Banks Ramp Up Foreclosures
Increase Poses Threat to Home Prices; Delinquent Borrowers Face New Scrutiny
Some
of the nation's largest mortgage companies are stepping up foreclosures
on delinquent homeowners. That will likely lead to more Americans
losing their homes just as the Obama administration's housing-rescue
plan gets into gear.
J.P. Morgan Chase & Co., Wells Fargo & Co., Fannie Mae and Freddie Mac
all say they have increased foreclosure activity in recent weeks. Those
companies say they have lifted internal moratoriums which temporarily
halted foreclosures.
Some mortgage companies had stopped foreclosing on borrowers as they
waited for details of the Obama administration's housing-rescue plan,
announced in February, which provides incentives for mortgage companies
and investors to reduce borrowers' payments to affordable levels.
Others had temporarily halted foreclosures while they put their own
programs in place, or in response to changes in state laws.
Bloomberg NewsA
foreclosure-auction sign in front of a home in San Jose, Calif., on
April 3. Some of the nation's largest mortgage companies have lifted
internal moratoriums on foreclosures and have begun determining which
troubled borrowers are eligible for federal help and which to
foreclosure on.
Now,
they have begun to determine which troubled borrowers are candidates
for help, and to move the rest through the foreclosure process.
The resulting increase in the supply of foreclosed homes could
further depress home prices and put additional pressure on bank
earnings as troubled loans are written off.
Some of the mortgage companies are themselves receiving funds under
the government's financial-sector bailout, which could make their
actions politically sensitive. But mortgage companies say they are
taking steps to keep borrowers in their homes, and are only resorting
to foreclosure when there are no other options.
Foreclosure sales had dropped in the second half of 2008 as mortgage
companies delayed taking action against delinquent borrowers. But sales
have been edging up this year, according to LPS Applied Analytics,
which tracks loan performance. Foreclosure-related filings increased by
nearly 6% in February from the month earlier, and were up almost 30%
from February 2008, according to RealtyTrac. The backlog of seriously
delinquent loans has been growing.
In California, notices of trustee sales, which are preludes to
foreclosure sales, climbed by more than 80% to 33,178 in March, from
February, according to data from ForeclosureRadar.com and the Field
Check Group. The increase reflects both the expiration of foreclosure
moratoriums and a California law enacted late last year that
temporarily delayed default and foreclosure notices, says Mark Hanson,
president of the Field Check Group, a research firm.
Ronald Temple, co-director of research at Lazard Asset Management,
expects home prices to fall 22% to 27% from their January levels. More
than 2.1 million homes will be lost this year because borrowers can't
meet their loan payments, up from about 1.7 million in 2008, according
to Moody's Economy.com.
Mortgage-servicing companies, such as J.P. Morgan Chase and Wells
Fargo, collect mortgage payments and work with troubled borrowers, both
for loans they own and those held by investors.
J.P. Morgan Chase has increased foreclosure actions since the
expiration of a moratorium on new foreclosures that began on Oct. 31,
and a later moratorium put in place at President Obama's request. The
Oct. 31 moratorium delayed foreclosures on more than $22 billion of
Chase-owned mortgages involving more than 80,000 homeowners.
"We had stopped putting additional loans into the foreclosure
process so we could be sure that delinquent borrowers would have every
opportunity to take advantage of new initiatives that we were putting
in place," a Chase spokesman says. Borrowers who are now receiving
foreclosure-sale notices, he said, "own vacant properties, have not
been in contact with us and/or do not qualify for the modification
programs."
Citigroup
Inc. says it stopped all foreclosures until March 12, at the Obama
administration's request, on loans serviced for Fannie and Freddie.
Since then, says a spokesman, it has "reverted to our previous
business-as-usual moratorium." Under that policy, it will not initiate
a foreclosure sale for any borrower who is working with Citigroup and
is a good candidate for a loan modification, provided Citigroup owns
the loan or has investor approval. "For borrowers who do not qualify
under these criteria and where no other options are available, we will
move forward with foreclosures," the spokesman says.
Wells Fargo has also increased foreclosure actions
since the expiration of its foreclosure moratorium, put into place
while it awaited details on the administration's plan. Wells Fargo
"will continue to work with our customers to find solutions up to the
actual point of a foreclosure sale," a Wells Fargo spokesman says. "But
the expiration of foreclosure moratoriums is having an impact."
Both Fannie and Freddie have stepped up sales of foreclosed
properties since their moratoriums ended on March 31. Freddie says it
has started to complete some foreclosure sales, such as those involving
investment properties or second homes, though it continues to delay
foreclosures on loans that may be eligible for modification under the
Obama plan.
Fannie has told servicers that "a foreclosure sale may not occur on
a Fannie Mae loan until the loan servicer verifies that the borrower is
ineligible" for a loan modification under the Obama administration's
plan, "and all other foreclosure prevention alternatives have been
exhausted," a Fannie spokeswoman says.
GMAC's
mortgage division, which had temporarily halted foreclosures while
awaiting details of the Obama plan, is now reviewing loans to see which
ones will qualify under the program. So far, about 10% of borrowers in
some stage of foreclosure appear to be eligible for the federal
program, a company spokeswoman says. Although GMAC may be able to work
with investors who own these loans to come up with another solution,
she says, many borrowers who don't qualify for help under the federal
program are likely to wind up in foreclosure.
Mortgage companies are sorting through loan files to determine which
borrowers are candidates for help. "At the time a moratorium expires,
we have a team of folks who will pore through all of those loans where
borrowers have not paid before we will take the next step in the
process," says Jim Davis, executive vice president for American Home
Mortgage Servicing Inc. "If there is any borrower contact, we will hold
off on the foreclosure process until we've exhausted every effort to
assist that borrower."
Still, some borrowers who are currently talking to their mortgage
companies are also likely to wind up in foreclosure once their files
are reviewed. "We are getting so many of these cases where people don't
fit the new [Obama] program," says Michael Thompson, director of Iowa
Mediation Service, which works with troubled borrowers. Many borrowers
are unemployed or underemployed or have credit problems that go well
beyond their mortgage troubles, he says.
Many have been "playing for time" while the moratoriums have been in
place, he says. But the delays have only increased the amount of
interest and fees they owe, making their loans "nonviable in the long
run."
Many troubled loans will ultimately wind up in foreclosure because
the borrower doesn't have sufficient income to make even a reduced
mortgage payment, or doesn't respond to the mortgage company's requests
for information. "Certainly half of the loans that would have wound up
in foreclosure before the foreclosure moratoriums went in place" will
ultimately wind up in foreclosure, says Michael Brauneis, director of
regulatory risk consulting at Protiviti Inc., a consulting firm.
While many troubled loans are held by hedge funds, pension funds and
other investors, the expiration of foreclosure moratoriums could also
put a dent in bank profits, says Frederick Cannon, an analyst with
Keefe, Bruyette & Woods. The moratoriums "have to some degree
postponed the realization of problems" and "may help bank earnings in
the first quarter" by delaying charge-offs of some troubled loans, he
says.
Write to Ruth Simon at ruth.simon@wsj.com
![[foreclosure chart]](http://s.wsj.net/public/resources/images/P1-AP485_FORECL_NS_20090414224838.gif)
Neil,
Fisrt, let me thank you for putting up the website and all teh terrific information on it, it’s been an invaluable resource.
I have a question in regards to my loan with HomeBanc. During the process of gathering information on thier business practices, I stumbled across an item from the WSJ blog in re omeBanc stiffing their attroneys even in bankruptcy. The pertinent paragraph is this:
“Anyone that wanted to handle HomeBanc’s once-lucrative business had to agree to go to the real estate closing table with checks drawn on their escrow accounts to cover home loans, even though HomeBanc’s payment had not cleared.”
http://blogs.wsj.com/bankruptcy/2009/03/12/homebanc-burns-another-batch-of-lawyers/?mod=rss_WSJBlog
My question… isn’t this a blatant violation of TILA? It seems to me that if you are requiring your attorneys to pay out of THEIR OWN ESCROW accounts then, HomeBanc is not the true lender, but that the closing attorney was the actual lender, since it was THEIR funds.
What do you think?
I met with a non-profit lawyer today, presented him with the Motion for Summary Judgment as well as my case for a motion to dismiss on 1) Countrywide has no standing as Plaintiff 2) The Plaintiff failed to provide discovery regarding chain of title documents 3) Fraud.
The attorney is basically pushing me towards a loan modification, but he is very skeptical about my intent to stay in my home, even though he has admitted the note was not properly endorsed and Countrywide is not holder in due course.
I don’t trust him, even though he’s non profit, the State Justice system has even recently launched a program to prevent foreclosures….but this guy is not giving me the slightest reason to be hopeful about getting this dismissed. Even though he said they had not produced any endorsed Note.
What are your thoughts guys and gals, much appreciated. I am happy that Countrywide has no standing as I had long suspected.
The web site is up and running very well, it is good and has a lot of information, some is factual and some may be speculative, but over all it allows many eyes to open to the reality of our Royal Bankster Class, that by the way feel they are being vilified. I am so concerned about people realizing how corrupt these guys and ladies are that I cannot sleep well at night. They never stopped to think how many millions of American families would lose their savings, retirements, and their sleep and some even their lives in the scam they created.
It is also very interesting how some of these Banksters were broke three months ago and now they are posting $3,000,000,000.00 in profits (TAXPAYER MONEY?), but the stress tests are showing real financial weaknesses.
When are we going to realize that we must fight for our homes and rights. Thanks for the heroes that put this blog together everyday.