Corporate America Back To Risky Mortgages

President Barack Obama

Corporate America still has not learned from the lesson that is the current mortgage crisis, which began in 2008 and continues unabated.

Wall Street is back to issuing risky financial instruments, with investor money, this time via loan modifications that are costly to the American people, in greedy attempts at gaining increased revenues.

For example, there is a Miami company that charges a service fee of $24,000 for the year, at a rate of $2,000 per month, to do a loan modification, with the alleged promise, the homeowner will be free of mortgage payments for 12 months, then given a new mortgage.

However, what they do not tell you is, that year is not actually free and will be piled on to the new exorbitant mortgage, along with other miscellaneous fees.

The government needs to move quickly to put legislation in place, dictating how much companies can charge consumers for loan modification services and legally compel them to disclose all the facts relating to their service.

There are companies and lawyers lying to home owners, collecting fees, telling them they do not have to pay their mortgage for many months, while the corporate entity works to obtain a loan modification, not informing them, the debt they owe will be significantly higher at the end of the 12 months, by 20-50% above their current mortgage.

Miami is not the only place in America a new breed of mortgage fraud is transpiring in the loan modification sector of finance. The proceeding New York Times article excerpt, highlights another treacherous company, FedMod, that is being sued for defrauding 650 homeowners via deceitful loan modification programs.

Anyone that defrauds and further damages already financially distressed homeowners, should not only be sued, but imprisoned under federal statutes. There are quite a few business vultures that view this financial crisis as their time to get rich or richer. It is time for the government to act.

Back to Business

Cashing In, Again, on Risky Mortgages

Published: July 19, 2009 - LOS ANGELES — From the ninth floor of a downtown office building on Wilshire Boulevard, Jack Soussana delivered staggering numbers of mortgages to homeowners during the real estate boom, amassing a fortune.

By Mr. Soussana’s own account, his customers fared less happily. He specialized in the exotic mortgages that have proved most prone to sliding into foreclosure, leaving many now scrambling to save their homes.

Yet the dangers assailing Mr. Soussana’s clients have yielded fresh business for him: Late last year, he and his team — ensconced in the same office where they used to broker mortgages — began working for a loan modification company. For fees reaching $3,495, with most of the money collected upfront, they promised to negotiate with lenders to lower payments on the now-delinquent mortgages they and their counterparts had sprinkled liberally across Southern California.

“We just changed the script and changed the product we were selling,” said Mr. Soussana, who ran the Los Angeles sales office of Federal Loan Modification Law Center. The new script: You got a raw deal, and “Now, we’re able to help you out because we understand your lender.”

Mr. Soussana’s partners at FedMod, as the company is known, were also products of the formerly lucrative world of high-risk lending. The managing partner, Nabile Anz, known as Bill, previously co-owned Mortgage Link, a California subprime lender, now defunct, that once sold $30 million worth of loans a month.

Jeffrey Broughton, one of FedMod’s initial partners, served as director of business development at Pacific First Mortgage, a lender that extended so-called Alt-A mortgages for borrowers with tarnished credit for Countrywide Financial, which lost billions of dollars on bad mortgages before being rescued in an acquisition.

FedMod is but one example of how many of the same people who dispensed risky mortgages during the real estate bubble have reconstituted themselves into a new industry focused on selling loan modifications.

Despite making promises of relief to homeowners desperate to keep their homes, FedMod and other profit making loan modification firms often fail to deliver, according to a New York Times investigation based on interviews with scores of former employees and customers, more than 650 complaints filed with the Better Business Bureau, and documents filed by the Federal Trade Commission in a lawsuit against the company.

The suit, filed in California federal court, asserts that FedMod frequently exaggerated its rates of success, advised clients to stop making their mortgage payments, did little or nothing to modify loans and failed to promptly refund fees. The suit seeks an end to FedMod’s practices, and compensation for customers...

http://www.nytimes.com

1.5 Million U.S. Foreclosures In First Half

Last month, in the June 15, 2009 article The State Of The U.S. Housing Market, I stated the current mortgage crisis was not over and the banks' unwillingness to work with homeowners, would create greater damage to the economy.

Data released today, reflects for the first half of this year, there were an unprecedented 1.5 million foreclosure filings in America. This indicates the problem is getting worse, not better, contrary to previous reports by mainstream analysts and economists.

I think it shows great ill will on the part of some major banks, to accept enormous amounts of taxpayer money and not help the taxpayer in the end.

U.S. Foreclosure Filings Hit Record 1.5 Million in First Half

July 16 (Bloomberg) -- U.S. foreclosure filings hit a record in the first half, a sign that job losses and falling property prices deepened the housing recession, according to RealtyTrac Inc.

More than 1.5 million properties received a default or auction notice or were seized by banks in the six months through June, the Irvine, California-based seller of default data said today in a statement. That’s a 15 percent increase from the year earlier. One in 84 U.S. households received a filing.

http://www.bloomberg.com

Foreclosures at record high in first half 2009 despite aid

Thu Jul 16, 2009 12:01am EDT - NEW YORK (Reuters) - U.S. home foreclosure activity galloped to a record in the first half of the year, overwhelming broad efforts to remedy failing loans while job losses escalated.

Foreclosure filings jumped to a record 1.9 million on more than 1.5 million properties in the first six months of the year, RealtyTrac said on Thursday.

The number of properties drawing filings, which include notices of default and auctions, jumped 9.0 percent from the second half of 2008 and almost 15 percent from the first half of last year.

"Despite everybody's best efforts to date we're not really making any headway against the problem," Rick Sharga, senior vice president at RealtyTrac in Irvine, California, said in an interview.

http://www.reuters.com

Obama Considering Homeowner Rental Plan

President Barack Obama

It was announced yesterday, President Barack Obama is, "Mulling a rental option for some homeowners." Last month, I wrote about the rental issues besetting homeowners across America, whose properties are in foreclosure or pre-foreclosure stages, in the June 15, 2009 article The State Of The U.S. Housing Market.

I wrote of my neighbors, who were barred from renting their home, whilst moving to cheaper accommodations in a neighboring county to save money. It was an unwise move on the part of the bank, as the house has been empty for over six months, when my neighbors had found someone who wanted to rent it at a good price back then.

Several thousand dollars in rental income could have been generated by now, which would have put their mortgage back on track. However, in light of the bank's decision, they had no choice but to abandon the house, which was very sad.

The house still has not been auctioned yet. Not to mention, many courthouse held auctions of homes in America are coming up empty, with properties going back to the banks, many times without a single bid on them.

This story is repeating itself across the country. Some people would move in with relatives and rent out their homes to save their properties, but the banks will not let them (rentals).

Once again, some major banks are not working with homeowners and they are losing money for it. It is as though some of these prideful banks would rather see the homes empty, than work with homeowners, which is bad business, as it drives down property values and creates deserted neighborhoods.

The banks also have to pay maintenance fees and taxes on said empty properties, incurring additional costs. It's just bad business all around.

There are some bad lawyers out there taking advantage of the foreclosure crisis, but there are some who are successfully fighting the banks via the court system, then obtaining a loan modification for their clients, keeping them in their homes with comfortable interest rates.

The key is to find a good lawyer and one that won't drag out your foreclosure case, leaving you to catch up on a year or more of payments, plus fees and penalties you will incur from the banks. Get your loan straightened out as soon as possible.

RELATED ARTICLES

The State Of The U.S. Housing Market

Obama And Homeowners

Obama mulls rental option for some homeowners-sources

Tue Jul 14, 2009 3:07pm EDT - NEW YORK, July 14 (Reuters) - U.S. government officials are weighing a plan that would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their homes instead, sources familiar with the administration's thinking said on Tuesday.

Under one idea being discussed, delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years, the sources told Reuters.

Officials are also considering whether the government should make mortgage payments on behalf of borrowers who cannot keep up with their home loans, tapping an unused portion of a $50 billion housing aid kitty.

As part of this plan, jobless borrowers might receive a housing stipend along with regular unemployment benefits, the sources said. (Reporting by Patrick Rucker; Editing by Diane Craft)

http://www.reuters.com

Americans Not Paying Mortgage Due To Devaluation

Some Americans have stopped paying their mortgages, because they can't afford to anymore, while others, disheartened at owning a home, whose mortgage is two times the property's value, have been withholding payments out of disgust. It is a very tough predicament many face.

U.S. consumers fall behind on loans at record pace

Tue Jul 7, 2009 1:11pm EDT - NEW YORK (Reuters) - Soaring U.S. unemployment and a shrinking economy drove delinquencies on credit card debt and home equity loans to all-time highs in the first quarter as a record number of cash-strapped consumers fell behind on their bills.

Delinquencies on the value of all card debt soared to a record 6.60 percent from 5.52 percent in the fourth quarter as more cardholders relied on plastic to meet day-to-day expenses, the American Bankers Association said.

Late payments on home equity loans rose to 3.52 percent from 3.03 percent, and on home equity lines of credit climbed to 1.89 percent from 1.46 percent.

A broader gauge showing late payments on eight categories of loans rose for a fourth straight quarter to a new record, edging up to 3.23 percent from 3.22 percent. That rate actually understates consumer pain because it excludes credit cards. The ABA tracks loan payments that are at least 30 days late...

http://www.reuters.com