The Great Cash Giveaway by Bank of America

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Bank of America's Great Cash Giveaway

The madness continues. Bank of America (BoA) is considering a special program for unemployed borrowers that would offer as many as nine months of no mortgage payments while they hunt for a new job. A spokesperson for BoA says that the program is still pending regulatory approval. Whether or not the payments are forgiven or just deferred has not been solidified yet, but according to the spokesperson, a likely option would be to capitalize the past due payments into the new permanent modification. If the borrower finds employment during the nine-month period, BoA would structure a loan modification using its own programs or the Home Affordable Modification Program (HAMP). BoA completed almost 32,900 HAMP permanent modifications through March, up from 20,666 in February.

BoA was the first to commit to the HAMP second-lien program from the Treasury and the first to offer principal write-downs as part of the servicing process. If the borrower cannot find a job after nine months, the borrower would enter into a previously agreed upon deed-in-lieu of foreclosure arrangement. BoA would offer a minimum $2,000 “cash-for-keys” check to the homeowner. “Sustained recessionary impacts and their effect on the unemployed, in particular, demand we consider creative solutions above and beyond what is currently available to put these customers in the best possible position to sustain homeownership,” the BoA spokesperson said. This month, 15 million people held no job, and the overall unemployment rate stayed at 9.7% in March – the same as February, according to the US Department of Labor.

Florida HB 1523 dies?

HB 1523, a bill allowing banks to foreclose on Florida homes without going to court, died in a House committee yesterday when the House's Criminal and Civil Justice Policy Council ended its Monday session without hearing it. It was the final committee stop for the bill, which is similar to the Senate's proposal in SB 2270. "We knew this was a big change in Florida law and we were asking a lot for it to happen in one session," said Anthony DiMarco, executive vice president for government affairs for the Florida Bankers Association. "When you have this kind of policy change, it can take more than one year." Under the House plan, the lender would be required to meet with a borrower, if requested, and the borrower would not be liable for the unpaid portion of the loan if he or she acts in good faith during the nonjudicial foreclosure.

The banks supported the change because they say it will speed the estimated statewide backlog of 500,000 foreclosures through the system. But opponents claim it would have taken away a homeowner's basic right to due process, giving too much power to lending institutions. Attorney Ken Direktor of Becker & Poliakoff's West Palm Beach office, said banks often want to slow down foreclosures so as not to have the liability on their books and to avoid paying delinquent association fees or liens. "In a nonjudicial foreclosure, we don't have the ability to go to the judge and say the banks are dragging their feet," said Direktor, whose firm represents several condominium and homeowner associations. "It gives banks complete control." Jacob Pewitt, legislative assistant to the bill's House sponsor Rep. Tom Grady, R-Naples says there is a small chance the proposal could still be heard if the house speaker pulls it out of committee and brings it to a full House vote, or if the Senate's version is approved by the House. "It would require some procedural work," Pewitt said. "But there is a small potential for life."

Barofsky back on TARP

A report by the Special Inspector General for the Troubled Asset Relief Program (TARP) noted that losses are estimated to be $127 billion, mostly driven by funds for AIG, the automakers, and attempts at preventing foreclosures. Financial institutions, meanwhile, have paid back $186 billion. While that's widely perceived as good news, the benefits have not been far reaching, said the special inspector general, Neil Barofsky. "Even as Wall Street regains its footing, however, signs of distress on Main Street remain disturbingly persistent," wrote Barofsky. Barofsky's biggest concerns are the progress in two key objectives of TARP: staving off mounting foreclosures and boosting small business lending. He noted that foreclosure filings were up 16% in the first quarter of 2010, and that bank repossessions were up by 35%.

In a March report, Barofsky had said the Treasury Department initially set targets that weren't "meaningful," mismanaged the implementation of the program, and risked a substantial number of "re-defaults," with many participants ultimately losing their homes anyway. He now says the Treasury Department has since attempted to address those flaws with new provisions aimed at reducing mortgage payments for unemployed homeowners, and reducing principal for borrowers who owe more than their homes are worth. But Barofsky said the policies create new challenges for the agency. "Treasury's urgency in rolling out the new initiatives, as laudable as it is, risks significant costs in the form of ill-defined goals, incomplete program guidelines, increased vulnerability to fraud, incentives that may prove ineffective, and the potential for arbitrary treatment of participating borrowers," Barofsky wrote.

Diana Olick - Homeownership is for everyone?

Diana Olick asks some thorny questions about who should, and who shouldn't. " The question now, as we scrape together what's left of our economic faith and investing gumption, is: Should we continue to push borderline borrowers into home ownership? The answer, at Fannie Mae at least, appears to be yes. The mortgage giant is offering troubled borrowers who opt to do short sales (sell their homes for less than the value of the mortgage) or deeds in lieu of foreclosure (essentially just hand the keys over to the bank) the chance to get back into home ownership more quickly. Two years sooner, in fact. The idea is to get former home owners back on their feet again and back into the business of buying homes. Don't get me wrong, I understand the theory behind it. With inventories rising again and more and more borrowers not qualifying for various loan modification programs or refinances, Fannie Mae (i.e. the government) is looking to get Americans out of homes they can't afford an d into homes they can.

I guess some of the rationale is that so many borrowers are in trouble because of the uniquely bad class of mortgage products they used during the housing boom, not because of their own fiscal irresponsibility. So somehow it's not them, it's the mortgage, and therefore they shouldn't be penalized as long, that is, take the credit hit for so long. I'm all for getting buyers back into the market, especially those who have 20 percent to put down. As for the fairness argument, I think the government has already shown, with its push to make lenders write down principal, that today fairness must be sacrificed for the good of the overall economy. Whether one agrees with that premise or not, I do think it's time to take another look at home ownership. Yes, it's part of the American dream, but is it the responsibility of the American government to make it happen?

Airlines vs the Volcano

As of Sunday, 63,000 flights had been canceled in Europe, as the air space of northern Europe was shut down by an enormous ash cloud from an erupting volcano beneath the glacier in Iceland. According to an analysis from an airline expert, it's costing U.S.-based airlines tens of millions of dollars per day. Robert Herbst, analyst and founder of, says The five largest U.S.-based international carriers -- Delta Air Lines, UAL Corp.'s United Airlines, AMR Corp.'s American Airlines, Continental Airlines and US Airways -- are collectively losing $21.9 million per day. Delta has the biggest presence in Europe and is therefore losing the most money, he said, racking up losses of $6.5 million per day. Spokespeople for Delta and three of the other airlines -- American, US Airways and United -- said it was too early to discuss financial losses. Continental did not respond to requests for comment.

Also, couriers FedEx and UPS announced that air shipments to Europe are delayed. FedEx spokeswoman Sally Davenport said her company had suspended 100 flights to Europe since April 15, but that it was still making some "urgent" shipments of packages weighing less than 150 pounds. A UPS spokesman emphasized that ground operations within Europe are still functioning. "UPS will not speculate as to the economic impact of the volcano, but...we're still keeping intra-European shipments moving across borders due to UPS's extensive ground network," said UPS spokesman Mark Dickson. European airlines are collectively losing at least $200 million per day, according to the International Air Transport Association. Steve Lotts, spokesman for the industry group, said that total losses have exceeded $1 billion so far.

Above Post Written by: Chris Mclaughlin with Short Sale

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