3 Banks Penalized for “Loan Modification Failings”

Three major banks have lost federal mortgage modification incentives in delivering a foreclosure relief program until they make big changes to improve their practices.

Obama administration officials have told Bank of America, JPMorgan Chase & Co., and Wells Fargo & Co. that they must make “substantial improvements” to the way they administer the Home Affordable Modification Program, and they will not receive any more federal money from the program until they do so. For example, officials noted that banks need substantial improvement in correctly evaluating borrowers’ incomes, which is a critical component for determining eligibility for the program. Some of the banks also need to improve how they identify and contact borrowers for the program.

Last month, the banks received $24 million in payments through HAMP, but no more payments will be made until servicers improve their performance, officials warned.

Full article at source: “3 Big Banks Lose Mortgage Modification Incentives,” Los Angeles Times (June 10, 2011) 

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“Fannie Revamps Rules” on Delinquent Loans

Fannie Mae announced this week new rules that will require mortgage servicers to act more quickly and consistently in helping troubled home owners avoid foreclosure.

Fannie told servicers they must strive to build a “strong customer service relationship,” better understand why the borrower is missing payments, and educate them on ways to prevent foreclosure.

“We want home owners to be able to understand their options when facing foreclosure, and we want servicers to reach home owners early in the process, communicate frequently and clearly, and help home owners avoid foreclosure,” says Jeff Hayward, senior vice president of Fannie Mae’s national servicing organization.

Also among the revamped guidelines, Fannie told servicers they will be required to contact home owners verbally and in writing within 120 days after a loan first becomes delinquent. They will need to try to complete a loan modification or other option that keeps the borrower in their home or helps the borrower avoid the foreclosure process.

If foreclosure is unavoidable, servicers will need to follow a clear timeline and must begin the foreclosure process once a loan has been delinquent for more than 120 days. Servicers also must make it clear when a property in the foreclosure process will be sold.

Source: “Fannie Mae Updates Rules on Delinquent Loans,” Associated Press (6/0 6/11) 

“Little customer service relationships” with the banks problem loans in the Placerville, California regions, continue to slow economic recovery. Let’s hope this really represents a change for the better!  Other related articles at: www.sierraproperties.com

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Banks Get Failing Grade in Foreclosure Handling

Banks continue to receive backlash for their handling of a flood of foreclosures across the country. A new report released this week by federal regulators finds that banks failed to do a good job in handling foreclosures and sometimes evicted home owners when they clearly should not have.

The problems were “significant and pervasive” and added up to “a pattern of misconduct and negligence,” according to the Federal Reserve. The Fed says it soon plans to announce monetary penalties against mortgage servicers.

The report revealed several cases “in which foreclosures should not have proceeded due to an intervening event or condition,” such as families in bankruptcy or home owners who were eligible for a loan modification or even in the process of doing a loan modification.

Source: “Report Criticizes Banks for Handling of Mortgages,” The New York Times (April 14, 2011) 

Other articles relating to the Sacramento and Placerville, California regions at:  www.sierraproperties.com

 

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Tactics of Loan Scammers

Four fair housing organizations released findings this week uncovering some of the most popular loan modification scam tactics after a year long investigation of about 80 companies.

According to the report, some of the common scam tactics used were:

  • 55 percent required an upfront fee to begin work or required a low initial fee to conduct minimal work — such as reviewing loan documents — on behalf of defaulting home owners.
  • 43 percent guaranteed or promised they would be able to secure a loan modification even prior to learning about the home owner’s financial limitations.
  • 24 percent advised or encouraged home owners to stop making their mortgage payments or to stop contacting their lenders.
  • 16 percent guaranteed a loan with a lower interest rate, between 2 and 6 percent.
  • 12 percent discouraged home owners from getting free help from government-approved housing counseling agencies.

The report was issued by The National Fair Housing Alliance, The Connecticut Fair Housing Center, Housing Opportunities Made Equal of Virginia, and the Miami Valley Fair Housing Center.

Source: “Undercover Investigation Reveals Mortgage Scammer Tactics,” HousingWire.com (April 6, 2011) 

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

 

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