MN Attorney General Proposes Foreclosure Relief, Fannie/Freddie to Suspend Foreclosures

MN Attorney general Lori Swanson proposed mandatory mediation for foreclosures at a press conference yesterday.  Strib reports:

The Homeowner Lender Mediation Act, patterned after a program from the mid-1980s that helped about 14,000 Minnesota farmers stay on their land, would put a foreclosure on hold for three months if a borrower asks to renegotiate mortgage terms to an affordable level.

So this is essentially a foreclosure moratorium under separate cover.  To which we say: Fine. Great. To the extent that it helps lenders and borrowers make rational decisions, and gets servicers that aren't negotiating in good faith with borrowers to the bargaining table, it's a good thing.

We do maintain a healthy skepticism about the extent of relief a moratorium of any kind will bring.  There are simply many, many foreclosures that will happen, no matter what. It is an unfortunate fact of a declining real estate market and faltering economy.

Also, as we shared with Chris Snowbeck at the Pioneer Press on this subject, if we are going to enlist the power of the state to professionally renegotiate mortgage terms on behalf of borrowers, there's real concern in many quarters that we are rewarding many that, perhaps, took ill-considered risks, and punishing those who stayed within their means. A quick scan of the angry comments on this article at the Strib is telling.

That said, with Fannie and Freddie announcing their own foreclosure moratorium, we're mostly beyond the point where flip arguments about "moral hazard" and "unintended consequences" are even relevant to the current conversation.  The banks, the servicers, and the borrowers need time.  Time to get control of the process and allow other relief efforts to take effect.

11/21/08 at 06:13 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Consumer Protection, Credit Crunch, Fannie Mae, Foreclosures, Freddie Mac

WCCO: Local Couple Among Thousands Whose Personal Data was Sold by CountryWide Employee

WCCO has brought forth a local couple who's information was sold, along with thousands of others, in a data theft by a Countrywide employee.  Check out the Video here.

The news on this data theft is nearly a month old, so in all likelihood, if you haven't gotten a letter yet, your data was not sold.  Countrywide is offering free credit monitoring to the customers whose info was stolen.

As a "servicy" aside:  Credit monitoring is probably the single best defense against identity theft, and we recommend it for everyone.  There are lots of providers, but for our money, the credit monitoring options at Fair Isaac's consumer website, www.myfico.com are tough to beat.  $5.00 per month is cheap insurance, after all.

09/15/08 at 03:15 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Consumer Protection

Minnesota Mortgage Industry Regulation Having the Desired Effect

"We wanted to make tougher to be in this business, and it's working,"
                            ~ MN Commerce Department spokesman Bill Walsh

Word.

Minnesota's tougher mortgage industry regulation, passed into law last year, seems to be having the desired effect: Brokers are forfeiting licenses, and there is a fairly broad consolidation move afoot as smaller brokers and their employees are being absorbed by larger, more established local and national outfits.  From the Star-tribune:

The state's 1,319 active originators last week were down from more than 4,000 last year at this time. Many of them surrendered their licenses after new state laws aimed at making it tougher to be in the mortgage business were implemented last year.

On thing to keep in mind here is that less originator licenses don't necessarily mean less people in the business.  Assuredly, many marginal loan originators have simply left the business, particularly in the sub-prime and Alt-a space, but many of these folks simply have merged or consolidated with other lenders, or banks, and no longer needed a separate, stand alone license.

06/02/08 at 09:42 AM Permalink | Comments (4) | TrackBack (0)
Filed Under: Consumer Protection, Real Estate Law, Twin Cities

Lending Tree Lets Data Slip

If being hounded by lenders with questionable motives and expertise isn't enough to steer you away from "Lending Tree" (whom we note has gone the high-profile sports sponsorship route previously tried by Ameriquest, but instead of baseball, with our beloved PGA Tour - excuse us while we puke) how about this:

several former employees" may have shared confidential passwords with "a handful" of lenders that were not approved by the company.

The lenders then used those passwords to access customer information files that contained mortgage request data such as name, address, e-mail address, phone number, Social Security number, income and employment information.

10-1 says these "lenders" or empoyees were selling access to that data.

UPDATE: Sam Glover (of our local Caveat Emptor, riding shotgun over at Consumerist for a couple of days) hoisted this post, along with some correspondence from Lending Tree attorneys who sought the removal of one of the comments.

The backstory:

The attorney, who called twice and emailed three times before noon, requested that we remove the comment by "Lance Moore" below, which contains some interesting and provacative allegations about Lending Tree's business model, among other things.

He first emailed under the cover of "please remove the non-public URL, this guy is encouraging hackers." Then, when we redacted that url, the attorney followed up right away stating that the comment contained numerous "defamatory" comments and again requested that the comment be removed. 

The attorney walked the line pretty carefully, and did not make any explicit threats, but here's the thing:  Any time we get an email from a corporate attorney tossing around jargon like "defamatory" and using interrogative sentences like: "Are you refusing to remove this?" we consider that a veiled, if unspoken, threat of legal action.

After all, if they really wanted the whole comment removed, why didn't they just ask for that in the first place?  That was what struck us as odd, and might mean their motives were not confined to angst over a hackable public url leading to a lender login page.  Maybe related to this? from Sam at Consumerist:

a class-action lawsuit in 2006 alleged just that: banks were not really competing, just LendingTree employees. As far as I can tell, the lawsuit is ongoing.

April 21, 2008

Dear LendingTree Customer:

We want you to know that some loan request forms our customers sent to LendingTree may have been seen by lenders without our consent. These lenders then used the forms to market their own mortgage loans to our customers. While we don't believe that the forms were used for any other purpose, we want you to know what happened and what we did to correct this situation, as well as what you can do to monitor your credit records.

What Happened and What We Did

Recently, LendingTree learned that several former employees may have helped a handful of mortgage lenders gain access to LendingTree's customer information by sharing confidential passwords with the lenders. When we learned of this situation, we quickly contacted the authorities, and LendingTree is helping with their investigation. We promptly made several system security changes. We also brought lawsuits against those involved.

Based on our investigation, we understand that these mortgage lenders used the passwords to access LendingTree's customer loan request forms, normally available only to LendingTree-approved lenders, to market loans to those customers. The loan request forms contained data such as name, address, email address, telephone number, Social Security number, income and employment information. We believe these lenders accessed LendingTree's loan request forms between October 2006 and early 2008.

What You Can Do

Again, we don't believe any identity theft or fraudulent financial activity resulted from this situation. However, we suggest you get a free credit report. Look for any accounts you didn't open and/or inquiries from creditors that you didn't initiate. If you see anything you don't understand, contact the credit bureau. If you see anything suspicious, you may want to file a fraud alert with the bureaus. For more information on how to do this, please refer to LendingTree's Guide to Protecting Your Credit and Identity.

Where to Get More Information

We regret any inconvenience and apologize for any unwanted mortgage calls you may have received. For more information about this situation, and for more information on what you can do, please refer to the attached Questions & Answers .

Sincerely,

R.L. Harris

04/22/08 at 11:09 AM Permalink | Comments (10) | TrackBack (0)
Filed Under: Consumer Protection, Rip-Offs

Star-Tribune on Centennial Mortgage & Funding

Jim Buchta provides some additional color to the story we broke right here yesterday:

Bill Walsh said that such orders, issued in this case for what he calls "substantial financial problems," are unusual for a company this size...in 2006, the latest year for which data was available, Centennial closed 1,828 mortgages.

We'd like to re-iterate the call for any borrowers, employees, (or anyone else) who've been impacted by this shutdown, or have direct knowledge of the goings on to contact us via email, or in the comments below.

03/29/08 at 10:10 AM Permalink | Comments (2) | TrackBack (0)
Filed Under: Breaking News, Consumer Protection, Credit Crunch, Twin Cities

Minnesota Financial Crimes Task Force Dropping Mortgage Fraud from Menu

Not sure how we missed this gem from Jennifer Bjorhus last week (we'll blame the Pioneer Press RSS feed):

As for the Minnesota Financial Crimes Task Force, its 17-member oversight council in January instructed the group to shut the door on mortgage fraud, saying the cases were so time-consuming they threatened to overwhelm the group. Chris Omodt, a Hennepin County Sheriff's lieutenant who heads the task force, said he thinks crimes will go unchecked, but acknowledges it doesn't have the resources

This means that unless a new Minnesota task force is created to specifically tackle mortgage fraud, all of the heavy lifting will be done by the (also overwhelmed) Federal Investigators working locally. 

This in a state that is in the top ten nationally for mortgage fraud.

03/26/08 at 12:43 PM Permalink | Comments (7) | TrackBack (0)
Filed Under: Consumer Protection, Fraud

More on The Foreclosure Moratorium: What Happens After The Deferment is Up?

Answering our own question from yesterday on the proposed (this is not a done deal yet) foreclosure moratorium:

Questions, questions.  Chief among them: What happens when the 12 month deferment period is up?  Can the lender go after the borrower for unpaid principal and interest during the deferment period after it is over? What about unpaid amounts that pre-date the deferment?  If that's the case, aren't we just postponing the inevitable?

We traded emails on this with U of M law professor (and primary architect of Minnesota's Predatory Lending Law) Prentiss Cox, who confirmed our take - The outstanding mortgage debt will not be discharged, and past due principal, interest, and penalties not only carry over, but continue to accrue during the 12 month deferment period.

In other words, even if your subprime loan is not negatively amortizing now, it sure will be after signing up for the deferment. 

The cynical take on this is that all that's being accomplished is a delay of the inevitable - which will be the case for many if not most that qualify for the deferment - but a few folks should and will use this time to get their finances in order, we suppose.

And they better, because if they're underwater now, just wait until a years worth of payment shortfalls rack up.

03/06/08 at 02:39 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Consumer Protection, Foreclosures, Housing Market Politics, Sub-Prime, Twin Cities

Minnesota May Pass Nations Strongest Foreclosure Moratorium

Audio only from MPR.  A few highlights we pulled from a quick listen:

• The measure would block foreclosures for a full year.
• Applys to owner occupied properties only.
• It is intended to force lenders to modifyout the loan, rather than foreclose.
• Borrowers would be required to Keep making payments - 65% of payment at the time of default, or initial interest rate, whichever is lower.

Here's a link to the text of the bill, we'll scan through it and share any further thoughts later:

UPDATE: More highlights, from the bill:

• Loan must have closed between January 1st 2001 and August 1st 2007.
• Must be a sub-prime or a loan with negative amortization for which the minimum payment increased.
• To suspend foreclosure, borrower must send an affidavit to the lender, which states:
  • I am the borrower
  • A foreclosure sale has been scheduled
  • I currently reside at subject property
  • I intend to reside at the subject property for 12 months.
  • I believe that the mortgage loan is sub-prime or has negative amortization and the payment has increased.
• There are criminal penalties (2yrs, $2000 fine) for misrepresentation in affidavit above.
• If the borrower does not make the reduced payment, the lender may re-initiate the foreclosure process and schedule a foreclosure sale.
• During the deferrment period, lender cannot charge an eligible foreclosed borrower any other amount than the reduced payment.

Questions, questions.  Chief among them: What happens when the 12 month deferrment period is up?  Can the lender go after the borrower for unpaid principal and interest during the deferrment period after it is over? What about unpaid amounts that pre-date the deferrment?  If that's the case, aren't we just postponing the inevitable?

Will the wholesale we-writing of these contracts make lenders less likely to lend in MN in the future?

03/05/08 at 02:11 PM Permalink | Comments (2) | TrackBack (0)
Filed Under: Breaking News, Consumer Protection, Foreclosures, Housing Market Politics

Around the Horn: Bernanke on Principal Writedowns. Appraisal Code-of-Conduct Coming Soon

A couple of interesting developments in the mortgage world that are worth pointing out:

Bernanke: Lenders Should Be Writing Down Principal on Troubled Loans
Speaking at the Independent Community Bankers Conference [full text of remarks]:

• "In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure. "
• ...a reduction in principal may increase the expected payoff by reducing the risk of default and foreclosure. "
• A writedown that is sufficient to make borrowers eligible for a new loan would remove the downside risk to investors of additional writedowns or a re-default.

This idea has always made a great deal of sense, in our view, and is nothing more than a simple math problem - if the costs of a principal writedown are less than the projected loss in a foreclosure, write the thing down already.  The trick is here is separating the truly troubled borrower from the opportunist.

Another thorny issue: The idea that a loan reduction large enough to make the borrower eligible for a new loan (so they can refinance elsewhere, limiting the risk of additional writedowns or delinquency) might be easier said than done. These will be 'troubled' borrowers (we presume - these writedowns should not come free of a credit score penalty) with few refinancing options even after principal reduction.  If the decision is made to write down principal, best write it down to the point where default risk is limited, and assume there won't be a lender willing to step in.

Fannie Mae/Freddie Mac Agree to Tighter Appraisal Controls.
A "code-of conduct" greement with NY AG Cuomo attempts to rein-in inflated appraisals by banks and brokers, some highlights from the WSJ:

• The code bars lenders and their representatives from pressuring appraisers to supply inflated estimates of property values.
• Bank employees who are involved in making loans won't be allowed to choose appraisers.
• Lenders won't be able to make loans on the basis of appraisals from their own employees or from other companies they control.
• The code also bars lenders from using appraisals ordered by mortgage brokers.
• The new code does not take effect until next Jan 1st (2008)

This will blow up the business models of more than a few brokers, lenders, and appraisers who've been reliant on juiced values (providing, or receiving) to do business.  This will also end the tidy little revenue stream provided by bank/lender owned appraisal affiliates.  About time appraiser independence got some support.

03/04/08 at 12:04 PM Permalink | Comments (14) | TrackBack (0)
Filed Under: Appraisals, Consumer Protection, Foreclosures, The Fed

Kedrosky on the Loan Default Myth

A post sure to terrorize lenders already having a puke-fest over the growing "social acceptability" of walking away from an upside down home, via Paul Kedrosky:

I get irritated at the line of argument that says the world was a better place when consumers let burdensome loans wreck their families, and drive them personally into the ground like over-sized tent pegs. Enough.

Yes, people used to be much more nervous about defaulting. But so what? If a loan no longer meets your requirements, or if it's crushing you financially, or if your circumstances have changed, there is no need to go leaping off bridges about it. The world has changed and the consequences of loan defaults & loan renegotiations are no longer need be as dire as they once were. People who pretend otherwise are selling something -- usually an over-rosy picture of an imaginary past.

It's about time individuals caught up with countries and companies. Both have always had more flexibility with respect to loan defaults/renegotiation than individuals have. While I'm not suggesting that loan commitments should be as fickle as, say, high school relationships, I am saying that imagining they they need to remain financial straightjackets is not rational. It is a mindset that prevents some appropriate people from getting loans who might appropriately get them (they may have the resources but are afraid of the commitment), and it keeps some people in loans who should have long ago been let out.

We agree completely.  Much of the lunacy in residential mortgage lending over the past few years was based in part on the belief that Americans would pay their mortgage no matter what - even if it was economically irrational to do so.  Looks like this premise is going to be tested, and many lenders will find out that the American homeowner can be just as financially ruthless as the business world has always been. 

01/29/08 at 09:19 AM Permalink | Comments (4) | TrackBack (0)
Filed Under: Consumer Protection, Foreclosures, Jingle Mail, Mortgage Economics