The collapse of the U.S. economy and the global recession it spawned almost one year ago was precipitated by the banking industry's insatiable addiction to put money into the hands of every American, from teens to octogenarians, regardless of credit risk.
Now that banks recognize embedded losses in their portfolios, many of these same banks that couldn't push money out the door fast enough are now terminating loans for frivolous and often unlawful reasons, forcing borrowers to the precipice of financial ruin. Sacrificing good borrowers to salvage shareholder value and fund excessive executive compensation packages is indefensible, thwarts federal policies to curtail foreclosures and keep people in their homes, and violates the law. Unless policy makers are educated about this new form of lender abuse, these banks that received billions of dollars in taxpayer bailouts will continue to act with impunity.
We at SPOCH, the Society for the Preservation of Continued Homeownership, have fought for a decade against unlawful, over-reaching, and abusive lender tactics that too often drive borrowers into unnecessary foreclosure. Today banks are desperate to reduce loan exposure in order to reduce their capital requirements, prop up balance sheet return on investment, and demonstrate to regulators that they have tightened lending standards.
Unfortunately, suspending or terminating loans is one new tactic we at SPOCH are seeing on an unprecedented scale. Banks are terminating loans for all sorts of reasons many of which are specious or based on hypertechnical violations of loan agreements or for diminimus economic reasons. In all cases, the borrower's financial lifeline is suddenly cut, and medical bills, housing, education, utilities, and other necessary expenses can't be paid.
One tragic example involves an 85 year old widow who was relying on a home equity line of credit from National City Bank to fund her necessary expenses. The borrower, who was learning to become computer literate, attempted to make an online $30.18 monthly payment. One week after she initiated the payment, the bank's customer service agent informed her that the payment was not completed as she clicked on the "print screen" button rather than the "pay" button on NatCity's website. The borrower immediately made the payment upon learning of the website confusion. Many months later, the bank sent her a termination letter for the accidentally late small payment. Now she is on the brink of financial disaster and may be forced into foreclosure and bankruptcy.
In addition to the small amount of the payment, NatCity's decision to terminate the loan is remarkable because it violates the Federal Reserve's, FDIC's, and Comptroller of the Currency's regulations and guidelines which prohibit terminating loans for delinquency when the lateness was due to an erroneous mailing address or an error in completing an online payment. In this case the punishment just doesn't fit the crime. The total lack of proportion between the borrower's accidentally late payment and NatCity's decision to halt credit advances is a stunning example of how far bank's have moved from valuing customer relationships to sacrificing such relationships on the alter of shareholder value. NatCity's real motivation is obvious to all experienced observers: it used a specious and immoral claim of delinquency as a pretext to purge its loan portfolio of unwanted assets. Such a tactic must not be condoned.
We the People own many of the banks engaging in these despicable practices. NatCity, in the example above, is now owned by PNC Bank, which received more than $7 billion in taxpayer relief. How can a government owned and regulated institution practice such oppressive, illegal and unjustified actions? Most of the borrowers who are innocent victims of this new phenomenon of wrongful terminations have no recourse as they lack the financial means to fund a lawsuit and have no access to media or political resources to forge a remedy.
National City is not alone in its shocking indifference to the plight of those whose dollars, and whose children's future dollars, were by the stroke of a legislative pen used to replenish their vaults. After pocketing taxpayer billions these lenders and mortgage servicers promised a lifeline to homeowners drowning under the weight of toxic mortgage loans. Instead, these industry giants are victimizing hundreds of thousands of owners by wrongfully terminating loans or restructuring the loans on unfair and financially onerous terms. SPOCH is seeing more temporary reductions in payments for the "lucky" ones while recouping fees and principal in a balloon payment. For the not so lucky distressed borrowers, loan modification applications are often ignored by lenders, lost, intentionally destroyed, or used as a pretext to claim termination or suspension of the loan.
SPOCH and other foreclosure assistance organizations don't take sides. Rather, we seek a reasonable compromise that allows borrowers to rehabilitate their financial situation and maintain homeownership while lenders can avoid a nonperforming asset classification by accepting some modification in loan terms that would continue to produce revenue for the bank. In the NatCity case, for example, rather than terminate the loan for an undisputed accidental late online payment, the lender should - if it was sincere in valuing the loan as a potential credit risk - propose adjusted loan terms rather than cut the widow's financial lifeline and set her adrift without any other resources.
NatCity's callous, wrongful, and egregious breach of its fiduciary duties is being replayed over and over across the nation by lenders and servicers. President Obama's Making Home Affordable foreclosure relief program is receiving only rhetorical support from banks like NatCity. Rather than work to rebuild our nation's long-term economic vitality, NatCity and its banking brethren provide only lip service to the President's program while flagrantly abusing innocent borrowers with impunity. The human toll from such actions is being painfully felt and silently suffered by many borrowers like the 85 year old widow SPOCH is unable to help. It's time for policy makers and regulators to stop protecting banks and start defending innocent victimized borrowers.
David Petrovich is the Executive Director, Society for the Preservation of Continued Homeownership, a 501(c)(3) nonprofit devoted to helping borrowers keep their homes.
Jeffrey Ross Williams is a director of SPOCH, a former FDIC official and the founder and managing partner of The Williams Law Firm pllc in Washington, D.C. where he advises on financial institution matters and public policy.
For hundreds of thousands of homeowners across the United States it is increasingly difficult to believe in the guarantees of "life, liberty and the pursuit of happiness" as the American Dream of homeownership evaporates along with jobs, retirement savings, college funds, and home equity. It will require new models of private-public partnerships to reverse the foreclosure crisis that has spread from sea to shining sea.
"We the People" are desperate for help. It is a priority to create realistic programs to stabilize the residential mortgage market and reduce the rising tide of foreclosures throughout the nation. At the end of 2008, almost ten percent of all mortgages in the United States were either delinquent or in foreclosure, according to the Mortgage Bankers Association. These are ominous signs for real estate values across our state. As homeownership rates plunge and equity evaporates, we all suffer the negative effects on our quality of life.
As the magnitude of the foreclosure tsunami grew, the federal and state governments adopted programs encouraging lenders to modify troubled loans. These efforts failed miserably as they did not stop the free fall in home values, keep owners in their homes, or stop the plunging equity markets. Even with loan modification relief, many borrowers are suffering severe financial hardship due to job loss and still cannot afford the payment.
Industry statistics indicate that within 6 months, fifty percent of all loan modifications fail to prevent foreclosure. The relief offered by lenders to borrowers in distress is little more than Band-Aid relief instead of what's really needed: reconstructive surgery to remove and replace their loan's toxic terms with terms commensurate with the borrower's ability to repay and proportionate to the home's current true value.
The federal government can't solve this crisis on it's own. Last September's TARP giveaway of $350 billion to both healthy and troubled banks did nothing to stop the dual downward spiral of foreclosures and consumer confidence (other than provide funds for exorbitant year-end bonuses for bankers). President Obama and the Congress now have a rare second chance to do this right.
Economic history shows that success in ending this crisis will come only from a new public-private partnership. The nonprofit sector has long been the source of success to help achieve national priorities. Today, nonprofit housing and mortgage counseling groups have the technical financial experience, entrepreneurial approach, market sophistication, and on-the-ground relationships to make quick progress in reversing the current grave trend in foreclosures.
As an example, the Society for the Preservation of Continued Homeownership (SPOCH), a New Jersey nonprofit for which I serve as the Executive Director, has the capacity, experience, and passion to keep people in their homes, stabilize market values, and improve the likelihood of success of the TARP II legislation.
Currently most loan modifications don't go far enough to restore sustained affordability for owners who are at risk of job loss, rising utility and food prices, and uninsured medical bills. If mortgage holders refuse to grant meaningful loan relief, let's replace them with efficient, nonprofit organizations whose corporate objective is to preserve continued homeownership and work for the best interests of the owners.
How? Pay 'em off and buy 'em out. Instead of spending taxpayer dollars to fund the purchase of corporate jets or luxurious retreats (never to be repaid) let's put the dollars to work serving the needs of our economy and ensuring that taxpayers continue to believe in the great American dream of homeownership. To initiate this program, funds could come from the Federal Home Loan Bank System or the Federal Reserve Banks, Treasury Department programs, or from state programs distributing federal funds.
As an example of a public-private partnership, SPOCH's HomeKeeper Turnkey Program would use TARP II or other government funds to (1) Purchase at a deep discount from mortgage holders nonperforming mortgage notes on New Jersey residences and pools of nonperforming mortgage notes; (2) Stop foreclosure and restore affordable homeownership for thousands of qualified, at risk homeowners whose unsuitable mortgage loan terms have resulted in foreclosure; (3) Recycle newly unaffordable subprime mortgages into performing, profitable mortgage loans which will be sold to the secondary mortgage market; and (4) Create jobs for displaced real estate professionals to administer the statewide program and by hiring new businesses to implement recommended green initiatives to modernize modest income homes (thereby reducing homeowners' long term costs for energy consumption).
As a mortgage holder with unilateral modification authority, SPOCH would appoint an HomeKeeper Counselor to meet with qualified homeowners to review options to foreclosure designed to preserve continued, affordable homeownership. The homeowner would provide authenticated updates to current employment and finances. An FHA 203K property appraisal and inspection report would follow to confirm the home's current fair market value - as the basis for a structured loan modification that makes sense for all stakeholders.
In the short term, the loan modification will result in reduced loan payments for the homeowner. Over time, as the economy and housing markets improve, program participants will be required to adhere to a strict budget, and eventually return a portion of the home's appreciated value upon its sale or refinance. The sale of modified, performing mortgages to the secondary market, and the assignment of owners' equity makes the HomeKeeper program self-funded and not dependent on subsequent government support.
David Petrovich is Executive Director of Society for Preservation of Continued Homeownership, a 501c3 non profit consumer advocacy, and author of Fight Foreclosure: How to cope with a mortgage you can't pay, Negotiate with your lender, and Save your home! (Wiley & Sons 2008) For more information, E-mail Mr. Petrovich or Jeffrey Ross Williams, Esq., a public policy advisor in Washington, DC, and Loch Arbor, New Jersey @ info@spoch.org
"The strength of a nation lies in the homes of its people." Abraham Lincoln
Millions of our Nation's homes are under threat of attack by mortgage foreclosure. We are experiencing the highest rate of unemployment and house the greatest prison population in decades. Isn't it about time We, The People awake from reality TV carb induced fog, and be interested and responsible to learn what is going on around us?
Congress, please, tell us where our (We, The People's) Bailout Billions have gone.... but don't pee on our legs and tell us it's raining....
I'm talking about TARP, the $700,000,000,000 Troubled Asset Relief Program. Taxpayers' (borrowed) money pledged to help millions of at risk homeowners avoid foreclosure and keep their homes.
Has it worked? Well, no. Despite the spending of these funds and more than two trillion by the U.S. Federal Reserve, there were more than 2 million home foreclosures in 2008. If actions speak louder than words, the letters TARP more likely stand for To Assist Rich People. So far, without our permission, our money has been repurposed and redirected. At risk homeowners will have to wait until recipients including Big Banks, Big Auto and Big Insurance have had their helpings... with some, like Bank of America and AIG going back for seconds.
So where has our (We, the Taxpayers') money gone? Not to be accused of sleeping while on duty, a Congressional Oversight Panel, a four person board authorized by Congress and led by consumer advocate Elizabeth Warren of Harvard Law School, is charged with finding out what Treasury has done with the billions it has already spent. "'We are here to ask the questions that we believe all Americans have a right to ask; who got the money, what have they done with it, how has it helped the country and how has it helped "ordinary" people?'"
Huh? Using the term ‘ordinary people' suggest some people are ‘extra-ordinary' as described in Orwell's Animal Farm. "We are all equal... but some are more equal than others....."
The following is a quote taken from Abraham Lincoln's First Annual Message to Congress:
"The prudent, penniless beginner in the world, labors for wages awhile, saves a surplus with which to buy tools or land for himself; then labors on his own account another while, and at length hires another new beginner to help him. This is the just, and generous, and prosperous system, which opens the way to all---gives hope to all, and consequent energy, and progress, and improvement of condition to all. No men living are more worthy to be trusted than those who toil up from poverty---none less inclined to take,or touch, aught which they have not honestly earned. Let them beware of surrendering a political power which they already possess, and which, if surrendered, will surely be used to close the door of advancement against such as they, and to fix new disabilities and burdens upon them, till all of liberty shall be lost."
So far, the Treasury's official response to the Congressional Oversight Panel has pretty much been, "Ah, it's really none of your business..."
It's no secret who the money hasn't helped. While AIG executives languish in luxury thanks to our bailout billions, the "ordinary" folks still wait. Do you recall the Nation's collective sigh of relief when the White House and the supportive fat cat Congress issued the Hope For Homeowners Program? It was introduced to help 400,000 at risk homeowners save their homes. Since its ballyhooed unveiling in late July 08, guess how many homes have been saved? If you guessed ZERO, you would be right. The program was a dismal failure... as many of us in the trenches predicted it would be.
Ah, it's really none of your business..." Bullshit! It's everybody's business because this crisis adversely impacts every person, every house, every neighborhood, every town, every city and every state.
Some of the most challenging issues We, The People face today are ensuring the stability of the residential real estate mortgage market, and the reduction of the rising tide of foreclosure throughout New Jersey, and the Nation. Along with other stakeholders, the Society for Preservation of Continued Homeownership ("SPOCH") a 501c3 nonprofit based in New Jersey for which I serve as the Executive Director has the capacity and experience to help achieve these priorities. How?
The current bailout philosophy of funding the top and allowing relief to trickle down "to the ordinary people" is the death knoll to families already in foreclosure. The funds ought to be used to immediately STOP thousands of foreclosures WITHOUT REGARD to lender losses, restructure the at-risk loans from unsuitable and non performing, to affordable terms which reflect the property's current, fair market value, and the borrower's demonstrated income.
Hey, Mr. Secretary of the Treasury! If you want results and a return on your money, then LOAN, not give, SPOCH some TARP funds. We'll use it for the public good, repay it, and create jobs, too. Without the overwhelming bureaucratic red tape, and not motivated by corporate profit mandates, I would unilaterally keep homeowners in their homes by cutting out the middle men and dealing instead with at-risk homeowners directly.
You must understand that while Lenders are invited to participate in non foreclosure workout alternatives, NO laws yet exist which require lenders to offer loan workouts to its borrowers. The contract between lender and borrower is pretty straightforward. If the borrower doesn't pay as promised the borrower forfeits the loan's collateral....the house.
Since Lenders are unwilling to help voluntarily, We, The People need to empower (fund) non profits, like SPOCH, to negotiate the purchase of lenders' bad debt at a discount, and then send them packing... and let SPOCH and others like SPOCH solve the nation's housing crises.
Unless and until We, The People demand TARP funds are re-dedicated to the purchase and restructuring of individual loans in foreclosure, and pools of non performing loans, instead of waiting for relief to trickle down from above.... the problem will get worse, much worse, before it begins to get better.
Sorry, there are no shortcuts. Loan Mod Reps who claim otherwise are deluded, or dishonest.
The process of prequalifying the borrower, then making appropriate application for a loan modification requires borrower participation, and unmitigated cooperation throughout the ordeal. There is hard work, discomfort, and desired results are not immediately achieved.... That's one reason why it's called a work out.
Many Borrowers who seek a painless process and then fail to make required telephone calls, complete application forms, or otherwise fail in their needed participation.... are bound to be disappointed.
There are no guarantees, either.
Borrowers who retain third party "specialists" must be diligent in keeping themselves apprised by calling the lender for status updates, remaining in contact with the specialist, and must prepare for an adjustment in expectations should their financial situation worsen..
There are no shortcuts. Results require full disclosure, hard work, a concerted team effort, and a willing lender.
Sometimes, its difficult for a distressed borrower to pass by the "band-aid" relief offered by the lender.... even if reconstructive surgery is indicated.... and instead dig in their heels, and stay on course for a meaningful loan modification.
The overwhelming majority of "short sighted" loan mods fail.
If you've been victimized, or worry about becoming victimized by a "so-called" loan modification service... visit Mods Gone Bad
We must appreciate the reality of problems and or life changing events which precipitate the borrowers' mortgage delinquency, default, or foreclosure. These problems exact an adverse impact on their decision making process. Emotionally and financially distressed homeowners struggling to keep their home will usually embark upon a course of least resistance, and during this time become prey to those whose motives are less than sincere, or whose experience and skills are either greatly exaggerated or non-existant.
New Years Advice to Those facing foreclosure:
Self-Education is required before you can trust a services provider.
Q. Hello... I live in the state of MD. My house went to auction on 12/15 and was returned to the bank. How soon can I expect the sheriff to show up at my door? I live in Prince George's County. Any info is appreciated. Thanks.
A. When the Sheriff does knock on your door, it will be to serve a Writ of Possession. Once the Writ is served, an Order of Possession is given by the Court to the Sheriff who then schedules the eviction.
Evictions can't take place if the temperature is below 32, or if it is raining. In some counties, a show cause hearing is required. You (and anyone with questions about foreclosure, or eviction proceedings) should contact your local Legal Services Corporation, or Society for Preservation of Continued Homeownership
Community Legal Services of Prince George's County
Executive Director: Neal Conway
6801 Kenilworth Avenue, Suite 150 Riverdale, MD 20737 Phone: (301) 864-8354 Fax: (301) 864-8352 E-Mail: conway@clspgc.org Web site: www.clspgc.org
Community Legal Services (formerly the Law Foundation of Prince George's County) provides civil legal assistance to all low-income persons of Prince George's County through a panel of volunteer attorneys. CLS also administers a MLSC-funded Reduced-Fee Child Custody Representation Project, matching private attorneys with low-income individuals seeking representation in custody matters.
Q. My lender sent someone to my vacant property that was not even in foreclosure and the locks were changed. Is that legal? I was not served with any paperwork and got to the house and the locks had been changed and the pipes had been drained.
A. That's not uncommon. The securitization of an "abandoned" property by the mortgagee is a perfectly acceptable practice. You likely gave your lender permission to secure the property in your mortgage loan agreement.
As property owner, you can enter, restore the original locks, and refresh the plumbing....
Better check your property insurance policy, too, since a vacant property requires specific insurance coverage.
Your loan payment was probably late, right? You should know lenders will order "drive-by" property inspections when loans are delinquent, in default, or in foreclosure. If a property appears vacant, especially in colder climates, the lender will order the property "secured" which includes changing the locks, and winterizing the plumbing.
Ten years ago today, our small board of directors received notification from the IRS the non profit, homeownership advocacy S.P.O.C.H. (Society for Preservation of Continued Homeownership) was approved for its 501c3 tax exempt, charitable/educational designation!
Since its founding, SPOCH has evolved into an alternative to "conventional" HUD counseling which seems intent to first micro manage household budgets instead of helping distressed homeowners prepare for their fight against foreclosure.
While money management is an essential component to the implementation of mortgage workouts, this in itself isn't enough.
SPOCH is less concerned with how much is spent on cable TV or drycleaning, and more concerned with how the homeowner manages the foreclosure timeline, and what steps it can take to negotiate favorable, non foreclosure alternatives.... the prime objective to keep the family intact, and preservation of continued homeownership.
Today, MANY non profit housing counseling organizations are funded, directly or indirectly, by the government, and the lending industry who impose its policy on HOW the funding is to be used, and what type of counseling their borrowers receive.
Lenders will only do what is in its own, best financial interest!
SPOCH, who relies on private contributions, is not paid by the lending industry, and is not obligated to serve the funders' self-interests... which is often in conflict to the interests of our Clients - distressed homeowners at risk of foreclosure and in immediate need of help.
When conventional counseling initiatives fail, SPOCH will help homeowners FIGHT FORECLOSURE!
All things foreclosure: subprime & predatory lending updates, mortgage origination fraud, loan servicing errors, loss mitigation, preforeclosure sale and preforeclosure short sale transaction construct, etc.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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