The filing decline may seem like good news and surely it’s a welcome relief for many families, however behind the lower numbers is the reality that foreclosure activity has been delayed by the continuing inability of loan servicers to get their paperwork right. The robo-signing scandal which first slowed the market last winter continues to hobble foreclosure activity. This means recovery in the housing market will remain stalled until the inventory of distressed properties is substantially reduced.

Robo-signing — the practice of having clerks sign foreclosure affidavits without actual knowledge of loan ownership or borrower default — has been discovered nationwide. Some of the results include foreclosing on active-duty military personnel and at least one case where a homeowner faced foreclosure — even though the property had been bought for cash and was mortgage-free!

“Despite a seasonal slowdown similar to what we’ve seen in each of the past four years, November’s numbers suggest a new set of incoming foreclosure waves, many of which may roll into the market as REOs or short sales sometime early next year,” said James Saccacio, co-founder of RealtyTrac. “Overall foreclosure activity is down 14 percent from a year ago, the smallest annual decrease over the past 12 months, and some bellwether states such as California, Arizona and Massachusetts actually posted year-over-year increases in foreclosure activity in November.

“Scheduled foreclosure auctions reached a nine-month high in November, corresponding to a recent surge in default notices that began back in August,” Saccacio continued. “Many of the new defaults that started the foreclosure process over the past few months are now being scheduled for public foreclosure auction.”

RealtyTrac also provided the following information

Nevada, California, Arizona post top state foreclosure rates

Nevada posted the nation’s highest foreclosure rate for the 59^th straight month in November despite artificially low foreclosure activity caused by a new state law passed in October (AB 284) that alters the foreclosure process in the state. A total of 6,512 Nevada properties received a foreclosure filing in November, up 3 percent from a 45-month low in October, but still down 43 percent from November 2010. One in every 175 Nevada housing units had a foreclosure filing in November, more than three times the national average.

Scheduled trustee’s sales in California hit a 10-month high in November, helping the state maintain the nation’s second highest foreclosure rate: one in every 211 properties with a foreclosure filing during the month. A total of 26,509 trustee’s sales were scheduled in California in November, up 14 percent from November 2010 — the first year-over-year increase in scheduled foreclosure auctions in California since March 2010.

Arizona foreclosure activity increased on a year-over-year basis in November for the first time since October 2010, and the state posted the nation’s third highest foreclosure rate for the fifth month in a row. One in every 256 Arizona properties had a foreclosure filing in November, more than twice the national average.

Substantial monthly increases in foreclosure activity in Utah and Georgia lifted those states’ foreclosure rates into the nation’s top five in November. Utah’s foreclosure rate of one in every 290 housing units with a foreclosure filing ranked No. 4 thanks to a 74 percent monthly increase in foreclosure activity, andGeorgia’s foreclosure rate of one in every 330 housing units with a foreclosure filing ranked No. 5 thanks to a 23 percent monthly increase in foreclosure activity.

Other states with foreclosure rates ranking among the top 10 were Michigan, Florida, Illinois, Ohio and South Carolina. South Carolina cracked the top 10 for the first time since RealtyTrac began issuing its report in 2005.

California, Florida, Michigan document highest foreclosure activity totals

There were a total of 63,689 California properties with foreclosure filings in November, the most of any state and 28 percent of the national total.

Florida foreclosure activity in November decreased 25 percent from a 13-month high in October, but the state still had 24,739 properties with foreclosure filings during the month — the nation’s second highest total.

There were total of 13,777 Michigan properties with foreclosure filings in November, the nation’s third highest state total despite a 14 percent decrease from October.

Illinois documented the fourth highest state foreclosure activity total in November, 12,398 properties with foreclosure filings, and Georgia documented the fifth highest state foreclosure activity total, 12,327 properties with foreclosure filings during the month.

California cities account for nine of top 10 metro foreclosure rates

Nine out of the nation’s 10 highest foreclosure rates among metropolitan areas with a population of 200,000 or more were in California. The only exception was Las Vegas, which ranked No. 6 with one in every 150 housing units with a foreclosure filing in November.

With one in every 120 housing units with a foreclosure filing during the month, Stockton, Calif., posted the nation’s highest metro foreclosure rate for the second month in a row. There were a total of 1,913 Stockton properties with a foreclosure filing in November, up 20 percent from the previous month and up 9 percent from November 2010. The increase in Stockton was driven largely by a 65 percent month-over-month increase in scheduled foreclosure auctions.

The eight other California cities with foreclosure rates ranking among the top 10 all posted double-digit percentage increases in scheduled foreclosure auctions in November, ranging from a 37 percent month-over-month increase in Modesto to a 100 percent month-over-month increase in Fresno.

Cities outside of California and Nevada with foreclosure rates ranking among the nation’s 20 highest metro foreclosure rates included Phoenix at No. 13 (one in every 209 housing units); Salt Lake City at No. 15 (one in every 223 housing units); Detroit at No. 17 (one in every 242 housing units); and Atlanta at No. 18 (one in every 244 housing units).

RealtyTrac: Foreclosure Activity Slumps 14% — But Rise Likely In 2012 is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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After years of dispute and conflict that was some of the most interesting — if painful — broadcasting on television, Paul Sr. and Paul Jr. seem fairly settled as rival bike builders who now churn out theme bikes and custom cycles. As well, Paul Sr. has somehow worked out his dispute with his lender, a dispute which at one point lead to mortgage loan foreclosure notices for his newly-built headquarters.

But with the end of a massive lawsuit between the son and father and with the headquarters property no longer distressed, the story of the battling Pauls has cooled and with it some fan ardor. One way to rev-up their long-running American Chopper series is to bring back Jessie James.

James, like the Teutuls, is a bike builder, TV personality and businessman. While Paul Sr. may yell and Paul Jr. may be collegial in the workplace, James is a different story. He is arguably the least vocal of the bunch, but plainly a shrewd planner and strategist, something which could be seen when he appeared on the second season of the Celebrity Apprentice and came in third under the watchful eye of Donald Trump.

Live and from Las Vegas

The build-off programs will run live on Discovery on December 5th and 6th and as I read the promo the end result will be three bikes. Viewers will then have a chance to vote for a winner, probably in the same way as viewers rated the two bikes built by the Tuetuls for Cadillac.

All three builders have strengths: Paul Sr. has a huge facility and is backed by a large number of mechanics, machines and craftsmen, most notably metalworker Rick Petco. Paul Jr. has a far-smaller shop and a much smaller crew but a vastly-better sense of design along with help from show regulars Vinnie, Brendan and Cody. As to Jessie James, he’s now centered in Austin and we’ll have to see what he can do.

So who will win? Viewers will likely enjoy the fireworks, bike building and verbal sparring among the three main rivals. Also, it will be interesting to see how much — if at all — Paul Sr. and Paul Jr. cooperate in the face of a common rival.

We don’t know at this writing who will win the bike build-off, but it’s certain that Discovery will have a huge ratings hit on its hands.

American Chopper Vs. Jesse James: Who Really Wins? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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“The October foreclosure numbers continue to show strong signs that foreclosure activity is coming out of the rain delay we’ve been in for the past year as lenders corrected foreclosure paperwork and processing problems,” said James Saccacio, chief executive officer of RealtyTrac. “However, recent state court rulings and new state laws keep changing the rules of the foreclosure game on the fly, creating more uncertainty in the housing market and threatening to prolong the road to a robust real estate recovery.”

There is no evidence that the robo-signing scandal which is slowing the foreclosure process will come to a sudden halt anytime soon. For instance,  state regulators are attempting yo work out a universal settlement with lenders and services that reportedly includes compensation of $20 to $25 billion. Such an agreement, however, also has to deal with possible civil and criminal cases that might also be allowed against institutions and individuals in the future. The liability question is a major sticking point.

Foreclosure Activity by Type

Default notices (NOD, LIS) were filed for the first time on a total of 77,733 U.S. properties in October, a 10 percent increase from September, but still down 23 percent from October 2010. Default notices in states using the judicial process (LIS) reached an 11-month high of 39,282 in October, a 16 percent increase from the previous month, but still down 31 percent from October 2010.

Default notices increased more than 25 percent on a month-over-month basis in several states, including Florida (28 percent), Pennsylvania (50 percent) and Indiana (61 percent). Despite the sizable monthly increases, default notices were down on a year-over-year basis in all three of these states.

Foreclosure auctions (NTS, NFS) were scheduled on 85,321 U.S. properties in October, up 8 percent from the previous month, but still down 38 percent from October 2010. Scheduled auctions in states using the judicial foreclosure process (NFS) reached an 11-month high of 25,941 in October, a 22 percent increase from the previous month, but still down 43 percent from October 2010.

Scheduled auctions increased more than 35 percent on a month-over-month basis in several states, including Florida (57 percent), Minnesota (43 percent) and Illinois (38 percent), although scheduled auctions in all three of those states were still down from October 2010.

Lenders repossessed a total of 67,624 U.S. properties (REO) in October, a 4 percent increase from the previous month, but still a 27 percent decrease from October 2010. REO activity increased 40 percent or more on a month-over-month basis in several states, including Michigan (40 percent), Oregon (45 percent), New Jersey (48 percent), and Indiana (73 percent).

Nevada, California, Arizona post top state foreclosure rates

Despite a 34 percent month-over-month drop in foreclosure activity, Nevada posted the nation’s highest state foreclosure rate for the 58^th straight month in October. One in every 180 Nevada housing units had a foreclosure filing during the month, still more than three times the national average despite the drop-off in activity. The month-over-month decrease in Nevada was driven by a 75 percent monthly decrease in new default notices, likely the result of a new law that as of took effect in October and requires foreclosing lenders to sign and record in public records an affidavit with key information about anythe foreclosure on it. The 1,201 new defaults in Nevada in October was the lowest since June2006, a 64-month low.

California default notices increased 17 percent from the previous month to a 13-month high, helping the state post the nation’s second highest foreclosure rate: one in every 243 housing units with a foreclosure filing in October. A total of 29,240 default notices were reported in California in October, a 1 percent increase from October 2010 — the first year-over-year increase in defaults in California since November 2009.

Arizona posted the nation’s third highest state foreclosure rate in October: one in every 259 housing units with a foreclosure filing during the month. Total foreclosure activity inArizona increased nearly 18 percent from the previous month, but was still down 36 percent from October 2010.

A sharp monthly increase in new default notices and scheduled auctions boosted theforeclosure rate in Florida to fourth highest among the states, up from sixth highest in September. A total of 15,234 new default notices were reported in Florida in October, up 28 percent from the previous month and a 12-month high. Scheduled auctions in Floridahit an 11-month high in October, with 10,655 reported during the month — up 57 percent from September.

New default notices in Michigan also reached a 12-month high in October, increasing 13 percent from the previous month, and the state posted the nation’s fifth highest foreclosure rate for the month: one in every 282 housing units with a foreclosure filing.

The top five states in terms of foreclosure rate in October — Nevada, California, Arizona,Florida and Michigan — accounted for 53 percent of the national total for the month.

Other states with foreclosure rates ranking among the top 10 were Georgia, Illinois,Idaho, Oregon and Colorado.

Las Vegas knocked out of No. 1 spot for foreclosure rates among metro areas

After 22 consecutive months with the highest foreclosure rate among metropolitan areas with a population of 200,000 or more, Las Vegas dropped to No. 5 on the list in October thanks to a 36 percent decrease in foreclosure activity from the previous month. The overall decrease in Las Vegas was caused primarily by an 80 percent drop in new default notices from September to October. One in every 162 Las Vegas housing units had a foreclosure filing in October, still more than three times the national average.

With one in every 143 housing units with a foreclosure filing in October, Stockton, Calif., took the top metro foreclosure rate away from Las Vegas. Foreclosure activity in Stocktonincreased 10 percent from the previous month, but was still down nearly 18 percent from October 2010. New defaults in Stockton were up 20 percent from the previous month and up 9 percent from October 2010.

Five other California metro areas had foreclosure rates that ranked among the top 10 inOctober. Modesto was close behind Stockton at No. 2 (one in every 148 housing units with a foreclosure filing), followed by Vallejo-Fairfield at No. 3 (one in every 150 housing units), Riverside-San Bernardino at No. 4 (one in every 155 housing units), Sacramento at No. 7 (one in every 176 housing units), and Merced at No. 9 (one in every 200 housing units).

Other metro areas with foreclosure rates in the top 10 were Saginaw, Mich., at No. 6 (one in every 174 housing units), Cape Coral-Fort Myers, Fla., at No. 8 (one in every 190 housing units), and Orlando, Fla., at No. 10 (one in every 208 housing units).

October Foreclosure Activity Down 31 percent, Says RealtyTrac is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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The answer as derived from the American Chopper TV show and public information is very simple: Both.

Let’s start with foreclosure. It’s plain that a foreclosure action was initiated by the lender, the GE Commercial Finance Business Property Corp.

The matter is openly discussed by Paul Sr. on the show. He raises such ideas as renting another facility, moving to another building he owns or building a new structure nearby. The local Times Herald-Record explains that loan payments of more than $100,000 had been missed as of June 1, 2010. (See: Orange County Choppers’ HQ faces foreclosure, Nov. 18, 2010)

Minutes from the Orange County Industrial Development Agency discuss the possibility of a smaller replacement building.

So if a property is foreclosed doesn’t that mean the borrower is soon tossed out?

Actually, no. Not always.

It’s in the interest of neither the lender nor the borrower to go through with a foreclosure, especially in many of today’s major foreclosure centers. The fact that a property has been “foreclosed” — that payments have been missed and foreclosure notices sent out — does not mean it will be lost.

There are a number of possible solutions to the foreclosure problem. For instance:

1. The lender and borrower can attempt to “cure” the loan. As one example, HUD reported that for fiscal 2009 the FHA had a “82.7 percent cure rate for properties 90 days or more delinquent.”
2. A cure can be created by bringing the loan current or moving unpaid money to the back of the mortgage; that is, making the loan term longer.
3. Another approach is to modify the loan by reducing the interest rate, forgiving principal, waiving penalties and fees or some combination of changes. Modifications have been used successfully by more than 720,000 residential borrowers under the government’s Making Home Affordable program.
4. If the lender will go along, the borrower can give up title — and then rent back the property. A deed-in-lieu of foreclosure with a rent-back allows the borrower to stay in place while generating income for the lender. This is the system behind Fannie Mae’s Deed for Lease progrtam. (When values are rising and foreclosure is not an issue, the better strategy is to sell the building and then rent it back — a sale and leaseback.)

Lenders would like to avoid foreclosures if possible because they can produce the most expensive outcome. To avoid that high-cost outcome lenders will sometimes agree to a short sale if the loss will be less than with a foreclosure.

For borrowers, foreclosure is a lousy choice, especially if the lender can go after not only the property but also your equipment and other assets. Credit will be damaged and the ability to get another loan will be impacted.

What happened between OCC and its lender is thus far a private matter. The objective fact is that something was worked out, maybe one of our options, maybe something else. (And, as I have mentioned elsewhere online, maybe there will be a lender theme bike to settle the matter…).

Meanwhile, at Paul Jr. Designs the approach is different. The property is rented.

Was it better for Junior to rent or for Senior to own? It’s years too early to answer that question, but Paul Sr. has been smart to have a world headquarters building that could showcase his custom motorcycle business and TV show while Paul Jr. was right to start with a rental since he may need more space in the future for his bikes, trikes and designs.

American Chopper — Foreclosure Vs. No Foreclosure is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Search the Internet and you can find an endless volume of postings which dissect and analyze the program’s leading players, first at Orange County Choppers and later at Paul Jr. Designs. Paul Sr., Paul Jr., and Mikey all come under the microscope and in many cases, harshly.

Within these discussions are the seeds of a huge conflict — and while conflict is good for literature, legends and TV ratings you wonder if it’s any good for the Teutels.

Family Dynamics

It’s difficult to believe that Senior and Junior originally planned or wanted a public airing of their family “interchanges” — that’s a nice term for lots of yelling and hurt feelings.

It’s something of a national therapy session and it’s compelling TV — look at the ratings. But in the end we’re talking about real people, a family and difficult struggles. How many of us would trade the wealth and fame of the show’s main characters for the cost of their personal battles and insecurities? The contrast with Vinnie and Rick is enormous, individuals who are insightful and clearly understand the tragedy around them.

Family dynamics are endlessly tricky. Armies of therapists are employed in an effort to heal childhood wounds and even the best parents will say there were instances where things went wrong. It’s some of the stuff that makes us human, imperfect and fallible.

Of course, today’s parents were once children and who knows that they went through, yet much online commentary suggests little or no sympathy for Paul Sr.

With American Chopper there are overt and open discussions of rehab and therapy, past drug use, sobriety, regret and alcohol. It’s gritty stuff.

Did fame and fortune — the by-products of a long-running national TV series — make things better or worse? Or neither? There’s no way to know.

Rich & Famous

It’s impressive to see the progression of homes, shops and buildings that have evolved with the show — inevitably bigger and better, part of the American dream. And then for OCC a business drop-off, foreclosure filings and resolution.

From a business and real estate perspective, the issues with the mortgage on the new OCC building and the lender’s decision to file foreclosure papers reflect the fate of too many small businesses. OCC is in many ways a metaphor of our time. Our economy is contracting. The money that was once there is too often gone and with it opportunities for growth and jobs. Such economic changes also impact people and the way they deal with one another.

The success enjoyed by PJD is great to see, but the context is that across the country such achievement is increasingly difficult and infrequent. Maybe that’s one reason so many people watch.

American Chopper — Family Values, Family Conflict is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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You could see this coming for much of the past year.

In November 2010, the local Times Herald-Record newspaper reported that the company had failed to make mortgage payments of more than $100,000 due by July 1st, 2010.

“The Choppers,” said the paper, “stopped making mortgage payments in order to put pressure on the lender to modify the terms of the loans, according to Choppers’ lawyer Richard Mahon. Mahon said that when the headquarters was built in 2007, it was valued at about $12 million. Because of the economic downturn, the building is now worth between $7 million and $8 million, he estimated.” (See: Orange County Choppers’ HQ faces foreclosure, Nov. 18, 2010)

According to public records, the property consists of a two-story building with 98,172 square feet that was erected on 3.3 acres of land in 2008. For 2011 the property is valued at $11,248,600

If the idea was to force the lender to accept a lower mortgage rate or give up principal because the value of the property declined then foreclosure of the new building was inevitable. Here’s why:

First, financing on the property was held by GE Commercial Finance Business Property Corp. according to the Times Herald-Record. The company is enormous with 2008 revenues of $26.7 billion. The $12.5 million provided to Orange County Choppers means the motorcycle builder has no leverage because it can’t materially impact the lender by withholding payments. Alternatively, by foreclosing GE can force OCC out of the building. This is no contest.

Second, GE is a lender, not a partner or co-owner. Think about it this way: If the value of the building increased would Orange County Choppers then voluntarily agree to pay additional money to GE?

Third, a savvy point is made by Digits over at Clutch & Chrome:

“Could anyone who bought an Orange County Chopper and is still paying for it with a loan go back and ask the motorcycle building company for a discount, or at the very least help with the monthly payments? Would there be some recourse for the different dealerships around the country reselling Orange County Choppers over their costs compared to a difference in selling prices during these tough economic times?”

Fourth, how much business has been lost to a new custom bike builder that recently set up shop nearby: Paul Jr. Designs? Is the market for theme bikes big enough to support two local companies — or to support two local companies well? Could the companies prosper without TV exposure?

Paul Senior and Paul Junior have now settled their lawsuit though personal relations between father and son are clearly strained. The good news, at least, is that all OCC employees will keep their jobs even if the physical plant is downsized — that’s enormously important at a time when unemployment is high and rightsizing and outsourcing are too common. Meanwhile, PJD is growing and that’s a great success story to watch.

American Chopper: Why Foreclosure Had To Happen is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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“This has become an all-too-familiar pattern in which the deceptive practices of Wall Street devastated homeowners and investors, and ultimately contributed to the collapse of our economy,– Coakley said. “Our extensive investigation revealed that Morgan Stanley not only backed loans for homeowners that they should have known were destined to fail, they also caused additional damage in the subprime marketplace. Through today’s action, we have secured significant relief to help keep hundreds of people in their homes and also recovered nearly $20 million for Massachusetts taxpayers.”

The state reports that “as a result of a lengthy investigation, the Attorney General’s Office alleged that Morgan entered the subprime arena in Massachusetts by offering funding to retail lenders that specialized in loans to less-qualified borrowers. Morgan provided billions of dollars to subprime lender New Century, which used Morgan funds to target lower-income borrowers and lure them into loans that consumers predictably could not afford to pay. These loans often were unsustainable because of payment shock or poor underwriting, but were lucrative for subprime lenders, who generated fees and could expect that borrowers would have to refinance in the short term or face foreclosure. Some Morgan Stanley investment bankers referred to New Century as Morgan’s “partner– in the subprime lending business.”

The question, of course, is whether attorneys general in 49 other states will now investigate to see if compensation is due to their borrowers and investors.

The Massachusetts release is below:

Morgan Stanley to Pay $102 Million for Role in Massachusetts Subprime Mortgage Meltdown Under Settlement with AG Coakley’s Office

BOSTON — Investment giant Morgan Stanley (Morgan) will pay $102 million to affected Massachusetts homeowners and the Commonwealth following an investigation by the Attorney General’s Office into Morgan’s role in the securitization and financing of Massachusetts subprime loans, Attorney General Martha Coakley announced today.

Under today’s agreement, filed today in Suffolk Superior Court, Morgan will provide substantial relief to affected parties in Massachusetts, including $58 million in relief to more than 1000 Massachusetts homeowners, $23 million to the Massachusetts Pension Fund for investment losses, and $19.5 million in taxpayer money to the Commonwealth’s General Fund.

“This has become an all-too-familiar pattern in which the deceptive practices of Wall Street devastated homeowners and investors, and ultimately contributed to the collapse of our economy,– AG Coakley said. “Our extensive investigation revealed that Morgan Stanley not only backed loans for homeowners that they should have known were destined to fail, they also caused additional damage in the subprime marketplace. Through today’s action, we have secured significant relief to help keep hundreds of people in their homes and also recovered nearly $20 million for Massachusetts taxpayers.”

As a result of a lengthy investigation, the Attorney General’s Office alleged that Morgan entered the subprime arena in Massachusetts by offering funding to retail lenders that specialized in loans to less-qualified borrowers. Morgan provided billions of dollars to subprime lender New Century, which used Morgan funds to target lower-income borrowers and lure them into loans that consumers predictably could not afford to pay. These loans often were unsustainable because of payment shock or poor underwriting, but were lucrative for subprime lenders, who generated fees and could expect that borrowers would have to refinance in the short term or face foreclosure. Some Morgan Stanley investment bankers referred to New Century as Morgan’s “partner– in the subprime lending business.

In addition to the $102 million in financial compensation, the settlement also requires Morgan to change its business practices going forward and to provide information and materials needed in the Attorney General’s ongoing investigation of the subprime securitization marketplace.

Today’s settlement is the latest in a series of actions brought by the Attorney General’s Office in response to the economic and lending crisis. AG Coakley’s Office has been a national leader in bringing actions on behalf of homeowners and taxpayers against companies relating to their role in the subprime marketplace, including Goldman Sachs, Fremont General, Countrywide, and State Street Bank. As a result of these actions, AG Coakley’s Office has secured more than $130 million in relief to investors and borrowers, ensured mortgage relief to more than 15,000 homeowners in Massachusetts, and recovered more than $50 million in taxpayer funds returned back to the Commonwealth.

Allegations in the Assurance of Discontinuance, filed today in Suffolk Superior Court, include that Morgan provided funding, known as “warehouse lending– services, to New Century, which New Century in turn used to fund an ever increasing number of subprime loans. After New Century made the loans, Morgan would place the loans into a securitization pool, and then act as the underwriter selling investments backed by the subprime loans in the pool.

As part of this securitization process, Morgan employed third party due diligence providers to review the quality of New Century’s loans. During this review, Morgan learned:

• New Century repeatedly violated the Massachusetts Division of Banks’ “borrower best interest– standard when it made subprime loans, and thus made loans that violated Massachusetts law.
• New
  Century calculated the Debt to Income (DTI) ratio for borrowers based only on the initial “teaser rate– for the loans, rather than the fully indexed interest rate that would kick in after the teaser period expired. When calculated using the fully indexed rate, almost 40% of the loans failed Morgan’s own internal underwriting standards for whether the borrower could pay them.
• The large majority of New Century loans failed the basic test of their own underwriting guidelines and could only be approved as “exception– loans, which required the presence of “compensating factors.” Sample reviews by Morgan vendors showed that many of these loans violated the guidelines in several different ways, and about one-third of the randomly sampled loans lacked compensating factors to justify the extension of credit.
• Appraisals used by New Century to value the collateral backing the loans (the homes) were often significantly different from the Broker Price Opinions ( “BPOs–) that Morgan obtained to check New Century’s figures. Appraisals are important because home value and the resulting loan-to-value ratio are key factors in assessing the riskiness of loans. Inflated or inaccurate appraisals create a heightened risk that the loans are prone to failure.
• New Century originated a large number of “stated income loans.” These are loans that lack basic supporting paperwork to document the income and other figures often placed on loan applications by mortgage brokers, borrowers, or originators. New Century relied significantly on these loans. In fact, a Morgan employee noted that New Century overused stated income loans to the point of abuse.

All of these due diligence discoveries underscored the riskiness and/or uncertainty relating to New Century’s loans and whether borrowers would be able to pay them back. It is illegal under Massachusetts law to make loans without reasonably assessing a borrower’s ability to pay the loan according to its terms.

In late 2005 and early 2006, Morgan began rejecting greater numbers of New Century loans as a result of the due diligence findings. After New Century suggested it would shift its business elsewhere, Morgan began again to include a wider range of New Century loans in its purchase pools. A Morgan Stanley senior banker purchased loans that Morgan’s own internal due diligence team initially rejected, and Morgan waived vendor concerns regarding a substantial number of the New Century loans identified as having material problems.

Moreover, as New Century finally spiraled towards bankruptcy, its risky lending practices exposed to the public, Morgan Stanley continued to lend money to the subprime originator even when other banks would no longer provide New Century with cash. During early March 2007, Morgan Stanley provided millions of dollars that New Century used directly to finance a last round of unsustainable predatory loans in Massachusetts.

Throughout 2006 and the first half 2007, Morgan continued to securitize New Century’s predatory subprime loans, and sold investments to two Massachusetts state entities–the Massachusetts Pension Reserves Investment Trust (PRIT) and the Massachusetts Municipal Depository Trust (MMDT). This led to state funds being used to fuel predatory subprime lending, and to significant losses for PRIT and the MMDT.

Under the terms of today’s settlement, Morgan will make the following payments and conduct reforms:

• Pay $58 Million in principal reduction and related relief to over 1000 Massachusetts subprime borrowers
• $19.5 Million payment to the Commonwealth
• $23.4 Million to PRIT and the MMDT
• $2 Million to non-profit groups throughout the Commonwealth to assist victims of subprime foreclosure
• Not fund unfair subprime loans in Massachusetts
• Make additional disclosures to Massachusetts investors regarding its future subprime securitizations
  Provide documents and information to the Attorney General’s Office in its ongoing review of industry subprime securitization practices.

The resolution follows a similar matter in May 2009 against Goldman Sachs, in which the Attorney General’s Office recovered $60 million in relief for the Commonwealth and over 700 affected Massachusetts homeowners. Also in 2009, the Attorney General reached a settlement with Fremont Investment & Loan, which included a permanent injunction restricting foreclosures and a $10 million payment for consumer relief, civil penalties and costs, and in March 2010 agreed to broad borrower relief with Bank of America concerning Countrywide-originated loans. The Attorney General’s Office has previously completed other investigations relating to the current economic crisis, and in 2008 recovered over $75 million from resolutions with UBS, Morgan Stanley, Citibank, and Merrill Lynch regarding their sale of auction rate securities to Massachusetts towns, cities, and governmental entities. The Attorney General’s Office also worked jointly with the SEC on a review of State Street’s undisclosed subprime investments in 40 State Street Bond Funds, resulting in a nationwide recovery of over $300 million for investors.

Homeowners with questions about today’s settlement should contact the Attorney General’s Insurance and Financial Services Hotline at 1-888-830-6277.

The Morgan Stanley matter is being handled by the staff of Attorney General Coakley’s Insurance and Financial Services Division, including Division Chief Glenn Kaplan, and Assistant Attorneys General Aaron Lamb, Amita Singh and Peter Leight, as well as Legal Analyst Matt Gendron, Economist Bryan Lincoln, Mathematician Burt Feinberg, and Paralegals Cassidy Fitzpatrick and Brian Daly, and Investigator William Mackay.’

Morgan Stanley To Pay $102 Million For Mortgage Role In Massachusetts is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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And then, just a few hours after my posting appeared, the FTC announced a $108 million settlement with Countrywide, now part of Bank of America.

Countrywide had been overcharging individual borrowers, about 200,000 of them, by hundreds or even thousands of dollars. And how did the FTC determine this?

Well, remember that the FTC had advised the public against the use of even a “a licensed, legitimate and trained auditor, mortgage professional or lawyer.” However, in their complaint the FTC flat out says “the FTC is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and to secure such equitable relief as may be appropriate in each case, including rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies.”

Notice how the FTC does it? They use lawyers. The lawyers carefully go over books and records. My late father, a CPA until almost age 90, might have called such a process a forensic mortgage loan audit. He knew about audits.

The overcharges faced by Countrywide borrowers are not a minor matter. The extra costs ranged from several hundred to several thousand dollars. Did additional costs unjustly drive some homeowners into foreclosure? Does anyone go to jail for this? What’s the difference between forcing someone out of their home by setting a fire and forcing someone out of their home with gross overcharges? In both cases the end-result is the same.

The FTC announcement is below:

Countrywide Will Pay $108 Million for Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers in Bankruptcy

Two Countrywide mortgage servicing companies will pay $108 million to settle Federal Trade Commission charges that they collected excessive fees from cash-strapped borrowers who were struggling to keep their homes. The $108 million represents one of the largest judgments imposed in an FTC case, and the largest mortgage servicing case. It will be used to reimburse overcharged homeowners whose loans were serviced by Countrywide before it was acquired by Bank of America in July 2008.

“Life is hard enough for homeowners who are having trouble paying their mortgage. To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible,” said FTC Chairman Jon Leibowitz. “We’re very pleased that homeowners will be reimbursed as a result of our settlement.”

According to the complaint filed by the FTC, Countrywide’s loan-servicing operation deceived homeowners who were behind on their mortgage payments into paying inflated fees – fees that could add up to hundreds or even thousands of dollars. Many of the homeowners had taken out loans originated or funded by Countrywide’s lending arm, including subprime or “nontraditional” mortgages such as payment option adjustable rate mortgages, interest-only mortgages, and loans made with little or no income or asset documentation, the complaint states.

Mortgage servicers are responsible for the day-to-day management of homeowners’ mortgage loans, including collecting and crediting monthly loan payments. Homeowners cannot choose their mortgage servicer. In March 2008, before being acquired by Bank of America, Countrywide was ranked as the top mortgage servicer in the United States, with a balance of more than $1.4 trillion in its servicing portfolio.

When homeowners fell behind on their payments and were in default on their loans, Countrywide ordered property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property, according to the FTC complaint. But rather than simply hire third-party vendors to perform the services, Countrywide created subsidiaries to hire the vendors. The subsidiaries marked up the price of the services charged by the vendors – often by 100% or more – and Countrywide then charged the homeowners the marked-up fees. The complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times. As a result, even as the mortgage market collapsed and more homeowners fell into delinquency, Countrywide earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue.

According to the FTC, under most mortgage contracts, homeowners must pay for necessary default-related services, but mortgage servicers may not mark up the cost to make a profit or charge homeowners for services that are not reasonable or appropriate to protect the mortgage holder’s interest in the property. Homeowners do not have any choice in who performs default-related services or the cost of those services, and they have no option to shop for those services.

In addition, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, the complaint charges that Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans. Countrywide also failed to tell borrowers in bankruptcy when new fees and escrow charges were being added to their loan accounts. The FTC alleges that after the bankruptcy case closed and borrowers no longer had bankruptcy court protection, Countrywide unfairly tried to collect those amounts, including in some cases via foreclosure.

Settlement Terms

The FTC’s complaint and settlement order name two mortgage servicers as defendants: Countrywide Home Loans, Inc. and BAC Home Loans Servicing LP, formerly doing business as Countrywide Home Loans Servicing LP. The settlement requires Countrywide to pay $108 million, which will be refunded to homeowners who Countrywide overcharged before July 2008.

In addition, the settlement order prohibits Countrywide from taking advantage of borrowers who have fallen behind on their payments. The defendants continue to service millions of mortgage loans, including tens of thousands of loans involving borrowers in bankruptcy and foreclosure. In the servicing of loans, the defendants are permanently barred from:

• Making false or unsubstantiated representations about loan accounts, such as amounts owed.
• Charging any fee for a service unless it is authorized by the loan instruments, by law, or by the consumer for a specific service requested by the consumer.
• Charging any fee for a default-related service unless it is a reasonable fee charged by a third party for work actually performed. If the service is provided by an affiliate of a defendant, the fee must be within limits set by state law, investor guidelines, and market rates. Defendants must obtain annual, independent market reviews of their affiliates’ fees to ensure that they are not excessive.

In addition, Countrywide must advise consumers if it intends to use affiliates for default-related services and, if so, provide a fee schedule of the amounts charged by the affiliates.

The settlement also requires Countrywide to make significant changes to its bankruptcy servicing practices. For example, Countrywide must send borrowers in Chapter 13 bankruptcy a monthly notice with information about what amounts the borrower owes – including any fees assessed during the prior month. The defendants also must implement a data integrity program to ensure the accuracy and completeness of the data they use to service loans in Chapter 13 bankruptcy.

This case was brought with the invaluable assistance of the United States Trustee Program, the component of the Department of Justice that oversees the administration of bankruptcy cases and private trustees. This action represents the FTC’s continuing work to help consumers who have been hurt by the economic downturn.

For more information about the case and the FTC’s refund program, see www.ftc.gov/countrywide.

The Commission vote to authorize staff to file the complaint and settlement was 5-0. The complaint and settlement were filed in the U.S. District Court for the Central District of California.

The Federal Trade Commission is a member of the interagency Financial Fraud Enforcement Task Force. For more information on the Task Force, visit www.stopfraud.gov.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the judge.

FTC Does Mortgage Loan Audits is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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For the moment and most-likely for a long time to come the answer is no. The problem is not one of technology — if you can order everything from shoes to software online then why not closing papers? — instead the barriers involve conflicting interests and long-time legal standings.

As an example, the HUD has announced that it would accept electronic signatures for FHA loans “on third party documents included in the case binder for mortgage insurance endorsement.”

Okay, so what’s a third-party document?

“Third party documents, says HUD, “are those that are originated and signed outside of the mortgagee’s control, such as a sales contract. An indication of the electronic signature and date should be clearly visible when viewed electronically and in a paper copy of the electronically signed document. Mortgagees must employ the same level of care and due diligence with electronically signed documents that they would for paper documents with ‘wet’ or ink signatures.”

Notice that HUD does NOT include a number of core documents where electronic signatures are permissible. According to HUD, mortgage documents — including the mortgage note — must have regular signatures. Also, the HUD-1 and the sale agreement must be signed by humans.

The reason electronic signatures are not allowed for mortgage documents is that they were created by the lender are the lender is not a third party.

Barriers

Okay, why not allow electronic signatures for all real estate paperwork?

The reason is to assure with total certainty that the buyer and seller really and truly saw the documents they signed, had an opportunity to read them and that no one other than the buyer and the seller signed the HUD-1, the sale agreement or the mortgage note — the central papers of most real estate transactions.

Will this change in the future? Not soon. The reason is that many different parties to the transaction — the buyer, seller, closing agent, lender and others all want documents with original signatures. So while some paperwork can be done electronically, some cannot.

For the latest information speak with local brokers, attorneys and closing agents in your community.

Can We Have A Paperless Real Estate Closing? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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A closing, settlement or escrow is merely an accounting of who owes what to whom. Among the interests represented at the closing table are not only the buyer and seller, but also the government (it wants taxes), brokers (they want commissions for their work), lawyers (they want to be paid for their services), title insurance companies (they need to collect their premiums) and everyone else with a claim for payment.

Closing Foreclosure

With a closing for a foreclosed property you still have various players and interests who need to be paid. However, there are some differences.

First, in some cases the seller is also providing the cash needed to finance the deal. Since the seller of a foreclosure is the lender, this can make sense for everyone if the mortgage terms are competitive.

Second, while buyers normally want good, marketable and insurable title, with a foreclosure they may get no more than a quitclaim deed. Such a deed merely says that whatever interest is held by the seller is now the property of the buyer. If the seller’s interest is bogus or nonexistent, then that’s what the purchaser has lawfully been sold.

Third, because the seller is a lender in general and maybe the source of financing for this transaction — and because the buyer may not be getting a general warranty deed or a special warranty deed — buyers should work with both real estate brokers and attorneys who specialize in real estate when purchasing foreclosure properties.

What Makes A Foreclosure Settlement Different? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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