Mortgage service companies questioned about loan modification delays

Despite government efforts to make loan modification available to homeowners, those facing foreclosure are still encountering delays and resistance. Senior officials from the departments of the Treasury, Housing, and Urban Development called in representatives from these companies to respond to allegations that servicers failed to deliver.

The statistics, presented by the New York Times, are troubling. As of mid-July, there were 160,000 trial mortgage modifications made by servicing companies, with another 165,000 offers outstanding. The number of mortgages in the modification process pales in comparison to the more than 1.5 million properties that received a default or foreclosure notice in the first half of the year.

It may seem that the reason more farther behind without foreclosure being filed is because there are so many delinquencies and lenders have a backlog of foreclosure filings. But many believe differently. The companies typically collect a percentage of the value of the loans they service. They extract their share regardless of whether borrowers are current on their payments. Indeed, their percentage often increases on delinquent loans. Legal experts say the opportunities for additional revenue in delinquency are considerable, confronting mortgage companies with a conflict between their own financial interest in collecting fees and their responsibility to recoup money for investors who own most mortgages.

Data on delinquencies reinforces the notion that servicers are inclined to let problem loans float in purgatory — neither taking control of houses and selling them, nor modifying loans to give homeowners a break. Even more questionable is data reported from the realty research company First American Core Logic. From June 2008 to June 2009, the number of American mortgages that were 90 days or more delinquent soared from 1.8 million to nearly 3 million. During that period, the number of loans that resulted in the bank taking ownership of the home declined to 245,000, from 333,000.

Ultimately, the benefits of delinquency erode incentives for mortgage companies to dispose of troubled loans quickly, say experts, allowing distressed houses to decay and fall in value — a fact that many believe is of little interest to the servicer.

Shockingly, the major financial institutions deny that they would place their own profits ahead of the best interest of the borrower. One Bank of America official is quoted as saying: "that's just not the right thing to do". But there has been no explanation offered by banks and servicers for why the modification process is so slow, except for general claims about backlog. One thing is certain: loan modification is not happening for most people. And the mortgage service companies, who have a financial incentive for it not to happen, cannot seem to provide a reason

Condo foreclosure reform movement continues in South Florida

In addition to homeowners, Florida condominium associations are also feeling the effects of foreclosure. With many owners facing foreclosure or in the foreclosure process, condominium associations have seen a substantial decline in collection of maintenance fees needed to maintain their operating budgets. Some associations have been forced to raise fees on all owners and cut back on services. In the worst cases, utilities have been shut off and some, like Miami Beach association, Maison Grande, have been forced to to file for Chapter 11 bankruptcy.


About 100 condo owners from Miami Dade and Broward condominium associations met last week for a second in a series of meetings, hoping to encourage the Florida legislature to address the foreclosure crisis and relieve its impact on the condominium associations. Unfortunately, much like the present foreclosure crisis, there appears to be no immediate relief in sight.

Former mortgage brokers profit from foreclosures by offering loan modification services

Many people are earning less these days as a direct or indirect result of the subprime mortgage crisis. But not those who had a hand in issuing the loans that caused it. Former mortgage brokers, many of whom arranged for dubious and questionable loans for riskier borrowers, are now making money as loan consultants. In essence, these former brokers are offering to assist borrowers now facing foreclosure as a result of the loans they should not have obtained in the first place. It should come as no surprise that these loan modification services are no more helpful to borrowers than the advice given to them in the first place.

In Los Angeles, former high risk broker Jack Sousanna reorganized his office under the name Federal Loan Modification Law Center. The new business venture charged large up front "retainer" fees, as much as $3500, and, according to a New York Times investigation, often produced little result for its clients. FedMod, the company who ran the modification center, is now defending itself in a lawsuit brought by the Federal Trade Commission.

As discussed in a previous post, Florida passed the Foreclosure Fraud Prevention Act to guard against such questionable business dealings. In Florida, foreclosure assistance firms or "rescue consultants"- defined as anyone who is not a lawyer, cannot charge upfront fees and must complete work as promised before collecting a fee.

But there is a relatively easy way to circumvent this law. A foreclosure consultant firm (which can be any set of individuals with little or no experience in law or real estate) can bring in an attorney partner and claim that they are operating as a law firm, as FedMod attempted to do. While this may ultimately land the attorney participating in such a scheme in considerable trouble, not to mention facing the loss of his/her license to practice law, that will be little consolation to anyone who gets caught up in such a scheme, and who may lose their home as a result of trusting an unscrupulous company masquerading as a law firm.

Florida Foreclosure filings decreased but Florida foreclosures remains high in national foreclosure rate

In a previous post, I discussed the decrease in foreclosure filings over the past month. Experts suggested that this was no cause for celebration. It turns out that the experts are correct.

Florida foreclosures are the third highest in the nation, according to realty trac. From January through June, 2009, 3% of Florida homeowners received at least one foreclosure filing. Florida's foreclosure rate is even more disturbing. With 268,064 properties receiving a foreclosure filing in the first six months of 2009, Florida documented the second highest state total number of foreclosure filings. Florida foreclosure activity in the first half of 2009 increased 7 percent from the previous six months and was up nearly 42 percent from the first half of 2008.

It is clear that Florida foreclosures will continue at an alarming rate as more and more homeowners are affecting by foreclosure. As unemployment is expected to rise, it is a certainty that this will lead to more foreclosure filings as well.

Foreclosure law: Foreclosed property prevention program suffers setbacks, falls well short of goals

Since the launching of the foreclosed property prevention program four months ago, only around 13,000home loans have been refinanced, far short of its admittedly lofty goal of helping 2 million homeowners.

It is not surprising that one of the main reasons for this underperformance is the failure of lenders and services to implement the policy goals. For example, under the program, refinancing should be made available to homeowners who owe up to 125 percent of their home value. Instead, Fannie Mae and Freddie Mac, have delayed buying these loans. As a result, lenders are not accepting the loan applications. Another example: while loans with insurance can be refinanced under the program, banks are refusing to accept applications from borrowers with mortgage insurance.

All of this points to a serious lack of accountability. The banks are simply refusing to follow the requirements of the program and offering no explanations for why they will not do so. In the case of loans with mortgage insurance, however, the answer appears pretty obvious.

It is also pretty clear that, unless banks are under far more pressure to negotiate with homeowners, they simply will not do so.

Florida foreclosure filings decline by 50% in June: experts warn that the numbers are misleading.

On July 17, 2009, the Miami Herald reported that new foreclosure filings in South Florida dropped 50% from May to June. While this may sound encouraging, lenders took back nearly double the number of homes in foreclosure actions and experts warn that the foreclosure crisis is far from over.
Despite all efforts by the Obama administration to make loan modification available to borrowers, all reports point to only a small number of homeowners receiving loan modifications. One of the main reasons is, in theory, due to the fact that lenders still do not understand the loan modification process. Lenders are also completely overwhelmed by the number of homes in foreclosure, which further slows down the process.
Even though the overall picture remains discouraging, there is hope for homeowners facing foreclosure. Loan modification, although difficult to obtain, is a viable option. At the end of the day, the bank does not want to own all of these homes. The foreclosure process is time consuming and expensive for lenders and the end result is that the home is sold at auction for a fraction of its previous sales price. The bank may receive all cash on the sale, but will still have a significant loss. It may be better for the bank to continue receiving payments from the homeowner in foreclosure, even if those payments are lower as a result of loan modification.
Loan modification is a difficult process, especially for homeowners attempting to do it themselves. Homeowners need to call their lenders repeatedly and incessantly, up to several times per day, to even reach a representative who can begin the loan modification process. The loan modification process is extremely time consuming and difficult, especially for a homeowner who is trying to keep his/her job at the same time. Hiring a foreclosure defense law firm or foreclosure lawyer with experience in negotiating loan modifications may be the best route for homeowners facing foreclosure. Anyone with questions regarding loan modification or foreclosure is encouraged to contact an foreclosure attorney.
The information included in this article has been prepared by Lori Barkus, Esq. for information purposes only and is not intended to be a substitute for legal advise from your own legal counsel. Transmission of such information is not intended to create, and receipt does not constitute, an attorney-client relationship between Lori Barkus, Esq. and the receiver. No information in this article should be acted upon any person, entity or firm without first obtaining proper legal advise. Be advised that the act of sending electronic mail or any telephone communication with Lori Barkus, Esq. or Lori Barkus P.A. does not in and of itself create an attorney-client relationship.
The hiring of a lawyer is an important decision that should not be based solely upon advertisements or articles written by the attorney. Before you decide, ask us to send you free written information about our qualifications and experience.

Facing foreclosure? What not to do

You’ve been served with a foreclosure action. Like many people, you are probably receiving lots of advice and unsolicited mail and telephone calls urging you to take one action or another. Foreclosure is overwhelming enough and now you have to decide what to do. Depending on your situation, there may be options for you and picking the best one is a matter of understanding the facts and circumstances and reviewing them with someone who is knowledgeable about both the law and the foreclosure process. If you make the wrong first move, your foreclosure action may be over before you have a chance to decide. Below some common mistakes made by homeowners facing foreclosure.

1. Do nothing: Remember when you were a little kid and you’d hide under the covers when you were scared? Many people have that same reaction as adults. If they ignore a problem, it will go away. In the case of foreclosure, the only thing that will go away if you ignore it is your house and the possibility of your keeping it or avoiding a judgment of foreclosure against you.
2. Go to court without representation: Some people decide that they will wait until there is a court date. At that point, they figure they will show up, tell the judge their story and he/she will not allow this to happen. This does not work because, while a judge may sympathize with your situation, the judge is required to follow the law. In order to prevent a foreclosure, you need to have a legal defense.
3. Fall victim to a scam: Unfortunately, there are people out there seeking to take advantage of homeowners who have been served with a foreclosure action. In a previous post, I discussed some of the more prominent foreclosure scams. Beware of any non lawyer who charges an upfront fee, anyone who offers to help by taking title to your home, or placing your home “in trust” while you work with the bank or any phone offers promising to stop foreclosure. Sadly, these scams exist and many who are already in an unfortunate situation have become victims.