According to the St. Petersburg Times, “Gov. Rick Scott, House Speaker Dean Cannon and Senate President Mike Haridopolos all say they are interested in considering legislation to change Florida laws so judges won’t have to referee foreclosures.”

No doubt about it, if lenders don’t have to go through the court system to foreclose you can bet the process would be a lot faster, cheaper and easier. Not only that but most states — “nearly” 30 according to the St. Petersburg paper — already allow lenders to foreclose without a court appearance.

The whole idea reminds one of George Santaya’s definition of fanaticism — that’s when you redouble your effort and forget your aim.

The view here is different: The foreclosure process ought to be right, accurate and fair. Borrowers who do not pay their mortgages must face foreclosure — and lenders who want to foreclose must be able to show they own the note and that the borrower has not made required payments.

As to helping judges avoid the duty of refereeing, that’s what judges do.

Gandhi

As Gandhi said “there is more to life than increasing its speed” and the same is true of foreclosures. The goal is not to be swift, it’s to be fair and just.

As to making the process easy, how much easier could it possibly be? The typical foreclosure takes a few minutes of court time. The rules which govern the process are influenced by lender lobbyists. If you think that borrower lobbyists are involved then name one national or state association which represents borrowers. Name one political action committee (PAC) that exists to advance the interests of borrowers. You’d have better luck enjoying unicorn steaks for dinner.

Truth is, foreclosure ought to require precision and honesty, two things you don’t get when clerks are signing thousands of foreclosure affidavits each day.

Isn’t accuracy a fairly minimal standard when the result of a mistake could be that a family will be tossed out onto the street? Maybe your family?

The shame is not that Florida — a state which ranks among the top ten foreclosure centers in the United States according to RealtyTrac — wants to end protections for families, it’s that “nearly” 30 states have already done so.

The Case For Slow Foreclosures

The foreclosure mess exists in large measure because lenders wrote the rules and federal regulators didn’t enforce even the minimal standards already on the books. The Federal Reserve, in particular, did not use its authority under the Home Ownership and Equity Protection Act to stop “unfair and deceptive acts or practices.”

The reality is that if the state of Florida speeds up the foreclosure process its situation will be worse, not better. Here’s why:

Let’s imagine that protecting families is not an important priority. If you speed up the foreclosure process then at the end of the day you have, ta da, more foreclosures. Not all of the properties which are foreclosed will be sold at auction, which means they will have to be added to lender inventories. Increase the number of lender-held properties and they have additional costs for security, maintenance, insurance and taxes — and reduced profits. Meanwhile, with more foreclosure in communities there’s additional pressure to reduce local home prices.

Is this really good for the state of Florida? Or is speeding the foreclosure process counter-productive?

You be the judge — something they need in the Sunshine State.

Why Foreclosures Should Be Slower is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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According to Ohio State Attorney General Richard Cordray:

“Judge Charles Pater of the Butler County Court of Common Pleas issued an order denying GMAC’s motion to ratify a judgment because ‘neither the Ohio Civil Rules nor the local rules of this court provide a procedure for or authorize a court to “ratify” a final appealable order’ and stating that “the proper course of action would be for GMAC to first file a motion to set aside its judgment and then, once the court grants that motion, to refile its motion for summary judgment with a correctly executed affidavit in support.”

Cordray adds that “it is improper for the plaintiff to ask the court to ratify a foreclosure judgment based on a false affidavit after the fact by simply substituting or supplementing what plaintiff now claims is a proper affidavit.”

Instead, he argues that “vacating the judgment is the proper way to handle these cases, as it removes a judgment based on a false affidavit and gives the homeowner an opportunity to contest a new motion for default or summary judgment.”

Cordray and Judge Pater are saying that as a matter of law robo-signing lenders cannot just change the paperwork for past foreclosure cases when documents were improperly prepared — and neither can courts. Instead, everyone must start from scratch with entirely-new cases. This means — if Cordray’s approach becomes widespread — that tens of thousands of foreclosure cases will have to be unearthed, reviewed and tried again if the original paperwork was faked. Large numbers of people who sought nothing but the best mortgage rates will be watching the process with great interest.

Lender Worries

Not only would new trials on a mass scale be a huge expense to lenders, lenders are unlikely to bat 1,000 and win every case. In those cases where they do lose it will then be necessary to explain how someone was thrown out of their house on the basis of a false affidavit or other error. Given the damage done if a falsely foreclosed owner is found, awards worth millions await borrowers who unfairly lost their homes.

And it could get worse. Imagine if vacated judgments begin to appear in other courts and in other states. Suppose bar associations begin to sanction attorneys who submitted falsified documents to force people out of their homes? And imagine if courts in various states look at falsified affidavits and think in terms of mass perjury?

National Foreclosure Rules

But, most likely, these things won’t happen. There’s now a movement in Washington to “unify” foreclosure standards around the country in the name of efficiency. Instead of 50 sets of state rules there will be one single national foreclosure standard operated from Washington.

Sounds pretty enticing — until you realize that consumers have virtually no rights in Washington and that the federal regulation of loan originations by national banks did absolutely nothing to prevent or stop the widespread use of toxic mortgages.

The movement to remove state-foreclosure courts is now underway. If it happens that state courts are shut down, who do you think will win when the rules are tailored to one party or another? Name one borrower PAC that will contribute to congressional races or impact decisions on Capitol Hill? Just think about the way the bankruptcy process has been distorted by congressional action, much to the joy of credit card companies and student lenders.

The foreclosure story mortgage lenders fear most is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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In each step there are fees and more fees, and the fees can be steep. In some cases there are state guidelines outlining the maximum legal fee. While an attorney might take less, what’s the incentive to do so?

Also, notice that the same legal fee to fill out the same form may apply regardless of the amount owed. In effect, fees can be seen as regressive costs that hurt small borrowers more than those who have big loans.

Foreclosure Fee

What kind of fees might you see? The answer depends on the jurisdiction where you live and the type of foreclosure — judicial or non-judicial — that you face. Examples include overnight delivery fees well above what a delivery service might charge, monthly inspection fees to check the property, processing fees, valuation fees to check the market price of the home, legal fees above actual lender costs, court costs, and payoff statement fees (demand fees). In total, the fees can amount to thousands of dollars,

Can you get rid of the lender’s foreclosure fees?

In some cases, if you have an attorney or legal clinic, it may be possible to have them reduced or eliminated as part of an overall settlement with the lender.

Alternatively, if you can engage in a deed in lieu of foreclosure then there’s no foreclosure, thus there are no foreclosure fees in the usual sense. It’s not a great option, but then the alternative is a foreclosure and that’s not a happy event in the first place.

For specifics in your area, please contact an attorney, legal clinic or community housing organization.

What’s A Typical Foreclosure Fee? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Does the safe harbor provision created by Congress last March for mortgage servicers allow servicers to change the terms of loans owned by investors without the approval and authority of investors — even when it means that investor returns will fall and that asset values will decline? According to United States District Judge Richard J. Holwell, the answer is no — meaning the investors now have the right to take Countrywide to court.

A major issue here concerns potent conflicts of interest. For instance, if a mortgage servicer is a big bank can it modify loans owned by investors — but not loans that it owns?

Greenwich is headed by William Frey, perhaps the country’s best advocate of mortgage investor rights. In conversations with me, Frey has pointed out that protecting investor rights is important as a matter of law even if such rights may not be politically popular.

Moreover, Frey notes that mortgage “investors” are often insurance companies and pension funds which actually benefit average citizens such as retirees, state workers and other groups. Cutting mortgage rates or reducing the value of mortgage securities can impact individuals across the country who depend on such money for their retirement and lifestyle.

Incidentally, Greenwich is a securities broker-dealer and not a hedge fund.

Greenwich Financial Decision

Mortgage News: Investors Have Rights Too is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Now James Robertson, a federal district judge based in Washington, DC, has decided that mortgage brokers will have to disclose their secret fees under new rules set up by the Department of Housing and Development.

The judge shot down an effort by the National Association of Mortgage Brokers to block the new HUD requirement.

Yield Spread Premiums

“Broadly speaking,” said the Judge, “NAMB opposes the new GFE because of the way it discloses ‘yield spread premiums’ (YSPs). A YSP is a payment by a lender to a broker that compensates the broker for originating a loan with an ‘above-par’ interest rate. The ‘par rate‘ is the interest rate at which the lender will fund 100% of the loan with no premiums or discounts.

“If the par rate for a certain $100,000 mortgage is, say, 5%, and the broker originates that mortgage at a 5.5% interest rate, then the lender might deliver $100,500 at closing — $100,000 that will be disbursed to the borrower, plus a $500 YSP for the broker.”

Huh? What’s this all about?

Par Pricing

Imagine that you are qualified to borrow $200,000 at 5 percent. Your lender says the best rate available is 5.5 percent. Since you rely on the lender, depend on the lender for product information and understand that the lender promised to get you the “best” rates you naturally accept the 5.5 percent rate.

Or, seen another way, you might qualify for a loan with a “par” price of 5 percent and no points. Instead, the lender sells you a loan at 5 percent and two points. Again, you’re paying more than you should.

The lender in either case has actually up-sold the loan because the mortgage has a higher interest rate than someone with your qualifications should pay. By paying more the asset — a mortgage loan is an asset to the owner — is now more valuable and mortgage investors will pay extra for it. When mortgage investors pay more that money goes to the lender and the loan officer. You, of course, also pay more for the life of the loan because you have a higher rate or steeper up-front costs.

The ARE some cases where paying more points can be a good deal say, for instance, if the lender will pay some or all of your closing costs. But there are many cases where the borrowers have no idea that they are overpaying for the loan because they do not know how loans are priced in the first place.

Confusion Alleged

“District Judge Robertson’s decision effectively guarantees that the consumer will continue to be confused during the loan selection process,– says Jim Pair, president of the National Association of Mortgage Brokers. “NAMB’s legal challenge against the RESPA final rule was an attempt to ensure all loan originator competitors uniformly provide information to consumers for them to proficiently shop for a loan.–

However, Judge Robertson rejected the unfairness claim. As he explained, YSPs are known in advance while “the value of any premium a direct lender may earn depends on when the lender sells the loan, what the market conditions are like, and other factors that are not established with certainty at settlement.”

For the full decision, please see: National Association of Mortgage Brokers V. Donovan.

Mortgage Brokers Must Disclose Secret Fees, Says Judge is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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At first this may seem unimportant. After all, when a home is financed doesn’t a lender own the loan? And if a borrower doesn’t pay shouldn’t the lender have a right to foreclose?

It turns out that the first question is not so simple. A large proportion of the institutions that we see as “lenders” don’t actually own the loans they make. Instead, they create loans and then sell them to issuers. The issuers package the loans to create mortgage-backed securities (MBS) and those securities are then sold to investors worldwide. The investors, in turn, are represented by a trustee.

That means, according to ruling by federal judge Christopher Boyko of the U.S. District Court in Ohio, that many foreclosures cannot proceed because the actual loan owners are not the lenders that originally issued the loans — even though the names of those original note holders continue to appear in official records.

Boyko 2007 Foreclosure Decision — Deutsche Bank Nat’l Trust Co. v. Steele, 2008 WL 111227

Who Owns The Loan?

Before someone can lose their home in a foreclosure a plaintiff must prove that it’s actually the loan owner. In more than a dozen Ohio foreclosure cases Deutsche Bank said it owned various notes and mortgages. However, Boyko found in each case that the paperwork actually identified the original lenders as the loan owners and said nothing about Deutsche Bank.

The problem is that the original lenders who created the loans — the lenders listed as the loan owners in public records — were not seeking to foreclose. Instead, it was Deutsche Bank that was taking homeowners to court and Deutsche Bank, said Boyko, had no grounds to foreclose because it did not own the loans or have any authority to foreclose.

Given that borrowers make monthly payments and that the money ultimately goes to those who own the mortgages, the Boyko decision seems odd. Aren’t the loan owners the ones getting the monthly payments?

It used to be that if you wanted a mortgage you went to a local lender such as a savings & loan association or a commercial bank. The lender actually owned the loan.

The Secondary System

However, the system changed with the development of the “secondary” market. Now local lenders could sell their loans to investors around the country. Big institutions, such as Fannie Mae and Freddie Mac, would buy local loans, but only if those loans met certain standards. The loans that could readily be sold on the secondary market were called “conforming” mortgages because they conformed to the requirements established by Fannie Mae and Freddie Mac.

With the secondary system a local lender could make loans, sell those mortgages, replenish its capital with the money it got from selling, and then make more loans. More loans meant the lender could generate more fees and charges. More loans also meant more money was available for local loans, and that helped lubricate the local housing market.

Within the secondary market Fannie Mae, Freddie Mac and others would create securities backed by mortgages. Those securities would be sold to investors worldwide. The securities sold well because home mortgages were believed to represent little risk and because Fannie Mae and Freddie Mac made certain guarantees. Since Fannie Mae and Freddie Mac were “government-sponsored enterprises” that could borrow directly from the U.S. Treasury, many investors thought mortgage-backed securities were just about risk-free.

Fannie Mae and Freddie Mac are not the only ones packaging mortgages, however. Wall Street firms got into the act and began accepting loans that did not meet conforming loan standards — mortgages with little down, loans with “nontraditional” terms and supersized “jumbo” loans that neither Fannie Mae nor Freddie Mac would buy.

In the past few years it would not be uncommon for a lender to put up capital to fund a loan. The loan would be marketed to borrowers by a mortgage banker or a mortgage broker who, essentially, was a salesman for the lender. To borrowers, the mortgage broker or the mortgage banker was their “lender,” however that was not usually the case. Instead, the loan was typically sold by the original lender to an “issuer” and borrowers would make payments to a “servicer.”

The actual owner of the loan at this point was not the original lender, not the mortgage broker, not the mortgage banker nor the servicer or the issuer. Why? When the loan was sold to the issuer, the issuer took that one mortgage, packaged it with other loans, and created a private-label mortgage-backed security (MBS). In effect, the issuer sold the loan to the holders of the mortgage-backed security.

Equitable Interest

But those who invest in the MBS do not actually own the loan either. They have, perhaps, an “equitable interest” in the sense that they are entitled to interest from the mortgage payments and a return of their capital when the loan is sold, paid off or foreclosed.

However, it could be that a single loan might wind up in several loan pools, each with a different level of investor risk — more risk would hopefully produce a higher level of return. Or, it could be that a loan is in one pool today and another pool tomorrow.

In such circumstances, as lawyers might ask, who is the real party in interest, the party who actually owns the loan?

“This court acknowledges the right of banks, holding valid mortgages, to receive timely payments,” said Boyko. “And, if they do not receive timely payments, banks have the right to properly file actions on the defaulted notes — seeking foreclosure on the property securing the notes. Yet, this court possesses the independent obligations to preserve the judicial integrity of the federal court and to jealously guard federal jurisdiction. Neither the fluidity of the secondary mortgage market, nor monetary or economic considerations of the parties, nor the convenience of the litigants supersede those obligations.”

In other words, a borrower can only be foreclosed when the actual owner of the loan goes to court. In the cases seen by Boyko, the paperwork said the loan owners were various banks, not the trustee for the owners of a mortgage-backed security.

What does it all mean?

First, the Boyko decision could be stayed or over-turned by higher courts. It may have no standing in other districts. It could also be voided with new laws from Congress.

While no one can predict how courts may rule, help for lenders, trustees and MBS investors from Washington is unlikely. The politics of the time — with an estimated two million homeowners facing foreclosure this year — make assistance from Capitol Hill improbable, regardless of PAC contributions.

Second, Judge Boyko asked a simple question: If a borrower fails to pay their mortgage then who is hurt? It’s not the original lender because they sold the loan. It’s not servicers because they do not have title to the mortgage. It may not be an individual trustee if a single mortgage has been used to support several mortgage-backed securities. Lastly, since mortgage-backed securities can be sold with electronic speed, it may not be the investor who held a stake in one particular MBS 10 minutes ago.

If the Boyko decision spreads to other districts and courtrooms, then issuers will have to tie specific loans to particular mortgage-backed securities. In the same way that real estate titles are recorded in official records, a similar system will be needed for loan documents. Such a system will support investor claims when borrowers default, but at the same time such a system will also prevent unjustified foreclosures and forfeitures.

“Given the huge stakes in this matter, everyone benefits by knowing who actually owns individual loans,” says Jim Saccacio, Chairman and CEO at RealtyTrac.com, the leading online marketplace for foreclosure properties. “There’s no doubt that some foreclosures can be avoided if only borrowers and loan owners communicated at the earliest possible moment. For such a situation to arise the name of the loan owner has to be disclosed in a way that’s easily accessible to borrowers, disclosure which is not common today.”

————————

Published originally by RealtyTrac.com during November 2007 and posted with permission.

Judge To Lenders: Show Me The Note is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Answer: Is this your property or is title still held by the estate? In the latter case, see what rights you have to sell and whether court approval is required before you can list or accept a purchase offer.

As to finding a broker, start with the thought that all real estate is local. Thus you want someone who successfully markets homes in the community where the property is located. Ask candidates such questions as: How many properties have you sold in the past year? On average, how long was each property on the market? What trends do you see in the local market? What was the difference between the original listing price and the final sale price? In this community, what concessions – if any – are sellers making? What repairs are needed to maximize the value of this property? How would you market the home if we list with you? Can you give us three recent references?

Can we sell our late mother-in-law’s house? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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• A Notice of Default — a public notice that loan payments have been missed.
• A Lis Penden — notice of a suit against a property owner.
• A Notice of Sale — essentially an announcement giving the time and date of a planned foreclosure sale.

If you receive any notice from your lender which is or seems to be one of the three notification forms above — or any document from your lender or servicer which claims that a payment is late or has not been made — contact your lender immediately. Don’t wait. This is not a problem that will go away, get better or which can be put off.

Your first step should be to see if you can bring the loan current. If not, ask if you can work out an arrangement (a loan modification) with the lender.

In some states a lender may need to go to court to get a foreclosure order, in other states the mortgage agreement alone will allow the lender to foreclose. Note that foreclosure rules and notifications vary by state and that in some jurisdictions you can lose your home in as little as 37 days.

For help, immediately contact an attorney, legal clinic or community housing group. For additional information online, go to the RealtyTrac Foreclosure Education Center.

What Are The Three Basic Forms of Foreclosure Notices? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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In some cases, however, it’s possible to get a good deal on estate property because the heirs often want to sell quickly for tax purposes and personal reasons.

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Such agreements typically have a number of clauses to assure that each party obtains certain benefits — basically the seller wants cash and the buyer wants the property.

Whatever the price and terms of the sale agreement, it is expected that both parties will work in good faith to assure that the transaction is successful.

But sometimes it happens that one party or the other either cannot go through with the contract, or elects not to honor the agreement.

In such instances, sale agreements often provide a number of remedies, such as the loss of a deposit, the right to sue for damages, and “specific performance.”

Specific performance means that a party to the sale agreement will be compelled by a court to go through with the transaction. While not a common event, specific performance may be one of the tools available when a sale agreement falls through for reasons of non-performance.

For specifics, see an attorney or legal clinic in your state.

What is “specific performance?” is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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