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Firms Will Be Embarrassed

Posted by CM on November 29, 2009

Yes, you read the heading correctly.  It seems that Obama and Geithner can’t seem to get our beloved mortgage servicers to effectively modify delinquent home loans.  That is one heck of a surprise!  We all know from experience that mortgage servicers will stop at nothing to get a foreclosure processed. 

On Monday, Obama will initiate a new campaign aimed at embarrassing mortgage firms (I hope mortgage servicers are included) into creating permanent modifications that reduce monthly payments.  Unfortunately, reducing principal balances was not mentioned in the article

Those servicers who have not made enough permanent modifications will be called out and embarrassed.  Recall that Geithner’s entire idea with his monthly mortgage servicer performance reports was to embarrass those firms that haven’t made many modifications.  That hasn’t worked very well and now it seems Geithner and his team is trying another embarrassment model for the servicers.  I don’t know about you, but when all the administration can think of is different ways to embarrass mortgage servicers, I don’t hold out much hope for this new campaign. 

A guess a bit of a change to HAMP is that the puny incentives ($1000 per modification) will not be paid until the modification is permanent and monthly payments are reduced.  To date, only 2,000 out of 500,000 or 0.4% of loans have been permanent modifications1.  If that is the only plan for pushing servicers in the right direction, I fear that that will only push servicers right out of HAMP all together.    

The word inside the Treasury Dept. is that HAMP is not really working but no one seems poised to create a new plan.  I have 2 ideas, 1. Reduce Principal Amounts and 2. One Year Freeze on all Foreclosures. 

Luckily the Senate is getting restless and they are pretending like they will create a National Foreclosure Prevention Program (like Philadelphia’s) where every delinquent home owner gets to have a court-supervised mediation1. Or they want bankruptcy judges to amend mortgages1.

It all boils down to the fact that servicers have zero incentive to modify loans and have more incentives to do a trial modification while still collecting delinquent fees. 

“I don’t think [mortgage servicers] ever intended on doing permanent loan modifications1.” Margery Golant 

Source:
1. U.S. Will Push Mortgage Firms to Reduce More Loan Payments. Peter S. Goodman. NY Times. 11/29/09.
URL: http://www.nytimes.com/2009/11/29/business/economy/29modify.html

 

For more about the run around between mortgage servicers and their customer’s regarding modifications see Goodman’s related article:
Winning Lower Payments Takes Patience and Luck.  11/29/09
URL:  http://www.nytimes.com/2009/11/29/business/economy/29modifyside.html

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Posted in Foreclosure, Green Tree Servicing, Mortgage Servicers, New York Times, PHH Mortgage, Treasury, white house | Tagged: , , , , , , , , | 1 Comment »

HR 1728

Posted by CM on September 6, 2009

HR 1728: The Mortgage Reform and Anti-Predatory Lending Act, Click Here for the full text in PDF

On April 28, 2009, Ms. Maureen McGrath of the National Advocacy Against Mortgage Servicing Fraud provided a written statement to the U.S. Congress to lend her organization’s support to HR 1728. 

The following are some key points regarding fraud from her written statement in her own words.

  • The first fraud by an institution is offering a loan when they know the homeowner does not have the means to ever repay the loan. 
  • The first fraud can also be offering a loan when the LTV (loan-to-value ratio) is upside down because the collateral cannot bear the price of the principal of the loan.
  • The second fraud is committed when a BPO (broker’s price option) is ordered rather than an appraisal.
  • An appraisal becomes fraudulent when an appraiser is coerced into “hitting the mark.”

Ms. McGrath further advocates oversight and regulation of the appraisal process because no uniform, nationwide oversight guidelines exist now.  Read her full statement here. 

I have advocated for a Mortgage Bill of Rights, but this bill is what we need instead.  It is comprehensive and worth the time to look over it.  Lets lend our support to this bill.  On May 7, 2009 the bill passed the House with 300 votes.  It is now awaiting Senate approval.  I will keep a tracker of this bill on the right side bar. 

Sources:

Written Statement of Maureen McGrath on behalf of National Advocacy Against Mortgage Servicing Fraud.  Submitted to the House Committee on Financial Services Hearing on HR 1728, The Mortgage Reform and Anti-Predatory Lending Act.   4/28/09.

Posted in Congressional regulation, Foreclosure, Green Tree Servicing, Mortgage Service Providers, Mortgage Servicers, PHH Mortgage, white house | Tagged: , , , , | Leave a Comment »

Making Money as a Mortgage Servicer

Posted by CM on September 4, 2009

By Coleen Martinez
coleen.martinez@stopmortgageservicers.org
9/4/09

On August 5th, 2009, the Associated Press published an article about lawsuits against mortgage servicers1.  Here are a few key quotes from that article, “Servicers earn a quarter to a half percent on the value of the loans they service.” And “servicers also make money through late fees and/or foreclosing.”  Well, this is how they make their money.    

Hypothetical example:

  • PHH Mortgage pays $1 million to Bank of America for the right to service a loan portfolio of 1,000 loans with a total balance of $100 million. 
  • The portfolio has an estimated average life of 7 years. 
  • The servicing fee on the $100 million is .25%, which generates income of $250,000 a year.
  •  It only costs PHH Mortgage $50 a year to service each loan, or $50,000 in total.
  • PHH’s net income is $200,000 a year for 7 years or $1.4 million. 
  • Therefore, after 7 years, PHH Mortgage has recouped their original investment of $1 million and made a $400,000 profit. 

Hypothetical example continued with late charges:

  • The rate of return on investment is 9.2% before late charges.
  • If a late charge of 5% of the payment is collected from just 1% of the borrowers, the rate of return on the investment goes from 9.2% to 10%.
  • If late charges can be collected from 5% of the borrowers, the rate of return exceeds 12%.   

Both examples were written close to verbatim from Maureen McGrath’s testimony to the U.S. House of Representatives.  (I added PHH Mortgage and Bank of America, Ms. McGrath’s testimony stated “firms” instead of actual companies.  I also added the $1.4 million net income and $400,000 profit so you would not have to get your calculators out!) 

 Ms. McGrath was kind enough to alert me to her testimony and send me a copy.  Click here for her full testimony.  Maureen McGrath is the founder of the National Advocacy Against Mortgage Servicing Fraud.  She testified before Congress in 2004.      

 Sources:
1. AP IMPACT: Government Mortgage Partners Sued for Abuses.  Daniel Wagner. AP. 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

2. Testimony of Maureen McGrath on behalf of National Advocacy Against Mortgage Servicing Fraud.  Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.  United States House of Representatives.  Field Hearing on “Broken Dreams in the Poconos: The Response of the Secondary Markets and Implications for Federal Legislation.”  6/14/04.

Posted in Congressional regulation, Court Filings, Foreclosure, Green Tree Servicing, Mortgage Service Providers, Mortgage Servicers, PHH Mortgage, Treasury, white house | Leave a Comment »

Call to Action

Posted by CM on August 21, 2009

Ok all of you disgruntled customers of PHH Mortgage, IT IS TIME TO ACT!  I just got a letter from the Federal Trade Commission (FTC).  My understanding is that if the FTC gets enough complaints about PHH Mortgage then they will consider opening an investigation.  So, lets go!  Lets flood the FTC website with our complaints about PHH Mortgage.  Since I have already submitted my complaint about PHH Mortgage, I will send in a different complaint.  I plan to send the FTC copies of ALL of the petitions with the signatures and a copy of complaints about PHH Mortgage that I have found on the internet.  If you know of a site with complaints about PHH Mortgage that you would like for me to include with my packet, please let me know. 

More Information:
1. Letter from FTC, pdf
2. www.ftc.gov
3. http://www.afscanhelp.com/companies/mortgage-companies/phh-mortgage-services.cfm

Posted in Congressional regulation, Foreclosure, Green Tree Servicing, Mortgage Service Providers, Mortgage Servicers, PHH Mortgage, white house | Tagged: , , , , , | Leave a Comment »

HR 3126

Posted by CM on August 20, 2009

H.R. 3126, The Consumer Financial Protection Agency, Click Here for PDF

This bill is 229 pages long.  I don’t expect you to read it, I just skimmed it.  We don’t need to read it to understand what it is.  This bill will protect us from our mortgage servicers.  When we need to complain, the CFPA is where we will go.  When we need to find out if our mortgage servicers are abiding by industry standards and/or the law, the CFPA will guide our search.  The CFPA probably will not solve all of our problems but it is a good step in the right direction and it shows that the Obama Administration is thinking about our plights. 

I really urge you all to visit Denise Richardson’s site often.  She has a wealth of information there.  I just read another true story about a couple in Missouri “who find themselves at their wits end after exhaustive attempts to have their mortgage servicing company stop charging them for unnecessary forced place insurance, pyramiding un-due late fees and destroying their credit have all failed.” Ms. Richardson’s title for the post is “Why We Need a Consumer Financial Protection Agency.2” 

In an earlier post, I made note that the Federal Reserve Chairman, Ben Bernanke is against the CFPA3.  Well, the Chairwoman of the FDIC (Federal Deposit and Insurance Corporation), Sheila Bair, is also against the CFPA1.  If you are like me, you probably don’t care what these Wall Street people think anymore.  I just find it hard to trust these financial wizards these days.  Since the market imploded in 2008, Wall Street has expanded the Mark-to-Market rule so that banks can use any excuse they want to value their assets as they see fit5.  I just learned that now only lenders are allowed to order appraisals and ethical appraisers say they have lost all of their business4.  Finally, it seems that Wall Street doesn’t want the CFPA.  Gee, I wonder why.  I guess that anything that benefits the consumer is seen as a negative for Wall Street.  The more I see of the Wall Street Wizards trying to stop the CFPA, the more I want to make sure that H.R. 3126 gets passed.  

Sources:

  1. “FDIC Chief says parts of regulatory plan won’t fly.” By Daniel Wagner, AP Business Writer.  8/14/09. URL: http://hosted.ap.org/dynamic/stories/U/US_FINANCIAL_OVERHAUL?SITE=SCAND&SECTION=HOME&TEMPLATE=DEFAULT
  2. “If You Want Financial Reform and Accountability, Tell Congress to Support HR 3126.” By Denise Richardson, Give Me Back My Credit. 8/3/09. URL: http://www.givemebackmycredit.com/blog/2009/08/if-you-want-financial-reform-a-1.html
  3. “Bernanke Tells Senate New Agency Isn’t Needed.” By The Associated Press. 7/22/09.  URL: http://www.nytimes.com/2009/07/23/business/economy/23bernanke.html?_r=1
  4. 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
  5. “Mark-to-Market Investigation.” By Coleen Martinez, STOP! Mortgage Servicers. 8/12/09. URL: http://www.stopmortgageservicers.org/?p=90

Posted in Congressional regulation, Foreclosure, Mortgage Service Providers, Mortgage Servicers, New York Times, PHH Mortgage, Treasury, white house | Tagged: , , , , , , , , , , , , , , , , , | 2 Comments »

Goals

Posted by CM on August 19, 2009

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.

Posted in Congressional regulation, Foreclosure, Green Tree Servicing, Mortgage Service Providers, Mortgage Servicers, PHH Mortgage, Short-sales, white house | Tagged: , , , , , , , , , , , | Leave a Comment »

Mark-to-Market (MTM) Investigation

Posted by CM on August 11, 2009

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

Posted in Congressional regulation, Foreclosure, Green Tree Servicing, J.P. Morgan Chase, Lehman Brothers, Mortgage Service Providers, Mortgage Servicers, New York Times, PHH Mortgage, Short-sales, Treasury, white house | Tagged: , , , , , , , , , , , , , , , , , , , , , | Leave a Comment »

Mortgage Summit with Treasury

Posted by CM on August 10, 2009

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?

Posted in Foreclosure, Green Tree Servicing, J.P. Morgan Chase, Lehman Brothers, Mortgage Service Providers, Mortgage Servicers, New York Times, PHH Mortgage, Treasury, white house | Tagged: , , , , | 1 Comment »

AP Articles

Posted by CM on August 5, 2009

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

Posted in Foreclosure, Green Tree Servicing, Mortgage Service Providers, PHH Mortgage, Short-sales, Treasury, white house | Tagged: , , , , | Leave a Comment »

Making Home Affordable

Posted by CM on August 5, 2009

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.

Posted in Congressional regulation, Foreclosure, Green Tree Servicing, J.P. Morgan Chase, Mortgage Service Providers, PHH Mortgage, Short-sales, Treasury, white house | Tagged: , , , , , , , , , | Leave a Comment »