mortgage

A Major Setback For Kamala Harris

by Aaron Sankin on April 18, 2012

Huffington Post…

For the nearly two years that Kamala Harris has been California’s Attorney General, she has made the fight against fraudulent foreclosures her signature issue. Now, largely due to pressure from business groups, legislators look like they may soon succeed in tanking her most ambitious plan yet to clean up the state’s mortgage market. Earlier this year, Harris began pushing for California to pass the “Homeowner Bill of Rights,” a collection of six bills that would make significant changes in the way the state regulates mortgages. Harris was scheduled to testify before the California Assembly’s Senate Banking and Finance Committee on Monday; however, only moments before she was supposed to appear, both of the bills she was discussing were pulled by the committee chairman, Democrat Mike Eng of Monterey Park. The sudden change reportedly prompted a chorus of catcalls from the assembled crowd. The pair of laws Harris was scheduled to discuss aim to increasing protections for mortgage borrowers by prohibiting lenders from foreclosing on a property while simultaneously negotiating a loan modification on that property and also simplifies loan documentation by establishing a single, standardized contract for foreclosures and loan restructuring. Other provisions in the bundle require banks to provide homeowners with a single point of contact during the loan modification process and levy a $25 fee on banks every time they register a default. Proceeds from the default fee would then go into a pool of money funding mortgage fraud investigations. As part of the $25 billion settlement between the nation’s five largest mortgage holders and the attorneys general of 49 states, in which Harris was a crucial player , the large institutions that hold nearly 30 percent of all mortgages in the state have already agreed to abide by some of these rules. However, that settlement expires in three years and Harris wants the rules to extend into perpetuity. The banking industry strongly opposes the measures. The Sacramento Bee reports : In letters to legislators, the state chamber said the measures amount to a “de facto moratorium on foreclosures” that would actually hurt the real estate market with a confusing new set of laws, squeeze credit for property purchases and trigger a wave of lawsuits. The chamber also contends the bills are in conflict with federal standards and are an “extraordinarily restrictive and draconian” permanent response to temporary industry abuses. Conversely, the bills have received strong support from civic leaders in San Francisco. “Too many San Franciscans have been devastated by the mortgage crisis and too many families have lost their homes due to deceiving banking practices right here in some of our most vulnerable communities,” said San Francisco Mayor Ed Lee in a statement to the San Francisco Sentinel . “Thousands of foreclosures have happened and are happening in neighborhoods in our cities. I applaud the leadership of Attorney General Kamala Harris for standing up for families and using the powers of her office to protect homeowners from mortgage fraud and abuse.” Last week, the city’s Board of Supervisors passed a non-binding resolution calling for a moratorium on all foreclosures in the city until additional protections, such as the ones in Harris’s bills, are enacted. An audit of 400 San Francisco foreclosures conducted by San Francisco Assessor-Record Phil Ting found that 84 percent were either fraudulent or missing crucial documentation. “This matters because families facing foreclosures are entitled to know exactly who holds their loan and to see for certain that the foreclosure is justified,” Ting wrote in a blog on the Huffington Post . “In one case, our audit showed a foreclosure initiated by a party that had no title to the property–and in a number of other cases, we found two competing claims to the title.” (Full disclosure: Aaron Sankin was briefly an unpaid intern on Harris’s 2003 campaign for San Francisco District Attorney.)

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A Major Setback For Kamala Harris

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U.S. Bank Faces Federal Investigation

by Janell Ross on April 17, 2012

Huffington Post…

U.S. Bank on Tuesday joined the ranks of large financial firms facing discrimination charges for the way it maintains foreclosed homes in mostly black and Latino neighborhoods. The National Fair Housing Alliance, a Washington, D.C.-based nonprofit, filed a formal discrimination complaint against the bank with the Department of Housing and Urban Development Tuesday. In the complaint, the organization accuses the bank of maintaining and marketing bank-owned foreclosed properties in predominantly white communities far more aggressively and consistently than it does homes in mostly black and Latino neighborhoods. The complaint filed against U.S. Bank and its parent company, U.S. Bancorp, marks the second charge in as many weeks brought by the National Fair Housing Alliance against a major bank. The alliance conducts housing discrimination investigations and receives some funding from HUD. Last week, the alliance accused California-based Wells Fargo , the nation’s largest mortgage lender, of similar civil rights violations. Minnesota-based U.S. Bank is the fifth largest commercial bank in the United States. On Tuesday, it also faced separate allegations logged by another nonprofit group that it offers pay day loans at annual interest rates approaching 400 percent to vulnerable consumers. Alliance investigators examined 177 U.S. Bank properties in seven cities, said Shanna Smith, the alliance’s president and CEO. Public records indicated each of the homes was owned, not simply managed, by U.S. Bank, she said. In Dayton, Ohio, alliance investigators found that 65 percent of U.S. Bank foreclosures in communities of color had broken widows or doors, according to the alliance’s complaint. Only 15 percent of the bank’s repossessed homes in white neighborhoods were in the same condition. In the Oakland, Calif.-area, 64 percent of the bank’s foreclosed properties in black or Latino neighborhoods were littered with, “substantial” amounts of trash. But, only 17 percent of properties in predominantly white Bay Area neighborhoods had the same problem. U.S. Bank said that the complaint filed with HUD Tuesday does not include the addresses of problem properties, which the bank needs to determine if it owns the properties or if it is simply the trustee managing administrative tasks for investors who own the home loans. Trustees oversee securities — in this case, mortgage securities made up of hundreds or even thousands of home loans — on behalf of investors. The investors are often large pension funds and insurance companies. Trustees, in turn, typically hire companies known as servicers to collect mortgage payments from the home buyers whose loans are part of the security. Banks often function as servicers and are responsible for dealing with loans before and after a foreclosure. So, servicers also often hire asset managers or contractors to maintain foreclosed properties. Nicole Sprenger, a U.S. Bank spokesperson, emailed a statement to the Huffington Post Tuesday that emphasized the complexity of these arrangements. As you may know, U.S. Bank is one of the nation’s largest corporate trustees. Accordingly, in the vast majority of cases where U.S. Bank is involved in a foreclosure, we serve as a trustee for an investment pool where the former mortgage was held, and have no role in servicing or maintaining the property. That is the responsibility of the servicer (typically another bank), and not the trustee. When we do own a property, we have a strong and comprehensive process in place to regularly inspect and maintain properties to marketing standards where we have legal access, regardless of their location. The bank’s argument is illegitimate, said Anne Houghtaling, executive director of HOPE Fair Housing Center in Wheaton, Ill. a city about 25 miles west of Chicago. HOPE is one of the nonprofit organizations that helped the National Fair Housing Alliance evaluate the state of foreclosed homes in cities around the country. “U.S. Bank has a list of its own properties, (and) could go and look at them, and should be going to look at them regularly,” Houghtaling said. “They could do that now.” There is clear evidence that U.S. Bank-owned properties in Chicago are treated differently if located in a community of color, she said. HUD declined to comment on the complaint but confirmed that it had been filed and will lead to a federal investigation. Should HUD find evidence that the alliance’s complaint against U.S. Bank is accurate, the federal agency can attempt to negotiate a settlement with the bank. If the parties are unable to reach an agreement, the Justice Department could file suit against the bank. The complaint filed Tuesday follows a nine-month probe during which the National Fair Housing Alliance evaluated the state of 1,000 bank-owned foreclosed homes in nine metro areas from California to Washington, D.C. Investigators found “overwhelming” and “troubling” evidence that six of the nation’s major banks market and maintain foreclosed homes in predominantly white neighborhoods differently than they do in others, according to a report issued by the agency last week. The pattern was pronounced in communities regardless of income, Smith said.

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U.S. Bank Faces Federal Investigation

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Romney Campaign Soft-Pedals Private Remarks

April 16, 2012

PHILADELPHIA — Mitt Romney’s aides soft-pedaled his latest tax pronouncements on Monday, insisting he wasn’t tipping his hand when he told donors privately that he might seek to end the tax break for mortgages on second homes and curb other deductions for the wealthy as part of tax reform. “He was just discussing ideas that came up on the campaign trail,” said former Sen. Jim Talent of Missouri, a frequent campaign surrogate. The remarks, made at a closed-door fundraiser in Florida and overheard by reporters, did not mark any “change in policy,” Talent said on a conference call with reporters. Whatever his intention, Romney’s remarks drew a tepid response from Rep. Dave Camp, R-Mich., the chairman of the tax-writing House Ways and Means Committee. “I’m going to listen very carefully” to Romney’s ideas, the lawmaker told reporters. “Obviously, as a presidential candidate, he is going to have some ideas on tax reform.” Camp added: “They’re not necessarily views the committee has adopted yet. But we’re going to be looking at all those items.” Camp said he has spoken to Romney several times about tax policy. Twice during the day, Romney himself passed up an opportunity to repeat his weekend comments. Speaking to the Independence Hall Tea Party, he said he wants to reduce taxes while President Barack Obama wants to raise them. “Taxes by their very definition limit our freedom. They should be as small as possible to do things that are absolutely vital,” he said. Earlier, in an ABC interview, he said: “I’m going to limit certain deductions and exemptions for high-income individuals so that even as we lower the rates for all Americans, we’re not going to shift the burden from – middle-income people to higher-income people.” As for abolishing federal agencies, he said, “I’m not proposing any eliminations at this point.” In his remarks over the weekend, Romney also mentioned possible elimination of the Department of Housing and Urban Development, and dramatically scaling back the Education Department. Romney mentioned possible elimination of state and local tax deductions for the wealthy as part of a plan to reduce income tax rates across the board. Democrats quickly accused the former Massachusetts governor of telling his financial supporters plans he has yet to share with the public. Ironically, the weekend fundraising flap took place less than two weeks after Romney accused Obama of conducting a “hide and seek” campaign in which he left the public in the dark about his plans for any second term. If nothing else, the attention Romney’s remarks drew underscored the increased scrutiny he faces as the party’s presidential nominee-in-waiting. With former Sen. Rick Santorum on the sidelines after suspending his campaign, Romney was campaigning across Pennsylvania for two days in advance of next week’s primary, then flying to North Carolina and Arizona. Romney has said he wants to keep all the broad tax cuts from expiring that were first approved under President George W. Bush. He also has said he wants to reduce tax rates by 20 percent, but he has not previously offered much detail about how he would pay for the costs of doing that. Nor has he defined an income level that would place a taxpayer in the class of the wealthy. Democrats have favored extending the Bush tax cuts, but not for the wealthiest Americans. Tax treatment of the rich has become a defining issue in this year’s presidential and congressional campaigns as the two parties vie for votes, with each arguing that it has the best ideas for reviving the economy. Romney’s weekend remarks were first reported by The Wall Street Journal and NBC News. ___ Fram reported from Washington.

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The Risk Of Foreclosure Scams Is Rising

April 16, 2012

If you’re a struggling homeowner watch out! The chance that you’ll get scammed is way up. The number of reported mortgage foreclosure scams has shot up 60 percent so far in 2012 , according to the nonprofit Homeownership Preservation Foundation. About 50 percent of the scams involve attorneys or others claiming to offer “specialized services.” The surge in schemes comes in the wake of recently launched federal programs that scammers have been able to exploit. “Regretfully, every new government initiative spawns a slew of foreclosure avoidance scams, often from the same cast of characters doing business under various names to avoid easy detection and identification,” Colleen Hernandez CFO of the organization said in a release that accompanied the findings . In one recent example, New York Attorney General Eric Schneiderman has warned that scammers may exploit the recent national mortgage settlement to take advantage of homeowners. The scammers claim to be government officials involved in the settlement and try to pry personal financial information, Schneiderman said earlier this month. In another example, a judge shut down a Santa Ana mortgage relief operation last month after the band of five companies and three websites raked in more than $1 million by allegedly taking advantage of hundreds of consumers, according to the Los Angeles Times . The operation allegedly used two scams: One that charged homeowners thousands of dollars to join a class-action lawsuit and another that for a price of at least several hundred dollars offered to do a home loan audit that would find lender violations at least 90 percent of the time. With the threat of foreclosure constantly looming there are many potential victims available for these scammers. One in every 662 housing units received a foreclosure filing in March, according to RealtyTrac. That’s an uptick from the month before indicating that there might be a surge in repossessed properties.

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D. Sidney Potter: Stories From the Frontline: Why Is Mortgage Aid, Hater-Aid?

April 16, 2012

As a continuing topic from the post entitled, “Stories From the Frontline: Robo Signers vs. the Silent Enemy,” the following is a continued look into the operational innards of mortgage operations centers. Why is the banking industry — for the most part, since I personally detest over generalizations, resistant to essentially doing the right thing and/or at least doing it in a timely matter? It is almost fascinating that acclimatization is loathed, rather than embraced. It is not often one gets to be a white knight in the face of such Armageddon-like financial tragedy, but these banking guys in the C-suite found a way to do it without really trying. Sociologists would call that cognitive dissonance. For example, I was engaged a few years back as a mortgage operations consultant for one “Too Big to Fail” bank that shall remain nameless (let’s just say it’s logo is a stage coach), whose loss litigation team had to consist of less than 30 full time members! Albeit, this was back in 2009, and banks were gonna through a deer in the headlights stage in adjusting their operational capacity to meet the massive avalanche of foreclosures coming upon them, but this mind you was a very apparent understaffing at this particular banks’ headquarter location. Out of curiosity and in passing, I asked the vice president in charge of this ‘start-up’ department, where were all the loan modifiers. Her reply, and slightly stunned response, was that they were working on it! Hello, did you not get the memo that the economy just got pierced wide open with a set of vice grips for open heart surgery and that it may have forgotten to administer itself with anesthesia. (Maybe the email went to her junk mail). The silent enemy — who are a form of malfeasant employees, are not necessarily a conniving bunch; and like the poisonous affect a few drops of python venom has on a healthy 200-pound man, so to can a few bad men within an industry that is entrusted in safe keeping our money. In the end, those individuals who work in loss mitigation centers for the banks are to a point, contributorily responsible for the prolonged economic recession. Like the 1977 movie Network , one wants to open a window and yell out “I’m mad as hell and I’m not going to take it anymore.” Mortgage mess, be over already, will you. But ultimately, these loan modifiers who are known as LMs (aka Lone Morons) are good Germans. And good Germans do what good Germans do best, and that is they do what their told. But consequently, they benefit financially by their individual group conformity — and as luck would have it, results in some of them not losing their own home to foreclosure. How ironic. Poetic justice almost sings again. The loss mitigation business, is not the only industry to do well when a mega-disaster hits. I’m not an expert on the histrionics of vaccinations, but somebody had to have made a killing with the onset of the black bubonic plague or even the polio epidemic at the turn of the last century. During and after every disaster there’s clean up to be done. What about German uniform manufacturers (for soldiers and prisoners), in the 1930s and ’40s? And lest we forget about German oven makers in the 1940s. Business most have been brisk. Couldn’t keep up with the demand. And in present day America, watch how many insurance claim adjusters come off unemployment whenever there’s a massive tornado. They call it tornado season for a reason. As a banking professional, you start to fill like you’re in the ‘body bag’ business of the mortgage industry. It doesn’t make what you do anymore digestible knowing that it’s God’s work, depending upon your mindset in which you try to convince yourself that you’re at least helping people. Metaphorically, it’s like being on a parole board and realizing that even though it’s usually a 3 to 5 board vote, your one vote could be the difference in properly adjudicating for the inmate/prospective parolee their future. Hence, some of the mortgage operations consultants — such as myself, take the contrarian point of view that a loan modification applicant ought to be helped, not hurt. For many bankers, the word help is a four letter word. And hence, that is the narrow bandwidth in which you live in — in which you can justify your professional credentials, and your professional wherewith all, and still look another mortgage ops professional in the eye without drawing scrutiny, scorn and contempt from others. And once again, you’d like to think that you’re doing God’s work, vs. the atypical maladjusted mortgage ops professional in the next cube over, whose’ pulling down $2k-plus a week while simultaneously casting judgment over others. For this reason, you come across some (although not nearly enough — since everyone has their best interest in hand), mortgage ops professionals who become the moral equivalent of Supreme Court Justice Anthony Kennedy. You become the swing vote. You become the unseen voice of reason. You become the final arbitrator, who may be able to justify the investigation or non-investigation of a mortgage applicant for suspected fraud. Realizing that another person fate is dependent upon you checking a box off on an intake sheet, or that the approval or denial of a loan modification may affect the uprooting of an entire family, or that because of professional peer pressure you deny a financially healthy loan applicant a cash-out “refi” that he is otherwise entitled to. This can sometimes be a heady undertaking. Without equivocation, you become the final denominator. Quite often, mortgage ops consultants are responsible for Monday morning quarter backing. You act as a referee of what’s just occurred. And sometimes you don’t always get instant replay and/or a commercial break to thoughtfully analyze the situation. In effect, you step atop a pedestal and decide (more or less), to fully adjudicate in your subjective opinion who wins or losses. Almost like Caesar summoning his court and deciding which of two remaining Gladiators to feed to the lions — or maybe both of them, for pure entertainment purposes. Even Caesar loved ratings. Some mortgage ops consultants where unfortunately ex-mortgage brokers who had no compunction, reluctance or guilt in seeing some hard working customers lose their home as a result of a loan modification specialist being short sighted. And in Caesar fashion, raising their clenched fist and pointing their thumb down. Next Huffington Post segment. Stories From the Frontline: Please Tell Me I’m in Kansas.

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U.S. Lost $1 Billion To Banks In Last 10 Years Thanks To Tax Shelter

April 16, 2012

By Megan Murphy and Vanessa Houlder, Financial Times and Jeff Gerth, ProPublica In November 2001, Bank of New York, a mid-tier U.S. bank, transferred nearly $8 billion of its own assets to a trust in the small, business-friendly state of Delaware through several layers of newly created companies. A mixture of home mortgages, shares and other securities, the transferred assets made up almost 10 percent of the bank’s total assets at the time. Yet, the transaction was not discussed with BNY’s regulators; nor was it noted in the bank’s financial statements or annual report. It had little practical effect on the lender’s day-to-day operations 2014 the assets continued to be managed and serviced by the same employees in New York. But it was a critical first step in setting up a complex structure known as STARS 2014 structured trust advantaged repackaged securities 2014 which U.S. tax authorities claim was used by several American banks as an abusive tax shelter that has cost the government more than $1 billion in tax revenue in the past decade. This week, BNY will square off against the Internal Revenue Service in U.S. Tax Court in New York over STARS and the tax benefits tit triggered for the U.S. bank and U.K.-based Barclays, its counterpart in the deal. At issue is whether STARS was set up primarily to generate artificial foreign-tax credits, as the IRS contends; or was a legal way for BNY to obtain financing at rock-bottom rates. The arguments heard this week will pose a crucial test of the U.S. government’s resolve to rein in sophisticated corporate tax planning that has sapped vast amounts of potential revenue. Tax authorities worldwide, notably in the U.S. and U.K., are under mounting pressure to show that large companies are shouldering their share of the tax burden as part of a broader political debate about fairness and corporate social responsibility. “We are upping our game in the large business area, particularly as it relates to international tax issues,” Douglas Shulman, the U.S. internal revenue commissioner, said in a speech this month in Washington, D.C. For the IRS, losing the STARS disputes would be a serious blow to its strategy in high-value cases, tax lawyers said. For the banks, the risk is both financial 2014 $900 million is at stake in the BNY case alone 2014 and to their reputations. An investigation last year by the Financial Times and ProPublica first detailed how STARS produced tax benefits for U.S. banks beginning in 1999. In all, six banks 2014 BNY (now Bank of New York Mellon), BB&T, Sovereign (now a unit of Santander), Wachovia (now part of Wells Fargo), Washington Mutual and Wells Fargo 2014 participated in STARS deals with Barclays between 1999 and 2006. Five of those banks are challenging IRS rulings that disallowed foreign tax credits generated in those transactions. WaMu has settled a STARS dispute in bankruptcy court by agreeing to forgo $160 million in claimed tax credits. In total, the IRS says, the STARS deals created $3.4 billion in foreign tax credits. Now, documents filed in BNY’s case in the past few weeks 2014 the court proceedings begin Monday 2014 provide unprecedented detail about how STARS was crafted at a time when banks and accounting firms were offering deals for multinational corporations to take advantage of loopholes in rules governing foreign tax credits. At the simplest level, foreign tax credits are designed to prevent U.S. companies from being taxed twice on overseas income by allowing them to claim credit for taxes paid in foreign jurisdictions. In the BNY case, the IRS claims STARS allowed both Barclays and BNY to claim credits for the same “illusory” foreign tax charges, ultimately reducing the U.S. government’s tax revenue by $18.15 for every $100 of income funneled through the Delaware trust. “The record will establish that STARS was a pricey financing that no prudent banker would undertake but for the tax benefits generated by the meaningless circulation of cash flows,” according to a court filing by the IRS on March 27. BNY has argued that the deal was a complex but entirely legal , allowing the bank access to low-cost financing from Barclays for its everyday business activities. Brainchild of Barclays Like hundreds of other foreign-tax-driven transactions sold to companies in the boom years before the financial crisis of 2008, STARS was developed by Barclays’ famed structured finance group, known as Structured Capital Markets. Roger Jenkins, one of Britain’s best-known dealmakers, and Iain Abrahams, the expert behind most of the bank’s tax arbitrage transactions, led SCM. The idea was for STARS to manufacture tax credits for Barclays and a U.S. corporate taxpayer by circulating U.S. income through an entity taxed in the U.K., the IRS said in its filing. Because of the differences between U.S. and U.K. accounting rules, STARS would allow Barclays to reimburse a U.S. company for half the tax paid in the U.K. while not reducing the amount of foreign tax credits that could be claimed by either party, the IRS said. Barclays is not a party to the IRS dispute with BNY and has not been accused of wrongdoing by U.S. authorities. According to the IRS, blue-chip U.S. companies including Microsoft and insurers AIG and Prudential Life passed on early versions of STARS for unspecified reasons. But the IRS said BNY, which bought the deal in 2001, had grown “addicted” to tax-driven transactions, which provided it with an important source of revenue. Before buying STARS, the IRS says, BNY had entered into more than 100 “lease-back” transactions, known as Lilos and Silos, that produced tax advantages. Shortly after participating in STARS, BNY also purchased from Barclays another foreign-tax-credit structure, nicknamed Toga, that involved high-grade debt securities, the IRS said. “Barclays understood that BNY was highly receptive to a wide range of tax-based ideas, and had targeted BNY for an SCM 2018tax product’ after discussions with BNY senior executives,” the IRS said in its court filing. The IRS also described KPMG as a pivotal player. The accounting firm provided a U.S. tax opinion blessing the structure for Barclays and sold STARS to BNY for a fee of $6 million, according to the IRS filing. David Brockway, then of KPMG, was engaged to provide the firm’s opinion on STARS, and is expected to testify at trial, according to the IRS. Brockway, a leading U.S. tax lawyer, left KPMG in April 2005 amid scrutiny of the firm’s previous sales of potentially abusive tax shelters. The IRS also has named lawyer Raymond Ruble, formerly a partner at Sidley Austin in Washington, D.C., as a key adviser on the structure. Ruble was convicted of multiple counts of income-tax evasion in a separate tax-shelter case involving wealthy taxpayers in 2009. He is in a federal prison in Lewisburg, Pa. The IRS, Barclays, BNY, KPMG and Sidley Austin declined to comment on the case. Jenkins, now a partner at the Brazilian investment bank BTG Pactual; Abrahams, still a senior executive at Barclays in London; and Brockway, now a Washington-based partner at the law firm Bingham McCutchen LLP, also declined to comment. $900 Million Disputed Both sides acknowledge that BNY’s STARS deal was executed through highly choreographed steps. First, BNY transferred about $7.9 billion of income-producing assets to the Delaware trust through layers of newly created subsidiaries. Barclays, as the counterpart, acquired shares in the trust, giving it a right to nearly all the income generated by the assets. In return, Barclays loaned $1.5 billion to BNY, also via the trust. Barclays and BNY then executed a repurchase agreement, or “repo,” under which BNY agreed to buy back the shares in the Delaware trust five years later, in November 2006. BNY appointed a U.K. company as trustee of the Delaware trust, making the income it produced subject to U.K. tax. At the outset of the deal, the trust’s pool of assets were expected to generate about $460 million of income a year 2014 of which, at a tax rate of 22 percent, $100 million would be paid to U.K. tax authorities. When the trust income failed to reach $460 million, as expected, BNY injected extra assets, essentially to boost the income stream. At the heart of the structure are differences between how it is treated under U.S. and U.K. tax law. Under U.K. rules, Barclays was allowed to take a deduction against its other taxable income in the U.K. on the condition that it immediately reinvested the income produced by the assets in the trust. But it was able to simultaneously take a credit for the tax paid by the trust. According to the IRS, those tax benefits were shared with BNY, generating gains for both banks. For every $100 of income circulated through the trust, the U.S. government lost $18.15, which funded BNY’s profit of $7.15, Barclays’ profit of $7.70 and U.K. tax receipts of $3.30, the IRS claims. But under U.S. tax law, the deal was considered a secured lending arrangement. So, subject to U.S. tax rules, BNY, as owner of the U.K. trust, could also claim a foreign tax credit for the U.K. taxes paid. In 2001 and 2002, BNY claimed nearly $200 million in foreign tax credits from the STARS structure, which the IRS has disallowed. Including interest, the total amount in dispute is about $900 million, according to the bank’s most recent annual report. “The foreign tax credits that Bank of New York claimed in the U.S. at a 22 percent rate were far more than the actual U.K. tax attributable to STARS,” the IRS said in its filing. “In other words, Bank of New York claimed credits for phantom U.K. tax expense.” BNY is challenging the IRS’ refusal to allow the credits and says it entered the STARS deal to borrow low-cost funds. Because of the U.K. tax benefits the structure generated for Barclays, BNY claims the British bank was able to provide it with the five-year, $1.5 billion loan at more than three percentage points below the prevailing benchmark lending rate. “The complication was required by Barclays’ U.K. tax objectives, not by BNY,” the bank said in a court filing March 27. “By lending to [BNY] through the structure that Barclays designed, Barclays could offer a very favorable borrowing rate.” In the coming weeks, U.S. Tax Court will hear from the bankers, lawyers and accountants involved as well as a raft of experts. A final decision is not expected for at least several months. With much at stake, BNY and the IRS appear to be digging in for a protracted battle. In its latest filing, BNY accuses the government of using “emotionally laden” arguments to try to deliver a “sweet sound bite.” The IRS says “no rational person” would have participated in STARS if not for the foreign tax credits. Let the war of words begin. Vanessa Houlder covers taxation and Megan Murphy investment banking for the Financial Times in London. Senior reporter Jeff Gerth is in Washington, D.C.

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Martha Burk: Equal Pay — Will We Ever Get There? An Interview With Lilly Ledbetter

April 15, 2012

April is the month every year when the paychecks of women working full-time, year-round catch up with what men earned by the previous December 31. This year it’s April 17. There are a number of causes for the pay gap, including job segregation (so-called “men’s jobs” pay more than “women’s jobs”) and the fact that working moms are often seen as less serious or less reliable, despite solid evidence to the contrary. But plain old sex discrimination plays a big part. Lilly Ledbetter found out the hard way after 19 years at Goodyear, when she learned she had been underpaid all along compared to men doing the same job. She sued — and won in lower courts. But the Supreme Court overturned 40 years of precedent when it ruled against her in the now-infamous Ledbetter v. Goodyear case, saying she should have complained earlier — even though she didn’t know about the discrimination. The Lilly Ledbetter Fair Pay Act restoring the previous standard (a victim has 180 days to complain beginning when she learns about the discrimination) was the first law President Obama signed. Ledbetter’s new book Grace and Grit chronicles her struggle and the aftermath. I interviewed her this month for my radio show Equal Time With Martha Burk . MB: When did you go to work for Goodyear? LL: I was hired in 1979. There were 5 of us in the group, 2 female. MB : How did you find out after 19 years that you were making less than the men doing the same job and in some cases with less seniority? LL: An anonymous note — a little piece of paper with my salary and 3 male co-workers. I knew it was correct, because my numbers were there to the penny. The first thing that hit me was devastation, humiliation. Then I thought about how many hours of overtime I had worked and not been compensated for what I was legally entitled to, and how hard it had been on my family struggling to pay the mortgage, education, doctor bills. We had done without quite a bit. And this was not right. I didn’t know how I could through my 12 hour shift. MB : Did you leave the plant and go home? LL: No, I finally got my composure. Halfway through my night shift it hit me. My retirement, my 401(k), and someday my Social Security all were dependent on what I was making — and that’s another tremendous loss. MB : Did you go to the company and complain? LL: I had already been to the company recently, because there were rumors, and I wanted to know where I stood. They told me “you’re just listening to too much B.S.. Your salary is fine.” Later my lawyer found out that for many years I had been paid below the minimum for the job I was doing. MB : It had to be a hard decision to file a suit, and risk retaliation or even getting fired. LL: Yes, I thought about it. But I decided I could not let a major corporation do me this way, and not stand up for myself. I went straight to the Equal Employment Opportunity Commission closest to my home. MB: You’ve said that one of the most important pieces of advice you can give to women in this situation is “don’t hold back, tell the investigators as much detail as you can, and document as much as you can.” LL: That’s absolutely correct. It’s very hard — you feel like you’re being a complainer and a whiner, and that’s actually the reputation you get when you do file a charge. But you should open up and tell everything. I was shunned by co-workers. MB: You were transferred to another job where you had to lift heavy tires all day. You were over 60 years old. Wasn’t that retaliation for filing the charge, which is against the law? LL: Yes, but I lost that part and also an age discrimination complaint. MB: The State of New Mexico has a rule that any company applying for a state contract has to file a gender pay equity report showing pay statistics for men and women in each job category. Would that have helped you? LL: Absolutely. I thought because Goodyear was a federal contractor they would be following the law. But that turned out not to be the case, and I couldn’t find out. MB: What would your advice be to women who might be considering filing a complaint? LL: Do your research on salaries in your area. Do not take anything for granted, and document everything. Discrimination is alive and well today. You cannot afford to work any length of time accepting less money, because you can never catch up. Listen to the full Lilly Ledbetter interview here:

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Eliot Spitzer: Obama ‘Has Been On Wall Street’s Side Since Day One’

April 14, 2012

When it comes to reforming Wall Street, President Obama is all talk, according to Eliot Spitzer. The former New York governor took to Reuters TV’s Fast Forward with Chrystia Freeland to slam the president for what he says is a talk-tough, act-weak approach to the financial industry, which less than five years ago brought the global economy to the brink of disaster. “I’m not persuaded that this President has really been a voice for reform when it comes to Wall Street,” he said. “Wall Street has pretended that it has taken its hits, but it really hasn’t.” Spitzer summarized Obama’s efforts as the “occasional speech” criticizing Wall Street practices, largely followed by little to no substantial legislative action. “When it has come to actually putting in place the reform-based structure that would actually have changed the way the banking system works, he has really been on Wall Street’s side since day one,” Spitzer said. Spitzer criticized the Obama administration for what he perceives as opposition to the Volcker Rule, a key piece of financial reform that aimed to curb banks’ high-risk bets with their own money. Such trading has been criticized for pitting banks against their own clients. The president first introduced the rule more than two years ago, calling it a “simple and common-sense reform” at the time. Spitzer also claims the White House did not fight to give judges the ability to reform mortgages in the wake of the housing collapse. “The White House and Treasury intervened to defeat that in the Senate, something that could have fundamentally altered the course of our mortgage crisis that still continues to this day,” he said.

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Obamas Claim Tax Break That Most Helps The Rich

April 13, 2012

President Barack Obama didn’t benefit last year from the huge break in the tax code that allows his presumptive rival, Mitt Romney, to pay taxes at a lower effective rate than most anyone who earns a regular middle-class salary. But the president and his wife did save more than $10,000 in 2011 by claiming a tax break that favors the wealthiest Americans. According to their tax returns released Friday by the White House, the president and the first lady claimed a $47,564 home mortgage interest deduction on their house in Chicago, which they bought in 2005 for $1.65 million. That equates to $13,318 in savings on their federal tax bill, according to an analysis by Michael Gillen, director of the tax group at the Philadelphia law firm Duane Morris. While most of the beneficiaries of the mortgage deduction are middle-class borrowers — about two-thirds of those who claim the deduction earn less than $200,000 — homeowners with larger, more expensive houses typically save much more on their tax bills. Average homeowners with incomes between $40,000 and $75,000 who claim the deduction save just $523 in taxes, economists at the University of Pennsylvania found . Average homeowners with incomes greater than $250,000 who claim the deduction save $5,459 on their tax bills. Renters, of course, save nothing. Nor do the millions of Americans in low-cost homes who pay mortgage interest each year, but don’t itemize their deductions because it is not worthwhile for them to do so. Just 1 in 4 Americans claimed the benefit on their taxes in 2010, the last year studied, according to the nonprofit Tax Foundation. The mortgage interest deduction, which allows borrowers to reduce their taxable income by the amount of interest paid on a loan (or loans) with a value of up to $1.1 million, has long been seen as an untouchable middle-class benefit. But many academic studies over the past few years have found it benefits the wealthy the most — and doesn’t really encourage homeownership. “Lots of middle-class people take the deduction and realize some savings on their tax bill, but they don’t understand that it is badly skewed,” said Seth Hanlon, director of fiscal reform at the liberal-leaning Center for American Progress. “A lot of people don’t realize that the benefit can be taken on vacation homes or even a boat.” Hanlon said his organization favors altering the deduction so that everyone receives the same level of tax benefit regardless of tax bracket. He said this change could be phased in slowly to avoid rattling an already depressed housing market. With the federal budget deficit careening out of control, some in Washington have proposed paring back the deduction. Most notably, the deficit reduction commission appointed by President Obama — and led by former Sen. Alan Simpson and onetime White House Chief of Staff Erskine Bowles — suggested reducing the limit on the deduction to $500,000 of a home’s value and eliminating the tax break for a second home. The bipartisan group of senators known as the Gang of Six that met last year in an effort to hammer out a deficit deal also reportedly embraced this plan. Would-be reformers face powerful opposition from groups like the National Association of Home Builders. An association spokesman did not return a message left Friday afternoon, but the group put out a press release earlier this week that called the interest deduction “a cornerstone of U.S. tax and housing policy.” “The mortgage interest deduction primarily helps middle class home owners and is consistent with the principles of a progressive income tax,” the April 11 release said. “Two-thirds of the benefits flow to working class American households who earn less than $200,000 annually and nearly all those who own a home of their own will claim the deduction at some point during their tenure as home owners.” Changing the rules would “penalize millions of baby boomers nearing retirement and seniors who own their homes outright,” said association Chairman Barry Rutenberg, according to the press release. “The collateral damage to the economy would be even more devastating, resulting in lower home values, which would leave more home owners underwater, trigger more foreclosures and prolong the housing slump for years to come.” The president and the first lady paid an effective tax rate of about 20.5 percent in 2011 on adjusted gross income of $789,674. The rate would have been higher if not for the mortgage interest deduction, but the largest tax saving came from charitable deductions. The Obamas gave $172,130 to charity in 2011, which was 22 percent of their income. In January, the Romney campaign released an estimated tax return for 2011 indicating he will likely pay an effective tax rate of 15.4 percent on $20.9 million in adjusted gross income. Romney also makes charitable donations, but his biggest tax benefit is due to how he makes money. Almost all of his earnings come from investments, which are taxed at a 15 percent rate. The White House did not return a request for comment on Friday. This story has been updated with a revised estimate of the Obamas’ tax savings from Michael Gillen.

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Americans Buying Huge Number Of Electric, Hybrid Cars

April 13, 2012

— ___ Hybrid and electric cars see record sales in March DETROIT (AP) – Americans are buying record numbers of hybrid and electric cars as gas prices climb and new models arrive in showrooms, giving the vehicles their greatest share yet of the U.S. auto market. Consumers bought a record 52,000 gas-electric hybrids and all-electric cars in March, up from 34,000 during the same month last year. The two categories combined made up 3.64 percent of total U.S. sales, their highest monthly market share ever, according to Ward’s AutoInfoBank. The previous high was 3.56 percent in July 2009, when the Cash for Clunkers program encouraged people to trade in old gas guzzlers for more fuel-efficient cars. And while their share of the market remains small, it’s a big leap from the start of the year, when hybrids and electrics made up 2.38 percent of new car sales. ___ Bank reports point to a healing housing market NEW YORK (AP) – Earnings reports from two major banks Friday painted a picture of a healing housing market, with more Americans taking out mortgages, paying them on time and taking advantage of low interest rates to refinance. At JPMorgan Chase, the biggest bank in the United States, income from new home loans set a record from January through March. The bank issued 6 percent more mortgages than a year ago and got 33 percent more applications. Wells Fargo, which issues the most home loans, booked the most mortgage fees since 2009. It issued 54 percent more mortgages than a year ago and took 84 percent more applications. ___ JPMorgan Chase earns $5.4 billion in 1Q, beats Street NEW YORK (AP) – JPMorgan Chase, which holds the most assets of any bank in the country, said Friday that it issued more mortgage loans in the first three months of the year and turned a bigger profit than Wall Street expected. The bank said it earned $5.4 billion for the first quarter, or $1.31 per share. Analysts expected $1.16 per share. Revenue and profit declined at most of JPMorgan’s businesses, including investment banking. As the nation’s largest bank, JPMorgan is a barometer of the economy and the financial industry. It is also the first major bank to report its results for the quarter. ___ Wells Fargo beats earnings expectations NEW YORK (AP) – Wells Fargo’s profit jumped 13 percent in the first three months of the year, thanks to strong mortgage lending and a drop in delinquent loans, the bank said Friday. Net income available to common shareholders climbed to $4.02 billion from $3.57 billion a year ago. On a per-share basis, earnings were 75 cents, beating the 73 cents expected by analysts polled by FactSet. The bank also beat on revenue, bringing in $21.6 billion instead of the predicted $20.4 billion. The San Francisco-based bank, the country’s fourth-largest, has fared better than many of its peers throughout the global economic meltdown, muscling its way to become both the biggest mortgage lender and servicer as rival Bank of America dramatically scaled back its own mortgage business. Nearly a third of mortgages made in the U.S. now come from Wells, according to Guy Cecala of Inside Mortgage Finance. ___ US inflation mild as gas prices rise more slowly WASHINGTON (AP) – Rising gas prices slowed in March, keeping overall U.S. inflation mild. The consumer price index rose 0.3 percent in March, the Labor Department said Friday, compared with February’s 0.4 percent rise. Excluding food and gas, so-called “core” prices increased 0.2 percent in March. Inflation has eased since last fall and is expected to stay tame. In the 12 months that ended in March, prices rose 2.7 percent. That’s below last year’s peak year-over-year rate of 3.9 percent. Core prices have risen 2.3 percent in the past 12 months, close to the Federal Reserve’s inflation target of 2 percent. ___ China’s economic growth falls to near 3-year low BEIJING (AP) – China’s declining economic growth fell to its lowest level in nearly three years in the first quarter, but analysts said it should rebound in coming months. The world’s second-biggest economy grew by a still-robust 8.1 percent in the three months ending in March, down from the previous quarter’s 8.9 percent, data showed Friday. It was the weakest expansion since the second quarter of 2009 but above the government’s 7.5 percent target for the year. China’s rapid growth has fallen steadily since 2010 as a slump in global demand battered its exporters and Beijing tightened lending and investment curbs to cool an overheated economy and surging inflation. ___ Bernanke defends Fed response to financial crisis WASHINGTON (AP) – Chairman Ben Bernanke said Friday that the Federal Reserve was left with few good options when it stepped in to shore up the largest U.S. financial institutions during the 2008 crisis. Bernanke defended the central bank’s actions to support insurance giant American International Group and help with the sale of investment bank Bear Stearns, during a speech to a New York conference examining the crisis. While there were risks associated with that support, Bernanke said that the billions of dollars in loans the Fed provided were backed by adequate collateral and taxpayers did not lose money. And he noted that the Fed and other U.S. regulators are better positioned to deal with a crisis because Congress passed an overhaul of financial regulations in 2010. ___ Goldman Sachs CEO Blankfein paid $16.1 million NEW YORK (AP) – Goldman Sachs CEO Lloyd Blankfein received total compensation of $16.1 million in 2011, a 14 percent increase from the year before. In a regulatory filing posted Friday morning, the New York investment bank detailed Blankfein’s compensation for last year. Goldman paid its chairman and CEO a salary of $2 million, a bonus of $3 million and stock awards worth $10.7 million. Blankfein’s total pay included $9,800 in matching payments to his retirement plan, $51,467 for a car and driver and $258,701 for security services. The amount Goldman paid for his security more than doubled from the year before. ___ Gulf sheen smaller; source may be natural seepage NEW ORLEANS (AP) – A federal agency says natural seepage of oil and gas from the floor of the Gulf of Mexico may be the source of an oil sheen off the Louisiana coast. The Bureau of Safety and Environmental Enforcement said Friday that the sheen is near an area where seepage is known to occur. The bureau said an investigation by Royal Dutch Shell, which has operations in the area, indicates oil and gas are being released from the seep area. The sheen was initially measured as about 10 miles long and a mile wide when it was spotted Wednesday. The Coast Guard said that by Thursday night it was about five miles long and 100 yards wide and is breaking up, about 130 miles southeast of New Orleans. ___ Procter & Gamble raises dividend by 7 percent NEW YORK (AP) – Consumer products maker Procter & Gamble Co. is raising its quarterly dividend by 7 percent to 56.2 cents. The Cincinnati company had been paying a quarterly dividend of 52.5 cents. It pays dividends on common shares and certain preferred shares. Its next dividend is payable May 15 to shareholders of record as of April 27. Procter & Gamble makes Tide laundry detergent, Crest toothpaste, Pampers diapers, and other products. ___ By The Associated Press(equals) The Dow Jones industrial average lost 136.99 points to close at 12,849.59, a loss of 1.1 percent. The Standard & Poor’s 500 index fell 17.31 points, or 1.3 percent, to 1,370.26. The Nasdaq composite fell 44.22 points, 1.5 percent, to 3,011.33. Benchmark U.S. crude fell by 81 cents to end at $102.83 per barrel on Friday in New York. Brent crude lost 31 cents to end at $121.21 per barrel in London. In other energy trading, natural gas stayed near 10-year lows, nearly unchanged, to finish at $1.981 per 1,000 cubic feet. Heating oil was up less than a cent to finish at $3.1746 per gallon and gasoline futures lost 1.06 cents to end at $3.3461 per gallon.

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Renting Out Foreclosed Homes Ready To Become Big Business

April 13, 2012

The business of turning foreclosed homes into rentals is set to boom. The practice could be a $100 billion industry this year, according to a report from real estate tracker CoreLogic . That’s equivalent to $125 for every Facebook user , the cost of halving global poverty for two years and 250,000 times the salary of the President of the United States, according to The Guardian . Why is the market for foreclosed properties-turned-rentals poised for a boom? In the aftermath of the housing bust, demand for owning homes has fallen, pushing rents up and home prices down . In response, everyone from big banks to smaller firms are increasingly taking advantage of the disparity by turning foreclosure properties into rental homes. Bank of America is currently running its own pilot program to rent homes to families that have been foreclosed on, called Mortgage to Lease . In addition, private equity firms and hedge funds are now spending hundreds of millions of investment dollars and racing to buy up foreclosed properties. In turn, Bank of America and government mortgage giants Fannie Mae and Freddie Mac are responding to the demand, selling off their holdings of foreclosed homes by the hundreds. Just this week, Bank of America announced a bulk offering of 500 foreclosed homes in six different states, following up on an offering of 200 properties late last year. Meanwhile, Fannie Mae and Freddie Mac have sparked a bidding war when it put up 2,500 of the 200,000 foreclosed homes it currently owns for sale. That’s because Wall Street firms say they’re interested in buying up the properties and renting them out. The practice of turning foreclosed homes into rentals is becoming so popular that the Federal Reserve issued guidelines earlier this month for banks to use when they’re flipping foreclosures into rentals. But the practice also faces criticism: Namely, some are concerned that the very banks and agencies responsible for the housing crisis in the first place will now benefit from their own questionable practices.

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Mother, Disabled Daughter Forced Out Of Home Even After BofA Modification

April 13, 2012

A Los Angeles-area woman and her severely disabled daughter were forced to flee their home of 25 years in a matter of minutes, allegedly in large part because of Bank of America. Dirma Rodriguez fell behind on her payments after taking out a loan to renovate her house, the Los Angeles Times reports. The reason for the renovation? Rodriguez’s daughter needed to better accomodate her daughter, who has cerebral palsy. BofA modified her loan, but then sold the house to a flipper at a foreclosure auction, who moved to evict her. There’s still hope though. After the Occupy Fights Foreclosure movement intervened, BofA said it’s considering giving Rodriguez a loan modification that would give her her home back. Though tragic, Rodriguez’s story isn’t that unusual for a variety of reasons. First of all, despite a pledge from President Obama in 2009 that his Home Affordable Modification Program would help 3 to 4 million struggling homeowners, there have only been 768,773 active permanent modifications as of last month. That means millions of homeowners are still having trouble paying off their loans with little hope in sight to stave off foreclosure. Secondly, Rodriguez isn’t the first homeowner that’s needed the intervention of the Occupy movement to keep her house. Helen Bailey, an elderly Civil Rights Era-activist , will now be able to stay in her Nashville, Tennessee home, thanks in larger part to Occupy Nashville and other organizations who started an online petition and ultimately convinced JPMorgan Chase not to foreclose on Bailey’s home. Finally, BofA has a history of foreclosing on homeowners under unusual circumstances. Earlier this week Atlanta homeowner Pamela Flores accused the bank of foreclosing on her home even after bank officials advised her to skip payments. Last year, BofA threatened to foreclose on an elderly Florida couple after they paid their bill too early. In addition, one Texas man was faced with the prospect last year that BofA would foreclose on his home, which was already destroyed in Hurricane Ike. But in what is perhaps one of the saddest cases, a quadriplegic man living in Oregon has been battling with banks , including BofA, to keep his home since 2003. Check out some of the biggest foreclosure fails in recent months:

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Feds Launch Probe Of Wells Fargo Housing Practices

April 12, 2012

Wells Fargo & Co., the nation’s largest mortgage lender, is facing the second of at least two federal probes into how it treats minority borrowers and the properties it owns in minority neighborhoods. Department of Housing and Urban Development officials confirmed this week that the agency will investigate allegations lodged against the bank Tuesday by the National Fair Housing Alliance. The alliance complaint accused Wells Fargo of working to maintain and market bank-owned foreclosed properties in predominantly white communities far more aggressively than it does in mostly black and Latino neighborhoods. Alliance investigators found that only about 7 percent of homes repossessed by Wells Fargo in mostly white communities had 10 or more maintenance problems, such as detached gutters, broken windows or doors, which can damage the property or the likelihood that it will sell. By comparison, 20 percent of homes reclaimed by Wells Fargo in predominantly Latino neighborhoods were in similarly poor condition. This disproportionate neglect not only deepens and extends the nation’s housing crisis but further batters the very communities hardest hit by the foreclosure crisis, said Shanna Smith, president and CEO of the Washington, D.C.-based alliance. The complaint follows a nine-month investigation in which the National Fair Housing Alliance evaluated the state of 1,000 bank-owned foreclosed homes in nine metro areas from California to Washington, D.C. Investigators found “overwhelming” and “troubling” evidence that six of the nation’s major banks market and maintain foreclosed homes in predominantly white neighborhoods differently than they do in others, according to a report issued by the agency last week. The pattern was pronounced in communities up and down the income scale. During the investigation, alliance investigators evaluated 218 properties reclaimed by Wells Fargo. Vickee Adams, a spokesperson for San Francisco-based Wells Fargo, did not respond to repeated requests for comment this week. However in a telephone interview Adams told Bloomberg News that the bank does not know if it owns the problem properties identified by the National Fair Housing Alliance or if it has simply been hired to oversee and manage them for another owner. The bank works with a property manager to maintain its stock of foreclosed homes, Adams told Bloomberg. She also insisted that the bank does not engage in discriminatory business practices. “Wells Fargo conducts all lending-related activities in a fair and consistent manner without regard to race,” Adams told Bloomberg. Among the many properties the alliance evaluated, bank-owned homes in communities of color were 42 percent more likely to have visible maintenance problems, such as overgrown grass, hanging gutters and damaged eaves or siding than those in comparable white neighborhoods. Foreclosed homes in mostly black and Latino neighborhoods were 34 percent more likely to be littered with trash and debris, and 82 percent more likely than bank-owned properties in white communities to have broken or boarded-up windows. Anyone who assumes that the bank may have a legitimate business reason for neglecting homes in communities of color has made a series of inappropriate and inaccurate assumptions, Smith said. Most of the homes the alliance evaluated were in lower middle to upper middle income neighborhoods. “It ultimately does not matter if a home is in a wealthy neighborhood or not. It doesn’t matter the condition at possession by the lender,” said Smith. “We were looking at what is routine maintenance and is required [at minimum] to maintain the home. We are talking about mowing the lawn, raking the leaves, shoveling the snow away, locking doors and fixing broken widows either by repair or boarding them up and removing trash. None of those issues have anything to do with the actual condition of the property at [the time the bank took] possession.” When it came to evaluating what the banks were doing to market the homes, the alliance investigators looked for a “for sale” sign. And here again, there were dramatic differences. Vacant and foreclosed bank-owned homes in white neighborhoods were 33 percent more likely to be designated with professional real estate signs that were visible from the street. Homes in black and Latino neighborhoods had signs made of construction paper or cardboard, or had no sign at all. Failing to maintain a foreclosed home makes life harder for the neighbors of the problem property, and it can also drag down median home prices and sales activity in entire cities, said David Blitzer, managing director and chairman of the index committee at S&P Indices, which includes the S&P/Case-Shiller Home Price Index. Many people are afraid to buy homes in neighborhoods studded with neglected properties, Blitzer said. And those who are brave enough to do so will almost never pay asking price. They want to bargain hard, which by extension shapes the national housing outlook, said Blitzer. “What seems like one neighborhood’s problem really does affect the broader market,” said Blitzer, who had not seen the complaint filed Tuesday. Should HUD find evidence that the alliance’s complaint against Wells Fargo is accurate, the federal agency can attempt to negotiate a settlement with the bank. If the parties are unable to reach an agreement, the Justice Department could file suit against the bank. The Justice Department is already probing the bank’s lending activities in the period before the housing bubble burst in 2007. Wells Fargo has been accused of steering black borrowers into higher-cost and higher-risk subprime loans that made foreclosure more likely, Bloomberg News reported in July. That month, the Federal Reserve also forced Wells Fargo to pay an $85 million fine in connection with the bank’s practice of steering buyers who could have qualified for better loans into subprime mortgages and falsifying information on key documents. “We will not hesitate to hold financial institutions accountable, including one of the nation’s largest,” Attorney General Eric Holder said in a statement issued by the Justice Department after the federal law enforcement agency reached a record-setting $335 million settlement with Wells Fargo competitor Bank of America for engaging in similar activities. “These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin.”

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Bailout Money Fails To Reach Neediest Homeowners: Report

April 12, 2012

A federal housing program funded with taxpayer money left over from the government’s bailout of the banks and auto companies is failing to deliver on its promised relief to struggling homeowners. The Hardest Hit Fund, a $7.6 billion initiative established by the federal government in February 2010 to help families in states most crippled by the collapsed housing market, has distributed just 3 percent of its money — or $217.4 million — to help homeowners, according to a report released Thursday by the Office of the Special Inspector General for the Troubled Asset Relief Fund, or SIGTARP. “Look at the TARP money that goes out to the banks,” said Special Inspector General Christy Romero in an interview with The Huffington Post. “That goes out in a matter of days. This has been two years and only 3 percent of these funds have trickled out to homeowners.” The Hardest Hit Fund has helped just slightly more than 30,000 homeowners, or 7 percent of the roughly 480,000 homeowners targeted for assistance by the end of 2017 when the program expires, according to the report. The program is funded by TARP, the 2008 legislation that has provided a $600 billion to bail out various banks and other companies in the wake of the nation’s financial crisis. “The Hardest Hit Fund is really struggling to get off the ground and it’s a real concern about whether this money can get out to these homeowners,” Romero said. The 76-page report reads like the autopsy of a dead housing program, placing the blame for the program’s paltry performance squarely on the Treasury Department, the government agency responsible for TARP and, in turn, the Hardest Hit program. According to the report, Treasury initially dragged its heels in getting the largest mortgage servicers to participate in the initiative, instead relying on the individual states to broker arrangements with the servicers. Some of the states lacked the necessary clout to secure servicer participation, thus limiting the program’s ability to reach needy homeowners, concluded the report. “These states don’t have the bargaining power that Treasury has with these large servicers,” Romero said. “Treasury is already working with these same servicers, having similar conversations with them for other housing programs, so Treasury should be using its influence to really get these servicers on board.” The Treasury Department was similarly slow in securing support from Fannie Mae and Freddie Mac, the government-owned mortgage giants that collectively control nearly half of all outstanding loans, further curtailing the initiative’s reach. The report also blames the Treasury Department for giving states too little time to roll out the program and for failing to establish clear, specific goals that would let the government and the public measure the program’s success. “Treasury actively and consistently engaged with servicers and [Fannie and Freddie] from the earliest stages of the program, encouraging support and addressing impediments to participation,” wrote Tim Massad, the department’s assistant secretary for financial stability, in a letter responding to the report’s findings . Massad also called the report “disappointing” for its focus on the program’s early months instead of more recent progress asserting that last quarter the number of homeowners helped by the fund grew 60 percent and the amount of money delivered to homeowners increased 93 percent. “This report misses the mark by not acknowledging the hard work of participating states and the innovative ways they are preventing foreclosures in their local communities,” wrote Massad in an email to The Huffington Post. “The Hardest Hit Fund is helping states address some of the most difficult problems caused by the housing crisis in ways that suit local conditions and have already kept tens of thousands of families in their homes.” While the Hardest Hit Fund’s performance is weak, it is not unique. Many of the federal government’s housing assistance programs have underdelivered, most notably the flagship Making Home Affordable loan modification program. Announced in the spring of 2009, the program was designed to help 3 million to 4 million homeowners avoid foreclosure by changing the terms of loans and lowering monthly payments. Nearly three years later, fewer than 1 million homeowners have received a permanent loan modification . The Home Affordable Refinance Program was also introduced in 2009 with the intent of helping 4 million to 5 million homeowners refinance their mortgages, taking advantage of the nation’s historically low interest rates. As of this past January, fewer than 1.1 million homeowners have refinanced through the program, which is reserved for borrowers whose loans are backed by Fannie Mae or Freddie Mac. Thursday’s report concludes with suggestions for how the Treasury Department can strengthen the Hardest Hit Fund’s effectiveness, including establishing measurable program goals, making performance data available online for the public and developing a plan to win “industry support” for the initiative. “If Treasury doesn’t make a change, the Hardest Hit Fund risks becoming another government housing program with limited impact,” Romero said. “It’s time to change the status quo.”

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Jason Alderman: Put Your Tax Refund to Work

April 11, 2012

If you’re among the millions of Americans expecting an income tax refund this year, you’ve probably already filed your 2011 return and are eagerly awaiting the money. But if you haven’t already mentally spent your refund on a guilty pleasure, here are several great ways you might better put that money to work for you: Pay down debt. Beefing up credit card and loan payments can significantly lower your long-term interest payments. Suppose you currently pay $120 a month toward a $3,000 credit card balance at 18 percent interest. At that pace it’ll take 32 months and $788 in interest to pay off, assuming no new purchases. By doubling your payment to $240 you’ll shave off 18 months and $441 in interest. Use this calculator to try different repayment scenarios. If you carry balances on multiple cards, always make at least the minimum payments to avoid penalties. Paying down the highest-rate card first will save the most money overall, but some people find that paying off smaller-balanced accounts first is a better motivator. Start an emergency fund . To protect your family against the impact of a layoff or other unexpected financial crisis (e.g., medical emergency, major car repair, theft), set aside enough cash to cover at least six months of living expenses — nine months is even better. Seed the account with part of your refund and then set up monthly automatic deductions from your paycheck or checking account. Boost retirement savings. Another great use for your refund is to beef up your 2012 IRA or 401(k) contribution, especially if your employer offers matching contributions; a 50 percent match corresponds to a 50 percent guaranteed rate of return — something you aren’t likely to find in any investment. Spend now to save later. Reap long-term savings on things you’ll eventually pay for anyway: Replace older appliances with energy-efficient models that will pay for themselves through lower utility bills. For example, replacing a 1980s refrigerator with an ENERGY STAR model will save over $100 a year. The government’s ENERGY STAR website can help you find ENERGY STAR products and estimate savings. Sell your older appliances or donate them to a charitable organization for the tax write-off to help offset the cost of new models. Switching from traditional light bulbs to energy-efficient alternatives like CFLs and LEDs, while initially more expensive, can save about $6 per bulb in annual energy costs. Just make sure they are ENERGY STAR-qualified models, which exceed minimum standards. Click HERE to learn more. Schedule routine car maintenance. According to AAA , simply changing your car’s air filter once a year can save over $270, while replacing older spark plugs can save $540 in wasted fuel. Ask whether your utility company offers free or subsidized home energy audits. An audit will tell you which investments — such as increasing home insulation and replacing drafty windows and doors — will lower both winter and summer energy bills. Overcome bad habits . If all that stands between you and quitting an unhealthy (and expensive) habit is the treatment cost, now’s your chance to make a down payment on your health. Also ask whether your health insurance will help cover weight loss and smoke-ender programs or at least lower your premiums afterwards. Finance education. Strengthen your career prospects and earnings potential by adding new skills through college courses or vocational training. Ask if your employer will help pay for job-related education. You can also set money aside for your children’s or grandchildren’s education by contributing to a 529 Qualified State Tuition Plan or Coverdell Education Savings Account. Bonus: Your contributions will grow tax-free until withdrawn. Visit the U.S. Securities and Exchange Commission’s Introduction to 529 Plans and the IRS’s Tax Topic 310 — Coverdell Education Savings Accounts for details. Vacation fund. Start budgeting and saving now for your summer vacation so you’re not caught off guard when the bills start rolling in. See my previous blog, Trim Your Vacation Costs , for travel budgeting tips. Charitable contributions . Many people wait until year’s end to make charitable donations, but nonprofits need help year-round. Prepay bills . If you expect major expenses later this year (e.g., insurance premiums, orthodontia, college tuition), start setting money aside now so you won’t rack up interest charges. Also, use this calculator to see how paying slightly more each month toward your mortgage principal can save you thousands of dollars in interest over the life of the loan. And finally, if you regularly receive large tax refunds, you’re probably having too much tax withheld from your paycheck — you’re essentially giving the government an interest-free loan. Ask your employer for a new W-4 form and recalculate your withholding allowance using the IRS’ Withholding Calculator . This is also a good idea whenever your pay or family situation changes significantly (e.g., pay increase, marriage, divorce, new child, etc.) This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation. To participate in a free, online Financial Literacy and Education Summit on April 23, 2012, go to Practical Money Skills .

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Bank Of America Sues Itself

April 10, 2012

WASHINGTON — Bank of America is suing itself for foreclosure. “It’s crazy,” housing data analyst Michael Olenick told HuffPost. “They shouldn’t be suing themselves.” Over the past two years, the nation’s largest banks and the Obama administration have repeatedly vowed to clean up the foreclosure fraud mess. In February, banks agreed to pay $25 billion and overhaul their foreclosure processes as part of a 50-state investigation into bank wrongdoing, resulting from practices that included robo-signing . But in Florida’s Palm Beach County alone, Bank of America has sued itself for foreclosure 11 times since late March, according to foreclosure fraud activist Lynn Szymoniak , who forwarded one such foreclosure filing, dated March 29, 2012, to The Huffington Post. (A white-collar crime expert, Szymoniak was recently awarded $18 million for her work helping the government recover $95 million as a result of bank foreclosure problems in North Carolina.) In the March 29 filing, Bank of America is seeking to foreclose on a condominium and names the condo owner and Bank of America as defendants in the suit. The company is literally seeking damages from itself in order to foreclose on the condo owner. “We are servicing the first mortgage on behalf of an investor and we own the second mortgage,” Bank of America spokeswoman Jumana Bauwens told HuffPost. “Naming the second-lien holder in the suit is necessary to eliminate the junior interest,” Bauwens said. “This just strikes me as classic robo foreclosure,” Professor Alan White of Valparaiso University Law School told HuffPost. White, a predatory lending expert who tracks and analyzes data on loan modifications and foreclosures, said that lawyers for the bank likely performed an electronic title search to see if any other liens on the property existed and simply wrote down the name of whatever bank came up in the search. Lawyers and paralegals who perform these tasks typically fill out dozens of such forms a day, White told HuffPost. “I’m sure the paralegal who did this did 100 others that day,” he said. Banks have been caught suing themselves before. In 2009, Dow Jones columnist Al Lewis uncovered a case in which Wells Fargo had sued itself in connection with a foreclosure in Florida’s Hillsborough County. The bank owned both the first and second liens on the property and ended up hiring two separate attorneys to deal with the snafu — one to bring the lawsuit and another to defend itself. The Bank of America self-suits seems to have emerged from a scenario that investors have complained about for years involving home equity loans. Big banks like Bank of America service mortgages on behalf of other investors. Bank of America processes payments, negotiates with borrowers and operates the foreclosure process but does not actually own the loan. Many properties from the housing bubble had an additional home equity loan, or second lien. Banks could charge higher interest rates on these second liens because they were riskier loans — the second lien is supposed to eat losses before anything happens to the first lien. When a bank brings a foreclosure case in court, it has to notify whoever owns the second lien that it is taking action. In this case, Bank of America owns the second lien. But meticulous attorneys would not ordinarily let their clients sue themselves. “It is a little bit mindless on the part of the lawyer,” White said. “They don’t need to sue themselves.”

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Interest Group Comes To Hatch’s Aid

April 10, 2012

WASHINGTON — A trade group representing nursing homes has given the Utah Republican Party $175,000 over the past year, money that could help Sen. Orrin Hatch stave off a tea party challenge and win re-election. If he does, and if the Republicans take over the Senate, Hatch stands to chair the committee that has jurisdiction over the tens of billions of Medicare and Medicaid dollars that flow annually to nursing homes. The trade group’s money was used to boost attendance at the state’s neighborhood caucuses last month, and analysts say the broad caucus turnout enhanced Hatch’s prospects for wining his party’s nomination for a seventh Senate term. That’s because the delegates elected to attend the state Republican Convention on April 21 included more moderates and fewer of the tea party supporters who two years ago rejected former Utah Sen. Bob Bennett’s bid for a fourth term in 2010. Nursing homes weren’t alone in attempting to help Hatch, now the senior Republican on the Senate Finance Committee and likely to be its chairman next year if the GOP takes control from Democrats in the November election. A political action committee representing radiologists has spent about $77,000 supporting his candidacy through print ads and other activities conducted independently of the Hatch campaign. The contributions show how some interest groups are demonstrating their support for Hatch beyond the $10,000 limit that political action committees must abide by when contributing directly to a candidate’s campaign. Such support could be particularly important next year if Republicans take control of the Senate. The Finance Committee has jurisdiction over Medicare and Medicaid spending, which is critical to both nursing homes and radiologists trying to fend off spending cuts in the coming fiscal year. Nursing homes rely greatly on federal reimbursements to survive. The federal government’s Medicare program is projected to spend about $31 billion on nursing home care in 2012. Medicaid, a federal-state partnership, will spend about $45 billion with nursing homes, according to Health and Human Services Department projections. Campaigning in Utah this week, Hatch said he wasn’t aware of contributions to the state party organization from Washington-based interest groups. “If any of them gave money because they like me, it is because they agree with what I stand for and not because I do what they want,” Hatch said. Officials at The Alliance for Quality Nursing Home Care declined to comment for this report. The alliance represents 12 companies owning about 1,400 properties throughout the county. Utah is one of about a dozen states that place no limits on how much money can be given to political parties. In past years, companies and lawmakers from Utah dominated the party’s donor list. But in 2011, trade groups from Washington moved to the top of the list. The Alliance for Quality Nursing Home Care provided the largest donation of the year, $100,000, records show. The group then kicked in another $75,000 this year, said Ivan DuBois, executive director of the Utah Republican Party. A trade group representing mortgage insurers also donated $40,000, as it did in 2010. Hatch’s Senate panel also has jurisdiction over the tax treatment of mortgage insurance. DuBois said the money the state party has raised funds its operations and three initiatives: registering more GOP voters, encouraging more people to vote by mail and boosting caucus participation. The donations from the Alliance for Quality Nursing Home Care weren’t solicited, he said, and the group didn’t specify how the money should be used. But “they were excited to see the caucus participation increase,” DuBois said. Utah’s nomination process is unique. First, voters gather around the state to select delegates for their party’s state convention. Then, those delegates vote to determine who should be the party’s nominee in the general election. A candidate needs 60 percent of the delegates’ support to win the nomination outright. Otherwise, the top two voters engage in a primary election. Hatch is hoping to secure the nomination at the convention or advance to a primary that would probably include either former state Sen. Dan Liljenquist or state Rep. Chris Herrod. Overall, the Utah Republican Party spent about $300,000 on efforts to boost attendance at the neighborhood caucuses last month. While the party is officially neutral in the Senate race, its get-out-the-vote effort for the caucuses helped Hatch, said Kelly Patterson, director of the Centers for the Study of Elections and Democracy at Brigham Young University. “The caucuses last time around were dominated by tea party activists who had a very anti-Washington, anti-incumbent bent,” Patterson said. “I think huge efforts were made to turn out as many delegates as possible to moderate the effects of the tea party ideology.” Hatch has spent nearly $8.6 million so far in seeking a seventh term. His chief rival, former state Sen. Liljenquist, said the money raised and spent by the state party seems minimal by comparison. He also said he believed that party officials focused their effort on caucus turnout without favoring any one candidate or ideology. “The driving caucus participation is a good thing and the party used their money fairly,” Liljenquist said. “But it pales in comparison to the money spent by the Hatch campaign.” Hatch has raised about $3.6 million directly from political action committees. It’s less common for PACs to engage in campaigning independently of the candidate, but that’s what the American College of Radiology has done in Utah. The group’s PAC spent about $77,000 in support of Hatch, according to Federal Election Commission reports. “Our effort is not necessarily to stand out from others but to support candidates that have a grasp of our issues, that know who and what radiologists are and do, and how the important work that (our) members perform fits into the larger healthcare arena,” said Ted Burnes, director of the radiologists’ PAC. “We support Senator Hatch and others that we think fit this description.” James Thurber, director of the Center for Congressional and Presidential Studies at American University, said the spending by the trade groups is a way to thank lawmakers for their work and to keep an open communications channel. “It doesn’t mean they can buy votes. It doesn’t mean they can buy influence, but it certainly means they are known and can talk to the senator and the senator’s staff about issues of their concern,” Thurber said. ___ Loftin reported from Salt Lake City.

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Major Lender Accused Of Discrimination

April 10, 2012

WASHINGTON — A group of U.S. nonprofit housing advocates has filed a discrimination complaint against Wells Fargo, accusing the nation’s largest mortgage lender of failing to maintain and market foreclosed properties in black and Hispanic neighborhoods. The National Fair Housing Alliance on Tuesday filed the complaint against San Francisco-based Wells Fargo and Co. and Wells Fargo Bank with the U.S. Department of Housing and Urban Development. Wells Fargo declined to comment, saying officials at the bank have yet to see the complaint. The bank services one out of every six home loans in the United States, The federal Fair Housing Act requires banks, investors, servicers and other parties to maintain and market homes without regard to race or ethnicity. The advocacy group began investigating the conditions of bank-owned properties in 2010. It looked more than 200 homes in a handful of cities: Atlanta, Baltimore, Dallas, Dayton, Ohio, Miami and Fort Lauderdale, Fla., Oakland, Calif., Philadelphia and Washington. Bank-owned homes in white communities were treated in a “far superior manner,” the complaint alleges. Those homes were 33 percent more likely to be marketed with a professional “For Sale” sign than homes in black or Hispanic communities. Nationwide, about 2.7 million homeowners faced foreclosure last year. .

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Bank Of America Tells Woman To Miss Mortgage Payments, Then Forecloses On Her House

April 10, 2012

Here’s how Pamela Flores tells it : A couple years ago, she found that she couldn’t keep making mortgage payments on her Atlanta house. She says she then tried to get a loan modification, according to CBS Atlanta . Instead, Bank of America advised her to stop making payments altogether so that she could qualify for the Making Home Affordable Program , a federal initiative meant to provide mortgage relief. According to Flores, BofA gave her the advice to stop making payments on more than one occasion. Flores says BofA put her on a trial plan, then told her she’d missed a payment during the trial period and rejected her application. Flores contends she made that payment. Now BofA is foreclosing on Flores’s home , saying it will go up for auction in less than a month. Flores is far from the first homeowner to come forward with a story like this. Since the implosion of the housing market a few years ago — followed by a spike in unemployment — millions of people have been looking for ways to cope with mortgages that they suddenly can’t maintain. In many cases, banks have advised struggling homeowners to miss payments in order to qualify for a loan modification — only to turn around and foreclose on the homeowner instead. The same thing allegedly happened to Frank and Deana Dixon of Scituate, Massachusetts and Annette Lake of Santa Clara , the latter also dealing with BofA. The practice is so common that it was one of the central subjects of a Senate banking committee hearing in December 2010. Flores’s case is also the latest public-relations snafu for BofA, which has been at the center of a litany of homeowner horror stories since the housing crisis took hold. The bank has foreclosed or threatened to foreclose on homeowners who have never missed payments, in some cases putting those homeowners through months of unnecessary court battles . In another case, in 2009, BofA contractors entered the home of Angela Iannelli, a borrower who was believed to be in default. The contractors padlocked Iannelli’s doors, cut off the electricity and water and confiscated her parrot. The bank later apologized, admitting that they’d made an error and Iannelli was not actually in default . And last summer, BofA mistakenly foreclosed on a retired Florida couple whose only crime was to make a mortgage payment a week early and file another payment online without a signature. The foreclosure was eventually halted. As for Pamela Flores, BofA sent a statement to CBS Atlanta saying it never got the disputed payment and has made several unsuccessful attempts to contact Flores. The bank says it will keep trying to reach out to Flores to consider her for a loan modification. Flores, meanwhile, has aligned herself with the Atlanta chapter of the Occupy movement, whose members say they are setting up a site at her house and will work to reach an agreement with the bank. Check out some other foreclosure fails:

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Occupy Groups Unite Over Foreclosures

April 9, 2012

* Occupy groups working in several cities * Foreclosure crisis inspires middle class * Some banks cooperate, wanting to avoid publicity By Nick Carey April 9 (Reuters) – Mercedes Robinson-Duvallon turned 83 in February, but there was little time for celebration. On her birthday, as she sat in a wheelchair recovering from surgery, sheriffs’ deputies arrived to evict her from the Miami home where she has lived since 1966. A year earlier her property had moved into foreclosure after she defaulted on a refinanced loan. Robinson-Duvallon says she would be homeless now but for the intervention of about 40 members of Occupy Fort Lauderdale, a Florida branch of the national movement that is protesting income inequality and corporate greed. The group took over her lawn and house and even baked her a birthday cake. The deputies decided to let her stay. “I owe the Occupy people,” said Robinson-Duvallon, who is now challenging the eviction in court. “This has all been so horrible, I can’t tell you how many times I’ve cried and cried.” What happened in Miami is also occurring in Cincinnati, Los Angeles and Minneapolis, as local Occupy groups pursue an issue they believe has emotional resonance among America’s struggling lower and middle classes. Fighting foreclosures and evictions, activists say, gives the disparate movement a unifying focus and embodies its anti-Wall Street message. It also has offered a way for Occupy – up till now a largely white, middle-class movement – to broaden its reach to minorities. Interviews with Occupy activists in 11 states show groups from coast to coast have taken up foreclosure fights through rallies, home occupations and court appearances. Matt Browner Hamlin of occupyourhomes.org, a national group focused on this cause, counts “more than 100 Occupy groups” that have taken direct action or formed foreclosure working groups. Cheryl Aichele of Occupy Los Angeles said activists there have helped a dozen homeowners thus far and have many more requests. “This cause,” she said, “brings together everything that we are fighting against – corporate greed, bank bail outs, a corrupt judiciary and corrupt government.” There is little evidence that the banking industry is taking notice, however. Robert Davis, executive vice president of an industry lobby group, the American Bankers Association, said, “It is unlikely that protests are going to have any bearing on the court process” where foreclosures often are challenged. He said banks rely on law enforcement to quash eviction protests that constitute “unlawful occupation of a property … They need to be removed so the property can be sold.” In Cincinnati, a group called Occupy the Hood has found the issue a rallying point in the city’s East Price Hill neighborhood, an ethnically mixed, working-class area hard hit by the economic downturn. Average neighborhood home values have fallen 41 percent since 2002. Amid chants of “Banks got bailed out, we got sold out,” Rigel Behrens and other activists in Cincinnati recently conducted a “foreclosure tour,” visiting seven boarded-up homes. “Abandoned homes are the most obvious, physical manifestation of what is wrong with our system,” said Behrens. Those who have watched the Occupy movement since its September beginnings say the foreclosure focus may help it recover from a slump that followed forced shutdowns of encampments in New York, Washington and other cities. “The Occupy movement seems to have lost some of its punch,” said Susan MacManus, a University of South Florida political science professor. “Focusing on an issue that affects the working class and leaves people feeling alienated is potentially a good strategy. If they can make it work.” FINDING COMMON GROUND Activists in Cincinnati and elsewhere say foreclosures are a serious political issue in minority neighborhoods, where the five-year-old housing crisis cast a long shadow. Housing counseling groups have cataloged how black Americans and Hispanics – even those with good credit – were more likely to end up victims of predatory lenders. Millions of Americans lost their homes in the downturn and around one in four American homeowners is “under water” — owing more than their homes are worth. Again, minorities suffered disproportionately, studies show. A recent study by the non-profit Woodstock Institute, examining properties in six Chicago area counties, showed 17 percent of those located in predominantly white areas were under water. In predominantly black and Hispanic areas, the number soared above 40 percent. In Minneapolis, Anthony Newby, a black housing counselor, appealed to the Occupy group to take on the case of struggling black homeowner Monique White. “It was very much a conscious decision to approach the Occupy movement,” said Newby, now a member of Occupy Homes MN. “The African-American community has been dealing with hardship for decades. But it was new for those white kids on the plaza who were falling out of the middle class for the first time.” In Atlanta, Occupiers say fighting evictions began as an impromptu battle that became a long-term strategy. “This is a strategy to generate tangible wins and build a broader base for the movement,” said Tim Franzen of Occupy Atlanta. “You don’t have to go to a park downtown to make a difference. You can go two doors down and help your neighbor.” “BANKS DON’T LIKE BAD PRESS” Evan Rosen, a lawyer in southern Florida, said the interest of Occupy Fort Lauderdale helped in a foreclosure case he was handling. Occupiers showed up in court to back his client, which he believes influenced the judge’s favorable ruling. “I am not a religious man, but it felt like divine intervention,” said Rosen, who asked that his client’s name be withheld while negotiations with the lender continue. Jeff Weinberger of Occupy Fort Lauderdale said the group has helped four homeowners avoid eviction. “The banks really don’t like bad press,” he said. “So when we show up with the local TV station, it has an effect.” But Bobby Hull says the Occupy movement can only do so much; the rest depends on homeowners themselves. “Occupy is a movement and the best they can do is to help us organize our communities,” he said. “That’s what it takes to win.” Hull, 57, faced eviction in Minneapolis when his health failed and his contracting business tanked. Occupiers rallied for him in December, and he renegotiated his Bank of America mortgage, though he says he is under a gag order and cannot discuss his loan terms. A Bank of America spokesman confirmed a loan modification is underway. Now, Hull and his neighbors have formed an “eviction-free zone” to fight foreclosures. Occupy groups claim the response they get is overwhelmingly positive. The first home on the “foreclosure tour” in East Price Hill was sold off in foreclosure for $1,347. It lost its roof and mildew is eating through the walls. “It’s truly great that these folks are doing something,” said Ron Etter, nodding toward the Occupiers as they approached the next house on the tour. “No one else is.”

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Neil McCarthy: Radical

April 9, 2012

Time to go radical. Reasonable is not working. If I hear one more politician or ersatz journalist rail about the need to find bi-partisan common ground in the sweet spot of a centrism where immediate deficit reduction and job growth live in some sort of economic harmony, I am going to get sick. It isn’t going to happen. It can’t. Over the last thirty years, conservative orthodoxy has simply pulled too much demand out the economy. That is what happens when (1) wages stagnate, the result of unions collapsing and globalized wage arbitrage taking over, and (2) bankers get unregulated free rein to peddle “products” that put consumers in long-term hock, which is what they accomplished when everyone was allowed to use their home as a credit card. Once those same bankers turned mortgages into cash for speculators via the now-infamous mortgage-backed securities, the con was complete. The ensuing real estate bubble created the impression that there was a free lunch (in the form of ever rising asset values). And then the bubble burst. Today, consumers are still over-leveraged (thanks to that explosion of private debt over the last decade), but banks can’t lend enough (given the shakiness of their balance sheets — where all those mortgage-backed securities are still being held at par — and the perceived need to adhere to credit standards that were ignored in the run up to 2008). So private spending is still weak. The March jobs report was a big disappointment. The private sector produced a mere 120,000 jobs that month . Wall Street (and just about everyone else) expected the number to be in the 200,000 range and it wasn’t even close. The recovery from 2008 continues unabated. But its pace is anemic and uncertain. In this world, conservatives continue to talk about immediate deficit reduction, business confidence and fears of inflation, certain that dealing with the first and the second is necessary to curb the third and produce jobs. All of this, however, is pure economic bunk. As Paul Krugman has continually pointed out to anyone willing to listen, we have not begun to put a dent in the job losses that came in the wake of 2008. The percentage of “prime age” workers who are actually employed — a real number, unlike the unemployment rate, which is distorted by failing to count those who stop looking — went down by about five points during the collapse and has gone up by less than one in the “recovery.” At the same time, our nominally low inflation rate (about 2% overall, even with the recent gas price hike) shows no sign of precipitously rising any time in the near future. Businesses are not hiring and producing because there is not enough demand (unemployed debtors don’t have a lot of walking-around money), not because they are worried about the tax and regulatory environment. The near term solution to all of this was a sufficient stimulus and some inflation. The conservatives, however, made the former impossible, and the chattering classes (including a lot of professional economists who should know better) have scuttled the latter. What we have, therefore, and have had for some time now, is an economic crisis that our political culture seems powerless to confront and solve. The problem here is not a lack of ideas. We have known how to pull ourselves out of depressions and severe recessions for at least 80 years. You do it by getting the government to increase consumer demand given that the private sector can’t or won’t. This typically involves some form of government spending — either on infrastructure (which creates both an immediate bump up in demand and also helps with long term productivity), welfare spending (food, housing, etc., which just increases demand), or targeted tax cuts (which increase demand so long as they are properly targeted to those who will spend the money rather than bank it). None of this, however, is politically possible now. A deficit which could create problems in the medium and long term is being used to eliminate any rational economic response to demand problems in the short term. It is also being used to eliminate any policies which could devalue private debt, which is what inflation and/or various forms of foreclosure relief would do. And the folks manning the barricades as deficit hawks circa 2012 are the same people who brought you the Bush tax cuts of 2001 and the two unpaid-for wars of the last ten years, which cumulatively turned the Clinton surplus into Bush’s sea of red ink. But hypocrisy has no cost in American politics. So it is practiced with abandon. I am a believer in incremental progress. I understand that American federalism is very slow. It is far easier to stop something than it is to pass anything. And that was the Founders’ collective intent. Over our two hundred plus years of history, therefore, progressives have always had to fight a two-steps-forward-three-steps-back war against reactionaries and the status quo. Their opponents changed — from slaveholders to industrialists to stock speculators to sexists. But the process rarely changed. Except when it did. Because, from time to time, progressives have abandoned the marble temples of incremental American federalism and… Gone radical. They’ve raised hell, hit the streets, jumped to the front of the bus, crossed the bridge, burned the draft cards, or camped out on the Mall. Unable to change the conversation from within, they altered it from without. Unwilling to defer to authority, they defied it. And underestimated by a smug establishment, they created a new one. That is where we are today. The system isn’t working. Twenty years ago, in his presidential campaign, former Massachusetts Senator Paul Tsongas made a point of admonishing unreconstructed New Dealers and trade unionists to stop bashing business. And the Democrats heard him and stopped. But now the other side has turned bashing labor… or women… or gay people… into a cottage industry. And that has to be stopped too. Progressives have to hit the streets. The kids have to vote like they did in 2008. The Wall Street occupiers have to return to Zuccotti Park. The conversation has to change. The people who change it will not be the bankers, hedge funders, or politicians checking out the “internals” on their polls. Because we have to stop talking just about margin… or return on investment… or individual responsibility… or the swing voter. And begin talking about redistribution… and economic fairness… and justice. We need to rediscover what it means to be a citizen in a democratic republic. Rather than just a consumer in a capitalist economy. We need to go radical.

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Great Expectations

April 8, 2012

* Earnings reports follow 24 pct rise in bank stocks this year * Some big banks could show profit decline from year ago * Investors count on eventual rise in interest rates, loan income By David Henry and Rick Rothacker April 9 (Reuters) – U.S. bank executives face great expectations from investors when they report first-quarter results beginning Friday. Bank stocks have shot up 24 percent this year, as measured by the KBW Banks index, in their steepest ascent in any quarter since the end of September 2009. Now investors want to know if they should stick with their bets that the economy will strengthen and lift bank lending margins and profits, or take their gains and get out. “Investors are out on a limb,” said Jack Ablin, chief investment officer at Harris Private Bank. They won’t get much help from the earnings, which are expected to be murky this quarter and confused by accounting items. Investors may have to rely on their own hunches to sort conflicting numbers and comments from bank executives about the unfolding course of the economy. Chris Bingaman, a portfolio manager at Diamond Hill Capital Management in Columbus, Ohio, is among the buyers. Bingaman, whose firm manages $9 billion, said he’s been picking up shares of Wells Fargo & Co, JPMorgan Chase & Co, U.S. Bancorp and PNC Financial Services Group Inc lately. The prices, compared with expected future cash flows, are still attractive, he explained. Still, Bingaman called the banks “revenue challenged” because bank customers remain reluctant to borrow and profit margins are being held down by low interest rates. “That puts a damper on revenue growth overall,” Bingaman said. At the least, Bingaman said, he wants to see the banks report that their lending margins have stopped contracting. Net interest margins at JPMorgan, for example, were down to 2.70 percentage points in the fourth quarter of 2011 from 2.88 points a year earlier and 3.33 points in 2009. Even if the contraction were to stop, at least another three to six months must pass before lending margins actually increase, said Chris Kotowski, an analyst at Oppenheimer. “You need to see more loan growth,” he said. But Kotowski said that the current slow growth in loan portfolios is a big step from the shrinkage two years ago and points toward increasing momentum in borrowing and a stronger recovery in bank profits. “Slowly, but surely, people are going to realize that this is for real,” Kotowski said. In the meantime, sorting out what is real could be difficult. Some banks will likely report loan growth that stems not from new demand from customers for funds, but from taking business from competitors, said analyst Paul Miller of FBR Capital Markets & Co. “The overall economic growth needed for loan growth still is not there,” Miller said. Loan balances at banks in recent weeks have been running about 4.0 percent higher than a year earlier, according to Federal Reserve data, but some of that increase is thought to have come at the expense of European banks and lenders in the capital markets. JPMorgan and Wells Fargo kick off bank earnings Friday morning. For 81 financial companies in the S&P 500 stock index, first-quarter earnings are expected to be up 6.5 percent from a year ago, according to surveys of analysts by Thomson Reuters I/B/E/S through April 4. For the full year, analysts expect the earnings will be up 22.4 percent from 2011. Underneath the averages are likely to be confusing cross-currents about whether the quarter was good or bad. For example, while profits are expected to be higher for banks in general, earnings per share will be down in the first quarter from a year earlier for JPMorgan and Citigroup Inc, according to surveys of analysts. But c ompared with the fourth quarter, profits for JPMorgan and Citigroup are expected to be higher. The big reason for the expected flip-flop in fortunes for the two banks: Their trading and investment banking business in the first quarter were worse than a year before but better then three months ago. Profit from making new mortgages is expected to counterbalance the loss of fee income from new restrictions on how much banks can charge merchants for debit card transactions. Wells Fargo and JPMorgan have big mortgage operations and some regional banks, such as SunTrust Banks Inc and Fifth Third Bancorp could get a lift, too. Though most new mortgages are used now to refinance existing loans, the are generating additional revenue for the banks. “We’re going to see decent earnings for banks that embrace mortgage banking,” said Miller of FBR Capital Markets & Co. “It’s probably some of the most profitable stuff you can do.” With overall revenue weak, bankers know investors will be looking hard at their expenses. At Bank of America Corp, whose shares are up 66 percent this year, more than any other big bank, executives are expected to supplement their April 19 earnings report with details of the second phase of a campaign that has already set out to eliminate $5 billion in annual expenses and 30,000 jobs. Analysts caution that there are at least two wild cards that could rock the results of the biggest banks: trading revenue and the impact of accounting adjustments, known as debt valuation adjustment or DVA, which must be made for changes in the value of debts the banks owe. Bond trading increased as investors were more willing to take on risk in the quarter than they were at the end of the year. But profit margins for the dealers tightened. Overall, quarterly revenue from fixed income, currency and commodity trading at the investment banks was likely down more than 20 percent from a year earlier, but up more than 100 percent from three months earlier, analyst David Konrad of Keefe, Bruyette & Woods wrote in a report April 2. Equity capital markets volumes and fees for advising completed takeovers were down about 25 percent in the quarter from a year earlier, according to Thomson Reuters data. The accounting adjustments known as DVA perversely reduce the reported earnings of banks when their creditworthiness improves. Because analysts vary in how much work they do to factor DVA into their earnings estimates, the adjustments can create confusion about whether banks actually missed or beat Wall Street expectations. Bank stock buyers may chose to ignore the accounting noise and the mixed signals. “The psychology seems to be getting better,” said Frank Barkocy, director of research at Mendon Capital Advisors. “We’re continuing to see signs of improvement in the US economy.” (Reporting by David Henry in New York and Rick Rothacker in Charlotte, North Carolina. Editing by Alwyn Scott.)

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Report: Predominantly Latino and African American Neighborhoods Suffer A New Front of Discrimination

April 7, 2012

Three years since a Wells Fargo Bank loan officer shared the details of how she and her colleagues targeted and directed prospective African American homebuyers into taking out expensive high-interest subprime mortgages to The New York Times, racial discrimination in the housing market is still an issue. According to a new investigative report by the National Fair Housing Alliance (NFHA), a coalition of fair housing non-profit organizations, six major banks are engaging in discriminatory practices in the maintenance and marketing of foreclosed Real Estate Owned (REO) properties in predominantly Latino and African American neighborhoods. CEO and President of the NFHA, Shanna L. Smith, said in a press release that the report “offers evidence that banks responsible for peddling unsustainable loans to communities of color and triggering our current foreclosure crisis are continuing to damage those communities by failing to properly maintain and market the properties they own.” The report looked at nine cities and cited “extremely troubling disparities.” For instance, in Philadelphia, PA, 41 percent of foreclosed homes in African American communities were cited with more than 10 distinct maintenance or marketing problems. In contrast, not one property in a predominantly white community was cited with the same. And in Phoenix, AZ, 73 percent of REO properties in Latino neighborhoods were missing a “For Sale” sign. The same could only be said for 31 percent of homes in predominantly white neighborhoods. Marred by disrepair and neglect, the report goes on to state that the abandoned homes, “degrade the quality of life in these neighborhoods.” Under the federal Fair Housing Act , it is illegal to engage in discriminatory practices with regards to real estate-related transactions. The NFHA and the U.S. Department of Housing and Urban Development plan to file administrative complaints against the banks in question. A 2009 report by the Center for American Progress found that among 14 major banks, all engaged in predatory lending practices that targeted people of color. In 2006, a whopping 41.5 percent of African American and 30.9 percent of Hispanic borrowers received higher-priced mortgages than necessary. 17.8 percent of white borrowers received higher-priced mortgages. Moreover, a study by the Center for Responsible Lending published last year found that borrowers of color were more than twice as likely than white households to lose their homes. The reason? “African Americans and Latinos were consistently more likely to receive high-risk loan products, even after accounting for income and credit status,” according to the report.

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White House Wants Fannie Mae, Freddie Mac To Start Helping Homeowners

April 6, 2012

WASHINGTON, April 6 (Reuters) – The Obama administration wants Fannie Mae and Freddie Mac, which finance the bulk of U.S. mortgages, to start reducing loan balances for troubled borrowers, but with safeguards to prevent them from purposely defaulting to obtain relief. Housing and Urban Development Secretary Shaun Donovan laid out the case for a program with such checks and balances to convince the Federal Housing Finance Agency, which regulates the companies, to provide more mortgage aid. “This isn’t about force; this is about making the right decision for homeowners and for the taxpayers,” Donovan said in an interview taped for C-SPAN’s public affairs television that was set to air on Sunday. The FHFA is evaluating whether financial incentives offered by the White House would be enough to cover the cost of Fannie Mae and Freddie Mac writing down mortgage debt. The agency said it may complete the analysis by mid-April. “We believe that with the changes that we’ve made over the past couple months that the case is compelling,” he said. Democrats have mounted pressure on the FHFA to use government resources to subsidize the cost of mortgage loan forgiveness. The agency has been criticized by consumer advocates for focusing too much on limiting taxpayers’ liability for the U.S. housing bailout instead of making more targeted efforts to help borrowers. FHFA Acting Director Edward DeMarco has blocked Fannie Mae and Freddie Mac from reducing principal amounts owed on mortgages, saying that would drive up the cost of a taxpayer bailout of the two government-run firms, which has topped $150 billion. Fannie and Freddie, the two largest sources of housing money, were taken over by the government more than three years ago as mortgage losses mounted. By using increased financial incentives, the administration has made it harder for the FHFA to dismiss concerns that allowing Fannie Mae and Freddie Mac to reduce homeowners’ loan debt is too costly. About 11 million U.S. homeowners are “underwater” – meaning they owe more on their mortgage than their home is worth – and home values have dropped more than 30 percent since the housing bubble began to burst in 2006. Those opposed to mortgage write-downs also argue that forgiveness would encourage defaults among borrowers who have kept making payments on mortgages that exceed the values of their homes. About three out of every four underwater borrowers with mortgages that Fannie Mae or Freddie Mac back are current on their payments. “This is a reasonable concern in certain circumstances but there are ways to be careful and design around it in order to ensure that it won’t be a real issue,” Donovan said. The HUD secretary said the regulator should design a loan forgiveness program that limits any “moral hazard” of encouraging bad borrowing behavior and the risk that some homeowners might stop making timely payments with an incentive for aid. “We shouldn’t punish the vast majority of folks where strategic default isn’t really a risk just to fix what may be a risk with a small percentage (of borrowers),” Donovan said. Asked how the administration might respond if the FHFA decides to turn down those incentive payments and avoid creating a program focused on mortgage forgiveness, Donovan did not offer any insight. The White House cannot “pre-judge what we might do if he comes back with a different answer,” he said. “We’ll have to look at that analysis and understand what his concerns are.”

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We’re Back To Our Pre-Recession Habits

April 6, 2012

WASHINGTON — Americans took out more loans to buy cars and attend school in February but used their credit cards less frequently for the second straight month. The Federal Reserve said Friday that consumers increased borrowing by $8.7 billion, the sixth straight monthly increase. The jump in borrowing was driven by $11 billion increase in the category that mostly measures demand for auto and student loans. Borrowing on credit cards fell by $2 billion after a $3 billion decline in January. Total consumer borrowing rose to seasonally adjusted $2.52 trillion. That’s nearly at pre-recession levels and up from a post-recession low point of $2.39 trillion reached in September 2010. Borrowing had tumbled for more than two years during and immediately after the recession. Consumer borrowing rose by $18.6 billion in January, following similar gains in December and November. The gains for those three months were the largest in a decade. A rise in borrowing could suggest that consumers are feeling more confident about the economy. However, few are comfortable enough to step up credit card use. Consumers carried $799 billion in credit card debt in February – 15 percent less than they held in December 2007, the first month of the Great Recession. Steven Wood, chief economist at Insight Economics, said February’s borrowing increase was strong. But he noted that it was the smallest increase since October. “Consumers still appear to be reluctant to use their credit cards,” Wood said in a note to clients. The outlook for the economy looked a little less rosy on Friday after the government said hiring slowed sharply in March. Employers added just 120,000 jobs last month – half the December-February pace. The unemployment rate fell from 8.3 percent to 8.2 percent, the lowest since January 2009. Many economists blamed seasonal factors for much of Friday’s disappointing jobs report from the Labor Department. Even with the March pullback, the economy has added an average of 212,000 jobs per month from January through March. The increase in hiring had helped boost consumer spending in February by the most in seven months. Some of that may reflect the rise in borrowing. Consumers are taking on more debt at a time when their wages have not kept pace with inflation. And they are paying more for gas – the average price per gallon nationally was $3.94 on Friday. Households began borrowing less and saving more when the recession began and unemployment surged. While the expectation is that consumers are ready to resume borrowing, they are not expected to load up on debt the way they did during the housing boom of the last decade. The Federal Reserve’s borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.

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Homeowners Stuck With High Rates Even After Refinancing Program

April 6, 2012

By Cora Currier ProPublica Some homeowners are getting stuck with relatively high interest rates even after they participate in the government’s program to help them refinance their mortgages. The biggest banks are not lowering rates as much as they could be — and homeowners have few options to go elsewhere. Analysts say that the big banks are set to make major profits off of the Home Affordable Refinancing Program, also known as HARP , which allows homeowners with loans backed by government-owned Fannie Mae and Freddie Mac to refinance if they owe more than their home is worth. The program, launched in 2009, is designed to let struggling borrowers take advantage of lower market interest rates. So far, about 1.1 million people have refinanced under the program, which was expanded last fall to make it more attractive for banks and to let more homeowners participate. Since then, the government says there has been ” tremendous borrower interest ” and estimates that another 1 million could qualify over the next two years . But while the expansion may let more people refinance, it may not be at the lowest rate possible because the incentives don’t favor competition, according to a new report by an investment group Amherst Securities. The report says the big banks are able to make a considerable profit from refinancing their existing customers under HARP, and that there is little incentive for them to go outside their own customer base and seek out more HARP business on mortgages that originated with other lenders. Few other companies have stepped in to offer HARP refinancing for people who’d like to leave their current lender, partly because it is still risky for them to take on the underwater loans, even with the HARP incentives. The result is that homeowners in many cases are stuck with what they’ve got, Amherst says, and the big banks can charge them more. Guy Cecala, who runs the publication Inside Mortgage Finance, said that there is “virtually no competition” for the big banks. “It’s normal business practice for mortgage lenders — when you can, you charge a higher interest rate.” Here’s how this situation came about. For Banks, Built-In Incentives Last fall’s expansion of HARP tries to make it more appealing to mortgage lenders, since the initial response to the program fell short of expectations. New rules removed the cap on how much a borrower could be underwater and still qualify. It also eased appraisal requirements and — critically for banks — removed some of the liability for bad loans that banks had when selling their mortgages to Fannie and Freddie. The Amherst report points out that the biggest lenders — JP Morgan Chase, Bank of America, and Wells Fargo — are responsible for more than 60 percent of HARP refinancing applications. The report also says the cost of refinancing an existing customer under HARP is minimal. The big banks already have plenty of demand in-house. As such, it’s easier and more profitable to stick with the loans they already service than to compete for new business, which could result in lower rates for homeowners. The report says that the extra steps required under HARP to refinance a loan from another lender make the process onerous and risky. A spokeswoman for the Federal Housing Finance Agency (FHFA), which is in charge of HARP, disputed the notion that it’s difficult to sign up new borrowers. “The additional information collected is minimal and appropriate, given that these lenders have no experience with or information on these (new) borrowers,” she said. JP Morgan Chase, Wells Fargo and Bank of America all confirmed to ProPublica that they have seen an increase in the volume of applications for HARP refinancing since the new rules came into effect. Last month, American Banker reported that banks were scrambling to bolster their mortgage-servicing units to deal with the influx of applications from HARP. The program is voluntary for banks, and they can place their own restrictions over and above those set by the government. JP Morgan Chase and Bank of America say they are only doing HARP refinancing for existing customers — not seeking out new business on loans originated by other lenders. Wells Fargo is accepting refinance applications from borrowers at other servicers, but it is putting a cap on the amount that the loan can be underwater. In January, according to the FHFA , roughly 50,000 people refinanced under the new HARP rules, and HARP’s share of all refinancing increased. Some smaller lenders, especially in states with the worst housing markets, are hoping to jump in and offer lower rates to people looking to leave their current bank, even with the greater risk.

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Man Duped by Car Loan Scam Tells His Story

April 5, 2012

Scott Zane, 42, was desperate the day he contacted Hope for Car Owners. It was the summer of 2010, and the Orlando, Fla.-based IT specialist had recently lost his job. Zane had a $1,600 monthly mortgage payment and a $600 monthly car payment. Even though he had secured a new job in law enforcement, he had taken a huge pay cut. Just months earlier he had been making $80,000 a year but was now pulling in just $48,000. Something had to give. He had resigned himself to losing his condominium but was determined to keep his 2007 Dodge Durango. “I’d tried to talk to my [auto] lender and say, ‘Hey, I don’t want to lose my vehicle,’” Zane told The Huffington Post. “‘I love my vehicle. I purchased a lifetime warranty on it. Help me.’ But they didn’t want to work with me. So Hope for Car Owners was a last ditch effort.” While looking online for help with his car loan, Zane had discovered Hope for Car Owners. For an up-front fee of $399, Hope for Car Owners promised to renegotiate Zane’s car loan so his monthly payments would be lower. The thought crossed his mind that it could be a scam, that he might pay the fee and never get the help, but as he read the customer testimonials on the company’s website, he began to feel more confident. He called the toll-free number and spoke with a company representative. “They said they have strategic alliances with major lenders, and I was told my lender was one of them,” said Zane, who decided to pay the fee. Turns out he would have been better off if he had followed his gut instinct. Hope for Car Owners is now facing federal charges for defrauding consumers . For weeks Zane did not hear anything from Hope for Car Owners. He did receive a letter from his lender stating that he had been approved for a 60-day deferment. Although Zane called and emailed Hope for Car Owners for a status update and guidance about how to proceed after the deferment period ended, no one replied. Unsure what to do, Zane resumed making his payments after the 60 days passed and continued to try to contact the company. He eventually reached a Hope for Car Owners representative who informed him that the company had delivered its promised services in securing the deferment and therefore had closed his account. “I was like, ‘Really?’ Most lenders will give you a deferment if you ask,” Zane said. “I could have done that myself. Why would I pay $399 for something I could have done on my own?” Arguing that he had hired the company to secure him a loan modification, Zane asked for a refund. Although the company advertised on its website that it grants refunds to dissatisfied customers, it refused to do so. Zane is among many customers believed to have been duped by Hope for Car Owners, one of two California auto loan modification companies that the Federal Trade Commission alleges have scammed struggling car owners. The FTC announced it was filing charges against both companies in district court on Wednesday , the first time the agency has brought cases against companies offering car loan modifications. One car owner filed a complaint against the company with the FTC alleging that she paid $400 to the company to renegotiate her loan. Since Hope for Car Owners advised her to stop making payments on her vehicle, she did not send her next payment; her lender informed her that her car was going to be repossessed. The Better Business Bureau has received 30 complaints about Hope for Car Owners and rated it an F on a scale of A+ to F because the “complaints contain a pattern of serious allegations that after paying fees the company failed to negotiate auto loans.” One Hope for Car Owners customer reported to the bureau that not only did the company fail to secure her a loan modification but that she had to pay her lender the difference between the loan balance and the auction sale price when her car was then sold at an auction. Hope for Car Owners could not be reached for comment and the company website hope4carowners.com no longer seems to be in operation. For his part, Zane filed for bankruptcy last summer, at which point he surrendered his Durango. “It absolutely broke my heart because I’d never liked a vehicle as much as this vehicle, and I only owed $17,000 by that point,” he said. Upon learning that the FTC is bringing charges against Hope for Car Owners, Zane said he was pleased that justice might be served. “I strongly believe in karma,” Zane said. “It took a while but karma apparently did catch them sooner or later, and karma’s a bitch when it comes back around.”

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We’re Paying Off Our Bills On Time Again!

April 5, 2012

* ABA: loan delinquencies fell in 11 categories it tracks * Group says overall delinquency levels still high * Increased gasoline prices could boost delinquency rates – ABA WASHINGTON, April 5 (Reuters) – Timely repayments improved on all 11 of the consumer loan categories tracked by the American Bankers Association in the final quarter of last year, the first time that has happened since 2004, according to the organization’s chief economist. The ABA said delinquency rates still remain high as the economy slowly recovers but the fourth quarter showed a marked improvement from the prior quarter in consumers’ ability to make payments on auto loans, credit cards and other debts. “The good news is that fewer people are losing their jobs and more people are becoming re-employed,” ABA’s James Chessen said in a statement on Thursday. “Those two factors combined means more people are better positioned to meet their debt obligations.” The ABA tracks late payments for bank-provided credit cards, auto loans, home equity lines of credit, and other consumer loans. It does not, however, track delinquency rates for traditional mortgage payments. The broad delinquency category that tracks eight types of loans fell to 2.49 percent from 2.59 percent. That is the lowest level since 2008, the group said. Delinquencies on payments for credit cards provided by a bank fell to 3.17 percent from 3.25 percent. The ABA defines delinquency as a payment that is 30 days or more overdue. The report said housing-related loans are not improving as much as other categories. The delinquency rate for home equity loans fell to 4.08 percent from 4.12 percent. Chessen said he expects delinquencies overall will continue to fall but not at the same rate as in the fourth quarter. The recent spike in gasoline prices poses the biggest challenge, he said, as prices have risen 71 cents per gallon since mid-December. “That’s $70 billion that could have gone towards other kinds of spending or to pay down debt,” he said.

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UK house prices see growth in March

April 4, 2012

(MENAFN) A report issued by mortgage lender Halifax showed that UK house prices grew 2.2 percent in March, the opposite of a 0.3 percent drop forecast, Reuters reported. Halifax’s data also …

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Big Bank To Pay Back Victims Of Improper Foreclosure

April 3, 2012

WASHINGTON — The Federal Reserve says Morgan Stanley will review foreclosures carried out by its old mortgage subsidiary and reimburse any homeowners who were improperly forced out of their homes. The Fed says it has settled with Morgan Stanley to “address a pattern of misconduct and negligence” at its former mortgage-loan unit, Saxon Mortgage Services Inc. Morgan Stanley officials declined to comment on the settlement Monday. Morgan Stanley sold a substantial portion of its holdings of Saxon to Ocwen Financial Corp., and it has closed other parts of its residential mortgage servicing business. Before the sale, Saxon was the 34th largest mortgage servicer in the United States.

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The $1.3 Billion Deal Haunting Goldman

April 3, 2012

FORTUNE — The Securities and Exchange Commission is likely to bring charges soon against Goldman Sachs (GS) for a 2006 mortgage investment deal. The agency hasn’t said which one yet, but Fortune has learned there’s a good chance the SEC’s case will focus on Fremont Home Loan Trust 2006-E, a bundle of more than 5,000 mortgages that has cost investors, including mortgage guarantor Freddie Mac and by extension U.S. taxpayers, an estimated $545 million.

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The Runaway Problem Putting The Recovery At Risk

April 3, 2012

WASHINGTON — The federal student loan program seemed like a great idea back in 1965: Borrow to go to college now, pay it back later when you have a job. But many borrowers these days are close to flunking out, tripped up by painful real-life lessons in math and economics. Surging above $1 trillion, U.S. student loan debt has surpassed credit card and auto-loan debt. This debt explosion jeopardizes the fragile recovery, increases the burden on taxpayers and possibly sets the stage for a new economic crisis. With a still-wobbly jobs market, these loans are increasingly hard to pay off. Unable to find work, many students have returned to school, further driving up their indebtedness. Average student loan debt recently topped $25,000, up 25 percent in 10 years. And the mushrooming debt has direct implications for taxpayers, since 8 in 10 of these loans are government-issued or guaranteed. President Barack Obama has offered a raft of proposals aimed at fine-tuning the system and making repayments easier. Yet the predicament of debt-burdened former students has failed to generate much notice in the GOP presidential campaign. Instead, the candidates are dismissive of government student loan programs in general and Obama’s proposals in particular. Rick Santorum went so far as to label Obama “a snob” for urging all Americans to try to obtain some form of post-high-school education – even though some polls show over 90 percent of parents expect their children to go to college. Front-runner Mitt Romney denounces what he calls a “government takeover” of the program. Newt Gingrich calls student loans a “Ponzi scheme” under which students spend the borrowed money now but will “have to pay off the national debt” later in life as taxpayers. And Ron Paul wants to abolish the program entirely. Lifting student debt higher and higher is the escalating cost of attending schools, with tuition increasing far faster than the rate of inflation. And enrollment has been rising for years, a trend that accelerated through the recent recession, fueling even more borrowing. Mark Zandi, chief economist at Moody’s Analytics, argues that government loans and subsidies are not particularly cost-effective for taxpayers because “universities and colleges just raise their tuition. It doesn’t improve affordability and it doesn’t make it easier to go to college.” “Of course, it’s very hard on the kids who have gone through this, because they’re on the hook,” Zandi added. “And they’re not going to be able to get off the hook.” It’s not just young adults who are saddled. “Parents and the federal government shoulder a substantial part of the postsecondary education bill,” said a new report by the Federal Reserve Bank of New York. And some of the borrowers are baby boomers, near or at retirement age. The Fed research found that Americans 60 and older still owe about $36 billion in student loans. Overall, nearly 3 in 10 of all student loans have past-due balances of 30 days or more, the report said. Complicating the picture further: Like child support and income taxes, student loans usually can’t be discharged or reduced in bankruptcy proceedings, as can most other delinquent debt. This restriction was extended in 2005 to also include student loans made by banks and other private financial institutions. “This could very well be the next debt bomb for the U.S. economy,” said William Brewer, president of the National Association of Consumer Bankruptcy Attorneys. “As bankruptcy lawyers, we’re the first to see the cracks in the foundation,” Brewer said. “We were warning of mortgage problems in 2006 and 2007. The industry was saying we’ve got it under control. Nobody had it under control. Now we’re seeing the same signs of distress. We’re seeing huge defaults on student loans and people driven into financial difficulties because of them.” A report by his group noted that missing just one student loan payment puts a borrower in delinquent status. After nine months, the borrower is in default. Once a default occurs, the full amount of the loan is due immediately. For those with federal student loans, the government has vast collection powers, including the ability to garnishee a borrower’s wages and to seize tax refunds and Social Security and other federal benefit payments. Nigel Gault, chief U.S. economist at IHS Global Insight, said the student loan crisis may not torpedo the financial sector as the mortgage meltdown nearly did in 2008, but it could slam taxpayers and the still-ailing housing market. “When student loans don’t get repaid, debts are going to be transferred from the borrower to the taxpayer,” further raising federal deficits, he said. And overburdened student-loan borrowers may fail to qualify for mortgages and “stay much longer in their parents’ homes,” Gault said. Young adults forming households have historically been the bulk of first-time home buyers – and their scarcity could dampen any housing recovery. “When kids do graduate, the most daunting challenge can be the cost of college,” Obama said in his State of the Union address, asking Congress to extend a temporary cut – due to expire in July – in federal student-loan rates. The reduced federal rate is now 3.4 percent. It the cuts aren’t extended, it will rise to 6.8 percent. Still, Obama said: “We can’t just keep subsidizing skyrocketing tuition. We’ll run out of money.” Obama also asked Congress to extend the current tuition tax credit, double work-study jobs over five years and let borrowers consolidate multiple student loans at reduced interest rates. But in this intensely partisan year, any congressional action seems dubious. “I wish I could tell you that there’s a place to find really cheap money or free money and pay for everyone’s education, but that’s just not going to happen,” Romney says. “Now the government is taking over the student loan business. I think you’ll get less competition.” The government has not taken over the student loan business. The private loan industry is still writing student loans, usually at interest rates far above the government ones. What the Republicans are zeroing in on is a section in Obama’s health care overhaul that eliminated big banks as middlemen in managing federal school-loan programs. Also, the new federal Consumer Financial Protection Bureau is clamping down on the lightly regulated private student loan industry. Santorum, who now says calling Obama a “snob” for promoting higher education was “probably not the smartest” choice of words, has been seeking to rally blue-collar support by emphasizing that many jobs do not require college degrees – and suggesting many colleges are liberal bastions. ___

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Private Equity Firm Buys 5 Home Per Day In Race For ‘Awesome’ Profits

April 2, 2012

It’s a landlord’s market and financial firms are taking advantage. One private equity firm, Waypoint Real Estate, is buying about five foreclosed homes per day and turning them into rentals in an aim to find a new way to make a buck off of foreclosed homes, the Washington Post reports. Other private investment firms are joining Waypoint, shifting from a years-old strategy that focused on flipping foreclosed homes instead of renting them. It’s certainly a good time to get in the rental game, with rental rates rising and the housing market still struggling along. Indeed, in almost every city in the country it is cheaper to buy a home than to rent one , according to data released last month by real estate website Trulia. And if the value of the homes ever does appreciate, the investors could be raking in big bucks by selling, Colin Wiel, the co-founder of Waypoint told WashPo. “I never thought I’d be rolling up single-family homes,” Wiel said. “But the yields are awesome.” By renting the homes in the meantime, the firms are also preventing them from increasing the supply of homes, subsequently pushing home values even lower. Private equity firms aren’t the only ones looking to transform foreclosures into rentals either. Bank of America is piloting a program that offers some of those borrowers facing foreclosure the chance to transfer the title to the bank and rent instead. The aim of the program isn’t only to help borrowers stave off foreclosure, it’s also a way for the bank to test whether converting foreclosed homes into rental properties is a viable business strategy. “This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support,” Ron Sturzenegger, legacy asset servicing executive of Bank of America, said in a statement announcing the program last month , according to the Associated Press. The program will likely help the bank’s bottom line, according to some experts. By renting homes in danger of foreclosure out to their owners, BofA could avoid spending money on the upkeep of the properties and take the time to find investors willing to buy the foreclosed homes at higher prices, according to MSNBC. Other Wall Street institutions have also expressed interest in buying foreclosed homes and offering them up for rent. Some firms said want the chance to buy some of Fannie Mae’s foreclosed properties and then rent them out, according to a Wall Street Journal reported from last month. Fannie is only putting up 2,500 of its foreclosed properties — or just 2 percent of the foreclosed homes it owns — up for sale. Still, if the pilot program works, the mortgage giant may offer up more.

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Mary Ellen Biery: The Hottest Industries To Start A Business In

April 2, 2012

Last year, three out of every 1,000 American adults chose to start their own businesses, according to a study out this month by the Kauffman Foundation. And while that’s slightly below the entrepreneurship rate of 2010, it’s still among the highest levels of entrepreneurship over the past 16 years — a byproduct of the Great Recession’s high unemployment rates, according to the foundation. There are, of course, many considerations to starting your own business. But if you’ve been wondering what fields might be fertile for a new business, a good place to start is the Bureau of Labor Statistics’ new employment projections for 2010 to 2020. Sageworks examined several businesses that entrepreneurs might consider as they look to tap into the trends cited in the government’s employment outlook. Based on a financial analysis of privately held companies’ results in 2010 and 2011, we’ve generated some key operating metrics that may be helpful in evaluating and planning your options. These metrics show some of the routine costs associated with running that type of business. Cost of sales, which covers the direct costs involved in producing a product or delivering a service, could include auto parts for a mechanic’s shop, for example. Overhead, or operating expenses, typically includes things like office-employee salaries, rent and advertising. Average annual revenues for the businesses were derived from the 2007 Census data on taxable establishments. We used taxable entities because Sageworks’ metrics are based on financial statements for for-profit companies. A day care center, an assisted living center or a consulting firm might be options, considering the BLS expects that the health care and social assistance sector, as well as the professional and business services sector, will generate nearly half of the job growth in the current decade. That’s not too surprising, said Libby Bierman, an analyst with Sageworks, a financial information company. “The aging population and growing technological efficiencies will keep demand for these industries fairly strong,” she said. For example, the growing pool of elderly seeking to maintain some level of independence is expected to help make nursing and residential care facilities one of the biggest job boosters, with annual employment growth of 2.4 percent. And the management, scientific and technical consulting services industry should add 575,600 jobs, or 4.7 percent growth annually, as businesses increasingly use consultants to keep up with the latest technologies, government regulations, and management and production techniques, the BLS says. If you’re thinking of hanging out your own shingle, other industries expected to see stronger employment: computer systems design, automotive repair and maintenance, and various non-physician health fields, including massage therapy and chiropractic care. As shown in the chart below, many of these growing industries are labor-intensive. “Personnel play a large role in operations and in the value they deliver to clients,” Bierman said. “That is why these industries–especially day care centers, assisted living residences, and consulting firms–have relatively high payroll costs and overhead expenses more generally.” Day care centers and assisted living residencies must closely watch the number of workers they have relative to clients, often because of various laws or regulatory oversight. “Keeping that ratio high is a also selling point, which makes adding workers a good investment,” Bierman said. “Given the variability in rent or mortgages, a company’s working space and its maintenance can hugely impact the company’s profitability,” Bierman said. Rent expense is more critical for some industries than others, she noted. “Businesses that typically pay out a lot in rent, like day care centers that need playground areas, may try to buy a space while real estate is less expensive or may begin the operation out of a residence,” Bierman said. Other start-ups, like a massage therapist or a management consultant, may be able to set up and maintain their business in a smaller space, allowing more of the revenues to fall to the bottom line sooner.

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10 Percent Of Detroit Homes Set For Demolition

April 2, 2012

By Mike Wilkinson and Christine MacDonald, Detroit News More than a quarter of homes whose loans failed at the height of the foreclosure crisis in 2006 and 2007 have already been razed or are on the demolition list, becoming a huge obstacle to the city’s rebirth, a Detroit News analysis shows. In neighborhoods on the far west side and the northeast corner of the city, as many as two-thirds of the properties that went into foreclosure just five years ago are in the city’s crosshairs or already on the ground. The worst-hit areas almost mirror perfectly parts of the city where the most subprime mortgages were issued before they helped trigger the collapse of the banking industry.

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‘Do You See The Shadow Yet?’

March 31, 2012

WEST PALM BEACH, Fla. — When Frank Verna pulls up to a battered, four-unit apartment building at lunch hour, he’s just over a mile as the seagull flies from the gated oceanfront palaces of South Florida’s wealthiest. But this stretch of 21st Street, pocked by homes with boarded-up windows and dead-ending at railroad tracks, is unlikely to make it to a tourism poster. Verna turns the car around in case he needs to make a quick exit and reaches into the center console for a Smith & Wesson M&P40. The real estate agent tucks the pistol into his jeans. “Just watch your step,” he says, pulling back the tangle of bushes grown across the building’s entry path. Beyond is the darkened doorway to Unit 1 – missing its door. “I think there’s a dead animal over there,” says Verna, traces of New York’s Queens still present in his accent despite two decades in the Sunshine State. He aims his flashlight at a mat of brown fur in the center of a living-room floor blanketed in garbage. The stench of whatever’s in there is already potent and the summer heat is still months away. Nobody is home. Verna is here because he specializes in distressed properties and Florida, thrashed by the mortgage and foreclosure disaster, has thousands of them. But figuring out just how many is not so simple. Each month, analysts issue reports detailing the number of homes nationwide in foreclosure or held by banks. The implication is that if we can just find a cure for these loans and homes – either by matching buyers with houses or helping the borrowers stay put – the economy will be able to heal at last. At ground level, though, it’s more complicated. The building on 21st Street is a good example. The last buyer paid $309,000 for this place six years ago. But today the county appraiser says it’s worth less than a quarter of that amount. A bank filed foreclosure papers against the owner in 2008, but a year later withdrew the case. Legally, it still belongs to the original owner, subject to fines and liens by the city. But the bank sold the underlying mortgage note to a hedge fund for pennies on the dollar. That company has hired Verna to check the condition and occupancy status of its investment, on the way to making it profitable (His research indicates the owner has left the country.) It’s one thing to take measure of the foreclosure crisis in the black and white of statistics. But here’s a reminder that reality also comes shaded in gray. People in the foreclosure trade have a name for buildings like the one on 21st Street: “shadow inventory.” Broadly speaking, it refers to all the homes in the foreclosure pipeline that will eventually flow in to the market but aren’t there yet. In practical terms, the definition of shadow inventory varies considerably depending on which analyst you ask, and there is truth to be gleaned from each of their carefully calculated studies. Numbers matter because figuring out how long the crisis will last requires knowing the extent of the damage. But if we’re going to take stock of the nation’s progress in working its way through the mortgage debacle, reading reports may not be enough. The only way to fully comprehend what’s going on out there is to wade into the wreckage. And to do that requires moving beyond the figures and the charts, and venturing into the shadows. ___ All rise and come to order. Judge Diana Lewis’ court is now in session. On a Monday afternoon, the three rows of benches in Courtroom 4B are packed. Lawyers and home owners who weren’t early enough to snag a seat cluster around the doorway and stand along the walls. The lawyers are the ones in the suits who look like they belong. The borrowers are the ones in T-shirts and sneakers, clutching overnight-mail envelopes stuffed with fraying documents, looking around nervously like maybe they’ve already missed something. Taped to a white board in the lobby, 16 sheets of paper list the 136 foreclosure cases scheduled to be heard in Judge Lewis’ courtroom on this one afternoon. Too late for a seat, Leanna Lalla, a lawyer representing homeowners, leans over to explain that today’s crowd in 4A is merely the norm, reflecting all those houses piling up in the pipeline. “Do you see the shadow yet?” she whispers. Florida, home to a quarter of all the nation’s foreclosures, is one of 20 states that rely entirely on the courts to deal with the crisis and the system is overwhelmed. A big part of the reason cases drag on for an average of two years is that last year’s robo-signing scandal forced banks to put the brakes on many cases with suspect documents. A settlement with state and federal officials has allowed the process to get moving again. But the proceedings in Lewis’ courtroom hint at the confusion, as well as delaying tactics by both lenders and borrowers, leaving scores of homes stuck in the pipeline. One of the first cases Lewis calls is Wells Fargo v. Killgore. The lawyer for a condo association steps forward, pursuing $15,000 in unpaid dues and fines on a Boynton Beach apartment in foreclosure. But a woman named Sue Elmore objects. Elmore is the daughter of the man who lived in the condominium at the heart of this case. She tries explaining to the judge that her father has Alzheimer’s disease and now lives in a nursing home. Years ago, he took out a reverse mortgage on his home and when he got ill, the family agreed to surrender it to the bank, a deal they thought was long done. “In our minds, we didn’t own it any more. We gave it back,” Elmore says later. “We just did what they told us to do.” Maybe someone forgot to tell the bank. Because the condo that the family thought they no longer owned is still listed in their name on the tax rolls. It’s not clear exactly how a home like this one should be classified or what it will take to figure out a solution. Later, Lewis calls up the parties in another case, Nationstar Mortgage v. Sands. The homeowner tells the judge he thought a loan modification had been finalized, allowing him to keep the home, until a lawyer called to say it was back in foreclosure. “That’s ridiculous,” Lewis tells the lawyer for the bank. “I’m not doing this thing two or three times. You’re making my head spin.” ___ From the courthouse, it’s a 15-minute drive to a neighborhood called Eden Place – a scene that is much more peaceful. On alphabetically named streets, well-tended, if modest homes built a half-century ago snuggle amid tropical foliage. But it’s not the same paradise it was 15 years ago when Jimella McKeag fled Pennsylvania winters for a pink stucco refuge on J Street. “That one on the corner, he didn’t pay his mortgage. He just moved out to Okeechobee and let it go,” McKeag says, surveying the block from a plastic Adirondack chair beside her front door. “This one here, he rented it a couple of times. … He let it go and it went back to the bank.” Of the 13 houses on McKeag’s block in Lake Worth, two are currently owned by banks after going through foreclosure. But neither is listed for sale. On this afternoon, a crew of three men is hauling mildewed mattresses and a sofa out of one of them; its living-room ceiling has caved in from leakage despite a blue tarp covering its roof. At the opposite end of the block sit two more homes that are clearly abandoned, but whose fate remains unclear. One was bought out of foreclosure by a local doctor last fall, but appears uninhabitable. The other, boarded up, still belongs to its original owner. At the peak of the market, houses on this block sold for $250,000 or more; they’ve lost at least half their value. One day, these vacant homes will come out of the shadows and on to the market, affecting the worth of neighboring houses. Analysts pore over data trying to figure out just how many homes like this are hidden from view. But it’s not easy. Economists at CoreLogic, a California company that analyzes mortgage data, weigh in at the low end, charting 1.6 million homes in shadow inventory nationwide. They count homes not listed for sale, with loans that are at least 90 days overdue, in foreclosure or bank-owned. Others say the shadow is much bigger. Laurie Goodman of Amherst Securities in New York says it covers from 8.3 million to 10.4 million homes. Goodman’s analysis includes homes with loans that are at least 60 days overdue, have been delinquent in the past and are likely to go into default again, and thousands of homes whose owners are making payments but are likely to give up because they are so far “underwater,” in homes worth less than they owe. “The question is `how long is the shadow?’” Goodman says. “I think some people are definitely underestimating the seriousness of the problem.” Mark Fleming, chief economist for CoreLogic, says his analysis is a snapshot of the problem at the moment, while Goodman’s is more of a forecast. “In many ways, we can both be right,” he says. The difficulty of trying to measure shadows becomes more obvious the further you go down J Street. A couple of blocks south of McKeag’s house, more homes are cut into rental units and there are fewer trees. More homes are empty here, some marked with “No Trespassing” signs posted by the sheriff’s office. But the houses that are occupied are the most difficult to figure. Take a two-family home with a carport in the 1400 block. According to county records, it has gone through foreclosure and is now owned by the Federal Home Loan Mortgage Corp. But tenants say they are still paying rent to the previous owner. There are scores of homes like this, experts say, owned by lenders who have yet to pursue an eviction of borrowers who are not making payments. Lenders have good reasons to delay. Empty homes require upkeep. Once banks claim a home, they are responsible for the taxes and fines from cities and homeowner’s associations. The loss on the loan goes on to their books. As long as a case in still in process, loan servicers continue to collect their fees. A recent check of records in this one county found more than 10,000 cases in which a bank secured a final judgment more than a year ago, yet there has still been no change in title, says Michael Olenick, a West Palm Beach computer programmer who tracks the system. Then there are houses like the white one in the 1300 block of J Street where Peter Gardner answers the door. Gardner, a former laser technician, bought this house for $44,000 in 1995. After a car accident left him disabled four years ago, he says he fell behind on his payments and tried repeatedly to work out a catch-up plan, borrowing enough money from his mother to cover the money owed, but not late fees. This is a variation of accounts often heard from borrowers and lawyers who represent them – for years, banks waited until people fell behind, then began imposing heavy late fees, while refusing to give ground. Gardner, who says he hasn’t made a payment on his loan in years, thought about selling. A real estate agent advised listing it for $275,000 to get a quick sale. But he resisted. The lender began foreclosure proceedings three years ago. Gardner asked for a loan modification, but every three months the bank told him he needed to reapply. Finally, last fall, the house went to auction. The lender claimed it for $500. The story doesn’t end there. The home is owned by a subsidiary of Bank of America. Gardner expects to be evicted one of these days. In the meantime, though, employees of the bank still call every few weeks to tell him he’s behind on his payments and responsible for the house. “They want me to live in the house, mow the lawn, keep the air conditioning on so the fungus doesn’t grow in it,” Gardner says. He keeps telling the bank employees that he no longer owns the place, but they don’t believe him. “Somebody went and sold my house and they’re telling me I’m not even in foreclosure,” Gardner says, standing in the driveway he no longer owns, but where he still parks. “I was mad crazy with it and every time you just have to laugh. Otherwise, you’d just kill yourself inside.” ___ The housing market is working through a riddle, trying to determine what homes are worth given limited demand. But shadow inventory keeps part of the supply hidden. “It goes deep and you have no clue,” says Danielle Giunta, who checks up on distressed homes on behalf of lenders. Giunta sold real estate until the market tanked. But she’s repurposed herself for the times. Now, a few days a week, she drives a 120-mile route through six Palm Beach County zip codes, knocking on doors, noting broken windows or water damage and snapping pictures. She usually spends just a few minutes at each house and earns a few dollars per stop. “The first few weeks I worked, I was very depressed,” Giunta says. Part of it was all the vandalism and garbage she came across. Other times, it was the conversations with families certain they were about to evicted. But, as an agent who stills watches the listings, she was also bothered by the difference between the number of homes for sale and all the others she was seeing. “I go online and see what they’re reporting and it’s not the same,” she says. “It’s not going to be better for years …and the reason I say that is the truth is not out yet.” There is, however, substantial demand for foreclosures at the right price. Driving through inland neighborhoods, agent Sharon Restrepo slows to point out small houses and condominiums. In a development called The Forest, she stops in front of a condo she bought for $30,000 a few months ago and resold to an investor for $40,000. After the investor paid $1,600 to fix it up, the place now rents for $950 a month. Restrepo says she’s buying five to 10 homes like this a month, turning most around as profitable rentals. You can’t build these houses for what they cost, she and others say. But investors and those who represent them complain banks are not realistic about the prices they’ll accept. Verna, the real estate agent specializing in distressed properties, says that slowing the flow of homes into the market creates an artificially low inventory in some neighborhoods, which can temporarily lift prices. At the same time, lenders are increasingly selling homes or the underlying loans in bulk to hedge funds. That’s where Verna comes in, tracking down borrowers to convince them to trade deeds for cash, and turning around homes like the building on 21st Street for resale. This takes patience and a strong stomach. Abandoned homes are frequently trashed or occupied by squatters. Borrowers are difficult to track down and reluctant to talk. Verna has tracked one homeowner from address to address to address. Each time the real estate agent thinks he’s caught up, the man has moved again. At this rate, Verna figures it will be three to five years before lenders let all the homes go. The risk is that, by moving too slowly they could artificially raise prices in some areas, which might spur investors who bought homes as rentals to put them up for sale. “The truth of the matter is we would have already gotten over it if they just let the properties get out there and get sold,” Verna says. “So what are you doing? You’re not stabilizing the market. You’re creating more chaos.” ___ When Lynn Szymoniak moved to South Florida three decades ago as a lawyer for migrant farm workers, the land stretching west along Lantana Road was planted with cash crops. Today, a Home Depot store has taken over a tomato field. And what was once a U-Pick farm is now a neighborhood of 262 homes called Strawberry Lakes. “Sometimes you can’t tell when a house is in foreclosure unless you go back two or three times, because the neighbors will do things like park their cars in the driveway, all in an effort to make things more secure,” Szymoniak says, driving slowly through the subdivision. She points out houses with waterlogged newspapers piled on front steps and fabric hung across windows. One of her “favorites” is a house whose shingled roof has worn a blue rain tarp so long it has disintegrated to fringe, hanging from the eves like a monk’s haircut. “But one of the things you may have noticed,” Szymoniak says, “is that with all these foreclosed homes we’ve come upon, we’ve come upon zero `For Sale’ signs.” Szymoniak hasn’t counseled farm workers since the 1980s. But she found her way to Strawberry Lakes after battling to keep her own house. In 2008, Deutsche Bank filed foreclosure papers against her. By then, Szymoniak had spent years representing insurance companies in fraud cases and she’d become expert in spotting deception. She took note of suspect signatures on loan documents. Her detective work was instrumental in exposing the robo-signing scandal, reflected in $18 million awarded Szymoniak as part of the recently announced settlement between major banks and government officials. Szymoniak’s frustration, though, extends well beyond what happened with her loan. She is convinced banks still are not doing enough to resolve the crisis. She points to Strawberry Lakes as Exhibit A. The two- and three-bedroom homes here now sell for just a third of the $275,000 or more they fetched at the top of the bubble. Few of the neighborhood’s homes are owned by lenders. But many bear stickers on doors and windows, posted by banks and loan servicers with a vested interest in their fate. “This property is managed by Chase,” reads one, at a home on Strawberry Lakes Circle. A look through the window reveals a dining room ceiling that is caving in. At least three dozen homes are currently in foreclosure, with many cases dating back three or four years. Of those, at least five are houses where lenders won final judgments years ago, but have not moved forward. In addition, at least 57 houses not in foreclosure are owned by people who paid far above what they’re now worth. Prudent Alcindor, who paid $253,000 for a house currently appraised at less than $112,000, says he thinks often about whether to give up. “I still pay, but I will never have the house. I pay to stay in it. But it will never be mine. It’s like I rent it,” says Alcindor, who works at a vitamin manufacturer. The financial pressure on his neighborhood is “getting worse and worse every day.” It’s hard to know how others are doing in paying their loans. But Jeremy Vassalotti, president of the homeowner’s association, points out that as his neighbors have fallen behind, more responsibility lands on everyone else. Vassalotti, who owns a masonry company, lives in one of the neighborhood’s most carefully tended homes, with cast iron dragonfly sculptures on the walls by the entryway and stone frogs set amid the cedar chips. But he spends substantial effort now trying to keep up with what’s going on at the houses around him. In Strawberry Lakes, 105 of the homeowners are behind on their payments to the HOA, a hint that more of them could be headed to foreclosure. That uncertainty makes it difficult to measure the reach or duration of the crisis. But Szymoniak cautions against assuming that, just because the streets here are peaceful and the grass in front of the empty homes kept trimmed, the problem is going away. “You know,” she says, pointing out yet another vacant house, “when anybody tells me we’re coming out of the foreclosure crisis, I always take them for a ride and let them see what’s happening” in neighborhoods like this one – bathed in South Florida sunshine, but set deep in the shadows. ___ Adam Geller, a New York-based national writer for The Associated Press, can be reached at features(at)ap.org

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Anti-Foreclosure Activists Step Up Efforts At Detroit Conference

March 30, 2012

A string of recent victories has emboldened activists working against foreclosures and evictions to step up their efforts both in Detroit and around the country. In Detroit, local activists saved the home of Bertha and William Garrett and are pushing JPMorgan Chase to settle with Alma Counts , an 82-year-old resident facing foreclosure. Attorney Jerry Goldberg, who belongs to Detroit’s Moratorium NOW! Coalition to Stop Foreclosures , works actively with Occupy Detroit and other local organizations to fight the displacement of Michigan families from their homes. He noted pushback to evictions and foreclosures nationwide. “In almost every city people are fighting and challenging foreclosures in light of the Occupy movement,” Goldberg said. “Now is the perfect time to … take the movement that uses direct action to stop individual foreclosures and to escalate it into a political struggle to end all foreclosures.” Moratorium NOW! is sponsoring a gathering for anti-eviction activists in Detroit Saturday. They will meet to share their experiences and set the groundwork for a national campaign to enact a two-year moratorium on foreclosures. Activists are also planning to hold a tribunal for Bank Of America during the September Democratic National Convention , held in Charlotte, N.C., home of the bank’s international headquarters. Goldberg believes President Obama has the ability to institute a moratorium on foreclosures through an executive order, because the federal government controls mortgage loans through its stake in mortgage companies Fannie Mae and Freddie Mac and the Department of Housing and Urban Development. Obama proposed a 90-day moratorium on foreclosures during his presidential campaign in 2008. The Detroit conference will also include the groups Take Back the Land, the Chicago Anti-Eviction Campaign, Oregon’s Project REconomy, the Bail out the People Movement, North Carolina FIST and Occupy activists from several cities. After the event, attendees will head down for an evening of cultural events at 1515 Broadway, a local cafe and theater that was recently saved from foreclosure through the work of local activists . The conference takes place Saturday, March 31 from 10 to 6 p.m. at the Central United Methodist Church (2nd Floor) at 23 E. Adams St. at Woodward Ave. For more information see nationalmoratorium.org .

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‘Octomom’ Nadya Suleman Faces Eviction This Week

March 30, 2012

The Octomom and her kids may soon be looking for a new house. Nadya Suleman and her 14 children are facing eviction from their La Habra, Calif. home, the Los Angeles Times reports. Still, she may get a bit of a reprieve because the foreclosure sale could be delayed until late April. According to Jeff Czech, who told the LA Times that he is Suleman’s attorney, he was able to have the foreclosure delayed for “a short while,” adding, “We are working on it. The foreclosure sale is not likely this month.” But Czech may not be authority on the issue. He told the Associated Press earlier this week that Suleman is “not doing well [and that] she’s struggling financially,” claims she denied in an interview with The Huffington Post . She also said she hasn’t worked with Czech since last May. Suleman, better known as Octomom after she gave birth to octuplets in 2009, has been facing eviction and foreclosure on her home since 2010 . The 36-year-old mother and reality star has been struggling to pay her mortgage for years, prompting others to look for ways to help the Octomom while still making a profit. In 2010, Vivid Entertainment co-founder Steve Hirsh, who once offered Suleman $1 million to perform in one of his adult videos, offered to purchase the $450,000 bank note connected with the home, but quickly dropped the offer . Hirsch did send a check to cover Suleman’s 2011 February mortgage payment, but said she wouldn’t accept it. Hirsch told the OC Register , “[Suleman] completely understands that she is in no position to turn down a gift … [She] has made it clear she doesn’t want to perform in an adult movie, which we respect. She’s a fascinating personality and we had hoped to be able to help her with her financial situation.” More recently, Suleman agreed to pose partially nude for Britain’s Closer magazine to help pay her debts. “I got $8,000 [for the photos]. I have to do what I have to do to take care of my family, and I’m not ashamed. I’m not ashamed at all,” she told Anderson Cooper on his talk show “Anderson” airing March 30. But Suleman isn’t the only celebrity dealing with mortgage trouble these days. Even teen popstar Justin Bieber, who has raked in millions of dollars, is having trouble getting approved for the mortgage he wants on a 9,000 square foot home near Hollywood, according to TMZ.

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Simpson-Bowles Plan Dealt Huge Bipartisan Rejection

March 29, 2012

WASHINGTON — The House voted decisively late Wednesday to reject a bipartisan budget mixing tax increases with spending cuts to wring $4 trillion from federal deficits over the coming decade. The 382-38 roll call paved the way for Republicans to muscle through their own, more stringent budget on Thursday, a measure that would blend deeper spending reductions in safety-net programs for the poor with a plan to dramatically overhaul Medicare. The vote also underscored the partisan polarization dominating Washington this election year, with leaders of both parties showing little inclination to compromise and let the other side claim a victory. The bipartisan measure rejected Wednesday was patterned on a plan by President Barack Obama’s 2010 deficit commission and was written by moderate Reps. Steve LaTourette, R-Ohio, and Jim Cooper, D-Tenn. “This is the only bipartisan way to solve the nation’s problems,” Cooper said. “When you know you have a good deal is when the left and right are pounding the snot out of you, and that’s what’s happening today,” LaTourette said. House Budget Committee Chairman Paul Ryan, R-Wis., was the only lawmaker to speak against the plan, saying it relied too heavily on tax increases and not enough on spending cuts. The plan won praise from outside budget experts. But GOP leaders have been unwilling to stray from party principles on taxes while top Democrats have shown no give on cuts to social programs. The bipartisan alternative was similar to a proposal crafted by former White House chief of staff Erskine Bowles, a Democrat, and former GOP Sen. Alan Simpson of Wyoming, co-chairmen of Obama’s deficit commission, whose package ended up being ignored by lawmakers. The measure, like the Simpson-Bowles plan, called for a tax overhaul that would bring the top tax rate down from 35 percent to 29 percent or lower, financed by repealing various tax breaks, deductions and credits. Overall revenue would rise by $1.2 trillion since the money raised by eliminating dozens of tax breaks would exceed the revenue lost by lowering rates. The vote came shortly after the Republican-run chamber unanimously rejected Obama’s $3.6 trillion budget for next year in a roll call forced by GOP lawmakers to embarrass Democrats. Republicans have opposed Obama’s budget all year, criticizing its tax increases on the wealthy and saying it lacks sufficient spending cuts. Democrats have defended Obama’s budget priorities but voted “no” as a bloc Wednesday night as the House rejected the president’s plan 414-0. Republicans said Democrats were afraid to vote for Obama’s proposed tax increases and extra spending for energy and welfare. Democrats indicated they were worried that voting for Obama’s budget would let Republicans accuse them in re-election campaigns of endorsing every part of it, including details they might oppose. The House also rejected a plan by the Congressional Black Caucus, 314-107, that was more generous than Republicans to many domestic programs. At the center of Wednesday’s debate, however, was a budget-slashing GOP plan by Ryan that would quickly bring the deficit to heel but only through unprecedented cuts to programs for the poor such as food stamps, Medicaid, college aid and housing subsidies. The Republican budget also reprises a Medicare plan that would switch the program – for those under 55 today – from the traditional framework in which the government pays doctor and hospital bills to a voucher-like approach in which the government subsidizes purchases of private health insurance. The GOP plan was set to pass on Thursday, but swiftly die in the Democratic-controlled Senate. Under the arcane budget rules of Congress, the annual budget resolution is a far-reaching but nonbinding measure that sets the parameters for follow-up legislation. The measure reopens last summer’s hard-won budget and debt deal with Obama, imposing new cuts on domestic agencies while easing cost curbs on the Pentagon that gained bipartisan support just months ago. It would set in motion follow-up legislation that would substitute $261 billion in spending cuts spaced over a decade for $78 billion in automatic spending cuts that would cut the Pentagon budget by about 10 percent next year and cut numerous domestic programs as well. The election-year GOP manifesto paints clear campaign differences with Obama, whose February budget submission offered tax increases on the wealthy but mostly left alone key benefit programs like Medicare, Medicaid and food stamps. Obama and his Democratic allies instead promise to protect programs aimed at the elderly and the poor. Ryan said the GOP plan steps in aggressively to prevent a European-style debt crisis that would swamp the economy and force draconian spending cuts and tax increases. “Let’s not wait until we have a crisis. Let’s not wait until interest rates go up and we’re in sort of a European meltdown mode,” Ryan said. “Let’s do it right and do it now, because then we can keep the promises that government has made to people who need it the most.” But Democrats said the Ryan plan makes spending cuts that are simply too extensive, knocking millions of people off of food stamps and forcing states to drop Medicaid nursing home coverage for many elderly people. At the same time, Democrats said the GOP budget promises a radical overhaul of the tax code that would deliver big tax cuts to upper-income people while taking away tax deductions and credits important to the middle class and the poor, like the child tax credit, and deductions for health insurance, mortgage interest and contributions to charity. Democrats say the GOP Medicare proposal, similar to a plan that started a political firestorm last year, would cut costs steeply and provide the elderly with a steadily shrinking menu of options and higher out-of-pocket costs. “It is not bold, not bold to provide tax breaks to millionaires while ending the Medicare guarantee for seniors and sticking them with the bill for rising health care costs,” said Maryland Rep. Chris Van Hollen, the top Budget Committee Democrat. “It is certainly not brave to cut support for seniors in nursing homes, individuals with disabilities and poor kids. And it is not fair to raise taxes on middle-income Americans, financed by another round of tax breaks for the very wealthy.” Compared with Obama’s budget, the GOP measure includes deficit cuts totaling $3.3 trillion – spending cuts of $5.3 trillion tempered by $2 trillion in lower taxes – over the coming decade. The deficit in 2015, for example, would drop to about $300 billion from $1.2 trillion for the current budget year. But the GOP measure – despite assumptions of major cuts to transportation, education and food aid – doesn’t achieve balance for almost three decades, leading conservatives to offer an even tougher plan that would come to balance in five years. The GOP measure is likely to pass almost exclusively with GOP votes, though some tea party lawmakers will oppose it for not going far enough. ___ Associated Press writer Alan Fram contributed to this report.

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For Cash-Strapped, This Is A Priority

March 29, 2012

NEW YORK — The recession and its hangover may have turned bill-paying habits upside down. Cash-strapped Americans are paying off their car loans before they pay credit card bills and make mortgage payments, a study finds. It used to be that Americans would pay their home loans first, then their credit card and car loans. After all, homes have been the most valuable possession for most people for decades, and nobody wanted to jeopardize that. But TransUnion, a credit information company, studied the payment patterns of 4 million Americans with at least one car loan, one credit card and a mortgage and found a clear priority for staying current on the car loan. Among Americans who were late on payments last year, 39 percent were delinquent on the mortgage while current on the car loan and credit cards, and 17 percent were late on credit cards while current on the other two. Only 10 percent were late on the car loan while current on the other two. When TransUnion first did the study in 2006, staying current on the mortgage was the priority, says Ezra Becker, the company’s vice president of research and consulting. “Today, most people need a car to get to a job or to look for a job, and that has made cars a priority,” he says. It hasn’t helped that home prices keep falling while the mortgage remains by far the biggest payment for most people. The latest Standard & Poor’s/Case-Shiller home price index found that prices in big cities had fallen to 2002 levels, down 34 percent from the peak. There is also more leeway on the mortgage. Foreclosure can take two to three years. Cars can be repossessed 90 days after people stop paying. Matt Saxton of Columbia, Md., was not surprised by the study’s results. Saxton is on unpaid medical leave from work, recovering from spine surgery and relying on his savings. Saxton says he dares not be late on his car payment and risk having his car repossessed. Instead, he’s decided to be late on his credit cards and student loans. “I can work with the credit card companies. They won’t shut off or take away anything,” says Saxton, who made a $474 payment this week. “I won’t have the ability to get to work or even get another car if they repossess this one.”

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Watchdog: Mortgage Giants Too Free To Make Their Own Decisions

March 29, 2012

WASHINGTON — A government watchdog says the top U.S. housing regulator should take a more active role in overseeing mortgage giants Fannie Mae and Freddie Mac, which have received huge infusions of taxpayer cash. The Federal Housing Finance Agency is deferring too much decision-making to Fannie and Freddie, the agency’s inspector general said, and it’s failing to adequately evaluate the two companies’ actions. For example, the report said that the agency did not sufficiently scrutinize a decision by the companies to award their top six executives more than $35 million in bonuses in 2009 and 2010. The FHFA is also understaffed and doesn’t have enough examiners to oversee Fannie and Freddie, the report said. The agency was set up in 2008 during the financial crisis and soon took over both mortgage giants. Soaring foreclosures caused huge losses for Fannie and Freddie, which later received $150 billion in taxpayer support. “With dim prospects for a quick recovery of the housing finance system, and ultimate resolution of (Fannie and Freddie) uncertain, FHFA faces significant challenges continuing to manage” the companies effectively, the report said. The two mortgage companies buy home loans from banks and other lenders. They package them into bonds with a guarantee against default and then sell them to investors around the world. McLean-Va.-based Freddie and Washington-based Fannie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past year. Fannie and Freddie’s rescue was the most expensive bailout of the 2008 financial crisis. It could cost nearly $200 billion more to support the companies through 2014 after subtracting dividend payments, according to FHFA. Pressure has mounted to eliminate Fannie and Freddie and reduce taxpayers’ exposure to further risk. The Treasury Department put forward a plan a year ago to slowly dissolve Fannie and Freddie, although that process could take up to seven years. Abolishing Fannie and Freddie would transform how homes are bought and redefine who can afford them.

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How Do I Get Rid Of My Crap Mortgage?

March 28, 2012

How many hoops do homeowners have to jump through to shake off a bad mortgage? This question is at the heart of a growing area of law as judges across the country try to determine whether borrowers who took out loans at the height of the subprime bubble, under shady terms that they weren’t told about, can cancel their mortgage and walk away debt-free. Under the federal Truth in Lending Act, homebuyers who aren’t properly informed of the terms of their mortgage have up to three years to cancel or “rescind” the loan. What’s unclear now is whether borrowers, to ensure the debt is canceled, also have to file a lawsuit within that three-year window against whoever owns the loan. On Tuesday, the Consumer Financial Protection Bureau weighed in, filing a friend of the court brief in a case involving a Denver woman who tried to rescind her mortgage, but instead is facing foreclosure because she didn’t also sue the loan owner, HSBC. It is one of 10 such cases currently in federal appeals courts, according to court documents. The CFPB, created under the Dodd-Frank financial regulation law, has announced a blizzard of initiatives in its short history to make student lending transparent, to better regulate debt collectors, and, especially, to make mortgage lending more fair. In its brief, filed in the U.S. District Court of Appeals for the 10th Circuit in Denver, the agency sided with homeowners, arguing that borrowers need only notify a lender that they want to cancel a loan within three years in order to successfully rescind a loan. Requiring a homeowner to also sue within that time frame “disregards the statutory and regulatory text, forces potentially unnecessary litigation on lenders, and wastes valuable judicial resources — all in contravention of the statutory scheme to provide a private, non-judicial mechanism to rescind mortgage loans,” the agency said. The case involves Jean Rosenfield, who took out a $388,000 mortgage in 2006 from Ownit Mortgage Solutions, a now-defunct subprime lender. As was typical at the height of the subprime bubble, the loan was so expensive that it was almost certain to fail. Rosenfield took out a 50-year mortgage with a variable interest rate that her complaint said averaged 10.5 percent. It also included a balloon payment of $351,907 due in 30 years. Had Rosenfield somehow remained current on her payments for 30 years, she would have paid the lender a total of $813,812, with just $36,093 in principal. In 2008, Rosenfield filed a notice with HSBC, which bought the loan from Ownit, stating the loan should be cancelled because the lender violated the Truth In Lending act’s disclosure requirements. The lender failed to notify her of her right to rescind the loan, provided incomplete disclosures regarding the variable interest rate, and inaccurately stated the total finance charges, she claimed. John Nelson, Rosenfield’s lawyer, said that his client tried to work out a solution with HSBC, but the bank wouldn’t agree to a mortgage modification. Three years and one month after she took out the loan, Rosenfield sued HSBC to force the bank to cancel her debt. (An attorney for HSBC did not respond to a request for comment.) Last year, a district court judge dismissed Rosenfield’s case, ruling that the law requires borrowers to sue within the three-year window. She appealed. It’s not clear how many home loans are at stake. Nelson said he was aware of 43 cases at the federal district court level that involve the same time-limit issue. Nelson said that there could be many more homeowners with the potential for a recission, though if they haven’t already filed a request with their lender it may be too late. “In my experience, almost every loan packaged [during the housing bubble] contains deficiencies that would allow consumer to rescind if they wanted to follow that course of action,” Nelson said. The CFPB said in court documents that it plans to intervene in similar cases, trying to win rulings consistent with its view. But the bureau faces an uphill fight. So far, courts have mostly ruled in favor of lenders, which argue that the statute requires homeowners to not only inform a bank that they want to rescind a loan within three years from origination, but also sue in that timeframe in order to cancel the mortgage.

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Why You Smiling, BofA CEO?

March 28, 2012

March 28 (Reuters) – Bank of America Corp Chief Executive Officer Brian Moynihan made $8.1 million in total compensation last year, up from $1.9 million in 2010, according to a filing with the U.S. Securities and Exchange Commission on Wednesday. Moynihan’s 2011 pay included $6.1 million in performance-based stock that vests only if the bank meets a certain return on assets measure by the end of 2015. The CEO of the second-largest U.S. bank received no cash bonus, and his salary stayed the same at $950,000. In 2011, Bank of America shares fell 58 percent as investors worried about the company’s need for more capital to absorb mortgage-related losses and meet new international capital standards. Those concerns have eased after the bank passed the Federal Reserve’s stress test in March, and its stock is up more than 70 percent this year. Bank of America also nominated director Virgis Colbert for re-election, even though he has reached the age of 72. The company’s guidelines say directors who reach that age should not be nominated unless it is in the “best interests” of the company, according to the filing.

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The Huge Wall Street Scandal No One’s Talking About

March 26, 2012

The LIBOR trading scandal could turn out to be far worse for Wall Street than its mortgage troubles.

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Holliday, Fenoglio Lead Veteran Team to CBRE

March 26, 2012

CBRE recruited Harold E. (Hal) Holliday, John T. Fenoglio, David M. Aaronson and James M. Richards Jr. as executive vice presidents. The brokers will serve in the mortgage brokerage’s debt and equity finance group in Houston. The team previously worked at Grandbridge Real Estate Capital. Holliday has nearly four decades in mortgage brokerage and co-founded Holliday Fenoglio. After HF’s acquisition by Amresco 18 years ago, he successfully led the…

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Feds Rips Big Bank Decision

March 25, 2012

SAN FRANCISCO — Federal securities regulators are asking a federal court to order Wells Fargo & Co. to turn over documents in an investigation of the bank’s sale of $60 billion in mortgage-backed securities. The Securities and Exchange Commission said in a statement Friday that Wells Fargo agreed to produce the documents under subpoenas dating to September of 2011, but the bank has failed to hand over much of the requested material. The agency has asked U.S. District Court in San Francisco to order the nation’s largest mortgage lender to turn over the paperwork. The SEC is investigating possible fraud in the bank’s sale of securities that were made up of multiple mortgage loans between September 2006 and early 2008. Wells Fargo called the SEC’s action “inappropriate and unwarranted.” Spokeswoman Mary Eshet said Saturday in an e-mailed statement the bank will vigorously defend itself in court. The bank has cooperated with the SEC, and the agency violated an understanding that both sides had about the remaining documents, the statement said. The SEC said it is investigating whether the San Francisco-based Wells Fargo “made material misrepresentations or omitted material facts” in securitizing the loans. The company would perform a due diligence review of a sample of the loans within the securities and would drop loans that didn’t meet its underwriting standards, the SEC said. But the agency said it doesn’t appear that Wells Fargo took steps to drop bad loans from the rest of the securities. “The commission is investigating, among other things, whether Wells Fargo misrepresented to investors that the loans being securitized complied with the bank’s loan underwriting standards,” the SEC statement said. The SEC said it is gathering facts and has not determined if any laws have been broken. Wells Fargo also said the SEC inaccurately described its conduct involving mortgage-backed securities and that no enforcement action by the agency is warranted. Wells Fargo hasn’t been under as much public scrutiny as companies like Goldman Sachs Group Inc. and Bank of America Corp. for its sales of mortgage-backed securities to investors.

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Bank Of America To Offer Rentals As Foreclosure Alternative

March 23, 2012

NEW YORK — Bank of America says it has begun a pilot program offering some of its mortgage customers who are facing foreclosure a chance to stay in their homes by becoming renters instead of owners. The “Mortgage to Lease” program, which was launched this week, will be available to fewer than 1,000 BofA customers selected by the bank in test markets in Arizona, Nevada and New York. Participants will transfer their home’s title to the bank, which will then forgive the outstanding mortgage debt. In exchange, they will be able to lease their home for up to three years at or below the rental market rate. The rent will be less than the participants’ current mortgage payments and customers will not have to pay property taxes or homeowners insurance, the bank said. “This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support,” Ron Sturzenegger, legacy asset servicing executive of Bank of America, said in a statement. Among requirements to qualify for the program, homeowners must have a BofA loan, be behind at least 60 days on payments and be “underwater,” owing more on their mortgages than their homes are worth. The bank based in Charlotte, N.C., said it will at first own the homes, then sell them to investors. If the program is successful, it could be expanded to include real-estate investors who buy qualifying properties and keep the occupants on as tenants. “If this evolves from a pilot into a more broadly based program, we also see potential benefits from helping to stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market,” Sturzenegger said. Foreclosure tracking firm RealtyTrac says foreclosure activity has picked up in some states, as banks deal with a backlog of homes with mortgages that had gone unpaid yet remained in limbo due to delays stemming from foreclosure-abuse claims, according to Nevada has the nation’s highest foreclosure rate as of last month, with one in every 278 households in the state receiving a foreclosure-related filing, twice the national average, according to RealtyTrac. Arizona ranks third behind California, while New York has not been as hard hit, with one in every 4,604 households receiving a foreclosure-related filing.

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US mortgage applications down 7.4%

March 23, 2012

(MENAFN) The US Mortgage Bankers Association (MBA) reported rhat mortgage applications went down by 7.4 percent by the sixteenth of March because of an increase in mortgage rates to their highest …

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BofA Tests An Option to Foreclosure

March 23, 2012

Bank of America Corp. BAC -2.24% is launching a pilot program that will allow homeowners at risk of foreclosure to hand over deeds to their houses and sign leases that will let them rent the houses back from the bank at a market rate. While the initial scope of the “Mortgage to Lease” program is small—the bank began sending letters Thursday offering leases to 1,000 homeowners in Arizona, Nevada and New York—it represents a big change in the way banks deal with borrowers who can’t afford their mortgages.

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‘We’ll Fight This To The Death’: The Vicious Capitol Hill Battle Between Banks and Credit Unions

March 22, 2012

WASHINGTON — In early February, Alabama Republican Spencer Bachus called for a meeting between two of the most quietly influential interest groups in the nation’s capital: credit unions and community banks. Bachus, chairman of the powerful House Financial Services Committee, was looking to ensure the passage of a slew of federal favors benefiting both sides. All the lobbyists had to do was show up at a meeting and figure out how to work together. It was too much to ask. The Credit Union National Association and the Independent Community Bankers Association immediately agreed to the sit-down, but as the meeting approached the community bankers abruptly cancelled the event, according to lobbyists and congressional staffers familiar with the plans. “There was supposed to be a couple of joint meetings with different congressional offices and with the leadership of Financial Services. And the banks decided that we had too many bills in play and they didn’t want to meet with us,” says Linda Armyn, a senior vice president for Bethpage Federal Credit Union. It’s no small matter to cancel on a committee chairman. ICBA had performed the Capitol Hill equivalent of cussing out the boss at an office Christmas party. Still, the group has no regrets. “There won’t be any meetings. There won’t be any compromise. There won’t be any deals. There won’t be any discussions,” says ICBA chief economist Paul Merski. To most folks, community banks and credit unions are indistinguishable. Both are often viewed as good-guy alternatives to Wall Street banks, eschewing the too-big-to-fail crowd’s phantom, subprime profits in favor of safe, consumer-friendly products. After the 2008 financial crash, that strategy allowed them to reap financial rewards and reputational halos. The “Move Your Money” movement and Bank Transfer Day shifted billions of dollars worth of business from Wall Street to these small lenders. But community banks and credit unions each operate under different government charters and regulatory regimes. They compete for the same good-guy customer base, and are openly hostile with each other on Capitol Hill. Their mutual animosity is frequently unmoored from profit margins and bottom lines, a passionate conflict that at times seems like a Washington version of the Hatfields and McCoys. “The credit unions have become the skunk at the garden party,” Merski says. “The hypocrisy of the bank lobby appears to have no end,” Credit Union National Association (CUNA) CEO O. William Cheney said during a November hearing . But while the dispute between the two groups goes back decades , their most recent clash serves as a window into the way American government works — or doesn’t work — in the 21st century. Legislative scuffles between entrenched interest groups occasionally gather enough momentum to attract public attention. Last year’s blowout over debit card swipe fees hijacked the Senate schedule for nearly six months, and the Stop Online Piracy Act sparked furious online protests. Most of the time, the special interest stranglehold over Congress is exercised relatively quietly, in small-bore negotiations that never really get off the ground. Even if the bills go nowhere, they present lucrative fundraising opportunities for lawmakers, while devouring the time and attention that elected officials could be using to attend to the public good — say, solving the jobs crisis, ending homelessness or improving the standard of living for the one in four American children who currently live in poverty . Instead, lawmakers expend tremendous amounts of energy trying to bridge emotional divides between favored interest groups that are accustomed to getting their way and have little interest in compromise — like, for example, credit unions and community banks. Few fight harder in Washington than your cuddly local lenders. “People always say it’s Wall Street, but the big banks aren’t the most potent lobbyists, because everybody hates them,” says Rep. Barney Frank (D-Mass.). “It’s the credit unions and the community banks because of their grassroots networks.” A big bank like Citigroup appears to have oceans of lobbying clout that a small community bank lacks. But every congressional district has a community bank and a local credit union. As united forces, the ICBA and CUNA can (sometimes) defeat even their Wall Street competitors on the Hill. This week, they will flex that muscle. CUNA expects 4,000 members of the credit union community to fly in to Washington for the group’s annual lobbying convention — including at least one from every congressional district. Like the credit unions, community banks will be making their annual descent on Capitol Hill later this year. Both groups have profitable requests pending in Congress. The Communities First Act, introduced in April 2011, reads like ICBA’s wish-list for the entire year. During a November hearing on the bill, Georgetown University Law School professor Adam Levitin criticized the bill as a set of unearned giveaways for small financial firms — tax cuts, accounting gimmicks to hide losses, weaker capital requirements and even immunity from some forms of scrutiny by the Securities and Exchange Commission. But whatever its impact on communities, the bill would undoubtedly help banks pad their profits. “It does nothing for communities,” Levitin said, calling the bill “narrow, special-interest pleading.” Credit unions, meanwhile, are seeking legislation that would allow them to expand their business lending operations. Credit unions are currently barred from issuing business loans in excess of 12.25 percent of their total assets, an arbitrary rule that banks were able to slip into a 1998 law over the objections of both credit unions and President Bill Clinton’s administration. Over the past year, credit union lobbyists have amassed 121 co-sponsors — 46 Republicans and 75 Democrats — for the Small Business Lending Enhancement Act , a bill that would raise that business lending cap to 27 percent. Credit unions argue that allowing them to make more business loans will help small firms hire, claiming the bill will create 140,000 jobs. Community banks and credit unions need each other. Neither the Communities First Act nor the Small Business Lending Enhancement Act is likely to pass on its own, prompting Rep. Bachus’ attempt to combine them. (Bachus’ office did not return requests for comment). The only trouble? The credit unions and community banks have been at each other’s throat for decades. “It’s a very visceral reaction they have,” says Ryan Donovan, a top CUNA lobbyist, referring to community bankers. “The ICBA would rather have their entire legislative agenda burned than let our small bill pass.” On the bill that would lift the lending cap on credit unions, ICBA’s Merski says,”We’ll fight this to the death because of the fundamental philosophical unfairness. It’s almost un-American, really.” Banks have little to lose from the credit union bill, and large potential profits to gain from their own legislation. Credit unions do very little business lending. For the most part, they stick to simple, standardized consumer products like checking accounts, mortgages and credit cards. Credit unions are generally small, even compared to community banks, and account for just 1 percent of the commercial lending market nationwide, according to CUNA, with an average loan amount of only $220,000. “We’re not talking shopping malls,” explains CUNA senior vice president for communications Mark Wolff. “We’re talking landscaping and bakeries.” Even community banks that compete head-to-head with specific credit unions simply will not lose very much if the credit union bill passes. The credit union group only pegs the gains from their legislation at 140,000 jobs — a drop in the bucket relative to the jobs crisis. Yet the legislative arm-wrestling continues. “If you look at the marketplace, the banks have 95 percent of the market share. There isn’t a whole lot of data that supports we’re taking their business,” says Armyn of the Bethpage Federal Credit Union. “I mean, we’re taking a piece of their business, but if you look at it on the grand scale, they still have 95 percent of the market share.” But the battle isn’t really over balance sheets. It’s over those “philosophical” differences Merski cites. Talking to members of both groups, bankers essentially think credit unions are tax cheats, while credit unionists see bankers as greed-mongers. Credit unions are nonprofits owned by their customers, a unique status among financial institutions which allows them to be exempt from income taxes. But a credit union charter comes with major drawbacks — they can’t pay dividends to shareholders, since they don’t have any shareholders, nor can their executives enjoy wild paydays in the form of stock options. They also only have one option for growth: profit. Banks can take on debt or issue stock to capitalize on profit opportunities, but credit unions have nothing but year-end earnings to draw on. Bank executives do enjoy higher paydays. Among credit unions with at least $100 million in assets, the median CEO pay comes out to $211,558, according to CUNA. According to data compiled by SNL Financial, publicly traded banks with less than $10 billion in assets (a common threshold in regulation and legislation to define a “community bank”) pay out median CEO compensation of $385,577. As with most CEO pay in the financial industry, the bigger the bank, the better the potential payday, but community banks with less than $500 million in assets still paid a median of $248,437 — about 15 percent better than the median for all credit unions over $100 million in assets, according to the SNL Financial data. The largest credit union is Navy Federal, with $46 billion in assets . But both sides use such relative metrics to criticize the other. “They don’t pay taxes!” says ICBA’s Merski. “They don’t get that we really are a different model,” counters CUNA’s Wolff. Both sectors, of course, have always been free to change their charters whenever they wish. Credit unions file to become banks all the time, and there is no law barring banks from adopting a credit union model. This year’s skirmish between community banks and credit unions will almost certainly dwindle into obscurity, a common fate for special interest legislation. Next year the two groups will undoubtedly concoct new slates of legislative demands, as is the nature of lobbying. But the public has still paid the opportunity cost for the lobbying push. The dispute between credit unions and community banks is one of an endless array of Washington feuds that tend to not connect with the broader public interest. Even if the two groups had been able to put aside their differences and move their legislation forward, the tangible benefits for everyday Americans would have likely been minor. It doesn’t make much difference for most businesses whether they get their loan from a small bank or a credit union, so long as they get their loan. And the benefits that ICBA was seeking amount to a set of unhelpful deregulation . Even if the uncounted hours of attention that were devoted to introducing the bills, garnering co-sponsors, holding hearings and briefing lawmakers had borne fruit, the public would still have been left out of the equation. Similar disputes take place every year between dozens of special interests, on every committee in Congress. And, in this case, the special interests groups themselves say the fuss has largely proved to be just that. “We all just want to move forward and grow,” says Armyn, the Bethpage Federal Credit Union executive, frustrated with the political gridlock. “To me, it’s just silly.”

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