The South Florida Law Blog loves a good burger!

We’re finally starting to catch our breath, with the substantial amount of news we’ve seen come down the pipeline in the housing market this week.

President Obama’s State of the Union, and the apparent collapse of the federal government’s settlement with the banks have been our focus this week, and rightfully so.  But there’s been lots of other stories that have crossed our desk this week, some big, some small, but all important.

Republicans Offer Unpopular Solutions for Housing Fix

Most of our attention has been on the President this week, but we’ve also been keeping our eyes of the Republicans as well. With the Florida GOP Primary just days away, the candidates have been descending on Florida as expected. Foreclosure, which has been long absent from the GOP discussion, has become a more focal issue this week.

Unfortunately, it feels like much of the talking points have focused on the candidates blaming each other for causing the housing crisis, and less on what they plan to do to fix it.

This excellent piece in The Street details all the remaining Republicans comments on foreclosure. They all have suggested a hands-off approach, and appear to be under the misguided notion that the market will correct itself on its own. Gingrich and Paul have made one-note villains out of the Dodd-Frank Act and The Federal Reserve, respectively.

Romney’s past comments about market correction have come back to haunt him as he tries to pass himself off as sympathetic to the homeowners’ plight. Frankly we don’t feel like any of the Republican candidates are looking out for the homeowners.

Chase, BofA may lose $131 million in HAMP payments

Anything that hurts the banks in the pocketbooks, we’re all for. We realize that $131 million is chump change to them, but it’s great to see the banks being held accountable for failing to live up to expectations. This story further proves how little the banks have done to correct their own mistakes.

The Special Inspector General for the Troubled Asset Relief Program (TARP) is threatening to take away this money because both banks have failed to improve their performance in the in the Home Affordable Modification Program. In a report released this week, the SIG said both had failed to properly evaluate homeowners for the HAMP program.

While the report states that Bank of America has made some headway, it was particularly critical of JPMorgan Chase, saying “JPMorgan Chase’s continuing refusal to comply with program requirements is deeply troubling and there must be serious repercussions.”

Florida Attorney General bashes states that rejected nationwide foreclosure settlement

We can’t get through this recap without some mention of the robo-signing settlement, as Republican Pam Bondi continues to stand with it as it crumbles. Our Attorney General, whose been accused before of being soft on lenders, came out Thursday saying the deal needs to be passed now so Floridians can start getting foreclosure relief. Bondi has been one of the settlement’s biggest backers.

“The settlement under discussion contains all the elements California purports to be looking for; transparency, substantial relief for distressed homeowners, and strict enforcement,” Bondi said.We of course, strongly and respectfully disagree, particularly when it comes to her belief the settlement offers strict enforcement, which is why Obama’s plan to form a new investigative unit is so necessary.

From foreclosure king to burger king: Stern buys into Five Guys

From the sublime to the ridiculous  – Foreclosure attorney David Stern, the lawyer at the center of one of the largest foreclosure mills in Florida, is now making money in the fast food business.Stern has now invested in a company that owns several Five Guys Burger and Fries  franchises.

Stern’s law firm closed last March, and Stern is now being sued by the company that paid him $60 million and now claims his business was unlawful, so he has to make money somehow right? Of course the fact that he has money to invest in such a large chain probably doesn’t make homeowners too happy.If you’re hungry we’d be cautious about stepping into one of his restaurants, Stern might steal the fries right off your plate!

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.

Small wonder that HAMP has turned into an embarrassing failure for the Obama administration.

This past weekend, I was in our Nation’s capital. It is always interesting to see things from the inside looking out, as opposed to from the outside looking in. It is like being in a house of mirrors.

One thing is apparent: the Beltway economy is not suffering like places such as Florida, Nevada, and Detroit. As a result, our elected representatives and the administration may not truly understand the depth of the housing crisis. I think they still blame the greed of “over ambitious” homeowners and speculators as opposed to the real driving force: Wall Street, the over-sized “too big to fail” banks and themselves. The buzz, of course, was the fact that Fannie Mae may have been playing its own political three card “monty” with homeowners over the past year. Simply put: whistleblower Caroline Herron, a former Fannie Mae executive and consultant, is suggesting the administration pushed for temporary modifications knowing full well that many of the loan modifications would fail prior to becoming permanent. In fact, Congress is now pushing for hearings.

Fannie Mae executives bungled their responsibilities of the federal government’s massive foreclosure-prevention campaign, creating a bureaucratic muddle characterized by “mismanagement and gross waste of public funds,” according to the suit Herron filed. The suit alleges that the homeowner-relief effort was marred by delays, missteps and executives’ preoccupation with their institution’s short-term financial interests. “It appeared that Fannie Mae officers were focused on maximizing incentive payments available to Fannie Mae under various federal programs – even if this meant wasting taxpayer money and delaying the implementation of high-priority Treasury programs,” Herron claims in the lawsuit.

The problem started with a skewed financial incentive at the heart of HAMP. The government paid Fannie bonuses for trial modifications that lasted three months, but apparently provided no incentive to move those homeowners into permanent modifications. Under pressure to show that they could turn a profit after the massive bailouts of 2008 and continuing bailouts in 2009, Fannie Mae executives apparently focused on earning those bonus payments.

The result: very few permanent modifications.

Herron charges that Fannie Mae continued in headlong pursuit of “trial mods” knowing many had little chance of becoming permanent. As late as September 2009, barely one percent of trial modifications had converted to permanent modifications by the end of their three-month trial, a Congressional oversight panel found. Nevertheless, Fannie Mae preferred doing trials, Herron alleges, because it was eligible to receive incentive payments from the Treasury Department for trial modifications booked before the end of 2009.

As of February 2010, 83 percent of the one million active modifications being handled by HAMP were trials rather than permanent arrangements. The allegations suggest that the modifications resemble the sub-prime loan market prior to 2008. Government incentives pushed Fannie not only to prioritize trial mods over permanent settlements, but also to pull borrowers with no hope of rescue into the program in order to profit off of them.

Herron’s lawsuit accuses Fannie executives of “actively working against” the borrower. In fact, she alleges that Fannie was reluctant to move quickly in processing the modifications.
Small wonder that HAMP has turned into an embarrassing failure for the Obama administration. Although the President promised 3 million modifications, only now approximately 300,000 have been successful.

Roy Oppenheim
From the Trenches

According to the article, HAMP is part of the U.S. Treasury’s Home Affordability & Stability Plan to save 3 million to 4 million homes from foreclosure. So far,  approximately 360,165 trial modifications have started nationwide.

I was asked to provide my take on the program and will be quoted in the article.  Here is a summary of my opinion as expressed to Julie:

One flaw with the program is that while a small percentage of individuals has seen their interest rate drop or the terms of their loan extended, the program does not provide for principal reduction.

A second flaw I identified is that the program does not extend to jumbo mortgages, second homes or investment properties– a group which makes up more than half of all homes.

So be sure to check out South Florida Business Journal entire story or if you are a subscriber, you can check it out at http://southflorida.bizjournals.com/southflorida/stories/2009/09/28/focus5.html

Here’s the entire story by SFBJ Julie Kay:

Three months behind on his mortgage, Hollywood resident Neil Reisner applied for a mortgage modification under the federal government’s $50 billion loan modification initiative.

But, he has been less than thrilled with the outcome. JP Morgan Chase, his loan servicer, offered him $300 off his $2,700 monthly mortgage. What he saves now will be tacked onto the back end of his mortgage.

Reisner, a journalism professor at Florida International University and father of two, says he will probably be forced into foreclosure.

“It’s disappointing,” he said of President Barack Obama’s housing plan. “They should reduce the principal. I could easily justify walking away just to get this albatross from around my neck.”

Reisner is not alone. The goal of the Home Affordable Modification Program (HAMP), part of the U.S. Treasury’s Home Affordability & Stability Plan, is to save 3 million to 4 million homes from foreclosure. So far, 360,165 trial modifications have been started nationwide.

Some people are getting meaningful reductions, allowing them to stay in their homes, according to Diane Cantor, director of Centro Campesino Farmworkers Center in Miami.

“People fall on their knees in joy” when they get modification details, she said.

Centro Campesino is one of the nonprofit agencies teaming up with Chase – which also handles mortgages issued by Washington Mutual and EMC Mortgage Corp. – to offer seminars on mortgage modification.

“We’ve seen people have their monthly payment reduced by $900,” Cantor said. “That’s the difference between staying in their homes and not staying in their homes.”

Many hoped that offering mortgage modifications to homeowners would stem the foreclosure crisis. But, modifications are voluntary, and some lenders appear to be participating more than others.

Bank of America, which has the largest number of delinquent loans in the HAMP program, had started trial modifications on only 7 percent of those loans by August, according to a new government report.

Chase has started loan modifications on 106,200 – 25 percent of eligible loans. Chase has opened 27 mortgage modification centers tnationwide, including two in South Florida.

“We’re trying to do a lot of outreach, to let the community know that we are here,” said Ertha Brathwaite, manager of the Chase Homeownership Center in Aventura. “We are getting quite a few people coming in. Based on the delinquency in Miami, though, you would expect more.”

Seven modification seminars are planned in South Florida in the next 45 days.

Homeowners can also walk into one of Chase’s mortgage modification centers or apply over the phone.

“At the centers, they are trained to handle mortgage modification,” Chase spokeswoman Nancy Norris said. “That is all they do. They don’t sell mortgages, they’re not dealing with credit card issues. They’re just trying to help homeowners stay in their homes.”

Chase can drop the interest rate to as low as 2 percent and extend the term of the loan, Norris said. However, she emphasized that the program is not about “principal forgiveness.”

“The biggest misconception in South Florida is that being upside down is a financial hardship – and it’s not,” Norris said. “Our goal is to make it affordable to the homeowner to make their house payment, not to reduce the principal.”

That is one of the key flaws with the program, according to legal experts.

“There is some urban legend that you’re going to see some massive amount of principal reduction,” said Roy Oppenheim, a foreclosure defense lawyer in Weston. “You’re seeing some reduction – about 20 percent – but it’s usually interest, penalties and stuff. On rare occasions, you see some principal reduction.”

Oppenheim said HAMP excludes jumbo mortgages, second homes and investment properties.

“That’s 60 percent of homes right there,” he said.

April Charney, a nationally recognized foreclosure expert, says the only real solution to the problem is for Congress to declare an emergency moratorium on foreclosures.

The HAMP program cannot work, said Charney, who sits on the Florida Supreme Court Foreclosure Task Force, because much of the mortgage paper has been bought in bulk and sold to foreign countries.

“Until we can do workouts with stabilized mortgages, we’re all going to lose,” she said. “Until we can reduce principal and interest rates, we are counterproductive.”

Still, on the ground floor, workers at Centro Campesino in Miami are optimistic about the HAMP plan. More than 20 people came to the first outreach meeting with Chase last month.

“We would like to do this with all the different lenders one day a week,” Cantor said. “It’s going to take a lot of things working at the same time to solve this foreclosure problem, but that doesn’t mean there isn’t some value in getting the mortgage reduced from 7.25 to 2 percent.” by Julie Kay

“We are writing to you as a participant in the Administration’s Making Home Affordable (MHA) program. As you are aware, the Home Affordable Modification Program (HAMP) under MHA is designed to help responsible but at-risk homeowners modify their mortgages in order to lower their monthly payments to sustainable levels and avoid foreclosure. This program is a critical part of our collective effort to stabilize the housing market and promote economic recovery.

Since we published our detailed guidance, we have started to see a significant ramp-up in the number of trial modification offers and trial modifications underway. However, much more progress is needed. There appears to be substantial variation among servicers in performance and borrower experience, as well as inconsistent results in converting trial modification offers into actual trial modifications. We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share.

In order to assess our progress under the program and improve the speed of implementation, we request that you designate a senior liaison, with whom you have regular contact and who is authorized to make decisions on behalf of you as CEO, to work directly with us on all aspects of MHA. We will invite this person to meet with senior Treasury and HUD officials on July 28 to discuss full implementation of the program. To prepare for that meeting, we ask that your liaison send us a letter by July 23, detailing specific steps that your organization will take towards effective implementation and compliance. Similarly, we invite you or your liaison to provide suggestions on ways that we can improve program design.

In conjunction with this meeting, we plan to take three important steps to improve the program’s performance. First, we will begin publicly reporting results under the program. By August 4, we will begin issuing monthly reports with servicer-specific performance measures, including the number of trial modification offers each servicer has extended to eligible borrowers, the number of trial plans that are underway; the number of final modifications, and eventually, the long term success of those modifications. The purpose of these reports is to provide a transparent and public accounting of individual servicer performance as well as overall program performance. We will discuss with you the content of these reports at the July 28 meeting.

Second, we will work with servicers such as you to set more exacting operational metrics to measure the performance of the program, such as average borrower wait time for inbound

borrower inquiries, the completeness and accuracy of information provided applicants, document handling, and response time for completed applications.

Third, in order to minimize the likelihood that borrower applications are overlooked or that applicants are inadvertently denied a modification, Treasury has also asked Freddie Mac, in its role as compliance agent, to develop a “second look” process pursuant to which Freddie Mac will audit a sample of MHA modification applications that have been declined. Freddie Mac will coordinate with servicers such as you to address specific cases that arise and to address general operational weaknesses where errors prove more systematic.

We are asking that all servicers expand servicing capacity and improve the execution quality of loan modifications in order to help the sizable number of homeowners at risk of foreclosure and eligible for the program. This will require adding more staff than previously planned, expanding call centers beyond their current size, providing an escalation path for borrowers dissatisfied with the service they have received, bolstering training of representatives, developing extra on-line tools, and sending additional mailings to borrowers who may be eligible for the program.

We are confident that together we can improve the speed and efficacy of the MHA program in a manner that is consistent with your aims as a leading financial institution.

Our shared goal must be to make the program as successful as possible in keeping Americans in their homes and providing stability to the housing market. With your continued help, we believe that we can achieve this goal.

Sincerely,

Timothy F. Geithner Shaun Donovan”

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/09/AR2009070902928.html