Not sanitized: Mortgage agents try to steal homes again
Those of us who have done work on foreclosures over the years know that what mortgage companies tell their borrowers has only a passing relationship to the truth. After the financial crisis, borrowers were told they had to miss three payments to get relief under the government’s loan modification program. It was not true ; nothing required that. And those who did as they were told gave their service companies the ability to trap them in debt and confiscate their homes.
So when I started hearing from borrowers that they were told they could ask for a three-month forbearance (a postponement of their loan payment), but that they would have to repay the three months at the end of the loan. period, my ears pricked up. Others have also heard it, like this Wall Street Journal reporter and Lisa Epstein, one of the subjects of my book Title chain, who writes for a subscription website called The Capitol Forum. The two have found AmeriHome Mortgage, a privately funded company, informing customers of an immediately due lump sum payment after three months, and it’s not just about them. (I’ve also heard from clients of Wells Fargo.)
First, the period of abstention authorized by the CARES Act was six months, which could be extended to one year. So I didn’t know where the number of three months came from. The lump sum payment didn’t sound right, either.
It wasn’t fair. Generally speaking, two types of loans are eligible for forbearance: FHA loans and those held or guaranteed by Fannie Mae and Freddie Mac. Here is the FHA Tips. He says agents should give borrowers tolerance if they are in financial difficulty, that it “can be up to 6 months”, that an additional 6 months should be approved if necessary, that all charges for defaulting payments should be canceled and borrowers should be assessed for “home retention options” (that’s a loan modification) after the forbearance period ends. It doesn’t say anything about an immediate lump sum payment. Likewise, this Freddie Mac Call Script for service providers makes it clear that if the borrower cannot afford a lump sum payment, the provider should offer “alternative means” of payment “in an affordable manner”.
As if that weren’t enough, yesterday Mark Calabria, director of the Federal Housing Finance Agency (FHFA), curator of Fannie and Freddie, said categorically, “No lump sum is required at the end of a borrower’s forbearance plan,” and said he specifically addressed concerns about consumer complaints. The way this is supposed to work is that borrowers who use forbearance will be given options ranging from a repayment plan, to modifying the loan by putting the payments owed at the end of the mortgage, to reducing the loan. monthly payment.
So why would repairers lie to borrowers about a lump sum? Some repairers claimed that the FHFA told them it was necessary, but obviously it was wrong. If you listen to industry spokesmen, like former FHA chief David Stevens, they’ll blame Congress, saying the CARES Act did not allow bailouts for service providers, who must continue to advance money to investors in loans despite missed payments. “It’s a destructive inducement,” Stevens told the Newspaper, which forces repairers to lie to their customers.
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But that doesn’t explain this lie. Why would telling borrowers to repay a lump sum help service agents? Presumably, knowing that they could not repay in three months, borrowers would opt out of forbearance. They could then either a) raise enough money to pay off the loan for a period of time, at which point repairers get paid, or b) cut their losses and go into foreclosure, at which point repairers can assess all kinds of foreclosure charges. and get paid A LOT MORE. the now eleven years of study the reasons repairers prefer foreclosure to modification remain operational; the pay structure has not changed. Repairers are paid more in the event of foreclosure, so they try to trigger it, directing borrowers away from better options to trap them.
I appreciate Calabria committing to this, and maybe increased awareness will stop a foreclosure crisis replay. But you will need monitoring and enforcement; repairers are tricky and borrowers are not encouraged to read the FHFA website. As Christopher Peterson, a former senior CFPB official, told me, “This is a collapse waiting to happen.
Quite a start for the newest member of the Congressional Oversight Committee, to monitor Federal Reserve bailouts. the title of this Politico story concerns how Republican Senator Pat Toomey and Elizabeth Warren’s aide Bharat Ramamurti “split” over the terms the Fed should attach to its loans. But Shalala has undermined his Democratic colleague at every turn. She told Politico “I’m not particularly interested in nitpicking” the Fed’s choices, but rather “seeing what their strategy is, who are they helping and what the details are.”
In other words, she wants to react once the money is out and there is nothing to do rather than try to influence the direction of aid. This from someone who voted for legislation allowing aid! One would think that she would be slightly interested in having the intention of Congress respected. Then, in a thinly veiled photo of Ramamurti, she said: “This is a commission, this is not an individual mission… we shouldn’t be thugs in this role. Finally, respond to those of us who questioned her suitability for the job, Shalala claimed she had the relevant experience because “I’ve had a long relationship with the Treasury in particular, and I’ve known almost every Fed chairman as well as the governors, and I understand that the Fed. “In other words, the people she’ll be watching are her friends and belong to the same social circles, so it’s okay.
It is becoming increasingly clear now that Shalala was part of the watch group tasked with monitoring Bharat Ramamurti, not the Federal Reserve. “Pelosi was sending a message to the populists and progressives in his caucus that they had no real power,” Jeff Hauser of the Revolving Door Project wrote in an email. “It will be fascinating to see what, if anything, populists and progressives do in response.”
Another day at the SBA
Paycheque protection program restarted for small businesses got off to a flying start yesterday when the Small Business Administration computer system Locked ten minutes later. Keep in mind that this was two weeks after the end of the first round, giving the SBA time to fortify its IT. In addition, it is a first-come, first-served process which, if it is to be administered in a fair manner, must be able to track the arrival of requests. In ten minutes it was over, giving rise to inevitable questions of fairness.
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These have dominated the program from the start, as Congress cleared a loophole that made franchises eligible with multiple locations, as long as each had fewer than 500 workers. This damaged the reputation of the PPP, and the SBA and Treasury closed the loophole by writing new guidelines suggesting that they would investigate companies obtaining the loans that had other means of financing, paradoxically exacerbated it, as this led to the companies repaying the loans, raising awareness of how many got the money initially. Steve Mnuchin has just announced that every loan over $ 2 million will be audited, cleaning up the reputation mess caused by Congress. Over $ 2 billion has already been returned (more than 0.5 percent of the first round), at the latest by the the Los Angeles Lakers, which is clearly not a small business. The Knicks, maybe.
Meanwhile, the real failure of PPP is not temporary IT malfunction or undeserving recipients, but the fact that it doesn’t have enough money. The system collapsed because the banks lined up so many loans that missed the first round. If you haven’t received your request weeks ago, you won’t receive this money. This is what makes the political headlines; if there was enough for everyone, no one would care much about the Lakers. The oversubscribed PPP is ludicrous, because the Federal Reserve has already committed to borrowing indirectly, and could absorb the costs on its balance sheet. Two months of payroll are also underweight; no one expects it to end in this time frame. A duration of emergency basic income for these companies, so to speak, makes much more sense.
SBA did one thing right yesterday, averting another public relations disaster. He blocked the companies in the portfolio of hedge funds and private equity firms to obtain the loans, reasoning that companies engaged in speculation and investment are not eligible. This is the latest blow to private equity, which sees bright skies on the road when it can buy out sick companies at a discount, but which are stuck now with bankrupt portfolio companies, they bought at high rates. High level private equity bets are consider bankruptcy. The industry has other ways to get its bailout; the Federal Reserve’s announcement to buy high-yield debt partially protects them. But it’s interesting to see PE companies in the same boat as everyone else for a change.