The Zuckerberg Re-fi …

This past week, several news outlets reported on the recent re-finance of Facebook CEO and founder Mark Zuckerberg’s $5.95 million California mansion.

The NY Daily News reported that Zuckerberg’s unnamed lender has provided a 30 year adjustable rate loan at 1.05% interest.  As Greg McBride of Bankrate Inc., points out “When you can borrow at a rate below inflation, you’re borrowing for free”.  He makes a point.

While millions of American homeowners confronting legitimate hardships attempt to stay in their homes, they’re being refused loan modifications – forcing them to continue paying upwards of 8% (in many cases, higher) while deals are being cut to guys like Zuckerberg, who can clearly afford to pay the higher rate.

For those who believe that “class warfare” is simply a manufactured term used in the heat of the current political season, this might be proof that the term has legs.

By definition (according to Merriam-Webster), class warfare is: “opposition of and contention between social or economic classes; esp : such a struggle between or felt to exist between the proletariat and the capitalist classes”

Unfortunately, no one is reporting who Zuckerberg’s lender is.  However, if a lender who received bailout or TARP money owns his loan, this clearly fits the definition.

Using the tax dollars of the soon to be foreclosed and giving them to banks who then turn around and provide those dollars to the mega-rich, with terms available to almost no one else, while denying assistance to those who provided the tax dollars, sure sounds like class warfare to me…

To read more on the story, follow this link to The NY Daily News.

Feds Introduce Updated Short Sale Guidelines…

Earlier this week, the Federal Housing Finance Agency (FHFA) announced a new list steps/improvements to expedite the short sale process. According to the FHFA website, the new guidelines will go into effect on November 1^st, 2012.

Some of the highlights of the new guidelines include (my thoughts in italics):

1. Those deemed “most in need” of a short sale will see the process move forward expeditiously, often with a reduced need – or without any need at all – for documentation of economic hardship. A step in the right direction – especially if this expedites the process for homeowners who went delinquent because Fannie or Freddie told them to.

2. Allow for those with certain hardships to qualify for a short sale WITHOUT having to go delinquent on their mortgage payments prior to submitting the offer and without additional approval from Fannie Mae or Freddie Mac.  Among those hardships, include: death, divorce, disability and distant employment transfer or relocation.  Notably, the transfer component is for those moving 50 miles or more from their home for a job transfer or new employment opportunity. Huge.  Up until now, people were being punished for good behavior and rewarded for bad behavior.  Working with people who are trying to honor their obligation as opposed to telling them assistance is only available when they go delinquent, is long overdue.

3. Fannie and Freddie will waive the right to pursue for the deficiency in exchange for a financial contribution when a borrower has sufficient income or assets to make cash contributions or sign promissory notes.  Terrible.  Fannie & Freddie have taken BILLIONS of taxpayer dollars.  BILLIONS!!!  Until that money is repaid, not a single homeowner with a deficiency – who is current on their taxes – should have to pay a dime back towards the deficiency, unless fraudulent behavior can be proven.

4. Offer special treatment for military personnel with Permanent Change of Station (PCS) orders.  This was already announced a couple months ago, I suppose has been grouped in with the new guidelines. No brainier.  How it took this long for this guideline to be introduced is criminal.

5. Consolidate existing short sales programs into a single uniform program, which they claim will feature more clear and consistent guidelines, making it easier to process and execute short sales.  Included in that will be providing servicers and borrowers clarity on processing a short sale when a foreclosure sale is pending. This is kind of vague.  I’d like to see the guidelines and exactly what makes them “clear and consistent”, before I comment on them.

6. Fannie and Freddie will offer up to $6,000 to second lien holders to expedite a short sale.  Excellent.  Too many short sales die, because second liens request too much – often, more than the borrower has – and everyone ends up losing.  Increasing the payoff amount from a max of $3k to a max of $6k won’t save every deal, but it’ll certainly help close far more.

The new guidelines (in full) can be viewed at the FHFA website, here.

The Idea Of Eminent Domain To Fix Housing Gains Traction…

Two months ago, I wrote a post about the possibility of using eminent domain to fix the housing crisis, by having city’s/county’s/etc., purchase underwater mortgages at fair market value, then selling them to private investment firms which would lower the monthly mortgage payments, helping to keep people in their homes.

At first glance, I was a little skeptical of the idea and had a couple questions – chiefly, can we trust a corporation clearly out to make a buck?  What will happen to the deficiency?

On Monday, “The Huffington Post Live” launched, and one of their first discussions was about this topic.  Among the guests at the round table were actor John Cusack (someone with whom I’m a fan of both his acting chops and social/political activism), as well as Mortgage Resoultion Partners CSO John Vlahpolus.  You can see the segment, here.

After watching the discussion, I started looking for more opinions on the topic and came across the blog of someone else I’m a fan of – Matt Taibbi of Rolling Stone magazine, who wrote a very supportive piece on the topic.  You can read the blog, here.

With both of these anti-establishment heavyweights on-board – at least with the concept, if not this specific proposal from MRP – it certainly made me feel like this might actually be a legitimate vehicle for fixing the housing mess.

Both men concede that yes, MRP will make money from this plan and that’s ok.  After all, they are business and there is no crime in making a reasonable profit.  The crime, is making it at the peril of homeowners who have done nothing wrong but continue to make their payments, on time – as obligated – only to see their homes continue to drop in value, digging them into a deeper hole should they eventually need to sell.

As for the deficiency, I’m still not seeing a clear answer.  Currently, MRP is working with San Bernadino Co, in California, which is a non-deficiency state:  meaning in most instances, a lender can’t pursue for the deficiency.  Does that mean this process would only work in non-deficiency states?

My questions aside, the more interesting dynamic in all of this has been the response from Wall Street, which appears to be scared enough to go on the attack already.  According to Taibbi:

“But MRP’s role aside, this is also a compelling political story with potentially revolutionary consequences. If this gambit actually goes forward, it will inevitably force a powerful response both from Wall Street and from its allies in federal government, setting up a cage-match showdown between lower Manhattan and, well, everywhere else in America. In fact, the first salvoes in that battle have already been fired.

For instance, the Wall Street trade association, SIFMA, this past week issued a denunciation of the eminent domain plan that includes a promise of a legal challenge. “We believe the MRP proposal is unlikely to survive a judicial challenge,” one of SIFMA’s lawyers wrote. Other trade groups are lining up to describe the tactic as illegal or "unconstitutional."

More insidiously, however, SIFMA pledged that its members will not allow future home loans originated in counties that use the eminent domain tactic to participate in something called the To-Be-Announced (TBA) markets for mortgage-backed securities. Explaining this would require a sharp detour into a muck of inside-baseball mortgage terminology, but the long and the short of it is that SIFMA is promising to make it difficult for any community that tries this tactic to obtain private mortgage financing in the future.

Essentially, SIFMA is promising a kind of collusive financial lockout of uncooperative communities. The threat would appear to be a high-handed form of redlining that raises serious antitrust questions, but in a way, that kind of response is to be expected.”

Well, to quote Ron Burgandy, “Boy, that escalated quickly.”  Or at least, that’s certainly a much stronger initial response than I’d have expected.

But yesterday the tough talk continued, as Ben Hallman of The Huffington Post chronicled more threats from the SIFMA and the Association of Mortgage Investors, among others. You can read that piece, here.

Clearly, this isn’t a story that’s going away, or being brushed aside as a wacky idea – this thing has legs.  We will keep our eyes and ears on this one and provide more information as it becomes available…

Foreclosure Settlement Fails To Force Mortgage Companies To Improve…

An excellent piece appeared in The Huffington Post by business editor Peter Goodman on Wednesday, discussing the lack of progress being made in lender loss mitigation departments across the county, since the Obama administration and state attorneys general agreed to the $25 billion foreclosure settlement with the nation's five largest mortgage companies this past February.

The article is centered on Katie Diaz and her dealings with Bank of America, over the past four years.

A victim of the “great recession” and the housing crisis, Katie’s story is one that is all too familiar.  She’s not a cause of the housing crisis, but a casualty of it.  She wants nothing more to continue making her payments, but after losing work hours as the economy worsened – and eventually, her job – she did everything she was told to do in order to receive assistance from BofA , only to see the process drag on without results.

Not a new story, but this particular case is an encouraging one – when so many others seem hopeless.

Instead of communicating directly with her lenders loss mitigation department (at least, at this point in the process), the State of New York requires a settlement conference, with a court-appointed “referee” presiding over it.

Too often, the bank can get away with virtually whatever they want and it’s your word against theirs.  You can have all the fax confirmations, saved emails, etc., but if the bank says they didn’t get what you sent them, that’s the way it goes.

Until now.

With a neutral party involved, the playing field becomes a little bit more level.  I think what NY is doing is fantastic and I hope to see more states follow suit.

Sure, the article might end with Diaz being rejected for assistance, but I hardly think that’s the end of the story.

Anyway, read for yourself – it’s frustrating, but not nearly as frustrating if she didn’t have a neutral party overseeing the insanity…

Study Links Increase In Child Abuse To Housing Collapse…

I came across this article a couple weeks ago and thought it was worth sharing – if for no other reason, as a cautionary tale.

“According to findings based on a database that tracks discharges from pediatric hospitals in major metropolitan areas, researchers found that between 2000 and 2009, admissions for physical abuse at U.S. pediatric hospitals peaked in 2008 - right about the time housing foreclosures were taking off in many parts of the country.

Between 2000 and 2009, there were just over 11,800 admissions for physical abuse of children younger than six at 38 hospitals. That accounted for 0.28 percent of the nearly 4.2 million admissions in those hospitals overall.  Over the years that rate fluctuated, peaking at 0.3 percent in 2008.

Researchers then looked at each metropolitan area's unemployment rates and housing woes. They found that for each percentage increase in an area's foreclosure rate, admissions for physical abuse rose 6.5 percent the following year. There was a similar pattern with 90-day mortgage delinquency rates.”

Sadly, these results are hardly surprising.

As someone who spends much of their day either on the phone, overseeing calls or reading notes from calls to lenders, the treatment I witness is enough to drive one to violence.

Bank behavior when it comes to loss mitigation is well documented – loss mit reps are rude, regularly lose paperwork and keep people on hold for hours, only to disconnect them, forcing them to start over.

Much has been written about this broken process, but until you actually dip your toes in the short sale/loan modification waters, you really have no idea how dysfunctional it actually is.

For starters, you can submit documents 4 or 5 times before they can finally be confirmed received.  Since most lenders advise that it takes at least 48-72 hours for submitted documents to scan in to their systems, it is a process to follow up with them.  If you have to wait 2-3 business days before you can confirm, then it can take weeks to confirm receipt of one simple document, if you’re forced to re-submit it multiple times.  Once the documents are finally uploaded and reviewed, they are often deemed out of date and need to be updated, starting the cycle over.

Another common frustration involves adhering to the recommended follow up process exactly as provided by your negotiator, only to be told you’ve been poorly advised and followed up incorrectly.

We had been assigned a negotiator on file recently, who instructed us to follow up with him and him only.   He left us a voice mail regarding a title issue and we called back with the clarification he requested, later that afternoon.

Over a three-week period, we left 9 voice mails for him and spoke with his manager, as well as various representatives in the loss mitigation department.  Each time we were told the same – our negotiator is the only person we can speak with, the notes show he’s still assigned to the file, please be patient and keep leaving him voice mails.

When we finally did receive a voice mail back, it was from a NEW negotiator who had just received the file, stating as much and advising: “…it shows that there are no new notes on the file and you haven’t contacted us to clarify the title issues, so we’re closing out the file…”.  When we called back and advised not only that we’d left 9 voice mails, but had also spoken with a manager, we were told that we should have known the file was no longer with the original negotiator.

The examples above are just a couple of the hundreds of daily frustrations we encounter, when dealing with lender loss mitigation departments.  We’re a business.  We are able to remove the emotional component of the process.

Imagine dealing with this, through your own personal housing crisis.

Imagine going through the stress of fighting for your house or trying to limit your financial losses, on the heals of a job loss, illness, divorce or the numerous other hardships that drive people to seek assistance from their lender, only to face this nightmarish system. 

Sometimes the frustration becomes so overwhelming, you want nothing more than to punch the person on the other end of the phone, but you can’t, so the people closest to you end up suffering.

It’s a terrible situation and we’ve seen no indication that lenders are doing anything to make the system better.  I regularly advise people that there is no secret to completing a short sale – it simply takes a lot of patience and even more persistence.  However, when patience runs out and frustration gets in the way of persistence, people tend to give up and that’s when the results of a study like this one surface.

If you’re facing a loss mitigation issue, call an office like ours – we will navigate you through this messy process, while helping you maintain your sanity.

You can read the full article here, at The Huffington Post…