Archive for February, 2012

San Diego America Saves Week Campaign February 19-26, 2012

Springboard is encouraging consumers to jump-start their savings program by participating in America Saves Week, the campaign that occurs annually to encourage better savings habits. This year, America Saves Week is recognized February 19-26. 

 “It’s never too late to begin good financial habits,” says Melinda Opperman, senior vice president for Springboard.  “Reducing debt and building wealth will pay big dividends in the end.  America Saves Week is the perfect time to get started,” says Opperman. 

 Springboard has developed useful online tools to help consumers reach their savings goal.  You can access http://credit.org/blog/americasavesweek for effective how-to-save-tactics, savings calculators, online courses, videos, worksheets and budget planners.  Please feel free to share this information with family and friends.

Wells Fargo started an incentive program that pays its single-point-of-contact employees more if they reach some sort of workout in lieu of foreclosure

Wells Fargo started an incentive program that pays its single-point-of-contact employees more if they reach some sort of workout in lieu of foreclosure.

Mortgage servicers must install single points of contact for borrowers on the verge of foreclosure, based on federal regulator consent orders signed in 2011, new Home Affordable Modification Program guidelines and the servicing standards set as part of the attorneys general settlement in February.

Wells officials said they installed such a program before even the consent orders. The San Francisco-based bank now has between 3,500 and 3,800 employees that serve as the point of contact for troubled mortgage borrowers, said Randy Bockenstedt, senior vice president of default operations at Wells.

“Wells Fargo does have an incentive program. But you don’t play the incentive game without doing it the right way,” Bockenstedt said at the Mortgage Bankers Association servicing conference Wednesday. “Quality is king.”

Bockenstedt wouldn’t disclose how exactly the Wells SPOC employees are paid or when the program was put in place.

One servicer who asked not to be named shook his head at the size of the Wells SPOC headcount.

“3,500,” he said. “That’s huge.”

“It’s not cheap,” Bockenstedt admitted.

The bank’s servicing performance over competitors cannot be linked directly to the incentive program, but the results are there. According to its fourth-quarter financial report, roughly 7.63% of the loans on the Wells Fargo servicing portfolio were either in foreclosure or delinquency, compared to 11.5% at JPMorgan Chase ($38.18 -0.28%) and 13.5% at Bank of America ($8.08 -0.03%).

Robo-Signing Ends with a $26 Billion Settlement

The 16-month robo-signing saga ends with a $26 billion settlement.

Nearly all 50 states agreed to a deal with Bank of America ($8.13 0%), JPMorgan Chase ($38.30 0%), Wells Fargo ($30.63 0%), Ally Financial ($23.31 0%) and Citigroup ($34.23 0%). Oklahoma AG Scott Pruitt is the only one not to sign.

If another nine smaller servicers join the settlement, the deal could rise to $30 billion.

Evidence arose showing these firms and their processors allegedly signed foreclosure documents en masse without a proper review of the loan file, evicted homeowners while in the modification process, and other abuses.

Iowa Attorney General Tom Miller led a multistate coalition with the Justice Department and the Department of Housing and Urban Development beginning in October 2010. Since then, a settlement has been perpetually imminent as negotiations dragged on in the largest federal settlement with a single industry since a deal with tobacco companies in 1998.

Roughly $5 billion of the funds will be used as $2,000 payouts to hundreds of thousands of borrowers affected by the abuses and were foreclosed on between the beginning of 2008 and the end of 2011. A portion of the $5 billion will also go to the states.

Nearly 8.9 million properties recieved at least one foreclosure filing since 2007, according to RealtyTrac.

Another $17 billion will be used as “credits” toward writing down principal on roughly 1 million loans mainly held in the bank servicing portfolios. However, officials said some of the principal reductions will go toward mortgages in private-label securities, meaning investors will take some of the hit. However, the “credits” would be significantly less for mortgages held in private MBS holdings.

Banks must comply with any pooling and servicing agreements with investors, meaning before a servicer can write down principal on a mortgage in a privately held MBS, it must pass the net-present value test. Only “a couple” of the servicers would do this, officials said.

Roughly $10 billion of the $17 billion held for principal reduction credits will go to borrowers who are delinquent on their mortgages.

Not every dollar the servicers reduce from the principal will be “credited” from the $17 billion the banks agreed to. For every dollar forgiven, roughly 50 cents or less will be credited under the $17 billion number. Officials said the settlement would ultimately result in an estimated $45 billion in total principal reductions.

Another $3 billion will be spent on refinancing borrowers who owe more on their mortgage than their home is worth. The servicers will send plans to an oversight monitor to be determined on how they would solicit borrowers for the refinance program.

One unnamed servicer will send $1 billion cash to the Federal Housing Administration as part of the settlement.

The servicers are required to complete the fixes within three years. The AGs built in incentives for relief provided within the first 12 months. The servicers are required to reach 75 percent of their targets within the first two years. Servicers that miss settlement targets and deadlines will be required to pay “substantial” cash amounts.

California and New York were in deep negotiations well night Wednesday.

California will get $18 billion of the agreement. California AG Kamala Harris left the multistate negotiations last September when the estimated relief to the state was $4 billion.

“California families will finally see substantial relief after experiencing so much pain from the mortgage crisis,” Harris said. “Hundreds of thousands of homeowners will directly benefit from this California commitment.”

New York will receive $648 million in assistance from foreclosure settlement, including $495 million for principal reductions.

The settlement also establishes servicing standards similar to those agreed to in the federal consent orders signed last year. Robo-signing, and dual-track foreclosures are forbidden and new processes are required to be put in place in order to clean up lost paperwork and oversight of document processors.

“In the past it’s been a dysfunctional system. This set of guidelines has the potential to change all that,” said Iowa AG Tom Miller. “I have a message for the banks. This is an opportunity for you to change things for the benefit of the homeonwers, the investors, yourself and your reputation.”

The settlement will also clear participating AGs to work with a federal fraud task force.

New York AG Eric Schneiderman will co-chair a task force with the Justice Department and HUD, reversed his previous decision to not sign onto the foreclosure deal. He was removed from the central negotiation committee last year when he tried to expand the scope of the investigation into securitization and other issues. His task force, along with California AG Kamala Harris and several other AGs, will look into secondary market and other fraud outside of the robo-signing probe.

Also as part of the deal, Schneiderman will not have to drop his suit against the banks for their use of the Mortgage Electronic Registration Systems.

“This historic settlement will provide immediate relief to homeowners – forcing banks to reduce the principal balance on many loans, refinance loans for underwater borrowers, and pay billions of dollars to states and consumers,” said HUD Secretary Donovan. “Banks must follow the laws. Any bank that hasn’t done so should be held accountable and should take prompt action to correct its mistakes. And it will not end with this settlement.”

HAMP 2.5 Program an Expanded HAMP Will Take Effect in May 2012

The Treasury Department said it expects mortgage servicers to begin evaluating borrowers under an expanded Home Affordable Modification Program in May.

The latest program is being referred to as HAMP 2.5.

In January, the Treasury extended the application deadline to the end of 2013, eased debt-to-income requirements, allowed investors with rental homes into the program, and announced it would pay investors triple for principal reductions. While the administration wouldn’t estimate how many borrowers could be allowed into the program as a result of the changes, bank analysts said it could net roughly 500,000 extra modifications.

Roughly $29.9 billion in TARP funds have been allocated for HAMP and other foreclosure prevention programs, but only $2.3 billion has been spent as of Dec. 31. Some of the remaining amount will be spent on the expanded program.

Participating servicers started roughly 325,000 permanent modifications in 2011, down 34% from more than 423,000 started the year before, according to an analysis of Treasury data released Monday.

In 2010, servicers began making improvements from paltry workout numbers. HAMP launched in March 2009, and by December of that year, only 67,000 three-month trials had been converted to permanent status. In February 2010, servicers converted 63,000 trials alone.

The Treasury tightened documentation requirements and began evaluating servicer performance, even witholding HAMP payments from some servicers. Many, including the Special Inspector General of TARP said the administration should do more to crack down on the worst performers.

“The decline in permanent modification starts is due, at least in part, to the shrinking eligible borrower pool,” said Isaac Boltansky, a policy analyst at Compass Point.

At the end of October 2010, roughtly 1.5 million borrowers were eligible for HAMP modifications, according to the Treasury. A year later, about 890,000 borrowers were eligible.

“This represents almost a 40% reduction in eligible borrowers year-over-year and is exactly why the Obama administration announced that it will make eligibility changes to the HAMP. The specifics of how Treasury intends to alter or augment the debt-to-income formula for the HAMP could result in a meaningful increase in borrower eligibility for the program,” Boltansky said.

Servicers started roughly 4,500 HAMP modifications that included principal reductions in December.

The Treasury said trials started in June will begin reflecting the latest HAMP changes, which include higher principal reduction payments.

“The recent enhancements we have announced will bring further assistance to homeowners, renters and their communities as our nation continues to heal from an unprecedented housing crisis,” said Treasury Assistant Secretary Tim Massad.