Most mortgage industry insiders believe there is still a 12 to 18 month window of opportunity left for foreclosure prevention services like loan modification and loan workouts. Loan modification leads are still hot in the mortgage marketing circles. Foreclosure scams continue to run rampant and that makes consumers very weary.
New measures are being implemented to take aim at what consumer groups say is a surge in fraud by entities offering to help struggling homeowners modify their home mortgage loans or avoid foreclosure. “There are a lot of different scams going on right now,” said Martha Lucey, president of ByDesign Financial Solutions, a nonprofit credit-counseling agency. “Homeowners are struggling with affordability and many are desperate. When consumers are desperate, they’re willing to pay for unrealistic financial solutions.”
The most common allegations involve struggling homeowners who make up-front payments, often in the thousands of dollars, to firms that promise to work with their mortgage lender to renegotiate their mortgage and lower their monthly home loan payments. The mortgage loans are never changed and the money is gone.
A bill by state Sen. Ron Calderon, D-Montebello, would prohibit firms from charging advance fees for mortgage loan modification services. Supporters say the bill would prevent people in bad financial straits from becoming even worse off.
In addition, the legislation would require for-profit firms to tell potential customers that they could get free assistance from various nonprofit counseling agencies. “The federal fix is going to take care of a lot of the problems we’re experiencing on the foreclosure side of things,” Calderon said. But people looking for help need to be protected, he said.
The California Association of Realtors opposes the bill. The organization objects to the measure’s blanket prohibition on advance fees. Assemblyman Kevin Jeffries, R-Lake Elsinore, said he is open to more foreclosure-related safeguards, up to a point.” My view is that the federal government is getting pretty pro-active in cleaning up the lending industry,” he said. “There’s no reason to duplicate what’s happening at the federal level.”
Several other bills build on parts of SB 1137 dealing with rental tenants in foreclosed properties. One measure would make the buyer of a rental property at a foreclosure sale responsible for returning the tenants’ security deposit.
According to Jim Miller, another bill would give renters up to a year to leave properties that revert to the lender after foreclosure. The renters would have to move if new owners want to move in. “We think having a family there is much better for all parties involved,” said Ronald Coleman, legislative director of the low-income advocacy group Association of Community Organizations for Reform Now, known as ACORN. Vacant homes get run down and attract vandals, he said.
Diana Golobay wrote an article recently about wo-thirds of homeowners surveyed in September said they met criteria for a mortgage refinancing program available through the expanded FHA mortgage offerings available under the newly-enacted Hope for Homeowners program, according to a media statement issued Monday by the Consumer Credit Counseling Service of Greater Atlanta.
Homeowners at risk of foreclosure or home loan default who called CCCS of Greater Atlanta for foreclosure prevention counseling in July and August were polled by e-mail regarding the requirements. Of the 591 homeowners polled, 381 – or 64.6 % – indicated through their responses that they were eligible to refinance their current mortgage loans into new fixed-rate mortgage insured by the Federal Housing Administration, according to the CCCS of Greater Atlanta statement.
The Housing and Economic Recovery Act of 2008, which became law in July and took effect Oct. 1, created a mortgage refinancing program intended keep homeowners from foreclosure. To qualify, borrowers must indicate they residence in the at-risk home, their mortgage originated before January 2008 and have no existing home equity lines or other second mortgages. Candidates also needed to indicate they do not own another home and they spend 31 % of their gross monthly income on mortgage debt.
“Our survey results indicate this new FHA loan program holds the potential to help a large number of U.S. citizens struggling to pay their mortgage,” said CCCS of Greater Atlanta president Suzanne Boas in the press statement. “Not everyone will be able to meet the terms. But if someone meets the basic criteria laid out in the housing bill, it would be worth a phone call to their lender to ask about the FHA refinance program.” For the 35% of homeowners polled who indicated multiple loans or second mortgages on the at-risk property, eligibility for the refinance program must wait until all 2nd mortgages or home equity loans are paid off. “Loan modifications could be difficult if the 1st and 2nd mortgage are held by different lenders because only the primary mortgage qualifies for the FHA program,” CCCS of Greater Atlanta said.
Virginia passed a bill amending several provisions of the Mortgage Lender and Broker Act (MLBA). Under the amended law, the term “owner-occupied” is deleted from the definition of “mortgage loan.” As such, mortgage loans subject to the purview of the MBLA are no longer limited to loans secured by owner-occupied properties. The amended law also requires mortgage lenders and brokers to consent to national and state criminal history records checks when applying for a license. A recent report indicated that mortgage loan applications have been declining in Virginia , Maryland and the greater D.C. area.
In addition Virginia mortgage lenders and brokers are now required to conduct background checks on all employees who may have access to personal identifying or financial information and must also ensure that employees are properly trained in applicable state and federal mortgage lending laws. The mortgage lending bill becomes effective July 1, 2008.
Colorado adopted an emergency rule formalizing initial and continuing education requirements for mortgage brokers required to be licensed under the Mortgage Broker Licensing Act (MBLA). Under the rule, mortgage brokers must complete a 40-hour education course and pass an examination prior to initial licensure. Mortgage brokers currently licensed under the MBLA have until January 1, 2009 to complete the initial education course and examination. Mortgage brokers must also complete 9 credit hours of continuing education during each 3-year renewal cycle. The 9-hour continuing education requirement is not required until after the mortgage broker’s first 3-year renewal cycle. Colorado mortgage lenders are not subject to the same laws and restrictions as mortgage brokers and this continues to fuel controversy. Why should mortgage brokers be required to disclose “yield spread premium” if lenders in the same state do not. Most mortgage professionals believe that yield spread premium also known as “rebate”, should not be a required in the disclosures like the “Good Faith Estimate.”
Massachusetts issued a Regulatory Bulletin formalizing initial and continuing education requirements for loan originators subject to Massachusetts’ recently enacted mortgage loan originator law. Under the new law, mortgage loan originators must complete a 24-hour residential mortgage lending course prior to initial licensure. Individuals employed as mortgage loan originators prior to November 30, 2007 who submit an application for initial licensing by May 27, 2008 are not required to complete the course. In addition, mortgage loan originators are now required to complete at least 8 hours of continuing education courses on an annual basis.
The Ohio Division of Financial Institutions has issued two letters stating that mortgage brokers, loan officers, and mortgage lenders subject to the Mortgage Broker Act and the Ohio Mortgage Loan Act must give due consideration to the procedures set forth in the Statement on Subprime Mortgage Lending (Subprime Statement). The Subprime Loan Statement was developed by the Conference of State Banker Supervisors, the American Association of Residential Mortgage Regulators, and the National Association of Consumer Credit Administrators to address emerging risks associated with certain subprime mortgage products and lending practices. The Subprime Loan Statement is an attempt to assist state regulators in promoting consistent practices in the mortgage market, and to clarify how Ohio mortgage lenders and brokers can offer subprime mortgage loans in a fair and prudent manner that clearly discloses the risks that borrowers may assume.
Maine passed a bill increasing the homestead exemption to $47,500. The bill also increases the homestead exemption to $95,000 if the debtor is elderly or disabled, has minor dependents residing in the residence, or has dependents that are elderly or disabled residing in the residence. This mortgage bill becomes effective July 15, 2008.
Mississippi passed a bill requiring mortgage lenders, mortgage brokers and loan originators licensed or registered under the Mississippi Mortgage Consumer Protection Law to utilize the multistate licensing system for all license and registration applications and renewals. The lending bill went into effect on April 7, 2008
Last month, North Carolina adopted rules affecting surety bond requirements for mortgage bankers and brokers licensed under the Mortgage Lending Act. The new rules require mortgage lenders, bankers and mortgage brokers to report any claims made against a surety bond within 10 days and to reinstate the bond to the full amount within 30 days. The rules also amended recordkeeping and notification requirements under the Act. The lending rules went into effect on March 20, 2008.
Mortgage brokers and lenders have embraced the increased FHA mortgage loan limits for North Carolina, because so many more homeowners now qualify for government refinance and purchase loans. In some cases these FHA mortgages actually help stop foreclosures. Like most states, North Carolina has seen a significant surge in foreclosure activities and short sale transactions.
Maryland passed a bill amending the state’s foreclosure law. Under the new law, a written Notice of Intent to Foreclose must be provided to mortgagors or grantors prior to filing an action to foreclose on residential property. An action to foreclose may not be filed until 90 days after default or 45 days after the Notice of Intent to Foreclose is sent to the mortgagor or grantor, whichever is last to occur. A copy of the complaint to foreclose or order to docket must also be personally served to the mortgagor or grantor at least 45 days prior to the foreclosure sale. In addition, the name and license number of both the mortgage lender and the mortgage originator must now be included in all mortgages, deeds of trust, and other instruments securing mortgage loans on residential property.
If the Maryland mortgage lender or bank is exempt from licensing, the mortgage or deed of trust must contain an affidavit to that effect. The bill went into effect on April 3, 2008. According to Jason Sklar an attorney who works with a Loan Modification Company in Owings Mills, the foreclosure issue is serious and needs to be addressed quickly so homeowners don’t lose their homes.
