Freddie Mac Announces New Foreclosure Policies By ALAN ZIBEL The Associated Press Published: January 31, 2009
WASHINGTON - Mortgage finance company Freddie Mac said it will allow some borrowers to rent their homes after losing them to foreclosure. The goal of the new policy, announced Friday, is to prevent properties from being vacant and falling into disrepair.
Freddie Mac also said it will allow renters to remain in their homes even if the landlord enters foreclosure. The McLean, Va.-based company has about 8,500 properties in the foreclosure process, but many of those are vacant. "Keeping foreclosed properties occupied and in better repair will support local property values and promote a faster recovery in the housing market," said Freddie Mac Chief Executive Officer David Moffett. Fannie Mae, which announced similar plans this month, said it has stopped about 20,000 foreclosure sales and halted 6,300 evictions of owners or renters this winter. Under Freddie Mac's new policy, tenants and former property owners need to demonstrate that they have enough income to pay the rental bill. Freddie Mac also said it would consider reinstating a mortgage for those borrowers who can qualify for a modified loan. Washington-based Fannie Mae and Freddie Mac were taken over by the government in September after mortgage losses put them in distress that was a prelude to the broader financial crisis that hit Wall Street in 2008. Together, Fannie and Freddie own or guarantee about half the $10.6 trillion in outstanding U.S. home loan debt. Both Fannie Mae and Freddie Mac also said Friday they would extend a previously announced suspension of evictions through February. However, Freddie Mac has not explained how tenants will be notified of the policy and has not committed firmly enough to halting evictions, said Amy Marx, a staff lawyer at Connecticut-based New Haven Legal Assistance. "The only thing that Freddie Mac has agreed to do is to not send the sheriff to forcibly remove tenants," Marx wrote in an e-mail. Owners Go Bankrupt To Keep Home By SHANNON BEHNKEN, The Tampa Tribune Published: November 13, 2007 TAMPA - Today, Jane and Enrico Parsons prepare to sit at a table in their attorney's office and sign a document that could keep their lives from crumbling. In order to do it, though, they will have to ignore a core value: Bankruptcy, they have always believed, is wrong. "This goes against my grain," said Jane Parsons, 54, manager of a pediatric medical office. "I cry every time I think about it. But I feel I have no choice." That's because the Parsons' mortgage lender is set to auction off their three-bedroom Riverview home Thursday at the federal courthouse in Tampa. At this point, filing for Chapter 13 bankruptcy, which allows people to reorganize their debt, is the only way the couple can stop the sale. The Parsons are among a growing number of homeowners in foreclosure turning to this kind of bankruptcy as a last resort to save their homes. As Florida's foreclosure rate has soared to the second highest in the nation, Chapter 13 bankruptcies have followed, on pace to double last year's results. The industry professionals who handle these bankruptcy cases say more people are filing solely to avoid foreclosure and don't have as much traditional debt, such as credit card and auto loans, as used to be typical. Still, the vast majority of those in trouble with their mortgage lenders don't qualify for Chapter 13 because of financing deals in which mortgage payments adjust upward, beyond what they can afford even through bankruptcy. A controversial bill now in Congress could change that and, if passed, would particularly help Florida homeowners. Proponents say the bill, which would allow bankruptcy judges to modify the terms of mortgage loans, would open the door to Chapter 13 for roughly 600,000 more homeowners. But critics say the bill would drastically change the lending industry and raise interest rates by as much as 2 percent on home loans for all future borrowers. Even if lawmakers approve the bill, it could be too late for thousands of Florida residents whose adjustable rate loans are about to ratchet higher. State's High Foreclosure Rate Florida's troubled real estate market has pushed the state's foreclosure rate to among the highest. Lenders have filed more than 20,000 foreclosure filings in Hillsborough, Pasco and Pinellas counties through September. That's up nearly 131 percent when compared to the same period last year. During the first nine months this year, 7,348 homeowners in the Middle District of Florida, which includes the Tampa Bay area, have filed for Chapter 13, court records show, 68 percent more than 4,361 who filed during the same period last year. As more and more people fall behind on their mortgage payments, lenders are pushing homeowners to call early if they're in trouble. Kurt Pfotenhauer, senior vice president for the Mortgage Bankers Association, said some lenders even call borrowers with adjustable rate mortgages before payments are scheduled to rise to make sure they can afford the new amount. There are things lenders can do to help homeowners from slipping into foreclosure, Pfotenhauer said. But many homeowners say calls to their lenders have fallen on deaf ears. The Parsons bought their Riverview home in March 2006. But that was when the real estate market was slowing, and they had trouble finding a buyer for their Atlanta home. They juggled two house payments for five months and then ran out of money. The Parsons say they called months before they missed their first payment. They say their lender said nothing could be done until they missed three mortgage payments. Enrico Parsons, a chef, got a new job in Florida and moved to the Riverview home in September 2006. Jane Parsons followed in October. They say the lender wouldn't accept any mortgage payments until April, when the lender offered a repayment plan. That plan included their regular monthly mortgage payment of $1,600, plus $1,100 a month for a year to cover the late payments and fees. They made the payments on time through July. On June 30, Enrico collapsed because of a blood clot on the brain. He has been out of work since then but expects to get a new job soon. With one income, Jane said she could no longer make the extra $1,100 payments. She said she tried to continue making her regular mortgage payments, but the lender stopped accepting them, saying she violated their agreement. The lender again filed to foreclosure on the home. "It just doesn't make sense," Parsons said. "It's going to take longer for the bank to get its money in foreclosure than it would if they'd just work something out with us." Chapter 13 Stops Proceedings Chapter 13 is attractive to those in foreclosure because it stops the proceedings immediately and requires lenders to accept mortgage payments. The biggest incentive: It gives homeowners five years to pay their debt. But Chapter 13, under the current bankruptcy code, won't help everyone in foreclosure. It's designed for people, such as the Parsons, who fell on hard times temporarily but can now make their regular monthly mortgage payments, said Catherine Peek McEwen, a U.S. bankruptcy judge in Tampa. "This is a good fit if you're not making the same kind of money you used to," McEwen said. Under Chapter 13, a person's monthly bills are consolidated into one payment. Payments on unsecured debt, such as credit cards, and automobile loans can be adjusted by the judge. But many in foreclosure are in trouble because adjustable rates have pushed their payments out of reach. Those people don't qualify under the current Chapter 13 bankruptcy code. Under the pending legislation, judges could modify mortgage terms. For example, a judge could determine a home that sold for $250,000 is worth only $200,000 in today's market and require the homeowner to pay only the lower amount. Or a judge could lower a person's interest rate in order to come up with a new mortgage payment the homeowner could afford. Henry Sommer, president of the National Association of Consumer Bankruptcy Attorneys, said the pending legislation would open the door to Chapter 13 for more than 600,000 homeowners who currently don't qualify. "This legislation is really needed," Sommer said. "If it doesn't pass, so many more people will lose their homes." The new rules could affect homeowners everywhere, but particularly those in states such as Florida, Nevada and California, where foreclosure rates are highest. Home prices in Florida, Sommer said, shot up too high, and many people paid more for homes than they were worth. The unusual financing that was readily available during the boom allowed many to buy homes they couldn't afford. "Many were tricked into taking these loans by mortgage brokers who were making so much money on these types of loans," Sommer said. "A lot of these loans should have never been made." But not everyone thinks the legislation is a good idea. The Mortgage Bankers Association strongly opposes the bill and says it would end up causing rates for all future borrowers to shoot up. "Lenders will no longer be able to count on quick recourse to secure a home loan," said Pfotenhauer, senior vice president at the association. "And lenders won't be able to count on the value of a home, because a judge will be able to change it later." The Parsons came close to going through Chapter 13 bankruptcy once before, and Jane Parsons said she's humiliated that this time she can't work out of debt herself. "I'm so embarrassed," she said. "I don't want to have to do this, but my lender left me no choice." Reporter Shannon Behnken can be reached at (813) 259-7804 or sbehnken@tampatrib.com. U.S. foreclosures rise 58 percent in first half of 2007
LOS ANGELES – July 31, 2007 – The number of U.S. homes facing foreclosure surged 58 percent in the first six months of the year, the latest sign of mounting problems in the mortgage industry, a data firm said Monday.
In all, 573,397 properties across the nation reported some sort of foreclosure activity in the first half of this year, including receiving notices of default, auction sale notices or being repossessed by lenders, Irvine-based RealtyTrac Inc. said.
That was 58 percent higher than the 363,672 properties in the first six months of 2006 and 32 percent higher than the 433,504 in the last six months of 2006.
“We could easily surpass 2 million foreclosure filings by the end of the year, which would represent a year-over-year increase of over 65 percent,” said RealtyTrac CEO James J. Saccacio.
California, Florida, Texas and Ohio were among the states with the highest number of homes receiving foreclosure-related notices, the firm said.
In the RealtyTrac report, California led the nation in foreclosure filings and the number of homes receiving notices.
Some 104,572 properties in the state received notices of default or other foreclosure notices – more than double the year-ago total and an increase of 80 percent from the previous six months, the firm said.
RealtyTrac said a total of 925,986 foreclosure filings were sent to homeowners during the first half of the year. Some of those filings targeted the same property, in part because owners had more than one mortgage.
That figure was up 56 percent from the year-ago period and up 39 percent from the last six months of 2006, the firm said.
Notices of default, the first step in the foreclosure process, accounted for the largest slice of filings during the most recent period, a total of 416,937.
The national foreclosure rate through the end of June was one filing for every 134 U.S. households, the company said.
In the past, RealtyTrac released the total number of foreclosure notices issued and did not say if a single property received more than one notice. The company is now breaking out the exact property count.
In recent months, the mortgage industry has been rocked by defaults and foreclosures, primarily driven by borrowers with subprime loans and adjustable rate mortgages.
Last week, Countrywide Financial Corp., one of the biggest mortgage lenders in the U.S., said even some of the most creditworthy borrowers were having trouble making their mortgage payments.
Lagging home sales and flat or decreasing home prices have made it more difficult for homeowners who fall behind on payments to sell their homes and clear the debt, spurring the rise in foreclosure activity.
In the report, Florida was the No. 2 state for homes in some stage of foreclosure, with a total of 64,250, an increase of 77 percent year-over-year and up 41 percent from the last six months of 2006.
Copyright 2007 The Associated Press, Alex Veiga (AP Business Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed. President Bush Signs H.R. 3648, The Mortgage Forgiveness Debt Relief Act of 2007
Roosevelt Room  Fact Sheet: The Mortgage Forgiveness Debt Relief Act of 2007
1:05 P.M. EST THE PRESIDENT: Thank you all for coming. Welcome to the White House. I'm pleased to sign a bill that will help homeowners who are struggling with rising mortgage payments. The Mortgage Forgiveness Debt Relief Act of 2007 will protect families from higher taxes when they refinance their homes. It will help hardworking Americans take steps to avoid foreclosure during a period of uncertainty in the housing market. I want to thank members of Congress for getting this bill passed. I appreciate it very much. It's been a joy working with you.  I thank my Secretary of the Treasury, Hank Paulson; and the Secretary of Housing and Urban Development, Alphonso Jackson, for taking the lead in helping people stay in their homes. I particularly want to thank the Chairman of the Finance Committee, Max Baucus; Senator Debbie Stabenow of Michigan; and Senator George Voinovich of Ohio, for sponsoring this legislation.
I remember calling you on the phone, telling you that I'm going to propose the same thing you are -- talked to George, as well -- and it's been a joy to work with you. I want to thank Jim McCrery of the House, Stephanie Tubbs Jones and Rob Andrews. Appreciate you all being here. I want to thank the staff who works hard at the Treasury and HUD to make this deal work. Appreciate your hard work. In recent months, our nation's housing market has faced serious strains. Home values have fallen in many parts of our country. At the same time, many homeowners with adjustable rate mortgages have seen their monthly payments increase faster than their ability to pay. And now some homeowners face the prospect of foreclosure. My administration has taken strong steps to help homeowners avoid foreclosure by making it easier to refinance loans. We gave the Federal Housing Administration greater flexibility to refinance loans for struggling homeowners. We helped assemble a private sector group of lenders, loan servicers, investors, and mortgage counselors called the HOPE NOW Alliance. This group has agreed on a set of industry-wide standards to help those with subprime loans refinance or modify their mortgages, so more families can stay in their homes. The bill I sign today will help this effort by ensuring that refinancing a mortgage does not result in a higher tax bill. Under current law, if the value of your house declines and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as money that can be taxed. And of course, this makes a difficult situation even worse. When you're worried about making your payments, higher taxes are the last thing you need to worry about. So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. And it's a really good piece of legislation. The provision will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes. With this bill, Congress has taken a strong step to address the turbulence in the housing market. Yet there's more work to be done. The Congress needs to pass legislation permitting state and local governments to issue tax-exempt bonds for refinancing existing home loans. Congress needs to pass legislation strengthening the independent regulator of government sponsored enterprises like Freddie Mac and Fannie Mae, so we can keep them focused on the mission to expand home ownership. Congress needs, as well, to complete work on responsible legislation modernizing the Federal Housing Administration, so that we can give the FHA the necessary flexibility to help hundreds of thousands of additional families qualify for prime-rate financing. By taking these steps, we can help our homeowners -- and we'll help more Americans become home owners. We want people to have a place they can call their own. After all, it's an essential part of the American Dream. And we want that dream to extend throughout our nation. I want to thank the members for joining us. I wish you all happy holidays. And this is going to make a happy holiday for many home owners. Thanks for coming. There was a time when lenders didn't want to work with you if you couldn't pay. Now they want to avoid foreclosure, lawsuits or repossession almost as much as you do. People who overdosed on debt in recent years learned the paradox of easy credit: While lenders were willing to let you borrow copious amounts, they weren't particularly interested in helping you work out a solution if you fell behind on repayment. Lenders often found it easier and cheaper to write off delinquent accounts as bad debt than work with you on a repayment plan. After all, they could get a tax break on the loss and then get on with the profitable business of extending credit to the next guy. Lately, however, lender perspectives have changed. Soaring default rates, a weakening economy and the credit crunch have rewritten the rules. - Credit card lenders charged off 5.47% of the total amounts owed on cards as bad debt in the second quarter, according to the Federal Reserve. A year ago, the charge-off rate was 3.85%.
- Consumer bankruptcy filings in October topped 100,000, a 40% increase from a year earlier and the highest level since the federal bankruptcy reform law took effect in October 2005, according to the American Bankruptcy Institute.
- More than 2.2 million homeowners are more than 60 days late on their mortgage payments, according to the Hope Now alliance of lenders and credit counselors, and one in six homeowners owes more on a home than it's worth.
- With home prices plummeting, every foreclosure now represents a loss of 44% of the original loan amount, up from 29% a year ago, according to data from LPS Applied Analytics.
That's why lenders are now looking for ways to keep people paying their bills, even if it means forgiving some of their debt. Now the paradox is that in order to qualify, you must be struggling, but not so much that a change in terms wouldn't help you. How the new programs work The most sweeping new program was announced Nov. 11. Freddie Mac and Fannie Mae, the government agencies that guarantee 31 million U.S. mortgages, will begin paying the mortgage service companies that maintain the loans $800 for every loan they modify. Borrowers would get help in several ways: Interest rates would be reduced so that borrowers would not pay more than 38% of their gross income on housing expenses. Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount to be deferred interest-free. (You can find more details here.) The same day, Citigroup announced it would halt foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments. Ultimately, it plans to modify the repayment terms on up to $20 billion in loans. Late last month, JPMorgan Chase expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 homeowners. The modifications were to include reducing amounts owed or the loans' interest rates, and replacing so-called "pay option" loans that typically resulted in mortgages growing over time. Bank of America, meanwhile, has said that starting Dec. 1, it would modify an estimated 400,000 loans held by newly acquired Countrywide Financial as part of an $8.4 billion legal settlement reached with 11 states in early October. Loan forgiveness is a key part of the Hope for Homeowners program. This is the foreclosure prevention program that Congress created as part of the $700 billion Economic and Housing Recovery Act of 2008. Lenders that want to participate typically must agree to reduce borrowers' principal to 90% of their homes' current value. But wait, there's more In late October, a coalition of lenders and consumer advocates asked banking regulators to approve a pilot program that would allow struggling borrowers to pay off, over time, less than they owe -- as much as 40% less. Under current rules, any repayment plan has to be for the full amount owed. Though the Office of the Comptroller of the Currency rejected the first draft over how banks would book the resulting losses, backers of the plan say they're committed to finding a remedy for overtaxed borrowers that's short of bankruptcy -- which would likely mean the banks see no repayment at all. In the first proposal, a joint project of the Financial Services Roundtable and the Consumer Federation of America, applicants would have been evaluated by certified credit counselors; those who couldn't pay off their debt under a regular debt management program would have been placed in one of four repayment plans that would reduce their principal by 10%, 20%, 30% or 40%. Only consumers closest to bankruptcy could have qualified for the biggest reduction. Hope for housing
Fannie Mae and Freddie Mac unveil plans to help homeowners avoid foreclosure. Travis Plunkett of the Consumer Federation of America said his group would continue to lobby regulators "to do everything they can, within bounds of the safety and soundness of the financial system, to help consumers," but that ultimately consumer advocates may have to turn to lawmakers for help. "It may be Congress that has to step in, and I think there's a lot of interest there" in doing so, Plunkett said. "We've got a train wreck coming." Student loans and car debt Meanwhile, makers of student and auto loans haven't announced any new plans for forgiveness. In recent years, in fact, both groups made escaping their debt more difficult. But: - Auto lenders are stepping up their education efforts to let troubled borrowers know they have alternatives if they fall behind on their car payments. According to credit bureau Experian, more than 500,000 borrowers are 30 days or more overdue on a car loan.
Yet fewer than half of consumers in a recent poll knew that auto financing companies often worked with troubled borrowers, said Eric Hoffman, spokesman for the Aware, an education group set up by auto dealers and lenders that commissioned the survey. Auto lenders may be able to modify a loan to stretch payments over a longer period or allow borrowers to make up missing payments, Hoffman said. "We tell people, 'Don't ignore the situation if you're having trouble,'" Hoffman said. "Get in contact with your lender and see if there's a way to work out a different payment plan." The same advice holds true for student loans. You may be eligible for income-sensitive or graduated repayment plans or, if you're facing economic hardship, forbearance or deferment that would allow you to skip payments for up to three years. Here's what to do about other debt: Credit cards. If you're already behind on your credit card payments, you shouldn't wait to see if you'll qualify for any loan forgiveness programs. Make two calls: one to a legitimate credit counselor and another to an experienced bankruptcy attorney. Between the two, you'll get the information you'll need to decide whether you should continue paying your debt or have it "forgiven" by the U.S. bankruptcy court. Mortgages. Gather your paperwork -- your mortgage documents, last year's tax return and some recent pay stubs -- and call a HUD-approved housing counselor to evaluate your situation and your options. If you qualify for a loan modification program, the counselor can help you get through to your lender's loss mitigation department, which will evaluate your application. A lender will want evidence that you're in trouble -- and assurances that any changes will keep the payments coming. Don't expect that it will immediately hack your loan balance to what the house is currently worth; it won't. Your lender has only a few ways to help you: It can reduce your interest rate, defer payments, extend the length of the loan or forgive some part of your principal. With your counselor's help, you should decide what solution you want before approaching the lender. If you have a temporary situation such as an illness that will be resolved soon, for example, ask for deferred payments. If your adjustable-rate mortgage is about to reset, use MSN Money's Mortgage Calculator to see if a reduced interest rate could keep you in your home. You may have trouble getting your lender's attention. That's particularly true if you haven't already fallen behind on your payments, something you should try to avoid, because late payments can kill your credit scores. Hope for housing
Fannie Mae and Freddie Mac unveil plans to help homeowners avoid foreclosure. Unlike some of those who advertise loan modification help, attorneys have a fiduciary duty to put their clients first (and clients have many remedies, including lawsuits and disciplinary complaints to the bar association, if the attorney fails to fulfill those duties). That's a far cry from many of the fly-by-night outfits that demand big upfront fees and then fail to act, or disappear with the money.If you decide to hire an attorney, you'll have to find one on your own, Jablonski said; anyone legitimate has a full workload and isn't proactively contacting potential clients. Your state's bar association may offer referrals. In any case, you'll need to confirm that the attorney is in good standing with the bar, and that he or she has experience with loan modification. Published Nov. 17, 2008 By ALAN ZIBEL The Associated Press Published: January 31, 2009 WASHINGTON - Mortgage finance company Freddie Mac said it will allow some borrowers to rent their homes after losing them to foreclosure. The goal of the new policy, announced Friday, is to prevent properties from being vacant and falling into disrepair.
Freddie Mac also said it will allow renters to remain in their homes even if the landlord enters foreclosure. The McLean, Va.-based company has about 8,500 properties in the foreclosure process, but many of those are vacant. "Keeping foreclosed properties occupied and in better repair will support local property values and promote a faster recovery in the housing market," said Freddie Mac Chief Executive Officer David Moffett. Fannie Mae, which announced similar plans this month, said it has stopped about 20,000 foreclosure sales and halted 6,300 evictions of owners or renters this winter. Under Freddie Mac's new policy, tenants and former property owners need to demonstrate that they have enough income to pay the rental bill. Freddie Mac also said it would consider reinstating a mortgage for those borrowers who can qualify for a modified loan. Washington-based Fannie Mae and Freddie Mac were taken over by the government in September after mortgage losses put them in distress that was a prelude to the broader financial crisis that hit Wall Street in 2008. Together, Fannie and Freddie own or guarantee about half the $10.6 trillion in outstanding U.S. home loan debt. Both Fannie Mae and Freddie Mac also said Friday they would extend a previously announced suspension of evictions through February. However, Freddie Mac has not explained how tenants will be notified of the policy and has not committed firmly enough to halting evictions, said Amy Marx, a staff lawyer at Connecticut-based New Haven Legal Assistance. "The only thing that Freddie Mac has agreed to do is to not send the sheriff to forcibly remove tenants," Marx wrote in an e-mail. |