurance they put on his home.”

Roy Oppenheim explained to the Daily Business Review that the mediation program was designed to be a more flexible forum for homeowners to get a loan modification or sale to avoid foreclosure.

“If you think there’s going to be a principle reduction, forget it,” Oppenheim said. “That’s never on the table. Those are just urban legends and the stuff of Internet scams.”

In many cases, mediation settlements resulted in a short sale to avoid affecting the Florida homeowner’s credit history. The program requires homeowners eligible for mediation, some 63,019 individuals, to pro-actively take advantage of it. However, by the end of 2010, only 8,669 mediations were conducted, of which only 2,309 resulted in an agreement.

A major bottleneck in the process is that banks continue to be overwhelmed. The lawyer for the bank may attend the mediation in person, but he has no authority. The bank’s modification officer appears by phone and the bank representative online has limited authority, never makes a decision during the meeting and routinely discusses the case as if he is looking at the file for the first time.

Click here for the full article

‘Hope’ stands as a fleeting memory for most Americans as unemployment stagnates, housing prices fall and economic growth looms as a lofty promise unfulfilled. And as we get closer to the 2012 Presidential Election, it’s becoming clear that the ideological political landscape that dominated the 2008 election cycle will be eclipsed by a menacing elephant in the room: the economy.

The President is well aware of the uphill battle he faces when it comes to convincing voters and campaign financers that his economic policies and regulations have not only been what we needed the past three years, but also what we need in the next four. According to The New York Times, President Obama has already started reaching out to the skeptical financial industry on Wall Street, hoping to win back one of his most vital sources of campaign cash.

While many on Wall Street view the President’s financial rhetoric as unfair to their industry, his apparent goal is to prove that his fiscal policies have helped to bring the banks and financial markets back to health and toward sustained growth.

The argument goes that the economy would have been dramatically worse at this stage had the Obama administration not taken the action it did in the wake of the real estate and financial crisis.

But how do you prove a negative? You can’t.

Historically, recessions have been ended by a wave of homeowner refinancing that predictably follows a lowering of interest rates. The President faces a number of obstacles to accomplishing a refinancing boom, however.

First, the number of homeowners who are underwater continues to rise.

Second, the banks have no motivation to lower interest rates of homeowners who are stuck in their homes.

Our current refinancing and banking system is stacked against the premise (and promise) that refinancing would push cash back into the economy, spur a consumer stimulus, and in turn promote spending, job creation and financial growth.

Too many people with good credit and jobs are stuck with high interest rate loans. The President would be wise to focus on developing a system for refinancing homeowners to stimulate an organic bailout of our financial crisis.

The fact that the President has more work to do to bring the country out of its funk and needs a different path to economic growth is backed up by a recent Time Magazine article debunking the myths of the new American economy.

Myth #1: This is a temporary blip, and then it’s full steam ahead.
The vast majority of economists do not believe we are on the way to a double-dip recession, but avoiding a double-dip is not the same as stimulating economic growth strong enough to revive the job market. The fact is that estimates point toward a five year recovery time before we return to a healthy unemployment rate of 5%.

Refinancing borrowers with strong credit and jobs could help speed up the process.

Myth #2: We can buy our way out of this.
Widespread government stimulus for loan modifications isn’t effective if homeowners don’t have jobs that allow them to make payments at all. There has been a decline in foreclosures, but the supply of foreclosed homes continues to undermine the national real estate market and dampen consumer spending.

The previous federal stimulus attempts have focused too much on homeowners who were already in trouble with their mortgages. While these homeowners certainly need help, shifting the focus to encourage refinancing of borrowers not underwater on their mortgages would allow this group to put its savings back into the economy. As the saying goes, “A rising tide lifts all boats.”

Myth #3: The private sector will make it all better.
Companies are making plenty of money. The problem is that they aren’t spending it to hire American workers. According to Time, American companies generated $1.68 trillion in profit in the last quarter of 2010 alone. Clearly, it’s a myth that American companies are waiting for economic and regulatory “certainty” before investing at home.

Myth #4: We’ll pack up and move for new jobs.
Most people couldn’t afford to move if they wanted to because they are underwater on their mortgages. While there are currently 3 million job openings, an additional problem is that the current labor pool’s skill set doesn’t match up with available jobs.

Myth #5: Entrepreneurs are the foundation of the economy.
New business creation has been shrinking since the 1980s. Is it coincidence that this started just when the financial sector began to explode? Lenders still aren’t lending, and the old methods of self-funding new business ventures through home equity loans or maxing out credit cards are no longer viable.

‘Hope’ was the foundation of President Obama’s victory in 2008.

The reality is Americans are still hoping for change.

The question is whether the President, or anyone for that matter, will be able to deliver.

Right now, it looks like if you want a bailout you better have your own plan in mind.

From The Trenches,

Roy Oppenheim

Mortgage Rates Set Fresh 2011 Low After Jobs Report

Fixed rate home mortgage loans dropped for the eighth straight week to a new low for 2011 amid concerns of another economic slowdown this year, according to data from Freddie Mac and a report by The Wall Street Journal.

The 30-year fixed-rate mortgage averaged 4.49%, down from 4.55% last week and 2010’s 4.72% average. Rates on 15-year fixed-rate mortgages fell from 3.74% to 3.68%. 15-year fixed-rate mortgages averaged 4.17% in 2010.

Lawyers Get More Time to Finish Foreclosures

Florida foreclosure defense is translating into more time for plantiff bank attorneys to complete a foreclosure, according to an article in the Palm Beach Post.

Due to the reality of Florida’s overloaded court system and swirling questions surrounding the validity of foreclosure paperwork, Fannie Mae is now allowing bank attorneys up to 450 days (about 15 months) for lawyers to complete a foreclosure before fines are levied. The previous time limit was 185 days, or about six months.

The increased time needed to complete a foreclosure legally and correctly against a homeowner is due in large part to Florida foreclosure defense attorneys working to protect the rights of South Florida homeowners, according to Roy Oppenheim.

Obama Blames Wells Fargo, Bank of America, Chase for Modification Failures

The three largest U.S. mortgage lenders are getting some heat from the Obama administration for the failures of the federal foreclosure-prevention program, according to The Associated Press.

The lackluster performance of Wells Fargo, Bank of America and Chase with helping homeowners lower their mortgage payments has led the Obama administration to remove financial incentives it had given these lenders.

Only about one-third of the 1.4 million people who applied for mortgage modifications through the federal program have had their payments lowered permanently.

Angry Homeowners ‘Foreclose’ on Lenders

Owners of a house in Florida have engineered a “reverse foreclosure” against a Bank of America branch in Naples, according to The New York Times.

The homeowners paid $165,000 in cash to buy their home from the bank and never borrowed against it. But last February, the bank began foreclosure proceedings against them. The homeowners hired a Florida foreclosure defense attorney and the case against them was dropped, however they were able to recover a judgment for $2,500 in attorney’s fees against the bank.

When the bank didn’t pay, the homeowners’ lawyer showed up at the bank with sheriff deputies and a moving truck to clean out the building.

The bank eventually settled with the homeowners for more than $5,700 to cover the fees and additional costs.

It’s still a buyer’s market. That’s the conclusion of consumers in a new Gallup poll that reveals 67 percent of Americans feel now is a “good time” to buy a house. That hasn’t changed much since April 2009.

So despite harder-to-come-by financing and the possibility of a housing double-dip, it seems historically low interest rates and bargain basement home prices are winning over public opinion. Interest rates may or may not rise, but the bargain basement prices are likely to continue as home foreclosures are reaching record highs.

Foreclosure headlines are telling. South Florida filings dropped 41 percent in 2010 due to the foreclosure freeze. And some are asking if foreclosure lawyers’ misdeeds are being ignored in Florida. Despite the freeze and other legal questions, though, Florida still ranks second in the number of foreclosures in 2010.

And the worst may be yet to come. News reports are citing studies that show real estate short sales are set to increase in 2011 as banks attempt to dispose of defaulting loans without foreclosing. And many may get caught flat-footed in the South Florida foreclosure wave.

As you read all of these headlines, keep in mind that if it’s a buyer’s market, that also means it’s a seller’s market. And with all the foreclosures hitting the market, it’s a good time for a buyer to seek a short sale purchase. Oppenheim Law’s sister company Weston Title & Escrow has been very successful closing short sale deals and guiding clients through the process of both buying and selling short sales.

Wondering what this means for Florida homeowners? Is 2011 the year of the short sale or the strategic default? Catch the replay of Oppenheim Law’s monthly Foreclosure Defense workshop on Oppenheim Law TV for the next 4 days!

Today, Weston Title and Oppenheim Law completed one of the largest short sales with JP Morgan Chase. The original note was approximately $6 million, but the bank approved a payoff for almost half that amount. The bank agreed to the haircut in exchange for receiving the $3 million in proceeds.

Further, the bank waived the deficiency judgment demonstrating what Roy Oppenheim has been stating for the past several weeks, “The banks are eager to deal and get the economy back on track.”

In fact, rumor has it that the JP Morgan Chase CEO, Jamie Dimon, had to sign-off on this deal.

As Oppenheim said two weeks ago in the Sun Sentinel, “The result will be more short sales, loan modifications and ‘meaningful mediations’ that will help stabilize housing prices that have been falling steadily since 2006.

For more on Foreclosures, catch the replay of last week’s Oppenheim Law monthly Foreclosure Defense workshop on Oppenheim Law TV for the next few days!

By Roy Oppenheim

We’re just half way through the first month of 2011 and foreclosure fraud continues to make headline news. Tonight Oppenheim Law will be in Boca Raton hosting our monthly foreclosure defense workshop “The Future of Foreclosures”.

Will this be the year of the short sale?

How will the Feds help (or not help)?

What is the best foreclosure bailout for you?

This week I spoke to Wall Street Journal’s Market Watch, Florida’s Sun Sentinel and DebtWire, a global financial news service, about my perspective on foreclosure defense in 2011.

Tonight we will answer your questions live online or in person.

Tune in to the webcast via Oppenheim Law TV for
The Future of Foreclosures Workshop
Tonight at 6 p.m.,
or come in person to the Boca Raton studio located at
95 NW 11th St., Boca Raton, FL 33432.

Our monthly workshop is designed to walk homeowners through various foreclosure defense strategies such as short sales, strategic default, loan modifications, deed in lieu and deficiency judgments, taking into account today’s law and the homeowner’s legal rights.