How to Get the Government Out of Mortgage Lending

Bloomberg View | December 20, 2016        One of the least discussed challenges of the incoming Trump administration may also be among the most economically consequential: what to do with Fannie Mae and Freddie Mac, the government-controlled entities that own or guarantee about half of all U.S. home mortgages.

Trump's pick for Treasury Secretary, Steven Mnuchin, has said he wants to put housing finance back into private hands. Sensible as the goal may be, the hard part will be getting there.

Fannie and Freddie illustrate how slippery the term "private" can be. The two operated as privately owned corporations for decades, albeit with a congressional mandate to promote access to mortgage credit. They generated ample profits for shareholders and gained a dominant position thanks in large part to the expectation that the government would rescue them in an emergency. That perception proved correct in 2008, and they have been wards of the state ever since.

The failure of Fannie and Freddie has drawn the government far deeper into U.S. housing finance than it ever intended, at a time when even its pre-crisis involvement appears excessive. Subsidized lending may have boosted home ownership, but it also contributed to a consumer-debt burden that has hobbled the recovery and rendered the economy more prone to crisis. Most other advanced-nation governments play a much smaller role, with little apparent effect on home ownership.  Read more here.

 

Fannie, Freddie Replace HAMP with New Foreclosure Prevention Program

HousingWire | December 14, 2016        Fannie Mae and Freddie Mac announced on Wednesday their replacement for the Home Affordable Modification Program. The government sponsored enterprises revealed the Flex Modification foreclosure prevention program, which is designed to help America’s families by offering reductions to their monthly mortgage payments.

The government's Home Affordable Modification Program is slated to end on Dec. 31, 2016, concluding a seven-year government program designed to save struggling homeowners who are behind on their mortgage, or in danger of imminent default due to financial hardship.

HAMP’s sibling, the Home Affordable Refinance Program, which was created at the same time, was extended in August until Sept. 30, 2017 in order to create a smoother transition period for a new refinance product. 

“The new Flex Modification announced by Fannie Mae and Freddie Mac (the Enterprises) today was designed based on lessons learned from crisis-era loan modification programs to help borrowers stay in their homes and avoid foreclosures whenever possible,” the FHFA said in a statement.   Read more here.

 

What’s Behind a Sudden Foreclosure Spike

CNBC | November 10, 2016     Foreclosures had been falling steadily to the lowest levels in nine years, but a curious spike in October may be the first sign of a crack in the recovery.

The number of properties with a foreclosure filing, which includes default notices, scheduled auctions and bank repossessions, jumped 27 percent in October compared with September, according to a new report from Attom Data Solutions. The volume is still down 8 percent from a year ago, but annual drops had been in the double digits all year, until now. Government-insured FHA loans are fueling much of the jump.

Foreclosures had been falling steadily to the lowest levels in nine years, but a curious spike in October may be the first sign of a crack in the recovery.

The number of properties with a foreclosure filing, which includes default notices, scheduled auctions and bank repossessions, jumped 27 percent in October compared with September, according to a new report from Attom Data Solutions. The volume is still down 8 percent from a year ago, but annual drops had been in the double digits all year, until now. Government-insured FHA loans are fueling much of the jump.

"While some states are still slogging through the remnants of the last housing crisis, the foreclosure activity increases in states such as Arizona, Colorado and Georgia are more heavily tied to loans originated since 2009 — after most of the risky lending fueling the last housing boom had stopped," said Daren Blomquist, senior vice president at Attom Data Solutions.

"The increase in October isn't enough evidence to indicate a new foreclosure crisis emerging in these states, but it certainly demonstrates that this housing recovery is not completely devoid of risk."  Read more here.

 

Dallas Firm Put Black Homeowners at Higher Risk of Foreclosure, Suit Alleges

The Dallas Morning News|  August 19, 2016       Dallas equity firm Lone Star Funds is being sued by a group of black homeowners in New York who allege the company pushed them toward foreclosure by misleading them about their mortgages.

A 53-year-old plaintiff told a federal court that the company's mortgage servicer would call him almost every day — sometimes two or three times a day — threatening foreclosure and pressuring him to accept an unfavorable change to his loan.

Lone Star's mortgage servicer, Caliber Home Loans, disputed the allegations and called the lawsuit "without merit."

The federal suit filed last week also targets the U.S. Department of Housing and Urban Development. At issue is the agency's sale of delinquent mortgages backed by the federal government to private investors such as Lone Star.  

Those sales leave homeowners with fewer protections and disproportionately harm black families because their share of government-insured mortgages in New York City is higher than that of white families, according to the suit. 

A HUD spokesman declined to comment. Meanwhile, Irving-based Caliber maintains that it treats borrowers fairly.

"Every Caliber loan modification is reviewed thoroughly without regard to race, gender, religious, or sexual orientation," executive vice president Marion McDougall said in a prepared statement.  Read more here.

Sorry You Lost Your Home: Americans Deserve More than an Apology for the Foreclosure Fraud Epidemic

Salon | August 9, 2016      “I lost my home of 30 years to fraudclosure.”

“I have been fighting this bank for over five years now. I am finally losing everything to their fraud.”

“We feel captive in our own home.”

This is a sampling of what I have awakened to practically every day for the past few months, since my book “Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud” came out. Hundreds of people have emailed me, sent me letters, attended my public events, to relate their personal horror stories of foreclosure and dispossession. They come from across America, from different social and economic backgrounds. Some lost everything, and some haven’t given up.

They contact me, a non-lawyer who has only written about and not participated in their struggle, because they have been abandoned, by a government that chose sides against them after the crash of 2008. They seek answers that I mostly don’t have and support I mostly cannot provide. Outside of referring them to legal aid, I cannot solve their foreclosure problems. I cannot convince a judge disinclined to rule in their favor, or a bank disinclined to see them as anything but a financial asset to be plucked, to change their minds. I can only note in sorrow that the massive netting of fraud laid by the mortgage industry over a decade ago continues to capture people like them.

But despite my lack of assistance, they typically express to me their gratitude, for one simple reason: just by giving voice to similar nightmares, I have instilled in them hope that they aren’t utterly alone in their misery, that they haven’t been singled out by a vengeful nation, that somewhere out there they have an ally and a confidant.

I wrote my book for them, for everyone who suffered as a result of the largest consumer fraud in American history and the greatest economic collapse in nearly a century. They shouldn’t be forgotten. In fact, somebody should apologize to them for having to bear the weight of the financial collapse on their shoulders, even while that suffering was exacted through outright fraud. It might as well be me.  Read more here.

Freedom Caucus Votes For $17 Billion In Government Payments To Banks

Huffington Post |  November 5, 2015    The House voted overwhelmingly on Thursday to preserve $17 billion in government payouts to banks, as part of a major highway funding bill.  The GOP had initially pressed to include other bank-friendly measures in the highway bill, including a plan to hamstring the new Consumer Financial Protection Bureau and deregulate large banks. Those efforts were scrapped in favor of the more straightforward $17 billion payment.  Read more here.

Foreclosure Abuses, Revisited

The New York Times |  October 6, 2015   The promise of widespread relief for homeowners facing foreclosure in the wake of the housing bust has never been realized. The government did not require the banks to rework bad loans, which in many cases the banks offloaded on the federal agencies that insured them. Now these same agencies are selling some of these loans at a discount to hedge funds and private equity firms. Has this merry-go-round helped homeowners? No. The myth of mortgage relief lives on.  Read more here.