There are a lot of homes available for squatters in the state because of unpaid mortgages and loans. California has the nation’s second-highest foreclosure rate according to RealtyTrac. Nevada ranks #1.

While the Occupy movement started in New York with Occupy Wall Street, it has a large number of local groups. Because the groups are independent, the views of one local chapter may not represent the views of related organizations or groups with similar names.

In this case, a Twitter announcement mentions that the Oakland group’s general assembly passed a proposal to encourage squatters. Think of it as squatting and squat-ins.

A New Trend?

It’s likely that the Oakland idea will spread nationally for several reasons.

First, there are a lot of unoccupied homes.

Second, there are a lot of people who need housing, lack jobs and are seeing an end to unemployment benefits.

Third, evicting people is not a fun job — there are already a huge number of foreclosures to process and over-worked local sheriff offices might not get around to a given property for a long time, perhaps months or even years.

Fourth, squatting provides a direct and visible way to confront lenders. While few may understand the complex financial instruments or arcane bets made by Wall Street, foreclosures are easy-to-see and local. Squatting can be a form of civil disobedience which is non-violent and results in public sympathy.

Is there a defense by lenders to avoid TV crews and lots of local coverage? Look for more lenders to suddenly adopt rental programs for foreclosed properties. For instance, since 2009 Fannie Mae has had a Deed for Lease program. In essence the idea is to allow foreclosed families to rent back their property. This allows borrowers to remain in place while giving Fannie Mae monthly income and fewer maintenance and security headaches.

Squatter’s Rights

It’s actually possible — though highly unlikely — to gain title to property through squatting under a concept generally called adverse possession or — formally — an easement by prescription.

The rules for adverse possession vary by state but are typically similar to the standard used in Pennsylvania:

“Adverse possession is commonly known as squatters rights. It is a legal doctrine that allows a person to acquire ownership of the property of another. Adverse possession involves the taking away of property rights by operation of law. Thus, while not typically a local government matter, it is a significant issue of fundamental importance. Paramount among the elements required for adverse possession is proof of possession for 21 years.

“However, mere possession of the land by a claimant is not sufficient to confer title under this doctrine. The claimant also must establish by credible, clear, and definitive proof that all the other constituent elements of adverse possession exist. The possession must be actual, continuous, exclusive, visible, notorious, distinct, and hostile.”

Adverse possession can work in a number of situations — think of a fence built six inches over a property line. The fence stays in place for years and years, no one complains, and over time it redefines the property boundaries largely by the fact that it’s in place and accepted. The extra six inches of land was never sold off but title changes through the magic of adverse possession.

Occupy Movement Eyes Foreclosures & Squat-Ins is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: adverse possession, benefits, easement by prescription, Foreclosures, jobs, loans, Mortgages, Oakland, Occupy Oakland, Rent, squat-in, squatters, squatting, unemployment

At first this may seem like an audacious idea, a violation somehow of the free market absolutism preferred by so many businesses and industries — at least until they need a special rule, tax break or handout from Uncle Sam.

In fact, it was not too long ago that Uncle Sam actually set mortgage rates for government-insured loans. For instance:

• Until November 30, 1983 HUD set interest rates for FHA mortgages. The practice ended with passage of the Housing and Rural Recovery Act of 1983.
• Under the Veterans Home Loan Program Amendments of 1992, the VA is allowed to set the maximum interest rate that can be charged for a VA loan as well as the maximum number of points. Today, the VA still has the right to set mortgage rates for vets but has elected not to do so.

Imagine what would happen if the government set daily mortgage rates for FHA and VA loans. Each day at 9 AM the daily rate would be made available online. Every borrower would have an opportunity to see the available rate for qualifying borrowers. Borrowers could compare the FHA and VA rates with rates for conventional financing — meaning there would be no need to set conventional interest levels, though if we wanted that could also by done through the Federal Housing Finance Agency.

The rates would be show at “par” — meaning with zero points — and with points so that borrowers could see a number of rate-and-point combinations. For instance, today a loan might be at:

• 3.75 percent and 1 point.
• 4 percent and 0 point (par pricing)
• 4.25 and -1 point (borrower gets a cash credit at closing or lender pays some or all closing costs).

In a marketplace filled with openness and clarity borrowers would have more of a chance of getting a fair deal.

Alternatively, we could go back to 2006.

The Wall Street Journal says in 2006 that 61 percent of all subprime loans originated that year went to borrowers who actually qualified for FHA, VA and conventional mortgages. Think how much borrowers could have saved if only they had known their real financial position. Think how many foreclosures could have been prevented. (See: Subprime Debacle Traps Even Very Credit-Worthy, The Wall Street Journal, December 3, 2007).

And while lenders might object to HUD and the VA setting rates for their insured loan products, they certainly have not complained with new rules which have benefitted mortgage companies.

For instance,  HUD limits on lender fees for FHA borrowers were ended in November 2008 — just two weeks after the presidential election. The Bush Administration said it decided to “remove the current specific limitations on the amounts mortgagees presently are allowed to charge borrowers directly for originating and closing an FHA loan.”

While many lenders have acted fairly and in good faith, some have not. That’s why better regulation is needed and that’s why the government should publish daily loan rates that anyone with Internet access can see.

Should Government Set Mortgage Rates? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: 1982, 2008, fees, FHA, home, home loans, HUD, interest, lenders, loans, mortgage rates, Mortgages, par, par pricing, points, points and fees, real estate, regulation, regulations, rules, subprime, VA, zero

A Bank of America subsidiary improperly foreclosed on about 160 service members from January 2006 to May 2009, according to allegations in the lawsuit that spurred the settlement. BAC Home Loans Servicing, formerly Countrywide Home Loans, allegedly failed to check the status of military borrowers before foreclosing. The SCRA protects active duty service members from some civil and financial penalties and provides a grace period against foreclosure proceedings.

Parties reached a second settlement with Saxon Mortgage Services, a subsidiary of Morgan Stanley. Allegedly, that firm illegally foreclosed on about 17 service members from January 2006 to June 2009, according to court papers. The company agreed to pay $2.35 million to resolve a lawsuit filed in the Northern District of Texas.

The suit against Bank of America’s subsidiary was filed in the Central District of California, which is where Countrywide maintains its headquarters.

Both companies pledged to compensate any service members who were wrongfully foreclosed upon from mid-2009 through 2010.

“With the numerous sacrifices our service members make while they are serving our country, the last thing they need to worry about is whether or not their families will be forced from their homes,” said James T. Jacks, U.S. Attorney for the Northern District of Texas. “These lenders’ callous disregard for the SCRA, a law which was designed to insulate these patriots from unlawful foreclosures and other civil and financial obligations while they are on active duty, is deplorable and I applaud the Department’s Civil Rights Division’s efforts in identifying and seeking remedies for these wronged service members.”

Some of Countrywide’s victims include military members who served in Iraq and Afghanistan. A few of the homeowners foreclosed by Saxon were severely injured while on active duty or suffer from post-traumatic stress disorder.

As part of the settlements, employees of both companies will be required to attend training sessions regarding the Servicemembers Civil Relief Act.

Military members and military families who believe their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance Program office. Find the one closest to you by visiting http://legalassistance.law.af.mil and click the Legal Services Locator.

____________________

About the author: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, including Bigger Pockets, Mortgages Unzipped and Scotsman Guide. A former newspaper and magazine writer, he is also content director for a leading VA lender.

Vets Get $22 Million to Settle Mortgage Foreclosure Claims is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Foreclosures, Justice, lenders, loans, Mortgages, SCRA, Servicemembers Civil Relief Act, VA, vets

Foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 262,339 U.S. properties in November, down 21 percent from October and off 14 percent from a year ago.

Both the 21 percent month-over-month decrease and 14 percent year-over-year decrease in foreclosure activity were the highest drops recorded since RealtyTrac began publishing the U.S. Foreclosure Report in January 2005, according to the company.

“Foreclosure activity decreased dramatically in November, with fewer than 300,000 properties receiving a foreclosure notice for the first time since February 2009,” said James J. Saccacio, chief executive officer at RealtyTrac. “While part of the decrease can be attributed to a seasonal drop of 7 to 10 percent that typically occurs in November, fallout from the foreclosure robo-signing controversy forced lenders and servicers to hit the pause button on many foreclosures while they scrambled to revamp their internal procedures and revise or resubmit questionable paperwork.”

Uncertain Future

The catch is what happens next. Seasonal declines are, well, seasonal. Reductions in foreclosure activity related to the robo-signing scandal may result in no more than temporary stumbles. Once robo-related delays taper-off or end, then monthly foreclosure numbers could again climb.

Alternatively, there is a minimum, implausible, very unlikely possibility that the paperwork system is so botched up that for various reasons lenders on a large scale will not be able to show they actually own huge numbers of mortgage notes and therefore have no standing to foreclose.

As an example, there is the reported case of Colorado homeowner Margaret Sadler. A court dismissed an effort to foreclose when the lender was unable to show it was the real party in interest. (See photo at top. Also see the Mortgage Servicing Fraud Forum.)

RealtyTrac also released the following data:

Foreclosure Activity by Type

A total of 78,955 U.S. properties received default notices (NOD, LIS) in November, a 21 percent decrease from the previous month and a 31 percent decrease from November 2009 — the 10th straight annual decrease in default notices. November’s default notices total was the lowest since July 2007.

Default notices in states that practice judicial foreclosures (called Lis Pendens filings) decreased 31 percent from the previous month and were down 43 percent from November 2009. Meanwhile non-judicial default notices (NOD) decreased 9 percent from the previous month and were down 12 percent from November 2009.

Foreclosure auctions (NTS, NFS) were scheduled for the first time on a total of 115,956 U.S. properties in November, a 16 percent decrease from the previous month and unchanged from November 2009. Scheduled judicial foreclosure auctions (NFS) decreased 34 percent from the previous month and were down 12 percent from November 2009, while scheduled non-judicial foreclosure auctions (NTS) decreased 7 percent from the previous month but increased 5 percent from November 2009. 

Lenders foreclosed on 67,428 U.S. properties in November, down 28 percent from the previous month and down 12 percent from November 2009. Bank repossessions (REOs) decreased month-over-month in 37 states and the District of Columbia. November’s REO total was the lowest since May 2009, but November’s numbers pushed the year-to-date 2010 REO total to more than 980,000 — already above the record year-end total for 2009.

Nevada, Utah, California post top state foreclosure rates
Despite a 20 percent monthly decrease in foreclosure activity, Nevada posted the nation’s highest state foreclosure rate for the 47th straight month. One in every 99 Nevada housing units received a foreclosure filing in November — nearly five times the national average.

Thanks in part to sharp monthly drops in foreclosure activity in Arizona, Florida, California and Michigan, Utah’s foreclosure rate leapfrogged to second highest among the states in November after being sixth highest the previous month. One in every 221 Utah housing units received a foreclosure notice during the month — more than twice the national average.

With one in every 233 housing units receiving a foreclosure filing in November, California posted the nation’s third highest foreclosure rate despite a nearly 14 percent decrease in foreclosure activity from the previous month and a 22 percent decrease in foreclosure activity from November 2009.

Other states with foreclosure rates ranking among the top 10 in November were Arizona, Florida, Georgia, Michigan, Idaho, Illinois and Colorado.

10 states account for more than 70 percent of national total
California alone accounted for 22 percent of the national total in November, with 57,378 properties receiving a foreclosure filing during the month — the nation’s highest state total. Default notices in California, which is primarily a non-judicial foreclosure state, decreased 11 percent from the previous month, while scheduled auctions decreased 2 percent and bank repossessions decreased 40 percent.

With 32,938 properties receiving a foreclosure filing in November, Florida posted the second highest state total despite a 42 percent drop in foreclosure activity from the previous month. Default notices in Florida, which is a judicial foreclosure state, decreased 52 percent from the previous month, while scheduled auctions decreased 46 percent and bank repossessions decreased 20 percent.

With 15,311 properties receiving a foreclosure filing in November, Michigan posted the third highest state total despite a 21 percent drop in foreclosure activity from the previous month. Default notices in Michigan, which is primarily a non-judicial foreclosure state, decreased 4 percent from the previous month, while scheduled auctions decreased 20 percent and REOs decreased 35 percent.

Georgia posted the fourth highest state total, with 14,423 properties receiving a foreclosure filing, and Texas posted the fifth highest state total, with 13,369 properties receiving a foreclosure filing. Both states — which are primarily non-judicial foreclosure states with short foreclosure processes that do not require a public default notice separate from the published foreclosure auction notice — documented double-digit percentage increases in scheduled auctions from the previous month but also documented double-digit percentage decreases in bank repossessions from the previous month.

Other states with foreclosure activity totals among the nation’s 10 highest in November were Illinois (12,941), Nevada (11,371), Ohio (10,458), Arizona (10,384) and Pennsylvania (5,672).

Top 10 metro foreclosure rates in Nevada, California and Florida
With one in every 86 housing units receiving a foreclosure filing in November, the Las Vegas-Paradise, Nev., metro area maintained the nation’s highest foreclosure rate among metropolitan areas with a population of 200,000 or more. Las Vegas foreclosure activity decreased 19 percent from the previous month but was up 21 percent from November 2009.

Reno-Sparks, Nev., also posted a foreclosure rate in the top 10, at No. 8 with one in every 150 housing units receiving a foreclosure filing in November.

Seven California cities posted foreclosure rates that ranked in the top 10: Stockton at No. 2 with one in every 130 housing units receiving a foreclosure filing; Bakersfield at No. 3 (one in 133 housing units); Modesto at No. 4 (one in 135 housing units); Vallejo-Fairfield at No. 5 (one in 144 housing units); Merced at No. 6 (one in 147 housing units); Riverside-San Bernardino-Ontario at No. 7 (one in 148 housing units); and Sacramento-Arden-Arcade-Roseville at No. 9 (one in 163 housing units).

Big monthly drops in foreclosure activity in many Florida metro areas resulted in only one metro area in the state with a foreclosure rate ranking among the top 10: Port St. Lucie at No. 10 with one in every 173 housing units receiving a foreclosure filing in November.

Mortgage loan foreclosures slowed by robo-signing scandal is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: bank repossessions, default notices, Foreclosures, loans, Margaret Sadler, Mortgages, OurBroker.com, robo-signing, scheduled auctions

Jobs

According to the Bureau of Labor Statistics we have 153.9 million people in the civilian labor force. Of this number, 14.8 million — 9.6 percent — were officially unemployed in October.

But wait, as they say on TV, there’s more.

There are also 2.6 million people who were not in the labor force, wanted work, were available for work but didn’t have a job. They were “marginally attached” to the labor force but somehow not “unemployed” for purposes of the official count.

Within the 2.6 million marginally attached workers were 1.2 million “discouraged workers,” individuals not currently looking for work because they believe no jobs are available for them. The other 1.4 million had given up and not officially searched for work in the four weeks preceding the survey for “reasons such as school attendance or family responsibilities.”

So, 14.8 million plus 2.6 million equals 17. 4 million people. That gives as a real unemployment rate — as humans understand the term — of 11.3 percent.

Foreclosures

A lot of people without jobs translates into big problems on the home front. RealtyTrac says there were 332,172 default notices, scheduled auctions and bank repossessions in October, about the same as in 2009.

Thanksgiving, foreclosures, mortgages & jobs is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Bureau of Labor Statistics, Foreclosures, jobs, Mortgages, Thanksgiving, unemployment

“In the best-case scenario,” says the congressional Oversight Committee, “concerns about mortgage documentation irregularities may prove overblown. In this view, which has been embraced by the financial industry, a handful of employees failed to follow procedures in signing foreclosure-related affidavits, but the facts underlying the affidavits are demonstrably accurate. Foreclosures could proceed as soon as the invalid affidavits are replaced with properly executed paperwork.”

Well, of course “this view” is embraced by the financial industry. What else would anyone expect?

“The worst-case scenario is considerably grimmer,” says the Committee. “In this view, which has been articulated by academics and homeowner advocates, the “robo-signing– of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure. In essence, banks may be unable to prove that they own the mortgage loans they claim to own.”

Loan Modifications

The report found that “documentation irregularities could also have major effects on Treasury’s main foreclosure prevention effort, the Home Affordable Modification Program (HAMP). Some servicers dealing with Treasury may have no legal right to initiate foreclosures, which may call into question their ability to grant modifications or to demand payments from homeowners. The servicers use of “robo-signing– may also have affected determinations about individual loans; servicers may have been more willing to foreclose if they were not bearing the full costs of a properly executed foreclosure.

Treasury has so far not provided reports of any investigation as to whether documentation problems could undermine HAMP. It should engage in active efforts to monitor the impact of foreclosure irregularities, and it should report its findings to Congress and the public.”

Mortgage Investors

“In addition to documentation concerns, another problem has arisen with securitized mortgage loans that could also threaten financial stability. Investors in mortgage-backed securities typically demanded certain assurances about the quality of the loans they purchased: for instance, that the borrowers had certain minimum credit ratings and income, or that their homes had appraised for at least a minimum value. Allegations have surfaced that banks may have misrepresented the quality of many loans sold for securitization. Banks found to have provided misrepresentations could be required to repurchase any affected mortgages. Because millions of these mortgages are in default or foreclosure, the result could be extensive capital losses if such repurchase risk is not adequately reserved.”

MERS

The report explains that “during the housing boom, multiple rapid transfers of mortgages to facilitate securitization made recordation of mortgages a more time-consuming, and expensive process than in the past. To alleviate the burden of recording every mortgage assignment, the mortgage securitization industry created the Mortgage Electronic Registration Systems, Inc. (MERS), a company that serves as the mortgagee of record in the county land records and runs a database that tracks ownership and servicing rights of mortgage loans.47 MERS created a proxy or online registry that would serve as the mortgagee of record, eliminating the need to prepare and record subsequent transfers of servicing interests when they were transferred from one MERS member to another.

“In essence, it attempted to create a paperless mortgage recording process overlying the traditional, paper-intense mortgage tracking system, in which MERS would have standing to initiate foreclosures.

“MERS experienced rapid growth during the housing boom. Since its inception in 1995, 66 million mortgages have been registered in the MERS system and 33 million MERS-registered loans remain outstanding. During the summer of 2010, one expert estimated that MERS was involved in 60 percent of mortgage loans originated in the United States. Widespread questions about the efficacy of the MERS model did not arise during the boom, when home prices were escalating and the incidence of foreclosures was minimal. But as foreclosures began
to increase, and documentation irregularities surfaced in some cases and raised questions about a wide range of legal issues, including the legality of foreclosure proceedings in general, some litigants raised questions about the validity of MERS.

“There is limited case law to provide direction, but some state courts have rendered verdicts on the issue. In Florida, for example, appellate courts have determined that MERS had standing to bring a foreclosure proceeding. On the other hand, in Vermont, a court determined that MERS did not have standing proved overblown. In this view, which has been embraced by the financial industry, a handful of employees failed to follow procedures in signing foreclosure-related affidavits, but the facts underlying the affidavits are demonstrably accurate. Foreclosures could proceed as soon as the invalid affidavits are replaced with properly executed paperwork. The worst-case scenario is considerably grimmer. In this view, which has been articulated by academics and homeowner advocates, the “robo-signing– of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure. In essence, banks may be unable to prove that they own the mortgage loans they claim to own.

Foreclosure robo scandal may impact millions of mortgages is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: 2010, Congressional Oversight Committee, Foreclosures, loans, MERS, Mortgages, OurBroker.com, report, robo-signing

The government is now trying to address this scenario, something which is common across the country, especially for those who bought during the past few years with little or nothing down, have toxic mortgages or who live in communities which are in the eye of the foreclosure storm.

The basic idea of a so-called FHA short refinance is to replace current loans with new and shiny FHA mortgages. The government’s plan is great news for homeowners, if it will work. But will it work? And if the plan does work will the government get stuck with a lot of FHA mortgages that will soon default?

New Twist

The government established the Making Home Affordable plan in March 2009 with the intent of refinancing as many distressed borrowers as possible. As of June about 1.3 million homeowners had started three-month trial periods with lower monthly costs and nearly 390,000 borrowers now have permanent loan modifciations.

This is good news for a lot of people because the average monthly loan payment for those in the program fell from $1,422 to $838. This is a big savings, but the Making Home Affordable program cannot save all homeowners. There are borrowers who simply do not have the income to make even smaller monthly payments. Some 520,000 homeowners have started the trials and then washed out. For them, foreclosure almost certainly looms ahead.

But what if the program was changed so that more borrowers could be eligible?

The Treasury Department and HUD have now come out with a new program to extend FHA loans to borrowers with negative equity. Such “enhancements” are scheduled to begin in September.

How It Works

The new program says if you’re a homeowner and owe more than the house is worth the government has a deal for you: Refinance into a sane and solid FHA loan. Here’s what you need to qualify:

1. You must be a homeowner (no investors allowed).
2. You must be current on your existing mortgage and it cannot be an FHA loan.
3. You must have a credit score above 500.
4. The existing first lien holder must write off at least 10 percent of the unpaid principal balance.
5. The refinanced FHA-insured first mortgage must have a loan-to-value ratio of not more than 97.75 percent of the property’s current value.
6. If there’s a second mortgage, then the combined balance of the first and second mortgage cannot be greater than 115 percent of the combined loan-to-value ratio.

7. You don’t qualify if you’ve been convicted of mortgage or real estate crime during the past 10 years (think of felony larceny, theft, fraud, or forgery; money laundering; or tax evasion).

Conflicts

Since the foreclosure crisis first began in 2007 the biggest question for lenders has been what to do with upside-down mortgages, situations where the property is worth less than the loan balance. Under the “enhancement” program, lenders would have to write off 10 percent of the existing mortgage balance to dump their loans.

In the case of the new government effort you’re just not going to see too many distressed homeowners getting new FHA loans. Two huge reasons stand out:

First, the borrower must be current on the loan. If the borrower has been making full and timely payments then the lender has no incentive to write-off a portion of the mortgage. The loan is performing, not distressed. To lenders, there’s no problem to “cure” and no reason to accept a loss. Since lender participation is voluntary you have to wonder why a lender would volunteer.

Second, in situations where there are two loans the junior lender under the program must allow the first loan to be refinanced and not move up to first place. But ask yourself: Why would a second lender agree to such an arrangement without compensation?

End Game

At this time the FHA program insures about 30 percent of all purchase money mortgages and 20 percent of all refinances. Given the rickety state of the housing market, and given common sense, nobody wants to do anything which would undermine the FHA program.

The enhancements announced by the government are unlikely to help many people because the requirements are self-contradicting and nobody wants the FHA to take on a bunch of high-risk loans. While the intention is good, the practical applications are remote and unlikely.

FHA “Short Refinance” — Is This The Way To Reduce Foreclosures? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: distressed, enhancements, FHA, HUD, loans, losses, Mortgages, refinance, reserves, short refinance, toxic, treasury

Fixing the mortgage system is crucial if we’re to prevent another financial meltdown. If the mortgages are done right than mortgage-backed securities will also be right — and that means there won’t be worries regarding securities ratings or insurance. Lenders will not be stuck with overvalued properties and undervalued paper.

No less important, if we fix the mortgage origination system we will also protect borrowers. No more toxic mortgages which are at the heart of our financial problems.

Here are six steps the borrowers, lenders and government officials can take now, this week, to revamp the mortgage system.

First, in the past year a Nationwide Mortgage Licensing System supported by state regulators and the federal government has begun operations. In essence loan officers now have unique registration numbers even if they move from state to state. This means the name and registration number for a loan officer can be included in mortgage documents — and loan officer performance can then be graded in the same way that we have credit scores. It may well be that prudent investors will not want mortgages included in a mortgage-backed security from loan officers with a score below a certain level — and it may also be that lenders will not want to hire such poor performers. Of course, the same concept of registration and responsibility should be extended to mortgage underwriters.

Second, lending rules must be changed so that loan officers have a fiduciary obligation to borrowers, in the same way that lawyers have an obligation to clients and doctors have an obligation to patients. The creation of a fiduciary obligation for loan officers would mean that aggrieved borrowers could take loan officers and their lenders to court in the event of abuse, a system which seems to work well for virtually every other type of business. Members of the UpFront Mortgage Brokers Association already have adopted this standard and promise that they “will endeavor to act in the best interests of the customer,” disclose their fees up front and credit the borrower for cash they receive from third-parties.

Third, require that all loans be fully documented and that income and employment are verified. This would do away with “stated income” loan applications where lenders do not verify borrower income claims.

Fourth, have HUD set the interest rate and points for FHA loans — and post that information daily online. There’s no reason this can’t be done. In fact, until 1983 HUD actually did set FHA mortgage rates. Borrowers would then have an easy way to follow the market by using FHA rates as a benchmark.

Fifth, predatory lending is NOT a federal crime. Loan fraud — where a lender is abused — is very much a federal crime but predatory lending where a borrower is overcharged by a lender is entirely ignored by federal laws. The next time you hear a politician yammer about “predatory” lending ask if he or she would support a specific federal law against such activities.

Sixth, every mortgage-backed security which has a high level of foreclosures should be audited by the FBI to assure that all loans were properly underwritten. When that’s not the case then appropriate action should be taken against the lender, the loan officer, the underwriter and the Wall Street securities packager who were paid for such work.

Would these ideas work? You bet. Toxic loans would be impossible and there would be real penalties for abusing borrowers and investors.

Mortgage Reform Now — 6 Ways To Fix What’s Broke is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: applications, FHA, fiduciary, Foreclosures, HUD, liar loans, licensing, loan officers, loans, mbs, mortgage-backed securities, Mortgages, obligation, OurBroker.com, predatory, ratings, real estate, registration, stated income, toxic

Critics of the program — and there are many and they are loud — will quickly overlook several issues:

First, not all borrowers are being helped. It’s true. But helping all distressed borrowers is not possible and has never been possible.

Second, the results are small compared to the problem. It’s true. But the problem of toxic loans did not start in 2009 when the Making Home Affordable program began, it started under the Bush Administration when lenders were allowed to ignore traditional underwriting guidelines and regulators did nothing to protect the public.

Third, no one will compare the Obama results to date with the results of the Bush Administration. But we will:

Hope For Homeowners under Bush resulted in 934 loan applications and 23 mortgage conversions.

The FHASecure Program was announced by President Bush in August 2007. At the time he said that “In the coming days, the FHA will launch a new program called FHA-Secure. This program will allow American homeowners who have got good credit history but cannot afford their current payments to refinance into FHA-insured mortgages. This means that many families who are struggling now will be able to refinance their loans, meet their monthly payments and keep their homes. In other words, we

Mortgage Modifications: Bush Versus Obama is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Bush, defaults, distressed, FHASecure, Foreclosures, HAMP, Hope for Homeowners, Making Home Affordable, Mortgages, Obama

Private mortgages can be alluring and in some cases financially dangerous. In the best case a private mortgage will provide a low rate with little down and fair terms, in the worst case you’ll have a hard-money loan with high interest and huge fees.

On the good side, one can get a mortgage — it’s just a loan — from a friend or a relative. In fact, Virgin Money has a program in place to create such loans with proper paperwork and administration.

Private Mortgages

Private mortgages should be treated just the way that a commercial lender would handle real estate financing. This means there should be an appraisal of the property, the borrower should provide financial information, there should be a formal written loan agreement prepared by an attorney and the loan should be properly recorded.

The reason both buyer and lender want such formalities is very simple: Relationships can change. Verbal agreements can be unclear. When everything is in writing and saved in a business-like manner then the obligations of each party are clear.

Private mortgages do not necessarily have to have the same terms as conventional financing. For instance, there can be loans where interest accumulates and the debt is paid off from time-to-time with lump sum payments. The interest rate can be lower and the qualification terms can be more liberal. With an individual as a lender, it’s actually possible for the debt to be forgiven in a will.

One concern with private mortgages is there length. Rarely can you get a 30-year private loan. Shorter terms are much more common.

I have obtained a number of loans from private sources. These typically are pension funds from law offices and medical practices which hold millions of dollars. The trustee for the fund can sometimes extend mortgage loans, depending on the terms of the pension.

Such extensions of credit are not minor matters. The trustee has fiduciary obligations to the pension and its beneficiaries and must act in a responsible manner. In my situation, there was always a formal settlement with recorded documentation. I am pleased to say that all loans were fully repaid, with interest.

Hard Money Lenders

Less attractive are asset-based loans from hard money lenders. These are typically short-term loans with high interest levels, big fees up front and small loan-to-value ratios — say a loan for as much as 65% of the property’s value.

As with all real estate loans, if the borrower does not pay the property can be lost to foreclosure. Of course, the tougher the terms the more likely default.

For specifics regarding a private mortgage, both lender and borrower should speak with an attorney.

What Are Private Mortgages? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: foreclosure, hard money, loans, Mortgages, private mortgages, recordation