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Today – 2017
Millennials: Trade your Student Loans for a Mortgage.
As we noted in an earlier blog, it’s no secret that mounting student loans have made it difficult for Millennials to buy homes. Eagle Home Mortgage, the lending arm of South Florida’s largest homebuilder, Lennar Corp., is proposing a new solution to try and remove this common financial obstacle. Lennar Corp recently launched a millennial mortgage program that offers to pay off up to $13,000 in student loans for borrowers who purchase a new home from Lennar.
A Significant Impediment to the American Dream
How much of a negative impact do student loans have on Millennials wanting to buy homes? In a recent study on millennial student loan debt released by the National Association of Realtors® and nonprofit American Student Assistance®, of the 80% who said they do not own a home, 83% said their student loan debt affected their ability to buy. The same study even noted that the average delay in home-buying was seven years. A recent survey conducted by Credible, a personal finance website, showed that 50% of Millennials surveyed stated that they would sacrifice their right to vote during the next two presidential elections in exchange for not having to make another loan payment.
The Fine Print
Lennar’s program does have fine print. Taking advantage of the Eagle Home Mortgage offer comes with certain conditions. According to Housing Wire, borrowers who use this program are able to direct up to 3% of the purchase price towards payment on their student loans. However, the borrower must purchase a new home from Lennar. Also, the program’s maximum loan amount is $424,100, and credit and income requirements must also be satisfied.
Is this the start of a new trend in the real estate market? Quite possibly. It is a step in the right direction, as various companies, including banks and developers, are beginning to acknowledge the significant setbacks of high student loan debt, including a void in the real estate market as Millennials forgo traditional first-time home-buying. Perhaps more solutions will be proposed to not only address the growing $1.3 trillion student loan debt issue, but also to further the dream of home ownership.
From the trenches,
You may have noticed that Nationstar is no more. After several years of transitioning, Nationstar has officially renamed itself “Mr. Cooper.” Why the new name? According to CEO Jay Bray, it’s all part of a “cultural shift” to improve the experience for customers, as Bray’s mission is to be the leader in service.
Time to Rebrand
The former Nationstar has quite a history. It was among the most complained-about companies, according to the Consumer Financial Protection Bureau’s reports on consumer complaints. Nationstar was also previously hit by the Bureau with the largest civil penalty ever imposed, in the amount of $1.75 million, for Home Mortgage Disclosure Act violations.
Due to such negative publicity, presumably, the Nationstar team realized that a total rebrand would create a new identity for the mortgage servicer. The “Mr. Cooper” brand hopes to create an impactful relationship with its customers, “upgrading [the] customers’ experience and challenging the standard for customer service in the mortgage industry.”
Mr. Cooper has already transformed its name, website, and mobile app; and aims to completely transform its identity to “personify” its relationship with customers. Mr. Cooper moved its customer service operations back to the United States and also released a Home Rewards credit card that provides customers with 1% cash back on purchases where the rewards are applied to the borrower’s mortgage principal.
What This All Means
The Nationstar-Mr. Cooper transformation leaves a few questions to be answered. Will Mr. Cooper erase Nationstar’s negative past? Will other mortgage servicers, hoping to shed their culpability in the foreclosure crisis, also rebrand? Will “Ms. Doe” be next? Even if rebrands happen, our question at Oppenheim Law is, can a leopard change its spots?
From the trenches,
The following is not a reality show; rather, it is a true story that highlights the worst of the financial crisis.
Erik and Renee Sundquist reached a settlement with Bank of America where the bank has agreed to pay them $6 million after eight grueling years of foreclosure. The Sundquist family endured a stress-induced heart attack and a suicide attempt, and a “long personal and legal nightmare that has impacted every facet of their and their sons’ lives,” according to court papers.
Being no stranger to fines, penalties, and settlements for wrongdoing, Bank of America has paid nearly $60 billion since the 2008 financial crisis for violations including tax evasion, money laundering, fraud, and misconduct.
When It Rains, It Pours
Events began to unfold in 2008 when the couple took out a mortgage made by Countrywide Financial, which was later acquired by Bank of America. The family sought a modification, at which time a Bank of America representative told them that they needed to miss three payments and default before their mortgage could be modified.
Despite knowing that this would damage their credit score, the couple proceeded with bank’s advice and defaulted. However, the bank rejected more than 20 modification requests, claiming that the applications were “stale”, incomplete, insufficient, and even “lost”. Despite the Sundquists’ subsequent bankruptcy filing, Bank of America proceeded with the planned foreclosure auction, violating the automatic stay.
Realizing it was in violation of the automatic stay, Bank of America reinstated the family as title holders without notifying them. When the family moved back in, they discovered their home had been vandalized, and that there was a $20,000 fine from their HOA for failing to keep up with the landscaping.
The end of a “state of battle-fatigued demoralization”
This entire ordeal is cited as the cause of Renee Sundquist’s heart attack and Erik’s attempted suicide, leading to what the judge described as a “state of battle-fatigued demoralization”. The judge awarded the couple $6 million in damages, and also awarded several legal organizations that helped fight the financial abuse an astounding $40 million in punitive damages.
The Sundquists’ legal nightmare is over. Unfortunately, the Sundquists had to pay the price for reprehensible and unlawful conduct that no one should ever have to endure.
From the trenches,
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