economics

January 10, 2011

Facing Scrutiny, Banks Slow Pace of Foreclosures By DAVID STREITFELD Published: January 8, 2011

Filed under: Uncategorized — ktetaichinh @ 5:06 pm
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PHOENIX — An array of federal and state investigations into the way banks foreclose on delinquent homeowners has contributed to a sharp slowdown in foreclosures across the country, especially in hard-hit cities like this one.
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Joshua Lott for The New York Times

Jonathan Arebalo auctions foreclosed homes outside a courthouse in Phoenix.
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Over the last several months, some banks have been reluctant to seize homes from distressed borrowers, economists and government officials say, as they face scrutiny from regulators and the prospect of sanctions when investigations wrap up in the coming weeks and months.

The Obama administration, in its most recent housing report, said foreclosure activity fell 21 percent in November from October, the biggest monthly decline in five years. Here in Phoenix, foreclosures fell by more than a third in the same period, reflected in the severe drop in foreclosed homes being auctioned on the courthouse plaza.

“There’s no product, just nothing to buy,” complained Sean Waak, an agent for investors, during a recent auction.

The pace of foreclosures could be curtailed further by courts. In a closely watched case, the highest court in Massachusetts invalidated two foreclosures in that state on Friday. The court ruled that two banks, U.S. Bancorp and Wells Fargo, failed to prove they owned the mortgages when they foreclosed on the homes.

If the slowdown continued through this month and into the spring, it could be a boost for the economy. Reducing foreclosures in a meaningful way would act to stabilize the housing market, real estate experts say, letting the administration patch up one of the economy’s most persistently troubled sectors. Fewer foreclosures means that buyers pay more for the ones that do come to market, which strengthens overall home prices and builds consumer confidence in housing.

“Anything that buys time, that reduces the supply of houses coming onto the market, is helpful,” said Karl Guntermann, a professor of real estate finance at Arizona State University.

It is not that borrowers have stopped defaulting on their mortgages. They are missing payments as frequently as ever, data shows. But the lenders are not beginning formal foreclosure proceedings or, when they are, do not complete them with an auction sale. And in the most favorable outcome for distressed borrowers, some lenders are modifying loans so foreclosure becomes unnecessary.

The drop in foreclosures began in late September when some lenders were revealed to have been using so-called robo-signers to process thousands of foreclosures without verifying the accuracy of the data. As the investigations into the problems proceeded, the uncertainty caused many lenders to become more cautious.

Their foreclosure procedures, the banks have repeatedly said, are sound. But preliminary results of several of the investigations have indicated substantial problems. Coordinating many of the inquiries is the Financial Fraud Enforcement Task Force, established by President Obama.

“The administration is committed to taking appropriate action on these issues where wrongdoing has occurred,” said Melanie Roussell, an administration spokeswoman.

The diminished supply of foreclosed homes has already had an effect on prices at the auctions on the courthouse plaza here, bidders said.

Houses change hands on the plaza with a minimum of ceremony. Three sets of trustees hired by the banks sit a few feet apart, their backs to a statue of a naked family looking for all the world as if its members had just been cast out of their home. The trustees call off properties in a monotone to bidders clustered around them. Winners must immediately hand over a $10,000 deposit in the form of a cashier’s check.

On a recent afternoon, one bidder, Pam Mullavey of Infoclosure, found herself in a bidding war with Chris Romuzga of Posted Properties for a 2001 house that had fetched $644,000 at the very peak of the boom.

This time around, the bank set the floor at $271,000. Ms. Mullavey and Mr. Romuzga rapidly pushed up the price in varying increments of $100 and $500. Mr. Romuzga’s client had planned to pull out at $307,000 but asked him to keep bidding as Ms. Mullavey sailed on. Her winning bid was $310,100, well above what a similar house might have fetched just a few months ago.

“Sometimes I wonder why people are bidding so much,” Ms. Mullavey said.

For Mr. Romuzga, it was the fourth time that afternoon he had been outbid. Only once had he secured a property.

The investors’ frustration could be a good thing for Phoenix homeowners, who have seen values fall 54.5 percent since 2006. In the last few months, home prices have started to drop again. A decline in foreclosures, economists say, could break the fall.

Cameron Findlay, chief economist with the mortgage company LendingTree, said that the shifting behavior of lenders had helped change perceptions about the foreclosed.

“Initially, society’s view was to run them out of the house,” he said.

That resulted in vacant and dilapidated homes, which blighted neighborhoods and drove potential buyers away.

“People should be hopeful the modification programs work — for their own benefit,” said Mr. Findlay.

More than four million households are in serious default and vulnerable to losing their homes. Lenders maintain that cases of borrowers improperly foreclosed are extremely rare.

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January 29, 2010

Yet another try at foreclosure rescue

Filed under: Uncategorized — ktetaichinh @ 2:19 am
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By Tami Luhby, senior writerJanuary 28, 2010: 2:43 PM ET

NEW YORK (CNNMoney.com) — Under fire for the low number of people receiving long-term mortgage help, the Treasury Department on Thursday announced new guidelines that will require applicants to provide all paperwork before getting a trial modification.

The new policy will make it harder for troubled homeowners to start the process, but it should make it easier for them to qualify for permanent assistance under President’s Obama foreclosure prevention plan.

The administration’s $75 billion housing effort has been plagued by paperwork problems since it launched last April.

Borrowers complain that their loan servicers constantly ask for additional documents and lose their forms. Servicers, meanwhile, say that borrowers are not handing in all that’s needed.

The new rules, which start June 1, will effectively shift the paperwork burden to the start of the process.

“They aim to make it easier and quicker to provide permanent modifications,” said Treasury Assistant Secretary Herb Allison. “These changes also will enable servicers to process more efficiently and handle more volume effectively so we can help more people more rapidly.”

Distressed borrowers will have to fill out a three-page request form that asks them to explain their hardship and list their income and expenses. They will also have to sign an IRS 4506-T form that allows servicers to pull their tax returns. Both forms are available on the Making Home Affordable program’s Web site.

Also, applicants will have to verify their income. For those earning a salary, two recent pay stubs will be sufficient. Other earnings, such as income from self-employment, benefits, or rental properties, must still be documented.

Those who are approved for trial adjustments and make three timely payments will be automatically converted to long-term modifications.

Returning to the original plan

Under the original plan, borrowers were supposed to submit their documents before entering a three-month trial period. The trial was a time that borrowers had to prove their could make the requirement payments.

The program, however, was slow to start as servicers were deluged by applications. In order to get more people into trial modifications, the administration started allowing servicers to approve borrowers’ applications as long as they met the minimum requirements and to track down the necessary documents during the trial period.

The problem then shifted to converting those in the trial modifications to permanent assistance. Servicers attributed the slow pace to the fact that they didn’t have all the needed forms. The Treasury Department responded by lengthening the trial period to five months and lightening the documentation requirements.

Coming under fire once again, the administration in late November ramped up pressure on servicers to convert borrowers to permanent modifications.

As for the end of the year, some 66,500 people have received permanent adjustments, with another 787,200 homeowners in trial modifications.

A Treasury spokesman acknowledged that fewer people will get trial modifications under the new rules, but more of those who make into the program will receive long-term help.

Those already in trial modifications

The administration also reiterated that servicers must review all those currently in trial modifications and determine whether they have been timely with their payments and have handed in their paperwork.

Those who haven’t handed in any documents or have missed payments will be denied permanent modifications, according to the Treasury guidance. These borrowers must be considered for other foreclosure prevention alternatives, such as servicers’ own programs or short sales.

In the case of those who are on time with their payments but have submitted only some documents, servicers must attempt to obtain the required paperwork. If they cannot, then the borrower will be kicked out of the program.

Borrowers have the right to appeal denials.

Some 450,000 people could be at risk of being denied permanent help because of paperwork problems, according to Richard Neiman, the New York banking superintendent who serves on the State Foreclosure Prevention Working Group. He urged Treasury officials last week to reduce the documents requirements and to make it easier for borrowers to submit forms. To top of page

January 2, 2010

U.S. Loan Effort Is Seen as Adding to Housing Woes

Filed under: Uncategorized — ktetaichinh @ 9:36 pm
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Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”

Mr. Katari contends that banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues

“Then the carpenters can go back to work,” Mr. Katari said. “The roofers can go back to work, and we start building housing again. If this drips out over the next few years, that whole sector of the economy isn’t going to recover.”

In late November, with scant public disclosure, the Treasury Department started the Foreclosure Alternatives Program, through which it will encourage arrangements that result in distressed borrowers surrendering their homes. The program will pay incentives to mortgage companies that allow homeowners to sell properties for less than they owe on their mortgages — short sales, in real estate parlance. The government will also pay incentives to mortgage companies that allow delinquent borrowers to hand over their deeds in lieu of foreclosing.

Ms. Reilly, the Treasury spokeswoman, said the foreclosure alternatives program did not represent a new policy. “We have said from the start that modifications will not be the solution for all homeowners and will not solve the housing crisis alone,” Ms. Reilly said by e-mail. “This has always been a multi-pronged effort.”

In late November, with scant public disclosure, the Treasury Department started the Foreclosure Alternatives Program, through which it will encourage arrangements that result in distressed borrowers surrendering their homes. The program will pay incentives to mortgage companies that allow homeowners to sell properties for less than they owe on their mortgages — short sales, in real estate parlance. The government will also pay incentives to mortgage companies that allow delinquent borrowers to hand over their deeds in lieu of foreclosing.

Ms. Reilly, the Treasury spokeswoman, said the foreclosure alternatives program did not represent a new policy. “We have said from the start that modifications will not be the solution for all homeowners and will not solve the housing crisis alone,” Ms. Reilly said by e-mail. “This has always been a multi-pronged effort.”

Mr. Zandi proposes that the Treasury Department push banks to write down some loan balances by reimbursing the companies for their losses. He pointedly rejects the notion that government ought to get out of the way and let foreclosures work their way through the market, saying that course risks a surge of foreclosures and declining house prices that could pull the economy back into recession.

Under the current program, the government provides cash incentives to mortgage companies that lower monthly payments for borrowers facing hardships. The Treasury Department set a goal of three to four million permanent loan modifications by 2012.

“That’s overly optimistic at this stage,” said Richard H. Neiman, the superintendent of banks for New York State and an appointee to the Congressional Oversight Panel, a body created to keep tabs on taxpayer bailout funds. “There’s a great deal of frustration and disappointment.”

As of mid-December, some 759,000 homeowners had received loan modifications on a trial basis typically lasting three to five months. But only about 31,000 had received permanent modifications — a step that requires borrowers to make timely trial payments and submit paperwork verifying their financial situation

Almost three-quarters of a million Americans now are benefiting from modification programs that reduce their monthly payments dramatically, on average $550 a month,” Treasury Secretary Timothy F. Geithner said last month at a hearing before the Congressional Oversight Panel. “That is a meaningful amount of support.”

But mortgage experts and lawyers who represent borrowers facing foreclosure argue that recipients of trial loan modifications often wind up worse off.

In Lakeland, Fla., Jaimie S. Smith, 29, called her mortgage company, then Washington Mutual, in October 2008, when she realized she would get a smaller bonus from her employer, a furniture company, threatening her ability to continue the $1,250 monthly mortgage payments on her three-bedroom house.

December 11, 2009

Istithmar Loses W Hotel Union Square in Foreclosure Auction

Filed under: Uncategorized — ktetaichinh @ 4:16 am
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Bloomberg NewsThe W Hotel in New York’s Union Square, shown late last month, now stands as a high-profile loss for Dubai World.

WHOTEL

WHOTEL

November 29, 2009

Foreclosure Protections for All

Filed under: Uncategorized — ktetaichinh @ 7:14 pm
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LAST year, a new law was put into place in New York to help protect subprime mortgage borrowers from foreclosure. Now the state is on the verge of extending similar protections to prime borrowers, too.

A bill passed by the State Legislature this month would require, among other things, that lenders give all borrowers 90 days’ warning before starting foreclosure proceedings and that they take part in settlement conferences with borrowers before proceeding with a foreclosure action. The bill also covers co-op owners.

Gov. David A. Paterson is expected to sign the legislation; most of the measures would then take effect within two months.

Richard J. Biondi, the immediate past president of the New York Association of Mortgage Brokers, said the new legislation was welcome, if a bit overdue. “It’s terrific that they finally opened the door to prime borrowers and made these protections available,” he said.

Richard H. Neiman, the superintendent of the New York State Banking Department, said that given the recent deadlock in the Legislature, he was pleased by the speed with which the bill was passed.

Of the nearly 20 measures in the legislation, mandatory mediation could provide the most relief for struggling borrowers, some of whom have been unable to get their lenders to consider loan modifications. Because of the high volume of mortgage defaults, many lenders have been unable to keep pace with such inquiries from borrowers.

The foreclosure mediation, free for homeowners, would require lenders to provide a representative at a certain date and place. Lenders may be subject to sanctions if they fail to come with financial documents and other information required by mediators.

New York’s mediation program for subprime borrowers has had only limited success, its administrators say, in large part because borrowers often do not attend the sessions.

Under the new legislation, when lenders notify the state of an impending foreclosure action, the state must send the borrower’s name to housing counseling agencies, which can then inform the borrower about foreclosure avoidance strategies like the mediation program.

The new measures relating to co-ops, meanwhile, highlight the difficulties faced by those who fail to make their monthly maintenance payments, which go toward building expenses and the building’s underlying mortgage.

Co-op units do not fit the legal definition of real property, and therefore do not qualify for the protections of traditional foreclosure processes. As a result, Mr. Neiman said, co-op owners can often be forced to evacuate a unit within two months of the time their building’s board takes formal action against a nonpaying resident. Now that the new law gives occupants 90 days before they lose their ownership shares, he said, owners will have more time to seek help.

The legislation also includes protections for tenants of multifamily housing units that go into foreclosure.

Jane Azia, the director of nondepository institutions and consumer protection for the State Banking Department, says that because New York’s housing market includes a heavy mix of multifamily units, the protections for tenants are especially meaningful. By law, she said, a lender can evict tenants only after a foreclosure judgment, which typically takes about 15 months in the state.

“There are tenants out there who are harassed into leaving after the foreclosure process begins,” Ms. Azia said, “and they aren’t aware of their rights.”

The new law would give tenants more time to get out, but Mr. Biondi of the New York Mortgage Brokers Association said this measure could further damage the financial health of lenders.

“Tenants will probably just stop making payments,” he said. “And for lenders, getting any sort of legal enforcement against that will probably be difficult in the current environment.”

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