The home loan modification mess

November 18, 2010

Last year, Noel Sandoval, an accountant in San Mateo, Calif., who is disabled from epilepsy, asked Bank of America to ease the terms of his $369,000 mortgage under a federal program designed to help homeowners in distress. After almost 12 months of back and forth, the bank told him no. Its explanation: The mortgage was owned by an investor who wouldn't permit any modifications.

It turned out, though, that the bank wasn't telling the truth — something Sandoval's legal services lawyer discovered only after she finally obtained a copy of the mortgage servicing agreement. There in black and white was a list of conditions under which loan modifications were possible.

"That is an error on our part," Barbara Desoer, president of Bank of America Home Loans, acknowledged Tuesday in testimony before the U.S. Senate. "We are not perfect."

One of the seeming mysteries of the mortgage foreclosure crisis has been the enormous obstacles distressed homeowners encounter when they ask for modification of their mortgage terms — even in cases in which modifying a loan would appear to leave the bank better off than foreclosure.

There's a Treasury Department program that's supposed to make modification easier, but it has fallen short of expectations. Officials hoped the Home Affordability Modification Program would help at least 3 million homeowners, but it has produced only about half a million permanent loan modifications so far.

Homeowners struggling to keep their homes have reported every conceivable nightmare: lost documents and delayed responses, foreclosure proceedings that chug ahead even after loan modifications have been promised, "robo-signed" affidavits — and, in Florida, a house that was seized and sold in foreclosure even though the homeowner had no mortgage at all.

In response to the horror stories, banks and other mortgage servicers have offered all the predictable responses. They say they have been overwhelmed by the wave of mortgage defaults the Great Recession unleashed; they simply weren't prepared to deal with this many requests for modification. In many cases, they note, a mortgage can't be saved from foreclosure — when borrowers' incomes have fallen so low that they can't qualify for any terms, for example. And, of course, there's the catchall excuse of human error.

All of these things are true in many cases. But none of that explains a situation like Sandoval's. Bank of America not only told him wrongly that his loan couldn't be modified; it even sent his lawyer an excerpt from the servicing agreement, from which someone at the bank had carefully cut out the lines that showed when modifications were allowed.

"I apologize for that error," Desoer said grimly at a hearing of the Senate Banking Committee.

Bank of America has earned a reputation among lawyers and housing advocates as among the hardest to deal with of the nation's big mortgage servicers. Customers complain that getting answers from the company is difficult; housing advocates say the bank often seems reluctant to negotiate seriously over requests to modify loans.

BofA says it has resolved to do better. Desoer told the senators that the bank has launched a series of reforms, including a commitment to give every homeowner "a fair opportunity" at loan modification and a new "case officer" system so customers need no longer explain their case to a different bank officer on every call. (The bank did not explain why it took a crisis to prompt such a simple innovation.) But even these reforms won't be enough, experts on mortgage law say. They say there's an underlying flaw in our system of bundled, resold mortgages: The companies that service mortgages can sometimes make more money from foreclosure than from modification. "In many cases … foreclosure is either less costly or more profitable," said Adam J. Levitin, a professor at Georgetown Law School.

A mortgage servicing company makes money by charging fees based on the principal amount of the loan; reducing the principal reduces the servicer's income. Foreclosure guarantees reimbursement of a servicer's fees and costs; modification can make reimbursement harder. And when a loan is in default and heading toward foreclosure, a servicer can collect late fees and other charges. "For servicers, the true sweet spot lies in stretching out a delinquency without either a modification or a foreclosure," notes Diane E. Thompson of the National Consumer Law Center.

What's the remedy? In the best of all possible worlds, Congress would be seriously looking at legislation to fix some of these problems. It could change the bankruptcy law, which currently makes a first mortgage the only kind of loan that bankruptcy judges are barred from shrinking. (The House approved that change in 2009, but the Senate balked.) It could require banks to offer loan modifications before foreclosure, limit foreclosure fees and push states to expand mediation programs. These are all proposals made by Sen. Jack Reed (D-R.I.) in a bill he introduced in September.

But in the current deadlocked Congress, even measures as voter-friendly as protecting distressed homeowners against foreclosure abuses appear beyond our legislators' ability.

Instead, the best hope for better foreclosure practices may lie with the 50 state attorneys general, who jumped on the scandal over "robo-signing" and are using their leverage over mortgage servicers in state courts to negotiate a broader set of reforms.

"It started as a mess, the robo-signing," said Iowa Atty. Gen. Tom Miller, who's leading the effort. "We want to figure out a way that it leaves the whole situation much better than when the mess started."

That would come as welcome news to Sandoval. In September, after more than a year of negotiations, he turned down an offer from Bank of America that would have turned his $2,400-a-month mortgage into an interest-only loan for five years — but then increased his payment to about $3,000 a month after that. "My only source of income is disability, and that's not going up," he said. "The good thing is that I'm cheap. I don't spend money on much of anything besides the mortgage and property tax." He's still making his payments, in part by renting a room to his father – and still hoping for a better deal.

doyle.mcmanus@latimes.com

http://www.latimes.com/news/opinion/commentary/la-oe-mcmanus-column-foreclosure-20101118,0,2346654.column

 

O'h Please God, Let This Story Not be True

FROM JOSEPH FARAH'S G2 BULLETIN
World Net Daily

Bosom bombers: Women have explosive breast implants
Authorities alarmed by possibility of surgically placed explosives

Posted: February 01, 2010
10:16 pm Eastern

LONDON - Agents for Britain's MI5 intelligence service have discovered that Muslim doctors trained at some of Britain's leading teaching hospitals have returned to their own countries to fit surgical implants filled with explosives, according to a report from Joseph Farah's G2 Bulletin.

Women suicide bombers recruited by al-Qaida are known to have had the explosives inserted in their breasts under techniques similar to breast enhancing surgery. The lethal explosives - usually PETN (pentaerythritol Tetrabitrate) - are inserted during the operation inside the plastic shapes. The breast is then sewn up.

Similar surgery has been performed on male suicide bombers. In their cases, the explosives are inserted in the appendix area or in a buttock. Both are parts of the body that diabetics use to inject themselves with their prescribed drugs.

The discovery of these methods was made after the London-educated Nigerian Umar Farouk Abdulmutallab came close to blowing up an airliner on Christmas Day with explosives he had stuffed inside his underpants.

Keep in touch with the most important breaking news stories about critical developments around the globe with Joseph Farah's G2 Bulletin, the premium, online intelligence news source edited and published by the founder of WND.

Hours after he had failed, GCHQ - Britain's worldwide eavesdropping "spy in the sky" agency - began to pick up "chatter" emanating from Pakistan and Yemen that alerted MI5 to the creation of the lethal implants.

A hand-picked team was appointed by Jonathan Evans, the head of MI5, to investigate the threat. He described it as "one that can circumvent our defense."

Top surgeons who work in the National Health Service confirmed the feasibility of the explosive implants.

In a report to Evans, one said: "Properly inserted the implant would be virtually impossible to detect by the usual airport scanning machines. You would need to subject a suspect to a sophisticated X-ray. Given that the explosive would be inserted in a sealed plastic sachet, and would be a small amount, would make it all the more impossible to spot it with the usual body scanner."

Explosive experts at Britain's Porton Down biological and chemical warfare research center told MI5 that a sachet containing as little as five ounces of PETN when activated would blow "a considerable hole" in an airline's skin which would guarantee it would crash.


http://www.wnd.com/index.php?fa=PAGE.view&pageId=123758

Change in Blog Style

I have changed two things in this blog. The first is, except for rare instances, I am not going to post articles to this blog. Most of them have been moved to another blog I have that is for holding articles I find interesting.

Secondly, I am removing any automatic posting my tags to other services that take my tags and index them for other services like Yahoo. This is available with a blog composing tool I use. I noticed that, for reasons I can't explain, the number of readers to my site slowed down right after I enabled the automatic posting function.

What I Have Not Done And Don't Want To

* Watch an Oliver Stone movie.
* Send or recieve a text message on my cell phone.
* Go into a Wallmart... except twice on a vacation where I really had no choice.
* Go skydiving, base jumping or bunjee jumping.
* Eat an insect on purpose... live or dead.
* Eat small rodents, worms or bats.
* Go vegetarian.
* Go New Age... except I do know that "what goes around comes around".
* Think it is okay for a Muslim woman to normally walk around with her head covered unless she is in a Muslim country.
* Ever think men and women are the same. But they are equal before God.
* Belive "everything is relative" at a fundamental level. When things seem relative it is only because of our lack of values or the limitations of our bodies and minds.
* That abortion is okay.
* Believe Heisenbergs Uncertainty Theory will always show it is impossible to know the exact position and momentum of a particle at the same time. Some other theory will come that will explain why this aparent impossibility is an illusion.
* Think homosexuality is okay. However, we are all sinners and everyone is worthy of respect... even when you disagree with them.
* Watched "Survivor" or other similar programs - this is good.
* Watched "American Idol" or other similar programs - this is probably bad.
* In the workplace act in a "kiss up and kick down" manner.