California Real Estate Fraud Report

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The Big Picture of the Mortgage Crisis Emerges – Finally

[The following, published in Mortgage News Daily,  is not an article about mortgage fraud per se; however, it indicates the severity of the situation and is descriptive of the resistance by the “big player” lenders to take action. There is an inexplicable sense of bewilderment as to how underwriting practices of the past few years are directly responsible for much of the current chaos and, unfortunately, still an apparent unwillingness to take decisive steps to mitigate what common sense dictates should be done to get themselves, homeowners, and local economies back on track. For the informed reader, this article is worth reading in its entirety. Anybody who thinks that there is such a think as “compassionate corporate capitalism”, or “enlightened self-interest” (the term used in this article), might think otherwise after reading it.]

In a conference call/press conference on Thursday, the Conference of State Bank Supervisors (CSBS) released its first report on loss mitigation efforts as reported by 13 major residential mortgage servicers. Iowa Attorney General Tom Miller explained that the report grew out of a concern dating back to last summer that the nation was facing a “foreclosure avalanche.” The AG said at that point the bank regulators and attorneys general who were expressing that concern were looking at the impact of individual foreclosures on the family and the community and had no idea of the collateral damage that would later emerge from the poor underwriting standards. They were, however, convinced that the avalanche could be mitigated by enlightened self interest. Such self-interest should come together where the borrower could afford to make payments in an amount that the owner of his loan could afford to accept.

A State Foreclosure Prevention Working Group was formed and met with 20 of the largest servicers of subprime loans. Most of these servicers agreed that loss mitigation made a lot of sense and signed on to the “enlightened self-interest” proposition. However according to Mark Pearce, North Carolina Deputy Commissioner of Banks, there was an immediate disconnect between what servicers said they were doing to ameliorate the problem and what the Working Group was hearing from borrowers and non-profits seeking to help those borrowers so the Group moved to collect data directly from servicers to verify what was going on. One immediate need was develop a metric of definitions so that “loss mitigation” or “repayment plan” meant the same thing to all players. The Group is now collecting data from 13 servicers representing 58 percent of the subprime market. Six servicers have either declined to provide information or are in negotiations to work out confidentiality concerns. Chase and Wells Fargo have declined to participate based on advice from the Office of Comptroller of the Currency which OCC has refused to change and Washington Mutual along with Chase have refused to provide data because of their participation in the Hope NOW Alliance While the report stated that many of the servicers participating in the data collection had not yet set up the kinds of tracking systems that would allow data to slice and dice information too finely, (e.g.was the loan modification an interest rate modification, a term modification, or a reduction in the amount owed?) this first report, containing data from last October, did contain some findings, the most interesting being that seven out of ten seriously delinquent borrowers are not on track for any loss mitigation option (my emphasis).

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© Copyright 2007-2017 Monique Bryher

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The information and notices contained on The California Real Estate Fraud Report are intended to summarize recent developments in real estate fraud, mortgage fraud, short sale fraud, REO fraud, appraisal fraud, loan modification scams, loan modification fraud and other real estate related crimes occurring in Los Angeles and California. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about real estate fraud, mortgage fraud and appraisal fraud matters or who believe they require legal counsel should seek the advice of an attorney.

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