Federal Government Orders Identification Of, Compensation For Wrongful Foreclosures
April 13th, 2011
Yesterday the federal government demanded that banks and mortgage servicers “identify and compensate borrowers whose homes were taken in wrongful foreclosures”[1]. These orders, written into the latest set of consent agreements set forth by the federal government as part of the ongoing lenders’ settlement that is an attempt to lay last fall’s robo-signer fiasco to rest, state that federal investigations found “unsafe” and “unsound foreclosure practices” that must be compensated for. The agreements also impose strict regulations on how lenders and borrowers work together to modify loans and proceed with foreclosures.
While these agreements are long-awaited, homeowner advocates criticize them because there are no hard numbers for reparations for faulty foreclosures. Lisa Epstein, a Palm Beach homeowner advocate, calls the agreements a “huge whitewash to shut everyone up.” She is not alone in her complaints. Since the Federal Reserve and the Office of the Comptroller of the Currency and the Office of Thrift Supervision began drafting these agreements, even the attorneys general involved in a parallel investigation have stated that whatever agreements are made, they will serve only as a “ground floor” and that any settlements reached with federal banking agencies “will not derail the AGs’ negotiations [with lenders]”[2].
Lenders have protested most loudly when required to make principal reductions, which they say is unfair to homeowners who have kept mortgages current and also could encourage strategic defaults. However, compensation to people who did, in fact, lose their houses inappropriately seems only reasonable. Do you think that this is a good term included in the settlements?
Thank you for reading REJournalOnline!
Let us know if you think these measures are enough in the space below.
[1] http://www.palmbeachpost.com/money/foreclosures/u-s-says-lenders-must-pay-for-wrongful-1398135.html
[2] http://www.reuters.com/article/2011/04/07/financial-regulation-servicing-idUSN0712027420110407
April 14th, 2011 at 7:12 AM
Hey, I lost a home that had a MERS mortgage of over $85,000. I tried to negotiate with Chase and they basically told me to go fish. I couldn’t sell it, I couldn’t rent it and I couldn’t afford to continue to pay the existing mortgage. I didn’t even ask for them to forgive any part of the debt, I just wanted them to work with me on the interest rate. So, they foreclosed, took the home and in February they accepted $18,200 for the home. By the way - it was in very good shape - it wasn’t a dump.
These lenders foreclosed and continue to foreclose because they make more money. They could care less about the homeowner, the neighborhood or the damage to the economy.
April 17th, 2011 at 9:47 AM
I Don’t see how they make more money on a foreclosure and don’t understand why they don’t see the logic in modifying-Even With Principle Reduction. Phil owed 85K the took the house and sold it for 18.2k It cost them at least 10 to 20 thousand to go from foreclosure to sale. Leaving a minimal if any gain from this foreclosure.
If they gave Phil a principle reduction to 110% of current market value modified the terms for 30 years at 5.5% interest assuming 85k was at peak current market value and the value has declined 40% since than the home would be worth appx 51k and 110% of that would be 56K (And simply disregard the past due and penalties due)This would create a monthly payment of $317.96. I think Phil would have been exstatic with this result and bank would then collect 360 of said payment for a total return of $114,446.26 minus the 85k they originally loaned Phil to buy the house and the bank pockets $29,465.60. Not to mention the total of what they already pocketed from the interest on all the payments Phil made prior to default. I would guestimate over 5 years an additional 25K plus they have already taken in in pure interest profit for a grand total of over 50K profit plus their loaned out principle returned.One heck of alot better than the 0 to $10k they made out with foreclosing.
Why can’t the banks see this logic and just accept a smaller than originally planned profit on ALL these defaulting loans. In fact just give out principle redution loan modifications to EVERYONE who’s loan originated prior to Jan 1 2007 delinquent and current so as not to force those strategic defaults they anticipate.
Because then they LOOK bad and they don’t want that.
Sure they will lose money from their PROJECTED bottom line but at least they will have a much higher bottom line than they will from processing all these foreclosures AND America will have millions of strong and productive consumers instantly replaced into the markets. Suddenly able to make purchases, which increase business, which causes a need for more employees, which creates more jobs, which creates more productive consumers…See the positive effect!