NATIONAL MORTGAGE SETTLEMENT
As you know, last February the 5 major loan servicers - BofA, Chase, Wells Fargo, Citi, and Ally - reached a Settlement of the lawsuit filed by the 50 Attorneys General based upon fraudulent foreclosure practices which came to be known as the "Robo-Signer Scandal". As reported in DSNews.com, through the end of June, the servicers have extended about $10.56 billion in aid and loss mitigation to struggling borrowers in a variety of ways. 7,093 borrowers received first lien modifications with principal forgiveness in the amount of $749.4 million. The amount of principal forgiveness per borrower amounts to about $105,650. Bank of America was the only servicer that failed to offer first lien modifications with principal forgiveness under the settlement. Another $10 Billion in lender obligations remains to be satisfied. In addition, the servicers have implemented between 35 and 72 percent of the 304 servicing standards required under the Settlement. However, Fannie Mae and Freddie Mac which hold 60% of the nation's residential loans were not included in the Settlement and continue to refuse to make any principal reduction.
HOMEOWNERS BILL OF RIGHTS
In July, California enacted the major pieces of legislation which were introduced by Attorney General Kamala Harris. These provision, which will take effect January 1, 2013, will incorporate many of the provisions of the National Mortgage Settlement into California law and specifically will: 1) eliminate "dual tracking" of foreclosures during loan modification negotiations (it's unclear if this will extend to short sales); 2) give borrowers a right to stop foreclosures that violate these laws; and 3) provide for civil penalties and attorney fees against violating servicers. While some worry that these laws will make credit harder to get in California, they will compel lenders and servicers to provide borrowers with fair and honest treatment in the loan modification process. They will not force any lender to make any loan modification.
NEW LOAN MODIFICATION OPTIONS
As referenced in my last E-News, in response to the above Settlement and Legislation, we can anticipate lenders getting more creative in their resolution of problem loans. Ocwen has now offered it's "Shared Appreciation Modification" which will write the principal debt on a property down to fair market value with payments reduced to as low as 2% interest. The unpaid balance will be forgiven over 3 years if the borrower stays current. In exchange, the lender will receive 25% of future appreciation to be paid upon sale or refiance. Look for similar opportunities to arise with other lenders... maybe even Fannie and Freddie.
DEBT FORGIVENESS RELIEF EXTENSION
We are still waiting for any confirmation that the Debt Forgiveness Relief Act will be extended beyond it's current December 31st expiration date. The Senate Finance Committee approved a bipartisan bill before heading home for summer recess that would extend the Mortgage Forgiveness Debt Relief Act through 2013. This will go to the Senate in September; President Obama has included the extension in his 2013 Budget proposal that would extend it through 2014; but nothing has passed into law as yet. The big question is where does Mitt Romney stand on this issue. So far, he's remained silent.
DEPARTMENT OF REAL ESTATE CRACKDOWNS
Through the end of June, 2012, The California DRE which licenses and regualtes real estate brokers and salespersons, has caused the suspension or termination of over 1,000 licenses, a 100% increase over just 5 years ago. And Cease and Desist actions against unlicensed persons acting as agents are up 170%. Whether this is the result of increased violations in a down economy or just increased vigilence by DRE, there is no question that investigations are up. Some fear that recent DRE activity points to efforts to stop "dual agency" where the listing and selling agent or broker are the same. What we expect is an obligation of agents to be able to show that they have protected the rights of both buyer and seller, particularly in a short sale situation.
If you or someone you know is upside-down on real estate and don't know which way to go; or if you are being contacted by a creditor demanding payment; or facing a DRE investigation, be sure to get legal help right away. Our BPE Law $200 flat fee Consultation Program can offer knowledge of what to expect and form strategies to respond and hopefuly eliminate any liability. To schedule a Consultation, please contact our office at (916) 966-2260 or e-mail me at sjbeede@bpelaw.com.
The information presented in this Article is not to be taken as legal advice. Every person's situation is different. If you are upside-down on your loan, especially if you're facing a lender lawsuit, get competent legal advice in your State immediately so that you can determine your best options.
