Posts Tagged ‘principal reduction’

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Friday Round-Up; Foreclosures Up Again, DeMarco Dances With Reductions; Bank Of America Sues Itself

Friday, April 13th, 2012
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cowboy lassoForeclosures, repos up from last year in South Florida

I said after the foreclosure settlement was announced that banks had been given the green light to rev up their foreclosures engines, and in South Florida at least, I’m being proven right.

RealtyTrac’s numbers from last month show dramatic year-over-year increases in both new foreclosure filings (85%) and repossessions (39%) in Palm Beach, Broward, and Miami-Dade counties, compared to March 2011.

In Florida overall, new foreclosure cases were up 58 percent. Nationally however, new filings dropped 12 percent from last year, however they rose 7 percent from February.

Since the sunshine state has one of the largest foreclosure backlogs in the country, it really shouldn’t surprise you that the numbers skew so heavily against Florida.

The settlement has emboldened banks to become more aggressive in seeking to foreclosure, and the numbers certainly back that up.

Edward DeMarco Not Ready For Principal Reduction

More back and forth this week from Edward DeMarco, who despite announcing that principal reduction could save Fannie Mae and Freddie Mac 1.7 billion dollars, seems unwilling to venture far from his previous stance on loan modifications.

He said in a speech this week that a new analysis does show writing down the value of some underwater mortgages does have the potential to lower foreclosure rate and save both GSEs substantial money, but he’s still downplaying the significance of principal reduction.

While he has eased up on his previous refusals to even entertain the idea of modifications, he still seems fixated on the risk of strategic default, which he feels could wipeout any potential savings.
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Posted in Bank Of America, Edward DeMarco, Florida foreclosures, Friday RoundUp | 1 Comment »

Did Fannie Mae and Freddie Mac Just Admit Principal Reduction is Good?

Monday, March 26th, 2012
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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.
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Posted in Edward DeMarco, Fannie Mae, Freddie Mac, Principal Reduction | No Comments »

Fannie Mae and Freddie Mac: Past Their Prime

Wednesday, February 15th, 2012
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Just like Old Yeller, Freddie Mac and Fannie Mae need to be put down

There were two players conspicuously absent when last week’s $25 Billion settlement was unveiled; two players that absolutely should have been front and center.

What are their names? If you’ve followed the housing crisis as closely as we have, then you probably know.

Our old and unwanted cousins Fannie and Freddie.

Their omission from the settlement was perhaps its biggest flaw.

There are millions upon millions of homeowners with mortgages controlled by Fannie Mae and Freddie Mac, yet they aren’t getting a single penny.

We’ve been advocating principal reduction as one of the best ways to help beleaguered borrowers, and we’re not alone in that assessment. That’s why it was at the center of the settlement.

Yet Edward DeMarco, the man behind both companies, still clings to the outdated notion that principal reduction would lead to a moral contagion among homeowners otherwise known as a “moral hazard”.

He’s forbidden Fannie and Freddie to even entertain the idea.

While President Obama and others, such as Massachusetts AG Martha Coakley have turned up the heat on DeMarco, he hasn’t budged.

DeMarco is more concerned about his political ideology than helping the American homeowners, who are in essence, is his clients.

He’s like that annoying relative that no one invited, yet keeps showing up every Thanksgiving. But DeMarco is far from the only problem.

When you have Freddie Mac trying to profit from securities that paid more if homeowners couldn’t refinance, that is proof that we are just too far down the rabbit hole.
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Posted in Edward DeMarco, Fannie Mae, Freddie Mac, Principal Reduction | No Comments »

Will Obama Target Housing Crisis During State Of The Union?

Monday, January 23rd, 2012
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President Barack Obama delivers remarks on the economy at Shaker Heights High School,Shaker Heights, Ohio, Jan. 4, 2012. (Official White House Photo by Chuck Kennedy)

We really haven’t seen President Obama insert himself directly into the housing crisis, but there are rumblings that he may do just that during Tuesday’s State of The Union address.

The fact is that is what homeowners have been clamoring for. A new USA TODAY/Gallup Poll found 58% of Americans want the government to do more to help people keep homes.

According to HousingWire, Ohio senator Sherrod Brown told reporters today that there was evidence that Obama would address the robo-signing case which involves several major banks. A North Carolina congressman even said there were rumours that Obama would announce a settlement, something HUD secretary Shaun Donovan suggested last week was ‘very close’, as we mentioned in our Week In Review on Friday.

For the record, Obama’s press secretary refused to confirm any details, saying only that the President was “focused on the issue of housing”.

Between Dononvan’s comments and the recent white paper sent out by the Federal Reserve, it seems that more and more top government officials are finally realizing how important the housing market is to our economic recovery, not to mention their own political survival.

This is not news to us here at the South Florida Law Blog.

In the Huffington Post last September, Roy Oppenheim called housing the “thousand pound gorilla in the room” in the 2012 election, as many of the states with the highest underwater mortgages, such asFlorida, are also key electoral swing states. The pressure on Obama to be more aggressive on the banks is growing in Washington, and it’s about time.
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Posted in Federal Reserve, Florida foreclosures, Florida Law News, Foreclosure Defense, Huffington Post, Obama, Roy Oppenheim, The Wall Street Journal | 3 Comments »

Week In Review: Foreclosure Judge Slammed, Bank Settlement Close? and So. Fla. Housing Crisis in One Chart

Friday, January 20th, 2012
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Florida Homeowner Slams Judge Hearing 300 Cases

In the absolutely-not-surprising-in-any-way file, one of the 300 homeowners who went before a Seminole County judge during a three day session this week thinks he was treated flimsily by the court.

Blaize McMonagle told ABC News that Judge Alan Dickey sped through his case without being given the chance to defend himself.

Dickey was quoted in the Orlando Sentinel earlier in the week stating that he was only going to be able to give each defendant about 30 seconds if everyone showed up. With retired judges no longer aiding to help navigate through the foreclosure backlog, we expect to see more and more complaints from homeowners.

Florida’s Hardest Hit Program Not Providing Real Relief

Our skepticism about Florida’s Hardest Hit Program being able to help homeowners in the long-run was confirmed in the Palm Beach Post this week. Sheryl Stuart, a Jupiter homeowner enrolled in the federally-funded program since September said she had doubts she’d ultimately be able to stay in her home once the payments ended because the salary at her new job wouldn’t cover her mortgage.

We believe the program might only delay the inevitable, and only with substantive help like principal reduction will homeowners have a real chance to get back on their feet.

UPDATE: After Stuart was profiled by the Post, she found out her payments, which are set to end in February, are being suspended because she also owns two condos, which are also in foreclosure. She claims the credit counselor who helped her with application for Hardest Hit was aware of this and never informed her of the limit.
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Posted in Week In Review | 1 Comment »

Restoring Equity a Reality! Underwater Homeowners Have Hope

Tuesday, August 9th, 2011
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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.
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Posted in Florida Law News, Loan Modification, Oppenheim Law | 4 Comments »

Principal Reduction: Why Banks Don’t Do It More + What’s Wrong With It

Saturday, July 16th, 2011
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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.
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Posted in Florida Law News, Loan Modification | 2 Comments »

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