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
1. U.S. Will Push Mortgage Firms to Reduce More Loan Payments. Peter S. Goodman. NY Times. 11/29/09.
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
Posted in Foreclosure, Green Tree Servicing, Mortgage Servicers, New York Times, PHH Mortgage, Treasury, white house | Tagged: Foreclosure, geithner, HAMP, modification, mortgage, Mortgage Servicers, obama, refinance, Treasury | 1 Comment »
Posted by CM on November 18, 2009
The NY Times has an article online today about Philadelphia’s “conciliation conferences.”(1) Basically when you are about to be foreclosed on, you and your bank meet at the courthouse and work out a solution. The article did not say whether principal amounts are reduced or how many homeowners redefault. The article did say that monthly payments are reduced in most cases. Well, as we know, reducing monthly payments means nothing if your principal is increased and if there is some hidden trigger that will balloon your payments all over again. This is just more of the same bank/mortgage servicer game playing. Until I hear that principals have been reduced, I’m not buying what their selling.
On a related note, The Justice Department has created a “Financial Fraud Task Force.”(2) The Treasury Dept is involved and they are going to investigate mortgage fraud among other things. How do we sign up?
1. Philadelphia Gives Homeowners a Way to Stay Put. Peter Goodman. NY Times. 11/18/09.
2. Administration Widening Pursuit of Financial Fraud. AP. 11/18/09
Posted in Foreclosure, Mortgage Servicers, New York Times, PHH Mortgage, Treasury | Tagged: financial fraud task force, Foreclosure, justice department, modification, mortgage servicer, refinance, Treasury | Leave a Comment »
Posted by CM on September 18, 2009
On September 9, 2009 The Treasury released the second Making Home Affordable Program Servicer Performance Report through August 2009. Click here for the report
Assistant Secretary for Financial Institutions, Michael S. Barr, provided written testimony to Congress about stabilizing the housing market. Click here for the testimony
Posted in Congressional regulation, Foreclosure, Green Tree Servicing, Mortgage Service Providers, Mortgage Servicers, PHH Mortgage, Treasury | Tagged: Foreclosure, mortgage, Mortgage Servicers, Treasury | 1 Comment »
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.
- “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
- “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
- “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
- In Appraisal Shift, Lenders Gain Power and Critics. By David Streitfeld for The NYTimes 8/18/09
- “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: AP, ben Bernanke, consumer financial protection agency, denise richardson, fdic, federal reserve, Foreclosure, give me back my credit, HR 3126, mark-to-market, mortgage, Mortgage Servicers, NYTIMES, obama, PHH Mortgage, Sheila bair, Treasury, wall street | 2 Comments »
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:
- 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.
- 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.
- 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.
- Mark-to-Market on Investopedia, A Forbes Digital Company. Found 8/11/09
- Mark-to-Market. Found 8/11/09
- Why Mark-to-Market Accounting Rules Must Die by Brian S. Wesbury and Robert Stein. Posted 2/24/09. Found 8/11/09.
- Our view on housing: On foreclosures, lenders play ‘extend and pretend’. USA Today Editorial Board. Posted 7/28/09. Found 8/10/09
- AP IMPACT: Government Mortgage Partners Sued for Abuses. Daniel Wagner. Associated Press. 8/5/09.
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: AP, assets, “bubble market”, “financial accounting standards board”, “financial crisis”, “forced liquidation market”, “mark-to-market”, “market value”, “mortgage servicers”, “short sales”, banks, forbes, Foreclosure, geithner, Investopedia, modifications, mortgages, MTM, obama, Treasury, underwater, USAToday | Leave a Comment »
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
Chase Home Finance LLC
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
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.
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: Foreclosure, geithner, Mortgage Servicers, obama, Treasury | 1 Comment »
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: fannie mae, Foreclosure, freddie mac, geithner, making home affordable, mortgage, mortgage servicer report, obama, PHH Mortgage, Treasury | Leave a Comment »