Fannie Mae to allow troubled homeowners to rent back homes

Mortgage titan Fannie Mae said it will begin allowing homeowners facing foreclosure to rent back their homes for up to one year in a move aimed at keeping a stack of foreclosures on its books from hitting the market, which is just beginning to show signs of recovery.

The new program is meant for troubled borrowers who don't qualify for or haven't been able to get a loan work-out, such as a modification, according to Fannie's news release.

Under the Deed for Lease program, the borrower would transfer title to the property to the lender by completing a deed in lieu of foreclosure and then rent back the house at market rates -- which in many markets have fallen over the last year and probably would be cheaper than a mortgage payment on a loan made during the boom years.

-- Alejandro Lazo

Photo: Rows of homes in Las Vegas. Credit: Bloomberg

BofA says it will meet goals under Obama foreclosure plan

The big banks that provide customer service on most U.S. home loans had egg on their faces in August, when the U.S. Treasury reported that they had made little progress toward modifying mortgages under President Obama’s then-newly implemented anti-foreclosure program.

The No. 1 servicer, Bank of America Corp., was the slowest of all to generate what the administration called Making Home Affordable modifications. Bank of America had offered three-month trial modifications to just 4% of the customers deemed likely to qualify, compared with 9% for all servicers combined, the Treasury announced.

The Treasury is set to release its third monthly report on the program Thursday. And this time, Bank of America says that it has gotten up to speed and will meet an Obama-set goal of starting 125,000 trial mortgage modifications by Nov. 1. (In all, the company services 14 million home loans.)

Bank of America, including the Countrywide Home Loans operations it acquired last year, had started more than 27,000 Obama-style trial modifications as of the end of July. That number reached 59,000 by the end of August, about 95,000 as of Sept. 30, and is now well above 100,000, said Steve Bailey, the bank’s home-retention strategies executive.

"Obviously, we’re feeling pretty good about the program," Bailey said.

Before the federal foreclosure-prevention plan emerged, Bank of America already was doing loan modifications to comply with its settlement of lawsuits brought against Countrywide by state regulators.

That program involved lowering and suspending interest payments, as well as extending the payback time on certain subprime and exotic loans. The goal was to get first-mortgage payments down to 34% of borrowers’ incomes.

The Obama program introduced some twists, including bonuses for borrowers who stay current on loans and paying servicers to reduce the first-mortgage payments (including taxes and interest) down to just 31% of borrowers’ gross earnings.

It also mandated the three-month trial modifications, during which time borrowers would prove they could make the lower payments and provide additional documentation before qualifying for long-term loan restructurings.

Bailey said Bank of America had done hundreds of thousands of modifications outside the Making Home Affordable plan, although the federal program is its first alternative these days.

It wasn’t possible to obtain details Wednesday on how modifications are going at mortgage rivals Wells Fargo & Co. and JPMorgan Chase & Co.

But there should be a lot more information Thursday in the Treasury report, which presumably will be posted on the department’s press release site.

-- E. Scott Reckard

Los Angeles mortgage modification event begins Thursday

More than 50,000 homeowners are expected to begin streaming through the Los Angeles Convention Center on Thursday, hoping for a hand in restructuring their mortgages or avoiding foreclosure.

The free five-day event, running through Monday, is organized by Boston-based Neighborhood Assistance Corp. of America. NACA hosted similar meetings nationwide this summer that attracted more than 180,000 participants.

Counselors at 360 computer stations will scan homeowners’ mortgage documents and send electronic files to nearly 2,000 on-site servicers and lenders, including representatives from Wells Fargo & Co., JPMorgan Chase & Co. and Bank of America Corp., who will negotiate more affordable loans.

“People usually call up the servicers and get the runaround,” NACA Chief Executive Bruce Marks said. “But here, there’s nothing to lose and everything to gain.”

The event will cost about $1 million, funded by federal grants. Boston-based nonprofit National Consumer Law Center released a study today of 25 foreclosure mediation programs from 14 states, including California, and concluded that most were inefficient.

The law center said that procedural barriers often kept homeowners from participating in those programs, and that mortgage servicers were rarely required to provide documentation or more affordable alternatives.

Rafael Mayo, 41, said NACA helped save his home from foreclosure by pushing both his 5% and 11% interest-only mortgages down to two 2% fixed-rate loans, saving him $850 a month.

“We were one foot inside the safety line, one foot outside,” he said.

The Save the Dream tour launched in Cleveland with 35,000 participants before moving to Chicago and St. Louis. Other stops will include Phoenix, Las Vegas and San Francisco.

Participants can register for appointments at www.naca.com or toll-free at (888) 499-6222.

-- Tiffany Hsu

Tips to avoid loan modification scams

The Federal Trade Commission has teamed with local and state authorities in a nationwide crackdown on loan adjustment scams, as reported in the Business section of The Times.

But one of the biggest challenges the FTC and its allies are up against is reaching homeowners looking to stave off foreclosure before the scammers reach them and dupe them, promising mortgage modification services that they never deliver.

The FTC produced a video on how to avoid scams as part of its inter-agency crackdown, dubbed "Operation Loan Lies," which can be watched and downloaded at www.ftc.gov/YourHome, or below.



The FTC's video, "Real People, Real Stories," is also available in Spanish, which can also be seen below.



For those seeking to lower their monthly home loan payments, here are some tips on avoiding scams. The suggestions come from the FTC and the office of California Atty. Gen. Jerry Brown:

• The first thing anyone seeking to modify an existing loan should do is call his lender.

• Lenders want to hear from homeowners and will probably be more willing to work directly with them than with a foreclosure consultant. Do not ignore letters from your lender. Many lenders are willing to work with homeowners who are behind on their payments.

• Contact housing counselors approved by the U.S. Department of Housing and Urban Development, who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at (800) 569-4287 or www.hud.gov.

• It is illegal for foreclosure consultants to demand money before they give you a written contract  and before they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan.

• However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the California Department of Real Estate for review.

• Do not transfer title or sell your house to a "foreclosure rescuer." Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later.

• Fraudulent foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. Beware -- this is a common scheme so-called rescuers use to evict homeowners and steal all or most of the home's equity.

• Do not pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

• Do not sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the "rescuer" who is actually a scammer.

Homeowners who think they have been ripped off can file a complaint with the California Department of Real Estate through their website here. The department also offers tips on how to avoid getting scammed and what to do if you think you've been scammed here.

Complaints can also be made directly to the FTC by phone at (877) 382-4357, the FTC's Headquarters or Financial Services Division in Washington, D.C., at (202) 326-2222. The FTC also has regional offices; in San Francisco at 901 Market St. and in Los Angeles at 10877 Wilshire Blvd.

HUD can set up homeowners with personalized guidance from housing counseling agencies they've certified at (888) 995-4673. More information on how to find free certified counseling services is available at HUD's guidance website at www.hopenow.com or the Obama Administration's website loan modification website, www.makinghomeaffordable.gov.

-- Nathan Olivarez-Giles

Lawsuits filed against 21 people, 14 companies suspected in loan rescue scams [Updated]

The Federal Trade Commission and California Atty. Gen. Jerry Brown unveiled lawsuits today designed to shut down 14 Southern California companies and 21 people accused of running loan-modification scams that ripped off thousands of struggling homeowners looking to avoid foreclosure.

The lawsuits were announced as part of a nationwide crackdown on foreclosure rescue scams known as "Operation Loan Lies," which pairs the FTC with state and local authorities to go after fraudulent companies preying on homeowners desperate for mortgage relief.

Under the operation, 189 lawsuits, cease-and-desist orders and other legal actions have been filed in 20 states,  FTC Chairman Jon Leibowitz announced at a morning press conference held with Brown in downtown Los Angeles.

Such fraudulent schemes are rampant in California, Leibowitz said.

"Part of the reason why we're out here today is because California consumers have been among the most hard hit and also because a lot of these malefactors are based in Orange County," Leibowitz said. "It's one of the hotbeds of mortgage scam activity."

Brown and the FTC are demanding millions in civil penalties, restitution for scammed homeowners and permanent injunctions to prevent the defendants and companies from offering mortgage-relief programs.

In documents filed in U.S. District Court in Los Angeles and Orange counties, Brown and the FTC allege that the California firms charged from $500 to $5,500 in upfront fees for loan modification services, often promising to help modify mortgages to make payments more affordable.

Firms named in the suits include:

• U.S. Homeowners Assistance, based in Irvine, and its executives Hakimullah "Sean" Sarpas and Zulmai Nazarzai. U.S. Homeowners Assistance also did business as Statewide Financial Group Inc.

• U.S. Foreclosure Relief Corp. and its legal affiliate, Adrian Pomery, based in the city of Orange

• Home Relief Services, with offices in Irvine, Newport Beach and Anaheim, and its legal affiliate, the Diener Law Firm

• RMR Group Loss Mitigation and its legal affiliates Shippey & Associates and Arthur Aldridge. RMR Group has offices in Newport Beach, Orange, Huntington Beach, Corona and Fresno

• United First Inc. and its lawyer affiliate, Mitchell Roth, based in Los Angeles.

Representatives for the accused companies and individuals weren't immediately available for comment.

[Updated at 11:55 a.m., July 16: An earlier version of this post described We Beat All Rates and U.S. Homeowners Preservation Center as alternate business names of U.S. Homeowners Assistance. Those two companies aren't affiliated with U.S. Homeowners Assistance and were sued separately.]

 -- Nathan Olivarez-Giles

Loan modifications result in higher payments

Loans modified but payments aren't lower? From the Associated Press at latimes.com:

WASHINGTON -- Though lenders are boosting their attempts to curb record-high home foreclosures, fewer than half of loan modifications made at the end of last year actually reduced borrowers' payments by more than 10 percent, data released today show.

The report, based on an analysis of nearly 35 million loans worth more than $6 trillion, was published by the federal Office of theComptroller of the Currency and the Office of Thrift Supervision. It provides the most detailed and broad analysis to date of efforts to stem the foreclosure crisis, which President Barack Obama is trying to combat with a $75 billionplan to promote loan modifications.

The report helps explain why many loans are falling back into default after being modified. Many borrowers and consumer groups contend that the modifications offered by the lending industry aren't very generous, despite more than a year of public prodding from regulators.

For instance, nearly one in four loan modifications in the fourth quarter actually resulted in increased monthly payments.

Unbelievable. What was the point of all this?

--Lauren Beale

Thoughts? Comments?

How California loan 'workouts' are working out

Figures on how many Californians have been able to get their mortgages modified come from today's Sacramento Bee story, "Lenders modified 136,785 mortgages under state deal":

Lenders that agreed to voluntarily step up loan modifications in a November 2007 agreement with Gov. Arnold Schwarzenegger rewrote terms of 136,785 troubled California mortgages in 2008, the state reported Monday.

More than half of loan workouts by year's end involved lowered interest rates to trim monthly payments and keep people in their homes, the state data show. Such modifications accounted for 58 percent of workouts in December, according to an analysis posted on the state Department of Corporations website.

Schwarzenegger, who corralled lenders into the nation's first voluntary loan agreement 16 months ago, said the results exceeded his goal of 100,000 modifications during 2008....

At least 10 major lenders and several smaller ones report loan workouts to the state as part of the governor's agreement. Their loans represent "easily more than half the market in California," said DOC spokesman Mark Leyes.

Major participants include Countrywide Home Loans, Carrington Mortgage Services, GMAC Mortgage LLC, Litton Loan Servicing, HomeQ Servicing, Ocwen Loan Servicing and Wilshire Credit.

In 2008, California saw 237,131 foreclosures, 2.8 percent of its 8.5 million homes and condos.

Some L.A. Land readers have reported success with loan mods and others, frustration. The story goes on to say lenders are most reluctant to just take the deed in lieu of foreclosure or reduce the principal. Interest rate cuts were the major modification tool, temporary suspension of payments and, in the second half of the year, short sales gained use.

--Lauren Beale

Thoughts? Comments?

Photo: Arnold Schwarzenegger, state governor and former body builder, has long been a supporter of workouts. Credit:  STR / EPA

White House unveils 'Making Home Affordable' plan

Do you fit into the White House housing plan? From the "$75-billion housing plan unveiled" report today at latimes.com:

The Obama administration today released details of its $75-billion plan to stabilize the housing market by helping as many as 9 million homeowners refinance or modify their mortgages.

"Two weeks ago, the president laid out a clear path forward to helping up to 9 million families restructure or refinance their mortgages to a payment that is affordable now and into the future," Treasury Secretary Tim Geithner said in a news release. "Today, we are providing servicers with the details they need to begin helping eligible borrowers."

The administration's "Making Home Affordable" housing plan has two main parts -- one aimed at prudent homeowners who would like to refinance into a lower rate, and another aimed at struggling homeowners seeking a way to lower burdensome monthly mortgage payments.

Details of the eligibility requirements for both programs have been posted on the government's economic recovery website: www.financialstability.gov/.

How many people might fall within the guidelines was the recent subject of analysis by Zillow, the online real estate site, which found that 9% of mortgage holders in the Los Angeles metropolitan statistical area met the parameters for part one of the plan as compared with 25.1% nationwide. Zillow explains:

This would mean that 91% of loan holders do not qualify for part 1 because they have:

-- A loan to value ratio of less than 80% and can refinance under traditional terms.

-- A conforming loan but exceeds the 105% qualifier: 8% ( 182,916 mortgages)

-- Both a jumbo (non-conforming) loan and a loan to value ratio of greater than 105%: 7.5% (171,761 mortgages)

-- A jumbo loan and fall between 80%-105% loan to value ratio -- the jumbo loan automatically disqualifies them: 7.6% (173,160 mortgages)

Not surprising, that we're out of the norm here with high home prices, steep value drops and lots of jumbo loans.

-- Lauren Beale

Thoughts? Comments?

Photo: Treasury Secretary Timothy Geithner. Credit: Susan Walsh / Associated Press

Inevitable inequity in the housing plan

"Finessing 'Moral Hazard' Is Tough in Housing Plan," published Saturday in the Wall Street Journal, looks at some of the arguments put forth by the plan's critics, many of which have been discussed here at L.A. Land. But here's one I hadn't thought of:

Someone working two or three jobs to make ends meet, for instance, may decide to give up one job in order to show a lower income. "Five years ago, if you really wanted to buy a house, you would do whatever you could to show every income source to make it as high as possible," says Tom Lawler, an independent housing economist. Now, borrowers seeking help "will want to show a low income." Borrowers with substantial assets but moderate incomes may also be able to get help, he adds.

The whole issue of who will qualify for the modifications and who won't seems to be filled with land mines. Offering a counterpoint was "Obama recovery plan stimulates whining" Monday at latimes.com:

... a certain amount of inequity is built into any government assistance program, but it gets trumped by society's needs in times like these. "Life is unfair," Tom Davidoff, a real estate expert at UC Berkeley's Haas School of Business, observes apropos of the housing bill. "We're doing this so the economy won't crash."

OK. So maybe inequity is inevitable. Just a wild idea, but why not limit those who get the mods to only being able to keep a small percentage of any appreciation down the road, like 2% a year, and the rest goes back to taxpayers at resale? (Low sales to family members not allowed.) Oh, that would probably end up in the hands of the lenders anyway. Perhaps L.A. Landers have other creative ideas. The floor is open. 

-- Lauren Beale

Thoughts? Comments?

Photo: A home in San Antonio under the threat of foreclosure. Credit: Eric Gay / Associated Press
 

RELATED POSTS:

Will the housing plan do enough to help Californians?

White House fact sheet: Homeowners Affordability and Stability Plan

Several lenders apply brakes to foreclosures

"Obama to outline plan to help struggling homeowners next week; major lenders halt foreclosures," from the Associated Press:

Several major banks are expanding their efforts to halt home foreclosures while the Obama administration develops its plan to help struggling homeowners.

The White House said President Barack Obama on Wednesday will outline his much-anticipated plan to spend at least $50 billion to prevent foreclosures in a speech in Arizona, one of the states hardest hit by the foreclosure crisis....

JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp. said Friday they are halting foreclosures through March 6. And Citigroup Inc. said its halt will extend until the administration has completed the details of the loan modification program or March 12, whichever is earlier. New York-based Citi's action expands on a similar effort that it started in November.

The banks' pledges apply to owner-occupied homes, not those owned by investors.

Obama's announcement next week is expected to include details about how the administration plans to prod the mortgage industry to do a better job of modifying the terms of home loans so borrowers have lower monthly payments.

So we've gotten a few more details than we gleaned Thursday. It should be another interesting week next week. Stay tuned.

-- Lauren Beale

Thoughts? Comments?

Photo: JPMorgan Chase headquarters in New York.

Credit: Mark Lennihan / Associated Press