Archive for December 2nd, 2010

U.S. Government blesses loan modification fraud

Every time I think the foreclosure fiasco can’t get any worse, it does.  Now, Fannie and Freddie (which are controlled by the U.S. Government and have survived on taxpayer aid, i.e. money from you and me), say it’s okay for foreclosure lawsuits to proceed even as loan modifications are being reviewed/processed – what’s become known as a “dual track” process.

With all due respect, this is a total disgrace and abomination of epic proportions.  To deceive homeowners into thinking a modification can happen, even though their foreclosure lawsuit is proceeding full speed ahead, is deplorable.  For the U.S. Government to advocate that approach, based on tax dollars of you and me, makes me sick to my stomach.  

Please, everyone, don’t take this lying down.  Stand up and fight.  Tell the media, your local congressman, your friends, anyone who will listen – this is wrong. 

Here’s the article…

Federal regulators and lawmakers pressed mortgage guarantors Fannie Mae and Freddie Mac to suspend foreclosure proceedings while distressed borrowers seek new mortgages.

Acting Comptroller of the Currency John Walsh testified at a Senate Banking Committee hearing Wednesday that his agency is directing national servicers to suspend foreclosures for borrowers who are actively seeking to qualify for loan modifications.

Dual-track processing is “unnecessarily confusing for distressed homeowners,” Walsh told the committee, which held its second hearing since allegations of shoddy or fraudulent foreclosure practices arose in September.

Government-controlled Fannie and Freddie, taking congressional questions on the dispute for the first time, insisted that borrowers and lenders both benefit from the dual track process of pursuing foreclosure and loan modification at the same time.

Freddie Mac Executive Vice President Donald Bisenius said that the dual-track process minimizes losses, protects communities from blight and ultimately helps borrowers.

“It is not in the borrower’s interest for the process to drag on indefinitely,” Bisenius said. “The longer the borrower’s delinquency goes uncured, the farther behind he or she gets, and the harder it becomes to bring the loan current.”

A foreclosure can cost $30 to $40 a day, or as much as $15,000 a year, Bisenius said.

Congress is examining the foreclosure process after Ally Financial Inc.’s GMAC Mortgage unit, JPMorgan Chase & Co. and Bank of America Corp. temporarily halted home seizures in September amid claims that legal documents were mishandled.

At the hearing, lawmakers questioned bank regulators about what actions they have taken to ensure that home seizures are fair and legal. They also criticized dual-track processing as confusing and sometimes unfair.

“Countless constituents have told us stories of being stonewalled by banks for very long periods of time, of not being told the reasons for their rejection of their modification request, of significant delays caused by banks losing their paperwork, and trial modifications canceled with no rationale,” said Sen. Robert Menendez, D-N.J. “That just can’t continue to happen.”

Federal Reserve Board Governor Daniel K. Tarullo called the system “literally a race between foreclosure and modification” and called for national standards on loan servicers.

“The problems are sufficiently widespread that they suggest structural problems in the mortgage servicing industry,” he said. “It has now become evident that significant parts of the servicing industry also failed to handle foreclosures properly.”

Attorneys general, consumer advocates and congressional lawmakers have said that problems in the housing system are further complicated because delinquent homeowners seeking to renegotiate their loans through government- or bank-sponsored programs such as the Home Affordable Modification Program are often surprised and confused to discover that their foreclosures haven’t been suspended.

Freddie Mac, Fannie Mae and other purchasers of home loans, including the Association of Mortgage Investors, said the dual-track system balances the interests of everyone involved.

“While we believe that borrowers who already are under significant stress arising from their financial situations should not be subjected to needless confusion, we also believe that unnecessary delays in an already lengthy foreclosure process would be counterproductive,” Bisenius said.

His comments were echoed by Terry Edwards, executive vice president at Fannie Mae. The two mortgage companies are controlled by the U.S. government and have been surviving on taxpayer aid since 2008.

The average foreclosure takes 449 days, Bisenius said, which provides sufficient time to explore alternatives. The company and its servicers suspend foreclosures when a loan workout, short sale or other option becomes viable, he said.

Mark Stopa

Posted in Main | 3 Comments »