By ALAN ZIBEL
The Associated Press
Saturday, October 2, 2010; 1:51 AM
WASHINGTON -- Bank of America is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents.
The move adds the nation's largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them.
Bank of America isn't able to estimate how many homeowners' cases will be affected, Dan Frahm, a spokesman for the Charlotte, N.C.-based bank, said Friday. He said the bank plans to resubmit corrected documents within several weeks.
Two other companies, Ally Financial Inc.'s GMAC Mortgage unit and JPMorgan Chase, have halted tens of thousands of foreclosure cases after similar problems became public.
The document problems could cause thousands of homeowners to contest foreclosures that are in the works or have been completed. If the problems turn up at other lenders, a foreclosure crisis that's already likely to drag on for several more years could persist even longer. Analysts caution that most homeowners facing foreclosure are still likely to lose their homes.
State attorneys general, who enforce foreclosure laws, are stepping up pressure on the industry.
On Friday, Connecticut Attorney General Richard Blumenthal asked a state court to freeze all home foreclosures for 60 days. Doing so "should stop a foreclosure steamroller based on defective documents," he said.
And California Attorney General Jerry Brown called on JPMorgan to suspend foreclosures unless it could show it complied with a state consumer protection law. The law requires lenders to contact borrowers at risk of foreclosure to determine whether they qualify for mortgage assistance.
In Florida, the state attorney general is investigating four law firms, two with ties to GMAC, for allegedly providing fraudulent documents in foreclosure cases. The Ohio attorney general asked judges this week to review GMAC foreclosure cases.
In New York, State Attorney General Andrew Cuomo is reviewing the matter "to prevent homeowners from being improperly removed from their homes," according to a spokesman, Richard Bamberger, who said Friday that Cuomo's office has been in contact with several of the financial institutions.
Mark Paustenbach, a Treasury Department spokesman, said the Treasury has asked federal regulators "to look into these troubling developments." And the Office of the Comptroller of the Currency, which regulates national banks, has asked seven big banks to examine their foreclosure processes.
"We both want to see that they fix the processing problems, but also to look to see whether there is specific harm" to homeowners, John Walsh, the agency's acting director told lawmakers Thursday.
A document obtained Friday by the Associated Press showed a Bank of America official acknowledging in a legal proceeding that she signed up to 8,000 foreclosure documents a month and typically didn't read them.
The official, Renee Hertzler, said in a February deposition that she signed 7,000 to 8,000 foreclosure documents a month.
"I typically don't read them because of the volume that we sign," Hertzler said.
She also acknowledged identifying herself as a representative of a different bank, Bank of New York Mellon, that she didn't work for. Bank of New York Mellon served as a trustee for the investors holding the homeowner's loan.
Hertzler could not be reached for comment.
A lawyer for the homeowner in the case, James O'Connor of Fitchburg, Mass., said such problems are rampant throughout the industry.
"We have had thousands, maybe hundreds of thousands of foreclosures around the country by entities that did not have the right to foreclose," O'Connor said.
The disclosure comes two days after JPMorgan said it would temporarily stop foreclosing on more than 50,000 homes so it could review documents that might contain errors. Last week, GMAC halted certain evictions and sales of foreclosed homes in 23 states to review those cases after finding procedural errors in some foreclosure affidavits.
Consumer advocates say the problems are widespread across the lending industry.
"The general level of sloppiness is pervasive around the industry," said Diane Thompson, counsel at the National Consumer Law Center.
Vickee Adams, a spokeswoman for Wells Fargo & Co., said Wells' "policies, procedures and practices satisfy us that the affidavits we sign are accurate."
Mark Rodgers, a spokesman for Citigroup Inc., said the bank "reviews document handling processes in our foreclosure group on an ongoing basis, and we have strong training to ensure that appropriate employees are fully aware of the proper procedures."
Mortgage finance companies Fannie Mae and Freddie Mac said Friday they're directing companies they work with that collect loan payments to follow proper procedures.
In some states, lenders can foreclose quickly on delinquent mortgage borrowers. By contrast, the 23 states in which Bank of America is delaying foreclosures use a lengthy court process. They require documents to verify information on the mortgage, including who owns it.
Those states are:
Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.
FHA Commissioner Discusses RESPA Reform and SAFE Act Implementation
FHA Commissioner David Stevens wrote to the industry today. He discussed RESPA Reform and provided and update on the implementation of the SAFE ACT. Below are his comments....
The Office of Housing’s latest efforts have a common thread: the continued need to strengthen protections for consumers in the home buying process. We are working to make the housing market stronger, sustainable, and safer.
Two examples of our efforts to accomplish this goal are the recent reform of HUD’s Real Estate Settlement Procedures Act (RESPA) regulations which make mortgages more transparent and understandable, and the development of Safe Mortgage Licensing Act (SAFE) regulations which better protects consumers.
Transparency is important for consumer protection. Fair dealings require open, clear information. The SAFE Act helps increase the integrity of the mortgage process and prevent fraud. In combination with RESPA reform, consumers have greater protection from possible bad actors in the marketplace. These two measures highlight our commitment to regulatory reform and consumer protection in order to bring trust and stability back to the housing market.
RESPA IMPLEMENTATION
In a previous edition, I briefly discussed some aspects of the Real Estate Settlement Procedures Act (RESPA) Rule. I now want to update you on the great efforts the Department has made providing clarity to the industry during the implementation phase, primarily involving the use of the standardized Good Faith Estimate (GFE) and the revised and expanded Settlement Statement (HUD-1).
The Office of Housing has delivered a live webcast and hosted an Industry Roundtable, and has also met with and trained many lenders and others in an effort to resolve industry implementation inconsistencies. The RESPA staff has participated in more than 150 formal speaking engagements to educate industry professionals and state and federal regulators on the new RESPA rule and plan more in the future. The response has been overwhelming. Since the start of the year, we’ve received and answered more than 7,000 emails. Finally, the Office is currently developing multi-media guidance and education for consumers.
Most recently we have posted additional Frequently Asked Questions (FAQs) on our website aimed to give detailed guidance on topics about which we have had the most inquiries. Two of the hottest topics are pre-approvals and the use of worksheets. For full information and guidance, please refer to the FAQ’s.
Pre-approvals
A pre-approval is a document issued by a lender stating that a consumer qualifies for a specific loan amount prior to the consumer choosing a specific property.
If the loan originator is missing one of the elements it requires for a loan application (e.g., the property address) and is not required to provide a GFE, the originator is not prevented from verifying information for which the customer voluntarily provides documentation.
Also, a loan originator IS PERMITTED to determine that a property address is not one of the required pieces of information that the loan originator needs in order to issue a GFE. It is important to note that a loan originator must consistently apply its policy on the information it deems necessary to issue a GFE, and the RESPA rule requires a loan originator to issue a GFE whenever it receives information sufficient to complete an application for a GFE.
Worksheets
A worksheet is a document issued by a loan originator that may include generic information regarding interest rates and loan fees, or a document that may provide additional information to the consumer regarding the cost of the overall transaction outside of loan fees that are disclosed on the GFE.
A worksheet may be provided to a customer for a rate quote if the consumer does not want to provide the information necessary to generate a GFE. However, loan originators should ensure the following: (1) to eliminate consumer confusion, a worksheet should not look like a GFE and should not lead the customer to believe that it is a GFE and (2) a loan originator should NEVER use a worksheet in lieu of a GFE.
A loan originator may also use a worksheet to provide the consumer with additional information about his or her loan transaction, such as the amount of cash needed to close, seller credits, and other non-loan transaction fees that would be helpful to the consumer.
HOMEOWNER WARRANTIES AND RELATED COMPENSATION
Another recent development in RESPA is that HUD’s Office of General Counsel has issued additional guidance on “Home Warranty Companies’ Payments to Real Estate Brokers and Agents.” This new rule interprets section 8 of RESPA and HUD’s regulations as they apply to the compensation provided by home warranty companies (HWCs) to real estate brokers and agents.
Specifically, the rule provides:
A payment by an HWC for marketing services performed by real estate brokers or agents on behalf of the HWC that are directed to particular homebuyers or sellers is an illegal kickback for a referral under section 8;
Depending upon the facts of a particular case, an HWC may compensate a real estate broker or agent for services when those services are actual, necessary and distinct from the primary services provided by the real estate broker or agent, and when those additional services are not nominal and are not services for which there is a duplicative charge; and
The amount of compensation from the HWC that is permitted under section 8 for such additional services must be reasonably related to the value of those services and not include compensation for referrals of business.”
This rule was published on June 25. You may view this interpretive rule here.
SAFE ACT
Passed by Congress as part of the Housing and Economic Recovery Act of 2008 (HERA), the SAFE Act mandates that all individual Mortgage Loan Originators (MLOs) either be licensed by the state where they do business or, if they are employed by a federally-regulated depository institution, be registered. Both licensing and registration must be done through the Nationwide Mortgage Licensing System and Registry (NMLSR), which also provides MLO’s with unique identifiers. The SAFE Act sets forth minimum standards for state licensing.
HUD is responsible for ensuring that state regulators implement and maintain SAFE Act-compliant licensing systems, as well as ensuring the overall effectiveness of the NMLSR.
HUD’s SAFE Act Office has worked closely with the Conference of State Bank Supervisors (CSBS), the American Association of Residential Mortgage Regulators (AARMR) and the states to ensure that all U.S. jurisdictions enact SAFE Act-compliant licensing systems through legislation or regulations.
Final Rule Status
HUD published a proposed rule in the Federal Register on December 15, 2009, setting forth the minimum requirements that a state would have to meet in order to be compliant with the SAFE Act. As of this date, the proposed rule has not been finalized. In the absence of a final rule, HUD cannot provide definitive guidance regarding certain compliance issues.
HUD received over 5,300 comments from the public during the comment period on the proposed rule. Most of the comments were from organizations and individuals concerned that they would need to license their employees.
Those who commented included: non-profit agencies, housing counseling organizations, loan modification and servicing specialists, housing finance agencies, those involved in owner/seller financing, mortgage industry groups and other interested persons. In developing its final rule, HUD is working to address concerns raised by comments.
In closing, I hope you find these overviews helpful. I am confident that updating the RESPA Rule and implementing the SAFE Act will lead to clear regulations for the housing industry, stronger protections for consumers, and a more stable housing market.
The Office of Housing’s latest efforts have a common thread: the continued need to strengthen protections for consumers in the home buying process. We are working to make the housing market stronger, sustainable, and safer.
Two examples of our efforts to accomplish this goal are the recent reform of HUD’s Real Estate Settlement Procedures Act (RESPA) regulations which make mortgages more transparent and understandable, and the development of Safe Mortgage Licensing Act (SAFE) regulations which better protects consumers.
Transparency is important for consumer protection. Fair dealings require open, clear information. The SAFE Act helps increase the integrity of the mortgage process and prevent fraud. In combination with RESPA reform, consumers have greater protection from possible bad actors in the marketplace. These two measures highlight our commitment to regulatory reform and consumer protection in order to bring trust and stability back to the housing market.
RESPA IMPLEMENTATION
In a previous edition, I briefly discussed some aspects of the Real Estate Settlement Procedures Act (RESPA) Rule. I now want to update you on the great efforts the Department has made providing clarity to the industry during the implementation phase, primarily involving the use of the standardized Good Faith Estimate (GFE) and the revised and expanded Settlement Statement (HUD-1).
The Office of Housing has delivered a live webcast and hosted an Industry Roundtable, and has also met with and trained many lenders and others in an effort to resolve industry implementation inconsistencies. The RESPA staff has participated in more than 150 formal speaking engagements to educate industry professionals and state and federal regulators on the new RESPA rule and plan more in the future. The response has been overwhelming. Since the start of the year, we’ve received and answered more than 7,000 emails. Finally, the Office is currently developing multi-media guidance and education for consumers.
Most recently we have posted additional Frequently Asked Questions (FAQs) on our website aimed to give detailed guidance on topics about which we have had the most inquiries. Two of the hottest topics are pre-approvals and the use of worksheets. For full information and guidance, please refer to the FAQ’s.
Pre-approvals
A pre-approval is a document issued by a lender stating that a consumer qualifies for a specific loan amount prior to the consumer choosing a specific property.
If the loan originator is missing one of the elements it requires for a loan application (e.g., the property address) and is not required to provide a GFE, the originator is not prevented from verifying information for which the customer voluntarily provides documentation.
Also, a loan originator IS PERMITTED to determine that a property address is not one of the required pieces of information that the loan originator needs in order to issue a GFE. It is important to note that a loan originator must consistently apply its policy on the information it deems necessary to issue a GFE, and the RESPA rule requires a loan originator to issue a GFE whenever it receives information sufficient to complete an application for a GFE.
Worksheets
A worksheet is a document issued by a loan originator that may include generic information regarding interest rates and loan fees, or a document that may provide additional information to the consumer regarding the cost of the overall transaction outside of loan fees that are disclosed on the GFE.
A worksheet may be provided to a customer for a rate quote if the consumer does not want to provide the information necessary to generate a GFE. However, loan originators should ensure the following: (1) to eliminate consumer confusion, a worksheet should not look like a GFE and should not lead the customer to believe that it is a GFE and (2) a loan originator should NEVER use a worksheet in lieu of a GFE.
A loan originator may also use a worksheet to provide the consumer with additional information about his or her loan transaction, such as the amount of cash needed to close, seller credits, and other non-loan transaction fees that would be helpful to the consumer.
HOMEOWNER WARRANTIES AND RELATED COMPENSATION
Another recent development in RESPA is that HUD’s Office of General Counsel has issued additional guidance on “Home Warranty Companies’ Payments to Real Estate Brokers and Agents.” This new rule interprets section 8 of RESPA and HUD’s regulations as they apply to the compensation provided by home warranty companies (HWCs) to real estate brokers and agents.
Specifically, the rule provides:
A payment by an HWC for marketing services performed by real estate brokers or agents on behalf of the HWC that are directed to particular homebuyers or sellers is an illegal kickback for a referral under section 8;
Depending upon the facts of a particular case, an HWC may compensate a real estate broker or agent for services when those services are actual, necessary and distinct from the primary services provided by the real estate broker or agent, and when those additional services are not nominal and are not services for which there is a duplicative charge; and
The amount of compensation from the HWC that is permitted under section 8 for such additional services must be reasonably related to the value of those services and not include compensation for referrals of business.”
This rule was published on June 25. You may view this interpretive rule here.
SAFE ACT
Passed by Congress as part of the Housing and Economic Recovery Act of 2008 (HERA), the SAFE Act mandates that all individual Mortgage Loan Originators (MLOs) either be licensed by the state where they do business or, if they are employed by a federally-regulated depository institution, be registered. Both licensing and registration must be done through the Nationwide Mortgage Licensing System and Registry (NMLSR), which also provides MLO’s with unique identifiers. The SAFE Act sets forth minimum standards for state licensing.
HUD is responsible for ensuring that state regulators implement and maintain SAFE Act-compliant licensing systems, as well as ensuring the overall effectiveness of the NMLSR.
HUD’s SAFE Act Office has worked closely with the Conference of State Bank Supervisors (CSBS), the American Association of Residential Mortgage Regulators (AARMR) and the states to ensure that all U.S. jurisdictions enact SAFE Act-compliant licensing systems through legislation or regulations.
Final Rule Status
HUD published a proposed rule in the Federal Register on December 15, 2009, setting forth the minimum requirements that a state would have to meet in order to be compliant with the SAFE Act. As of this date, the proposed rule has not been finalized. In the absence of a final rule, HUD cannot provide definitive guidance regarding certain compliance issues.
HUD received over 5,300 comments from the public during the comment period on the proposed rule. Most of the comments were from organizations and individuals concerned that they would need to license their employees.
Those who commented included: non-profit agencies, housing counseling organizations, loan modification and servicing specialists, housing finance agencies, those involved in owner/seller financing, mortgage industry groups and other interested persons. In developing its final rule, HUD is working to address concerns raised by comments.
In closing, I hope you find these overviews helpful. I am confident that updating the RESPA Rule and implementing the SAFE Act will lead to clear regulations for the housing industry, stronger protections for consumers, and a more stable housing market.
Extension of Homebuyer Tax Credit Closing Deadline Has New Life
The House just backed a measure to extend the closing deadline to Sept. 30 for buyers who met the April 30 deadline to have a signed contract. The current deadline requires those buyers to close the transaction by June 30 to receive the $8,000 tax credit for first-time homebuyers.
Today, the House of Representatives passed an extension of the $8,000 homebuyer tax credit for first time homebuyers. The extension was set to expire at the end of June. The extension, sponsored by Rep. Frank Kratovil and his colleagues Rep. Travis Childers (D-MS) and Kathy Dahlkemper (D-PA), will extend the credit until October 1, 2010.
“The first time home buyer tax credit is working to revitalize the housing industry, a major indicator of the overall strength of the economy,” said Rep. Frank Kratovil. “However, more than 2,000 Marylanders who have already signed a contract to purchase a new home are having their closings delayed through no fault of their own. This common sense legislation will ensure that these individuals receive the tax credit that they rightfully deserve. Extending this tax credit will not only boost our economic recovery and support our housing market, but it is also the right thing to do.”
The bill extends the credit for all homebuyers with a binding contract as of April 30, 2010 so that they are afforded more time to close the sale and still benefit from the credit.
In late September Reps. Frank Kratovil (D-MD) and Travis Childers (D-MS) introduced a bill, The Tax Credit Extension for Homebuyers with a Loss Deduction Incentive Act (H.R. 3640), to extend the first time home buyer tax credit. A similar home buyer tax credit extension was eventually signed into law on November 6, 2009.
Today, the House of Representatives passed an extension of the $8,000 homebuyer tax credit for first time homebuyers. The extension was set to expire at the end of June. The extension, sponsored by Rep. Frank Kratovil and his colleagues Rep. Travis Childers (D-MS) and Kathy Dahlkemper (D-PA), will extend the credit until October 1, 2010.
“The first time home buyer tax credit is working to revitalize the housing industry, a major indicator of the overall strength of the economy,” said Rep. Frank Kratovil. “However, more than 2,000 Marylanders who have already signed a contract to purchase a new home are having their closings delayed through no fault of their own. This common sense legislation will ensure that these individuals receive the tax credit that they rightfully deserve. Extending this tax credit will not only boost our economic recovery and support our housing market, but it is also the right thing to do.”
The bill extends the credit for all homebuyers with a binding contract as of April 30, 2010 so that they are afforded more time to close the sale and still benefit from the credit.
In late September Reps. Frank Kratovil (D-MD) and Travis Childers (D-MS) introduced a bill, The Tax Credit Extension for Homebuyers with a Loss Deduction Incentive Act (H.R. 3640), to extend the first time home buyer tax credit. A similar home buyer tax credit extension was eventually signed into law on November 6, 2009.
OBAMA ADMINISTRATION UNVEILS PLAN TO PREVENT AND END HOMELESSNESS
"As the most far-reaching and ambitious plan to end homelessness in our history, this plan will both strengthen existing programs and forge new partnerships," said USICH Chair and HUD Secretary Shaun Donovan. "Working together with Congress, state and local officials, faith-based and community organizations, and business and philanthropic leaders across our country, we will harness public and private resources to build on the innovations that have been demonstrated at the local level nationwide. No one should be without a safe, stable place to call home and today we unveil a plan that will put our nation on the path toward ending all types of homelessness."
By combining permanent housing with support services, federal, state, and local efforts have reduced the number of people who are chronically homeless by one-third in the last five years.
"Communities across the country have stressed the need for federal leadership to prevent and end homelessness," said USICH Executive Director Poppe. "For the first time, the nation will have goals, strategies, and measureable outcomes that will guide us toward a fiscally prudent government response. Local, state, and federal governments cannot afford to invest in anything but the most evidence-based, cost-effective strategies."
In recent years, over 300 communities have developed plans to end homelessness. "We know that the Federal government alone cannot address this challenge," said USICH Vice Chair and Labor Secretary Hilda Solis. "Achieving the goals in Opening Doors will require strong partnerships with Congress, states, localities, philanthropy, and faith based and community organizations across the country. After all, the people of our nation are best served when we work as a team.
Opening Doors serves as a roadmap for joint action by the 19 USICH member agencies along with local and state partners in the public and private sectors. The plan puts us on a path to end veterans and chronic homelessness by 2015; and to ending homelessness among children, family, and youth by 2020. The Plan presents strategies building upon the lesson that mainstream housing, health, education, and human service programs must be fully engaged and coordinated to prevent and end homelessness, including:
Increasing leadership, collaboration, and civic engagement, by a focus on providing and promoting collaborative leadership at all levels of government and across all sectors and strengthening the capacity of public and private organizations by increasing knowledge about collaboration and successful interventions to prevent and end homelessness.
By combining permanent housing with support services, federal, state, and local efforts have reduced the number of people who are chronically homeless by one-third in the last five years.
"Communities across the country have stressed the need for federal leadership to prevent and end homelessness," said USICH Executive Director Poppe. "For the first time, the nation will have goals, strategies, and measureable outcomes that will guide us toward a fiscally prudent government response. Local, state, and federal governments cannot afford to invest in anything but the most evidence-based, cost-effective strategies."
In recent years, over 300 communities have developed plans to end homelessness. "We know that the Federal government alone cannot address this challenge," said USICH Vice Chair and Labor Secretary Hilda Solis. "Achieving the goals in Opening Doors will require strong partnerships with Congress, states, localities, philanthropy, and faith based and community organizations across the country. After all, the people of our nation are best served when we work as a team.
Opening Doors serves as a roadmap for joint action by the 19 USICH member agencies along with local and state partners in the public and private sectors. The plan puts us on a path to end veterans and chronic homelessness by 2015; and to ending homelessness among children, family, and youth by 2020. The Plan presents strategies building upon the lesson that mainstream housing, health, education, and human service programs must be fully engaged and coordinated to prevent and end homelessness, including:
Increasing leadership, collaboration, and civic engagement, by a focus on providing and promoting collaborative leadership at all levels of government and across all sectors and strengthening the capacity of public and private organizations by increasing knowledge about collaboration and successful interventions to prevent and end homelessness.
- Increase access to stable and affordable housing, by providing affordable housing and permanent supportive housing.
- Increase economic security, expand meaningful and sustainable employment and improve access to mainstream programs and services to reduce financial vulnerability to homelessness.
- Improve health and stability, by linking health care with homeless assistance programs and housing, advancing stability for youth aging out of systems such as foster care and juvenile justice, and improving discharge planning for people who have frequent contact with hospitals and criminal justice systems.
- Retool the homeless response system, by transforming homeless services to crisis response systems that prevent homelessness and rapidly return people who experience homelessness to stable housing.
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