Could Fannie Mae and Freddie Mac finally be willing to sign off on principal reduction as a way to keep homeowners out of foreclosure and in their homes?

Edward DeMarco, the acting head of the Federal Housing Finance Agency and de facto leader of the two GSEs has been steadfast in his opposition.

President Obama has made principal reduction priority one. It was one of the highlights of the mortgage settlement and many economists point to it as the way out of this housing mess.

But DeMarco still hasn’t budged, because he says principal reduction will cost the taxpayer money and isn’t good for Fannie and Freddie’s bottom line.

Except maybe it is.

According to NPR and ProPublica, executives at both Fannie Mae and Freddie Mac have concluded that principal reduction would prevent larger losses and in fact, save the two companies money.

Their report claims that in part because of new Obama incentives, which would reimburse lenders half of what they write off, that Fannie and Freddie would benefit from principal reduction

These presentations have yet to be made public, but Democrats are already clamoring to see them. And so am I.

Look I’m not saying that principal reduction comes without risk. Could everyone decide to stop paying their mortgages in order to get a write-down? Sure.

But just because you might get hit by a car doesn’t mean you don’t cross the street. The housing market will NEVER rebound if people keep getting kicked to the curb.

And I don’t care what Edward DeMarco has said, the bottom line shouldn’t be his bottom line. It shouldn’t be about what is cost effective, it should be about what keeps borrowers in their homes. Last time I checked, they are taxpayers too.

And now in the wake of NPR and ProPublica’s investigation, it seems DeMarco has few legs to stand on.

We’ve seen what happens when foreclosure infects a neighborhood. Boarded up homes. More crime. Lower home values. Can you really tell me that the risk of moral contagion is so powerful that you would rather see empty neighborhoods instead?

I remember one Congressman in early 2009 who said “I don’t give a —- about moral contagion. I just care about keeping folks in their homes!”

Nice Thought!

Whether you like it or not principal reduction is finally on the horizon. It is an viable option. It does keep people in their homes. And as I’ve said all along, that’s the end game.

More and more banks will do. Yes they had their hand forced. And so far the sky hasn’t fallen.

And while less Fannie and Freddie loans are seriously delinquent, we can’t have two sets of rules. So if it’s good for the goose (big banks) then it’s good for the gander (Fannie Mae and Freddie Mac)

Now Edward DeMarco told NPR that he is reviewing these proposals to accept principal reduction. He’s come off as the grumpy old troll before, refusing to budge despite what I think is overwhelming evidence in favor of principal reduction.

Maybe, just maybe, he will finally come around. If not, he’ll likely be set packing!

Federal Reserve Wake-Up Call!

This week we blogged about the Federal Reserve finally coming around and looking out for the homeowners, instead of the banks. A 26-page white paper released by The Fed offered up their suggestions on how to fix the broken housing market. They also finally came to the conclusion that government MUST come down harder on lenders. Some of the ideas offered up by The Fed may be tough for Congress to swallow, but we believe they have a good chance of keeping more people in their homes.

We particularly liked the idea of turning more foreclosed and vacant properties into rental homes (so much better for the neighborhoods) and the need to offer principal reduction to more homeowners. Roy Oppenheim expands on this issue in his latest “From The Trenches” video.

Broward Foreclosures Down 67%

Foreclosures were in steep decline across the country in 2011, including a 67 percent drop here in Broward County, according to RealtyTrac. Thanks to the ‘robo-signer’ scandal, lenders were suddenly much more careful about bringing foreclosure cases to the courts. While that is likely to continue in 2012, Roy Oppenheim told the Sun-Sentinel that things could start to pick up.

“It’s going to pick up, but it’s not going to be insane like it was,” he explained.

Palm Beach County also saw a significant drop last year, 58 percent, while Florida was down 63 percent, RealtyTrac reported.

Fannie Mae CEO Williams resigns

Fannie Mae and Freddie Mac are always at the center of the housing crisis, so we are very curious to see the fallout from Micheal Williams resignation, which came down Tuesday. He’s been with Fannie Mae since 1991 and been head of the company since 2009.

Who replaces him could have a huge impact on the direction of Fannie Mae, David Stevens, the president of the Mortgage Bankers Association told HousingWire.

“Depending on whom you’re hiring sends a strong message about where this institution is headed,” Sanders said.

This means both GSE’s will leadership changes this year, with Freddie Mac CEO Charles Haldeman set to leave his post sometime this year. Housing Wire reports both each made roughly $2.3 million in bonuses,

Big Banks Face Inquiry Over Home Insurance

The banks have been ripping off the homeowner six ways to Sunday, and here’s another disturbing example, courtesy of the New York Times.

The New York Department of Financial Services is investigating multiple banks, including many of the usual suspects like JP Morgan Chase and Bank of America, this time over their use of what’s known as force placed insurance, the Times Louis Story reports. When a homeowner allows their existing homeowners insurance to lapse, something that is all too common these days, the banks step in, often with little notice, and take out new policies.

These end up costing the customer often double, triple, sometimes six times what they paid before. The article cites one unlucky State Farm customer whose policy skyrocketed from $2,000 to $6,000 dollars a year! Benjamin Lansky, the superintendent of the NYDFS, issued 31 subpoenas related to the case, according to Story, who said Lansky is looking to reports of kickbacks to the banks from the insurance providers. With more and more homeowners falling behind on their mortgages, this is another way the banks are engaging in price gouging.

We hope you’ve had a good start to your new year and hope you’ll keep up us here at the South Florida Law Blog so you can stay informed on the foreclosure issues you need to know about.

Have a good weekend!

The Oppenheim Law editorial team found this ironic: A drug dealer has more constitutional rights to protection from the government in his home than your average homeowner in foreclosure.

In a case being appealed to the United States Supreme Court, the Florida Supreme Court recently held that because the “home” has a long standing history of receiving additional constitutional protect

Interestingly enough, the U.S. government, through Freddie Mac and Fannie Mae, is the single largest investor of residential mortgages. So what this really means is that the government can steal your house through bad loan paperwork and fraudulent foreclosure practices, but the local drug dealer is safe from a sniff by Franky the Drug Sniffing Dog.ions, using a drug sniffing dog outside the front door of a drug dealer’s house constituted an illegal search and seizure under the Fourth Amendment. Yet this same court has allowed banks and investors to use the lower courts in Florida as their own private collection agency.

This is yet one more example of the absurd turn that this country has taken during the real estate crash and subsequent foreclosure crisis, putting the government into the position of protecting the sanctity of a home owned by a drug dealer violating criminal laws, while stripping the same protections from one who is just down on his financial luck, in part due to the banks themselves.

The English belief that “every man’s house is his castle” formed the basis of the Fourth Amendment, and yet now has been convoluted to only protect criminals from prosecution, while leaving homeowners in foreclosure high and dry against a system that steamrolls their constitutional rights in the interest of protecting big banks, Wall Street, and now Uncle Sam.

The Florida Supreme Court stated in its holding that a “dog sniff” was “a substantial government intrusion into the sanctity of the home and constitutes a ‘search’ within the meaning of the Fourth Amendment.”

Notably, numerous bank executives have been quoted as saying egregiously negative things about homeowners who admittedly cannot afford their payments, but who have legitimate defenses against banks who have attempted to ignore constitutional and statutory rights as homeowners.

Essentially, these lenders and their leaders who are paid tens of millions of dollars a year have taken the position that “these homeowners haven’t paid, so who cares about their rights and any defenses they may have.” Yet, for a drug dealing homeowner whose house is full of drugs, the fact that his house may have been subject to unlawful search and seizure is not only highly relevant, but in fact could prevent any prosecution of him, even though he clearly is guilty.

The question raised by this case is: how can the Constitution protect drug dealers from “Franky the Drug Sniffing Dog,” while leaving thousands of homeowners homeless at the hands of illegals seizures by “Freddie and Fannie – the government investors?”

The Constitution was not intended to protect only part of the population. The Court should interpret the Constitution evenly, and should not work to protect criminals over the average American taxpayer suffering at the hands of a broken economy.

If you are in or near foreclosure and need help keeping your home, please contact the team at Oppenheim Law.

The Florida Foreclosure Defense Headlines via Oppenheim Law

Notary behind robo-signing scandal found dead

A whistle-blower who brought a massive case to light was found dead inside her Nevada home.

Officers found the body of Tracy Lawrence, 43, after she failed to show up for a 8:30 a.m. court appearance, Las Vegas station KSNV reported. She was supposed to be sentenced for her role in the fraud case, but she never arrived and her lawyer said he was concerned for her well-being, so the judge dispatched officers to her home.

Detectives have ruled out homicide, KNSV reported, but it’s not known if Lawrence died of natural causes or if she took her own life.

The week before, she pled guilty one criminal charge of notary fraud, after she admitted that she had notarized around 25,000 fraudulent documents as part of a foreclosure fraud scheme.

Prosecutors allege title officers Gary Trafford and Geraldine Sheppard of California are behind the scheme that involved Lawrence, both were indicted on more than 600 charges in a 439-page indictment filed on November 16. Both are still at-large.

Homeowners join OWS movement

Last week 60 Minutes shined a harsh light on the homeless problem in Florida, that one third of the homeless families in America are from the Sunshine State. And two-thirds of homeless families are living on the streets. For them ‘Occupy Wall Street’ has literally become ‘Occupy The Street’.

If there is any positive to be had from this difficult news, it’s that the social stigma attached to losing your home is now gone, Oppenheim Law reports. For some underwater homeowners, foreclosure has become a form of protest, not unlike the OWS movement. But some are walking away willingly and protesting from their living rooms, while others are forced into their cars.

Says foreclosure attorney Roy Oppenheim, “in some cases we save people from being homeless by defending their homes through the foreclosure process . . . the flip side is that there are many families who did not seek legal advice and were handed walking papers by the banksters, who illegally foreclosed on and forced them onto the “street.”

Happy Holidays from Fannie Mae and Freddie Mac

Both Fannie Mae and Freddie Mac are giving embattled homeowners a small present, announcing they are suspending evictions during the holiday season. From Dec 19th through January 2nd, 2012, the federal lenders will not kick out anyone who is being foreclosed on.

Some major private lenders, such as Wells Fargo, Bank of America and Chase, are also following suit, according to CNN Money.

“The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure,” Terry Edwards of Fannie Mae said in a statement. “No family should have to give up their home during this holiday season.”

Before you think the Grinch’s heart grew three sizes, realize their good will isn’t halting the foreclosure process entirely. Both companies admitted they may still continue legal and administrative proceedings during this time. And once the new year comes, they’ll be back in the foreclosure game big-time, as the inventory of foreclosed properties is up to an all-time high, according to Lender Processing Services, with 4.29 of all active mortgages in the foreclosure process.

Foreclosure timeline increases

However the length of time people are living in a foreclosed property has gone up. According to statistics just released by the Mortgage Monitor, the average length of time a loan (as of October) has been in foreclosure is 631 days, nearly 21 months. That’s over 100 days more than average reported just last January, in January of 2008 the average was only 251.

Alison Rogers of Time magazine attributes this to the fallout from the robo-signing scandal, with banks now trying not to repeat their past alleged mistakes. Now banks are choosing to slow down the process to make sure every ounce of paperwork is properly processed, Rogers said, which results in a much more drawn out foreclosure timeline.

Mass. AG goes after five banks in foreclosure lawsuit

Finally, there’s more bad news for the nation’s top lenders, as Massachusetts’ top prosecutor is suing 5 banks she accuses of illegally foreclosing on homes and using deceptive loan servicing practices.

Attorney General Martha Coakley filed suit against Bank of America, Wells Fargo, JP Morgan Chase, Citigroup and GMAC.

Her 59-page complaint claims they used fraudulent documents and foreclosed on homes without holding the actual mortgage. They also failed to stick to loan modification promises they made Massachusetts homeowners, all in violation of state law, the complaint states.

“Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law” Coakley said in a statement to MSNBC, “Our action today seeks real accountability for the banks illegal behavior and real relief for homeowners.”

As the large inventory of distressed homes on the market continues to push a reduction in home prices as well as an increase in rental prices, the government is thinking about renting the homes owned by Fannie and Freddie.

The proposal has two benefits:

1. Reducing the amount of distressed homes for sale
2. Clearing the surplus of homes currently unoccupied.

These benefits would be the keys to a successful housing market recovery. Increasing the amount of rental properties available can also stabilize rent prices, which have been going up as foreclosed families wait before buying another home.

While the benefits of the proposal are obvious, it is still just a proposal. It’s too bad the Administration did not listen to Oppenheim Law back in 2009 when we advocated using the inventory of foreclosed homes to benefit communities, instead of just letting them sit unoccupied and cause suburban blight.

The Government could easily enact the proposal by ordering Fannie and Freddie to sell their foreclosed homes to investors who promise to rent them out. The investors could then hire management companies to look after the houses. If the Administration decides to follow through with the plan, the Government might actually make money on the deal and help the housing recovery at precisely the right time for it: before the next wave of foreclosures hit. That way, the market can be more resilient when the next hit comes and absorb more losses.

As Florida’s top prosecutor continues to investigate the state’s law firms for improper foreclosure work, a report has surfaced showing Fannie Mae was warned in 2006 of abuses in the way lenders and their law firms handled foreclosures, according to the Wall Street Journal.

The fraud-closure problem that’s been snow-balling could have been minimized, if only the government paid attention to documented reports!

This internal report, produced years before regulators began investigating the mortgage industry’s practices, said Florida foreclosure attorneys “routinely made” false statements in court attempting to process foreclosures more quickly.

The report said Fannie Mae officials “believe foreclosure counsel are sacrificing accuracy for speed” but did not name any firms, the Journal said.

How ironic that the government has essentially known of the fraudulent, illegal practices of banks and the mortgage industry for five years, and is still trying to fix these catastrophic wrongs. Essentially, this equates to fraud, perpetuated by the idea that you can privatize profits and socialize losses.

And apparently this is what you get when the fox is asked to clean up the hen house.

It is also interesting to note that after the government took complete control of Freddie and Fannie in 2008 amid soaring loan losses, Florida foreclosure filings soared to unprecedented levels. This report proves that the government is to blame for our real estate debacle as much, if not more, than the banks who have taken the brunt of America’s scorn for years.

Fannie Mae has been under investigation since September 2008 for its role in the mortgage crisis, but more recently, federal and state officials have been looking to see if banks and foreclosure law firms have improperly seized homes by using fraudulent or incomplete paperwork.

Two red flags raised by the report, which was produced at a time when national foreclosure numbers stood at relatively low numbers, include improper legal filings by foreclosure attorneys and questionable practices surrounding the Mortgage Electronic Registration Systems, an electronic-lien registry set up by the mortgage industry to reduce paperwork and lower costs.

According the Journal, the report said, “foreclosure attorneys may be taking short cuts by misrepresenting that [original loan documents] are lost.” Nearly a year ago, Oppenheim Law wrote about the Florida Supreme Court was working to end the abusive practice of banks filing a foreclosure based on a “lost note.”

Over and over again, homeowners have been subjected to foreclosure proceedings when banks and the government knew full well there was no ground to foreclose. It is appalling that the government had knowledge of these practices and still allowed gross infringements of Americans’ Constitutional right to due process.

Referring to the industry in general, Elizabeth Warren, the White House adviser in charge of establishing the new Bureau of Consumer Financial Protection, said that with proper oversight, “the problems in mortgage servicing would have been exposed early and fixed while they were still small.”

A month ago, Oppenheim Law asked, “Why isn’t Wall Street in Jail?” After today, it looks like the banks should be sharing a cell with the feds.

Why isn’t Wall Street in Jail? Is our government a giant Ponzi scheme?

These are the questions Roy Oppenheim asked during Wednesday night’s Short Sale and Foreclosure Defense seminar.

During the webcast, Oppenheim discusses how with the departure of Fannie Mae and Freddie Mac also goes the traditional 30-year mortgage, paving the way for a new 20-year mortgage, higher interest rates and larger down payments. In other words, buying a house just got harder.

Roy also touched on recent news headlines, including the 60 Minutes piece titled Homeless Children: The Hard Times Generation, New York Magazine’s jailhouse interview with master manipulator Bernie Madoff, and scathing commentary by Rolling Stone Magazine’s Matt Taibbi on Wall Street’s modus operandi.

If you missed this hour of economic insight from a leading industry expert, the replay will be available on Oppenheim Law TV and the Oppenheim Law YouTube channel for the next 30 days! We want to remind you that as the short sale market heats up, Oppenheimlaw and Weston Title are here to service all your legal and title insurance related needs.

Homeownership will no longer define the American Dream. That’s because 30-year, fixed-mortgage loans that we’ve known since the 1950s may become a luxury if the federal government tightens constraints on Fannie Mae and Freddie Mac—the two lenders that historically backed home loans for the masses (even with far less than perfect credit scores). Indeed, a private mortgage finance market could emerge with entirely new rules—rules that make it harder and more expensive to get a loan.

Next, consider convicted Ponzi scheme mastermind Bernie Madoff’s comments from his prison cell. Madoff told New York magazine that Goldman Sachs, Merrill Lynch and Morgan Stanley Smith Barney knew all along that he was working the system—and did nothing. Madoff suggested that the entire government is a Ponzi scheme. What if Madoff is right? It’s a disturbing thought…

That leads us to the question, “Why isn’t Wall Street in Jail?” Where’s the accountability? Clearly, greedy banks did their dirty deeds and clearly American taxpayers are footing the bill. Wealth has been destroyed. Lives ruined. Yet Wall Street—and the prominent firms that make up the financial services industry—seem to be living above the law.

What’s an American homeowner—or foreclosure victim—to do?

Join Oppenheim Law tonight, March 9 at 6 p.m. Roy Oppenheim is holding a real estate workshop where he discusses how the aftermath of Wall Street’s greed is still affecting homeowners across the country and what you can do to pull yourself out of the hole the banks created. Oppenheim will also share how rising oil prices, continued unemployment and the possibility of an American double-dip recession is impacting the South Florida real estate market, as well as the pros and cons of how changes to mortgage options could impact South Florida foreclosures and short sales.

What: Global Impact on Florida Short Sales and Foreclosures Workshop

Where: Oppenheim Law TV

Or come in person: 95 NW 11th St., Boca Raton, FL 33432

Cost: Free with advanced registration

RSVP: To register, email jackie@oplaw.net or call 954.384.6114