Home Appraisals

True Story

A couple recently sold their home and submitted an offer to buy another home.  This new home was damaged from flooding during a hurricane.  The couple wanted to purchase the home to fix it up.  Well, their first mortgage company refused to appraise the house for the offered price and instead kept lowering the price.  So, the couple went to Bank of America and found a loan officer who would approve a “drive by” appraisal.  The real estate agent then took all the photographs off of the internet and put curtains on the windows so that all the appraiser could see was the outside of the house.  And low and behold, the house appraised for the exact amount that the couple offered on the house. 

In today’s New York Times, there is an article about the appraisal business.  The Home Valuation Code of Conduct now says that “brokers and real estate agents can no longer order appraisals, only lenders can.”  Evidently folks in the mortgage industry feel that only unethical appraisers are getting the jobs with the new code.  Based on the story above, I would agree with their argument.

Source: In Appraisal Shift, Lenders Gain Power and Critics. By David Streitfeld for The NYTimes 8/18/09
                URL:http://www.nytimes.com/2009/08/19/business/19appraise.html

Banks just walk away…

Last week I watched a story on CNN about two homeowners who left their home when they received their foreclosure notice (auction notice I assume).  Well, about a year later, they were being threatened with jail time due to credit liens, unpaid property taxes, and unpaid city code fines (their home was fined by the city because of the lack of curb appeal).  Unfortunately I have not been able to locate CNN’s story to provide a link or a reference so the words used are not verbatim.  But it really doesn’t matter because I have heard this story time and time again.  You think the bank is foreclosing, you move out and a year later you find that you still own the house that has become virtually worthless. 

In my personal story, our home has been vacant and on the market for a year and a half.  Because of the story above, I have decided not to take all the utilities out of my name until I have proof that PHH Mortgage or someone else actually bought the house during the auction.  The last thing I need is to go to jail next year.  My family wouldn’t like that very much. 

For further reading on this subject, please read: House ‘Under Water’? Do Like the Banks Do and Just Walk Away. By Scott Thill for AlterNet.org 8/19/09

Goals

I have advocated complaining as a means to fix our problems with the mortgage industry.  After reading Tammy’s letter from Denise Richardson’s website, I am not so sure that complaining is working.  Tammy in Florida has a truly heart wrenching story.  But what struck me the most is how much she has complained and that she writes to the White House daily.  I thought I wrote to the White House and other elected officials a lot.  I think Tammy writes more than I do.  My point here is that our complaints on the internet and with various politicians and federal agencies are simply not doing enough if anything.  We need to step up our efforts. 

What do we do now?  I really want to hear from you all out there.  I want to know your suggestions for how to move forward.  I have set up social media accounts and a message board so we can facilitate discussions and brainstorm ideas.  My ultimate goal is to convene a hearing on Capital Hill where we can all voice our complaints and then be a part of the solution.  How do we get there from here?  Remember that no well-meaning idea is a bad idea. 

Just to get some ideas flowing, we could copy what Obama’s Organizing for America (OFA) groups are doing for health care reform.  We could hold neighborhood meetings and organize petition signing efforts within our communities.  We could even use OFA’s events calendar to promote our own events.  We could also use the message board on this site to plan events.  We can invite the press to our meetings.  So, join the community, spread the word and share your ideas.  Let Tammy’s story inspire you and remind us all that we are not alone and Individually we are Strong.  Together we are Powerful.

PHH Employee Reviews

The link will take you to the Glassdoor.com site where there are only 6 reviews of PHH Mortgage employees.  This is just an FYI.  Long ago I found a much better employee review site but haven’t been able to locate it again.  Leave a comment if you have come across it. 

Click here

Mark-to-Market (MTM) Investigation

By Coleen Martinez

First, let’s begin our discussion with an explanation of what Mark-to-Market (MTM) is.  From the Forbes website, Investopedia, MTM is the following¹:

1. A measure of the fair value of accounts that can change over time, such as assets and liabilities.  MTM aims to provide a realistic appraisal of an institution’s or company’s current financial situation. 
2. The accounting act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value. 
3. When the net asset value (NAV) of a mutual fund is valued based on the most current market valuation.

The Forbes’ website goes on to try to explain what happens in a MTM situation.  Take the “financial crisis of 2008/2009¹” (as if this crisis is ancient history) as the starting point of the following explanation.  So, as we all know, banks went around the country selling and buying lots of bad loans on houses with inflated prices.  And when the bubble burst, the loans that the banks were holding lost their value and in consequence, the banks themselves lost their value.  Forbes explains the above situation as this:

                 “Problems can arise when the market-based measurement does not accurately reflect the underlying asset’s true value. This can occur when a company is forced to calculate the selling price of these assets or liabilities during unfavorable or volatile times, such as a financial crisis. For example, if the liquidity is low or investors are fearful, the current selling price of a bank’s assets could be much lower than the actual value. The result would be a lowered shareholders’ equity.¹”

The bank bought loans for inflated values.  In turn, the bank sold shares based on the inflated values of the loans and ultimately marketed itself at an inflated price to have investors buy shares of their company so everyone could be happy and rich.   When the bubble burst, the bank would have lost its’ value because the loans lost their values, and ultimately the shareholders would lose the value of their high priced stock in the bank. 

What the Forbes quote above is trying to explain is that during a financial crisis, banks with bad loans will appear worse than they appear.  So to combat this awful situation for the banks, the MTM rule was kicked to the curb.  In April 2009, the Financial Accounting Standards Board (FASB) created “new guidelines that would allow for the valuation to be based on a price that would be received in an orderly market rather than a forced liquidation.¹”

Based on the financial industry’s faulty logic, they have concluded that during a financial crisis, they are allowed to value their assets at a price of their desire.  When doing this “magic math” banks will not lose shareholders because their only value is based on a bunch of bad loans.  Banks will instead keep all of their value and shareholders by lying about the value of their assets.  Isn’t this just fantastic!

I felt bad for not knowing about the MTM rule in the first place and not knowing about the rule’s demise in April.  I try really hard to know about current events especially when it comes to mortgage news.  Then I realized that rules disappearing and reappearing in the financial world is exactly why we had a “financial crisis of 2008/2009.¹”  It seems that while President Obama is trying to put forth new regulations in the financial industry, Wall Street is still playing their games. 

I guess that you wouldn’t be surprised to know MTM is a company also.  Check them out, they offer BPO’s (Broker Price Opinions) or as we know them as, appraisals².  I suppose that this website promises BPO’s in an “orderly market, not a forced liquidation market.¹” My personal experience tells me that the BPO’s ordered for my vacant home on the market were based on a bubble market (orderly), not a reality market (forced liquidation).

While doing research for this piece, I came across a wonderfully titled opinion piece on the Forbes website titled, “Why Mark-to-Market Accounting Rules Must Die.³” The writers complain about how terrible the rule is for banks and why we should allow the financial industry to get rid of the rule.  Clearly these writers have no clue as to the affect of not having this rule does for the average citizen. 

My house has been vacant and listed for sale since February 2008.  After 6 months on the market, I started requesting approval of short sale offers.  Every single BPO we received was entirely too high and not at all reflective of the current depressed market value of my home, of the neighborhood, and of the town.  Obviously my mortgage servicer had decided early on to ignore the MTM rule and now they can ignore the MTM rule in good conscience. 

In summary, the MTM rule has been relaxed to allow banks to value their assets as they see fit.  In a financial crisis, they can keep their assets valued high even though the assets might be low.  However, in a normal market, banks have to value their assets at face value.  The financial industry’s idea of a stable market is our idea of a bubble market, whereas our idea of a stable market is the financial industry’s idea of a “forced liquidation¹” market.       

We are still in a financial crisis.  Banks still won’t modify mortgages.  Obviously if banks modified mortgages they would be admitting that the values of their assets are lower than when they were first purchased.  As we have realized, this asset lowering in turn can lower the overall value of the bank.  Clearly this is why banks won’t accept short sales because they would have to admit that the loans are not as valuable as first thought.  This is why banks won’t refinance because typically the payment amount and interest will go down and thus lower the value of the loan.  This is why banks won’t modify mortgages that are underwater because again, they have to admit that the value of their loan has decreased.  Plus, by keeping an inflated value on mortgages, servicers earn ¼ to ½ percent per value of each mortgage⁵.  By keeping the values/mortgages/loans/assets at an inflated price, both the banks and mortgage servicers win.      

Lastly, “by allowing a property to go into foreclosure, banks have postponed the inevitable, admitting the value of their asset has decreased.⁴”  Take it from someone who knows, banks can drag out a pending foreclosure for a long time and all the while, they get to keep the same high value of their assets for as long as possible.  Plus, when the property does foreclose, banks and servicers earn fees⁵.     

I believe the MTM rule has become a joke.  Either we create a new rule or refer to the old rule and actually enforce it. 

Sources:

1. Mark-to-Market on Investopedia, A Forbes Digital Company.  Found 8/11/09
   URL: http://www.investopedia.com/terms/m/marktomarket.asp
2. Mark-to-Market. Found 8/11/09
   URL: www.marktomarket.com
3. Why Mark-to-Market Accounting Rules Must Die by Brian S. Wesbury and Robert Stein.  Posted 2/24/09.  Found 8/11/09.
   URL: http://www.forbes.com/2009/02/23/mark-to-market-opinions-columnists_recovery_stimulus.html
4. Our view on housing: On foreclosures, lenders play ‘extend and pretend’. USA Today Editorial Board.  Posted 7/28/09. Found 8/10/09
   URL:  http://blogs.usatoday.com/oped/2009/07/our-view-on-housing-on-foreclosures-lenders-play-extend-and-pretend–to-avoid-write-downs-banks-drag-feet-on.html?loc=interstitialskip
5. AP IMPACT: Government Mortgage Partners Sued for Abuses.  Daniel Wagner.  Associated Press.  8/5/09. 
   URL: http://hosted.ap.org/dynamic/stories/U/US_MORTGAGE_MIDDLEMEN?SITE=KYB66&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2009-08-05-20-52-21

Mortgage Summit with Treasury

Wow, am I behind the times.  Here is a list of the mortgage servicers that met with Treasury officials on July 28, 2009.

Aurora Loan Services LLC
Bank of America
Bayview Loan Servicing
Carrington Mortgage Services
CCO Mortgage
Chase Home Finance LLC
CitiMortgage Inc.
Citizens First Wholesale Mortgage Company
Countrywide Home Loans Servicing
First Federal Savings and Loan
GMAC Mortgage, Inc.
Green Tree Servicing LLC
Home Loan Services LLC
National City Bank
Nationstar Mortgage LLC
Ocwen Financial Corporation Inc.
Residential Credit Solutions
RG Mortgage Corporation
Saxon Mortgage Services Inc.
Select Portfolio Servicing
Technology Credit Union
Wachovia Mortgage
Wells Fargo Bank
Wescom Central Credit Union
Wilshire Credit Corporation

Source: Who’s Going to Be at That Treasury Meeting, Anyway? By Joe Nocera. Posted in Executive Suite; Joe Nocera Talks Business. 7/14/09.
                  URL:http://executivesuite.blogs.nytimes.com/2009/07/14/whos-going-to-be-at-that-treasury-meeting-anyway/

I know, where is PHH in all of this?  I don’t know.  The buzz words about this meeting was that the top 25 mortgage servicers would be there.  We know that PHH is in the top 25.  Are they hiding in one of the names above?

STOP! Mortgage Servicers

Hello!  Please check out my new blog, click here

For those of you familar with this site, you will find the new site very similar.  The goals are the same, to hold PHH Mortgage accountable.  But, after researching for posts for this blog, I realized that there is an entire community full of disgruntled mortgage servicer customers.  Hopefully the new site can become a meeting place for ideas, complaints, and support about all mortgage servicers.  Our ability to create change with the mortgage industry will rely on our numbers.  If we can get many people petitioning about the same goals then we can push for more recognition. 

Don’t worry, I am not abandoning the cause.  In fact, this blog will serve as the flagship for others who want to start a blog about their mortgage servicer.  Plus, I am still a PHH Mortgage customer and they haven’t done anything positive for me lately!  And, since PHH sold part of my loan to Green Tree Servicing, I need to branch out my complaints! 

So, please spread the word about the new site and lets become a community and kick some mortgage industry butt!!!!!!!

AP Articles

Federal Authorities Create Mortgage Fraud Team 7/31/09

AP Impact: Government Mortgage Partners Sued for Abuses 8/5/09 By Daniel Wagner

Tips for Borrowers Dealing with Loan Servicers 8/5/09 By Daniel Wagner

Mortgage Aid Program Helping Fraction of Borrowers 8/4/09 By Alan Zibel

Making Home Affordable

Click here for the Making Home Affordable Servicer Performance Report through July 2009

I am sorry to say that PHH Mortgage is not directly listed here.  If you think they are known by another name on this list, let me know. 
However, any loans held by Fannie Mae and/or Freddie Mac are part of this program.  I know based on the letter I received from PHH Legal Counsel that Fannie Mae owns our loans so I will still apply pressure to PHH and use these reports as my basis.  Although I have no idea what PHH’s particular stats are since their involvement in this program appears to be hidden.

Servicers facing hundreds of lawsuits

8/5/09; The Associated Press; Click here for the article

“An Associated Press investigation found thousands of lawsuits against servicers.”

“Loan servicers are middlemen who collect mortgage payments from homeowners and pass them to banks and other investors.”