115 CA Consumer Groups Call Upon Home Mortgage Lenders to Halt Accelerating Foreclosures

[TexasLawyer]

Source: PRNewswire

115 California Consumer Groups Call Upon Home Mortgage Lenders to Halt Accelerating Foreclosures Caused by Predatory Loans

SAN FRANCISCO, May 14 /PRNewswire/ -- One hundred fifteen community and consumer organizations led by the California Reinvestment Coalition (CRC) today called upon six leading mortgage lenders to stem the statewide tide of home foreclosures resulting from predatory loans. The lenders are being asked to declare a temporary moratorium and direct homeowners to financial solutions that will allow them to keep their homes.

"California is in the midst of a foreclosure crisis that could rob hundreds of thousands of homeowners of the American dream," said Kevin Stein, associate director of
CRC. "Many California homeowners are facing foreclosure because they were misled by unscrupulous mortgage brokers and lenders. We are asking the largest lenders in the state to take leadership so that families can keep their homes and California's economy won't suffer."

<snip>

California is experiencing record-breaking foreclosure numbers, with 31,434 foreclosures in March alone -- nearly triple the number of foreclosures in March of last year, according to Realtytrac. This surge in activity has pushed the state's rate of foreclosures to nearly twice the national average, Realtytrac reported.

The letter calling for a moratorium was signed by leaders from communities affected by the increase in foreclosures, and mortgage counselors who are deluged by thousands of borrowers seeking help with deceptive, and in some cases fraudulent loans made by brokers, lenders and Wall Street firms. Although such problematic practices are more likely found in California's neighborhoods of color, none of the state's communities and borrowers is immune from bad lending practices, Stein said.

<snip>



Read more: http://www.pr-inside.com/california-consumer-groups-call-upon-r123630.htm

[jody]

1. I don't understand, people gambled and lost so why shouldn't they pay? Would they have shared their

profits if they had flipped their houses for substantial gains?

[Jacobin]

2. This is what I see on a daily basis

People with very low credit scores and very little education who were hoodwinked into signing re finances of their homes and tricked into signing variable rate notes that go up hundreds of dollars a month in only a couple of years.

A lot of them were scammed by brokers who sold them these bad loans so they could make a fee, but they sell the loans on the open market and they have no risk from the loan going bad.

I have no sympathy for the speculator types, who aren't living in the homes but gambling to do a flip.

I do have sympathy for the poor people hoodwinked into these bad deals. They are the working poor.

[jody]

3. OK but do you want government to evaluate people and determine whether they should be allowed to buy

a house for a maximum price?

[Gman]

4. That's not the point

the point is these people should never have qualified for a loan and bought a house. Now they're wrecked for several years no matter what they do with the foreclosure on their record and all because someone wanted to collect the broker fee on the loan. These people were preyed upon because they wanted a house. They should never have had a house and now they're wrecked. THrow in the onerous new GOP bankruptcy rules and they're not only wrecked, they're royally fucked.

[jody]

8. If people shouldn't have qualified for a loan, then should government approve their loans? n/t

[Gman]

12. Of course not... what's your point?

[jody]

13. If govt approves loans, IMO the associated bureaucracy will be much less effective

and more costly than the current process.

If government is going to protect people from the danger of borrowing money when they shouldn't, I assume government should also protect citizens against criminals who commit violent crimes.

With that new government obligation should come the right of citizens to sue government if crimes are committed against against a citizen.

Glory Hallelujah, bigger government will save us from ourselves.

[Gman]

25. Government does not do things less efficient than private business

that is a myth. And protecting against dangers of borrowing money and violent crime aren't even comparable so your analogy doesn't make sense. To draw analogies, you must use similar things to make sense. The rest of your post makes no sense. Maybe it makes sense to you, but that doesn't mean it really does.

[jody]

33. Note I said effective not efficient. I see we disagree on whether government is more effective and

efficient than private business.

I only have to cite cases like UPS versus USPS to prove my point.

[Trajan]

30. A rare visit outside of the Gungeon ?

Hmmmm ....

[jody]

34. What's your problem? n/t

[Jacobin]

5. I don't think I said anything like that

I do think that predatory lenders who lie to vulnerable poor folks to make a quick buck should be prosecuted and the loans they originate should be subject to modification, based on the criminal actions of those who originate them.

[jody]

7. I know you didn't say that but if people should be protected against borrowing when they shouldn't,

then who will protect them?

Should government approve every loan for people who make less than a certain income?

How about government approving every loan for people who do not have a high school degree or college degree?

As to prosecution, I'm not familiar with the laws but it might be difficult to prove lies because the contract probably had tons of find print.

[Gormy Cuss]

28. The government's role should be to level the playing field for borrowers

regardless of income. The best ways to do this are 1)to require clear, consistent disclosures of the range of costs associated with the loan in clear language and not buried in the fine print and 2)to require lenders to assume and hold risk for mortgages that are nonconforming.

Neither of those steps prevents an individual from signing a contract against his/her own interest but at least it mitigates the risk of being duped by slick mortgage originator who are now taking advantage of the lack of regulation in this regard.

[jody]

35. What part of our Constitution says government should level the playing field for borrowers? n/t

[Gormy Cuss]

37. What part of our constitution says that it shouldn't?

Did I state that the constitution dictates it? I'm sorry if you got that impression. Let me clarify: in my opinion it is the role of government to level the playing field for citizens in dealings with private industry because it is good for a capitalist society. We regulate against monopolies, for example.
One can argue that the government is over or under regulating, but it in an intrinsic function of government to regulate.

[jody]

38. What part of our constitution says that it shouldn't? Answer: Amendment X

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

We the People through our Constitution do not give congress the power to level the playing field for borrowers. :shrug:

[Gormy Cuss]

39. You are missing the point. STATES are governments too.

And a simplistic reading of the tenth amendment holds about as much sway as a simplistic reading of any other amendment. If the constitution were that easy to interpret we would have a much lighter load for the Supreme Court.

[jody]

40. I've not missed the point but you insist that government should approve loans. What other business

transactions do you want government to approve? Purchases at fast-food stores or perhaps purchases of CDs and DVDs or the clothes you wear?

I know, the best approach is to let government do all the planning for production. That way stores would be filled with a wide selection of consumer products and luxurious housing would be available for all exactly as happened in Russia in the 20th century. :shrug:

[Gormy Cuss]

41. I did not insist that government should approve loans, only that the lender should not

be allowed to work without fetters. There's nothing novel about that idea. It happens every day in this country.

You seem to be espousing a view that governments have no right or duty to regulate commerce. If that is what you think then I'm afraid our opinions are too divergent to have a meaningful discussion.

[jody]

42. Clearly congress has a right to regulate commerce but the loans to buy houses in question are to

people without adequate income.

The only effective way for government to place fetters on lenders in this instance is for government to either approve loans before the fact through some govt. agency or after the fact with government prosecuting lenders who violate one or more of the fetters you would establish as laws.

[1932]

9. On NPR today mortgage brokers confessed that they did things such as

put a cover sheet showing a fixed rate mortgage but then had people sign agreements for variable rate loans. After they were signed, the brokers tossed the cover sheet.

Is that the buyer's fault?

[jody]

14. I believe that's the buyers fault under contract law. IMO, many people sign loan contracts who

do not have the experience or knowledge to prevent lenders take advantage of them.

Every time government steps in to help citizens in such situations, some citizens lose their freedoms to make decisions free of government meddling.

[1932]

27. If the mortgage company admitted they did that, it's fraud and the buyer could

sue and win.

[annabanana]

44. letter vs spirit. . . . . not "technically" illegal . . (familiar arguments)

[Trillo]

20. Perhaps the cover sheet should be the "fine print".

Sign the cover sheet, and it's the binding document.

Lose all the other pages of "lying fine print" that only a few lawyers can understand without years of study.


Perhaps a law requiring signed loan documents to be less than 100 simple words, for them to only contain pertinent data such as term, total loan amount, payment, "fixed", "variable", etc., would be a good idea.

[Rage for Order]

29. Those aren't legally binding documents

Counties will not record (and title companies will not accept) faxed documents. They must be originals. The only documents that matter are the ones signed in person at the closing. Even then, people who refinance have a 3 day right of recission which allows them to back out of the deal without incurring any costs. People buying a home don't have the same right of recission though.

edit: Most escrow officers will go over each document with you at closing and tell you what you're agreeing to when you sign the documents, including the rate, points, ARM/fixed rate, and prepayment penalty.

[1932]

31. not a fax cover sheet.

The top pages of the contract said it was fixed rate, but underneat was a contract for a completely different mortgage.

They'd take the signed contract back to the office and toss out all the fixed rate mortgage pages on the top.

[shrike]

32. If they don't, they've broken the law. Fair Trade Act of 1968

According to something I've read recently, there are a fair amount of buyers who got a "surprise," i.e., a balloon payment, a variable rate. When they complained to the lender, the response was, "You should have read the fine print." Sorry, that's not a defense.

[annabanana]

43. The "house" never loses. Predatory lenders have told

everyone. . everyone "Sure you can get a house! You can get a bigger house!! You can get a bigger house!!!"

Do you think they should bear any responsibility at all?

[CharmCity]

6. I wonder what % of foreclosures are from speculators

I haven't seen any data on that, but wonder...
Banks don't want to foreclose; they don't want to have to sell a house themselves. Bank of America is spending $1 billion to help borrowers who are in trouble -- they're working with community groups to "rework" the loans. Generally, this allows homeowners to keep their homes and get back on their feet.

[tanyev]

10. Asking them to shut the barn door after the horse already got out.

[western mass]

11. Does anybody benefit from a foreclosure?

Just curious...does foreclosure usually end up as a net loss for the bank?
Does anybody come out ahead?

[flvegan]

17. Depends on the property/equity, but usually no.

The bank almost always loses (estimated in the tens of thousands of dollars) on each foreclosure. Most loans going into f/c are relatively new loans, made in the last few years. There's no equity, property values are high but sales are low. Depending upon the state (judicial or non-judicial) a f/c can take 45 days or 6 months (or longer if it's contested or if there is a bky filed). Meanwhile, the lender may still have to write checks to FNMA or FHLMC for the interest every month. Oftentimes, people getting foreclosed will abandon the place or gut it. If they abandon it, you wind up with squatters or someone else guts it. During this time, nobody cuts the lawn or keeps the place up, and now code enforcement is all over you. After the courthouse sale, if the lender is the successful bidder, they now have to rehab/sell the property...in this market.

If there is sufficient equity/value in the property, folks that have done their homework come out and bid on it. The bank can usually only bid up to the amount of their Final Summary Judgment, so that's all they get.

[slackmaster]

36. The homeowner loses, lender is lucky if it recovers its principle

The only winners are people who process transfers, run auctions, etc. They get to stay employed.

[Wcross]

15. A very simple solution.

This would be applied to OWNER OCCUPIED homes only (Screw the flippers & speculators).
Convert the adjustable rate loans to a fixed rate loan at the going rate for each individuals credit score. Increase the loan term to a point where the payment does not exceed 28% of the homeowners gross monthly pay. Even if it meant they would have 100 year mortgages they would still be able to live in the home. They would be able to refinance if their credit score or income improves in the future.

[PassingFair]

16. Great idea.

I read somewhere that the majority of foreclosures in and around
Las Vegas were from speculators (go figure, they were GAMBLING
with mortgages!).

Here in Michigan, it's mostly single family home owners that are
getting creamed.

Say hello to the 50 year amortized mortgage!

[NashVegas]

18. If Banks Want to Do That, Okay, But It Shouldn't Be Legislated

There's hardly any difference between a 100 year mortgage and renting. Someone who got a deal like that would be best off cutting their losses and selling. That doesn't benefit the homebuyers, that benefits the banks.

Not to mention what it starts. Who remembers when there was no such thing as a 5-year car loan?

[Wcross]

19. The lender could come after the borrower for the shortfall.

It isn't unheard of for a lender to sue if the property sale doesn't cover the loan(s). Thanks to the wonderful new bankruptcy laws it is difficult to walk away from debt.
At least with my plan they would have a roof over their heads and the ability to sell/refinance when conditions improve.

[NashVegas]

24. Very Bank-Friendly Then, Indeed

The crisis is not that people may default; the crisis is that the cost of housing (and so much else) has gone up astronomically in proportion to wages.

[Wcross]

26. Win-Win?

The bank doesn't end up with a vacant house. The borrower doesn't end up in the street. If you want to talk labor issues, I already agree with you that wages have been lagging far behind. I want to see people keep their homes.

[flvegan]

21. You might even get lender buy-in if they were allowed

to take their foreclosure to Final Summary Judgment, then let your plan kick in. They don't dismiss the lawsuit for say, a year. That way, if the borrower defaults on this reasonable payment schedule, they can go right to sale (unless there's a bky, etc). I think you'd also have to put a time limit on this. Maybe the borrower has 5 years at this rate before they must refinance or go back to the previous interest rate. I see a big fight from the financing industry if they have to consider millions of dollars tied up at what might be 1% interest for 100 years (worst case scenario for them).

[Wcross]

22. Banks wouldn't be stuck with a 1% rate.

The borrower would pay the market rate for their credit score. The term of the loan would be extended until the payment was affordable.

[flvegan]

23. They could be if it's based on this:

"Increase the loan term to a point where the payment does not exceed 28% of the homeowners gross monthly pay." A lot of these loans were put through for people that couldn't afford the place to begin with.