While auditing files, we’ve seen a BPO (broker price opinion) charged to the same house 17 times in 20 days.  Give me a break!  Like the bank really sent an agent out to the house 17 times.  It is very clear when you audit a mortgage that many times the servicers are jacking the homeowner up with fees to line the bank’s pockets.

If Bank of America is your servicer you need to closely watch you account if you are struggling with your payments.

If you are a Countrywide customer prior to 2008 you need to have your mortgage audited immediately.

The FTC press release is below.

- The Bank Slayer

Countrywide Will Pay $108 Million for Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers in Bankruptcy

Two Countrywide mortgage servicing companies will pay $108 million to settle Federal Trade Commission charges that they collected excessive fees from cash-strapped borrowers who were struggling to keep their homes. The $108 million represents one of the largest judgments imposed in an FTC case, and the largest mortgage servicing case. It will be used to reimburse overcharged homeowners whose loans were serviced by Countrywide before it was acquired by Bank of America in July 2008.

“Life is hard enough for homeowners who are having trouble paying their mortgage. To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible,” said FTC Chairman Jon Leibowitz. “We’re very pleased that homeowners will be reimbursed as a result of our settlement.”

According to the complaint filed by the FTC, Countrywide’s loan-servicing operation deceived homeowners who were behind on their mortgage payments into paying inflated fees – fees that could add up to hundreds or even thousands of dollars. Many of the homeowners had taken out loans originated or funded by Countrywide’s lending arm, including subprime or “nontraditional” mortgages such as payment option adjustable rate mortgages, interest-only mortgages, and loans made with little or no income or asset documentation, the complaint states.

Mortgage servicers are responsible for the day-to-day management of homeowners’ mortgage loans, including collecting and crediting monthly loan payments. Homeowners cannot choose their mortgage servicer. In March 2008, before being acquired by Bank of America, Countrywide was ranked as the top mortgage servicer in the United States, with a balance of more than $1.4 trillion in its servicing portfolio.

When homeowners fell behind on their payments and were in default on their loans, Countrywide ordered property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property, according to the FTC complaint. But rather than simply hire third-party vendors to perform the services, Countrywide created subsidiaries to hire the vendors. The subsidiaries marked up the price of the services charged by the vendors – often by 100% or more – and Countrywide then charged the homeowners the marked-up fees. The complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times. As a result, even as the mortgage market collapsed and more homeowners fell into delinquency, Countrywide earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue.

According to the FTC, under most mortgage contracts, homeowners must pay for necessary default-related services, but mortgage servicers may not mark up the cost to make a profit or charge homeowners for services that are not reasonable or appropriate to protect the mortgage holder’s interest in the property. Homeowners do not have any choice in who performs default-related services or the cost of those services, and they have no option to shop for those services.

In addition, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, the complaint charges that Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans. Countrywide also failed to tell borrowers in bankruptcy when new fees and escrow charges were being added to their loan accounts. The FTC alleges that after the bankruptcy case closed and borrowers no longer had bankruptcy court protection, Countrywide unfairly tried to collect those amounts, including in some cases via foreclosure.

Settlement Terms

The FTC’s complaint and settlement order name two mortgage servicers as defendants: Countrywide Home Loans, Inc. and BAC Home Loans Servicing LP, formerly doing business as Countrywide Home Loans Servicing LP. The settlement requires Countrywide to pay $108 million, which will be refunded to homeowners who Countrywide overcharged before July 2008.

In addition, the settlement order prohibits Countrywide from taking advantage of borrowers who have fallen behind on their payments. The defendants continue to service millions of mortgage loans, including tens of thousands of loans involving borrowers in bankruptcy and foreclosure. In the servicing of loans, the defendants are permanently barred from:

• Making false or unsubstantiated representations about loan accounts, such as amounts owed.
• Charging any fee for a service unless it is authorized by the loan instruments, by law, or by the consumer for a specific service requested by the consumer.
• Charging any fee for a default-related service unless it is a reasonable fee charged by a third party for work actually performed. If the service is provided by an affiliate of a defendant, the fee must be within limits set by state law, investor guidelines, and market rates. Defendants must obtain annual, independent market reviews of their affiliates’ fees to ensure that they are not excessive.

In addition, Countrywide must advise consumers if it intends to use affiliates for default-related services and, if so, provide a fee schedule of the amounts charged by the affiliates.

The settlement also requires Countrywide to make significant changes to its bankruptcy servicing practices. For example, Countrywide must send borrowers in Chapter 13 bankruptcy a monthly notice with information about what amounts the borrower owes – including any fees assessed during the prior month. The defendants also must implement a data integrity program to ensure the accuracy and completeness of the data they use to service loans in Chapter 13 bankruptcy.

This case was brought with the invaluable assistance of the United States Trustee Program, the component of the Department of Justice that oversees the administration of bankruptcy cases and private trustees. This action represents the FTC’s continuing work to help consumers who have been hurt by the economic downturn.

For more information about the case and the FTC’s refund program, see www.ftc.gov/countrywide.

The Commission vote to authorize staff to file the complaint and settlement was 5-0. The complaint and settlement were filed in the U.S. District Court for the Central District of California.

The Federal Trade Commission is a member of the interagency Financial Fraud Enforcement Task Force. For more information on the Task Force, visit www.stopfraud.gov.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Thinking about taking on a new short sale?  REALTORS take note, Equator is the new “in thing” for Bank of America and now GMAC as well.  What used to be REOTrans has been upgraded and is now the new Short Sale Equator system.  We have been testing as well as using it for months and here is what we have discovered.

The negatives?

1. Internet access required.  The homeowner must create a userid on the system and have regular access to respond and upload docs.  I guess they assume all homeowners have unlimited access to scanners and the internet, but if not they must have extra money to buy what they need, right?
2. Behind the curtain, the process is still the same.  It is really nothing more than an automated hurry up and wait system.   You knock off all the tasks (like faxing, calling, and emailing the old way) and then wait on the bank for someone to be assigned to the account and review the uploaded docs.
3. It’s very impersonal.  The negotiators hide behind Equator and/or use it as an excuse for not responding.  Before Equator, the negotiators resisted giving out their email address but sometimes would and eventually you could have a conversation with a real thinking human being.  Now, everything has to be input into Equator virtually limiting as much as possible the human to human interaction.
4. Unreasonable demands.  The bank can and does take as much time as they want but every communication in Equator concludes with “if this is not responded to within 24 hours the file will be closed.”  Remember the part about “better make sure your seller has constant access to the internet?”
5. Unilateral negotiations.  Counteroffers by the negotiator through Equator are not always “accurate” per management or the investor’s (Freddie, Fannie and others) guidelines.  This leads to acceptance of an offer or counter and then it later being reneged upon.
6. Unfair trade practices.  The negotiator will attempt to reduce the REALTOR’s commission to the “standard” 4% or 5% or refuse to pay for seller’s portion of title insurance or eliminate entirely all title company fees or make unreasonable demands of other lien holders or POAs and HOAs.
7. Escalation improbable.  Not satisfied with a response or feel you’re not being treated fairly?  Please enter your complaint in the following field, include your name, number, best time to call and exact nature of your complaint, any incomplete forms will limit our ability to respond–limit your response to 24 characters.  Ok, the 24 characters part is not true.
8. GMAC has to submit its own files in Equator versus the agent doing it and starting the process.
9. If you like Equator it is not available (currently) for FHA-insured short sales.

- The Bank Slayer

PART 1

Thinking about taking on a new short sale?  REALTORS take note, Equator is the new “in thing” for Bank of America and now GMAC as well.  What used to be REOTrans has been upgraded and is now the new Short Sale Equator system.  We have been testing as well as using it for months and here is what we have discovered.

Let’s start with the positives, in theory.

1. No more long hold times and mysterious disconnects.  In a nutshell, they are pushing the loss mitigation work out of the bank and down to the homeowner, attorney, REALTORS, loss mitigation counselors and anyone else in the loop.  If you have the time, a good scanner and fast internet connection AND the homeowner does as well AND you are really on top of your game this could be reason enough to celebrate.
2. BYE, BYE fax machine and “we never got your fax”.  We used to hear this often during negotiations of short sale and loan mods with Bank O’ UnAmerica.    Their theory is an “upload” of the docs instead of faxing 90+ pages and then waiting for the bank to “scan and file” will streamline the process.
3. The system is online and thus always available.  Provided there are no scheduled, or unscheduled, maintenance windows.  Recall how the old system was always “slow” or “unavailable” at the end of the month?
4. Faster access to decision makers.  The negotiators should be assigned more quickly than before Equator.  This could be a real bonus since the front-line customer service processors  can’t do anything.
5. Faster response time.  Since the bank has less responsibility because they have pushed all the tasks out to you, they should be able to respond more quickly.  Sounds nice doesn’t it.
6. Costs less.  More automation, fewer people and less human-customer interaction are all good for the bottom line, Bank of America’s bottom line that is.
7. Tastes great.  Giving the customer access to the “system” makes them feel more involved and more empowered.  Fake silk feels just as nice as real silk, only it’s not.
8. Since Equator requires the internet, you and the homeowner can surf the net or play online poker while at work and not get in trouble for goofing off since you need to “check Equator” for your next task.
9. If you hate Equator, currently FHA-insured short sales are not permitted to go through Equator.

- The Bank Slayer

Friday was a day of rejoicing for many homeowners who saw the press releases touting that Bank of American will writedown your mortgage balance to the actual value of your home.   Hold the champagne.

According to The New York Times, BoA won’t actually write down loans to the value of the property.  Rather (and here’s the dirty secret):

Bank of America executives said the program would work this way: A borrower owes $250,000 on a house now worth $200,000.  $50,000 of that balance would be moved into a “special” interest-free account.

As long as the owner continued to make payments on the $200,000, without fail, every year $10,000 of the money in the special account would be forgiven until either the balance was $0 or the housing market recovered and the borrower once again had positive equity.

The program would be available only to former Countrywide customers (Countrywide was acquired by BoA in 2008) and is by “invitation only.” It is unclear what the application process is or when this program will go into effect.

This is s joke right?   Let’s examine a few problems:

1. How do you score an invitation?
2. Why only Countrywide former customers?  Maybe because Countrywide is on the hook to several state attorney generals for predatory lending?
3. What is the criteria BofA will use to determine when the house “has equity”?
4. What are the tax consequences?

I guess some is better than none.  Let’s just stop now before I really get fired up.

- The Bank Slayer

The second nasty title cloud appears when homeowners have modified their loan or taken the dreaded “HomeSaver Advance” which was rampant the last few years.

Let’s examine the result of a typical HomeSaver Advanced deal.  Imagine falling several payments behind and now you owe the bank $8,000 in past due payments.  We know most of these payments are mainly interest with a tad of principle tossed in (in the early stages of the loan).  So now you have roughly $7,999 in past due interest.  The bank rolls out the HomeSaver Advance.  You sign on the dotted line, mail it back and “POOF” you are now current again.   What happened?  You just agreed to take the past due payments and convert it all to principle and add it to your loan balance.  It will now show up a second or third lien on your home which will need to be paid off when selling or refinancing the home.  This can quickly erode equity.

What about loan mod?  Ok, let’s see…you borrower the money for the purchase from AmeriQuest, made payments to Countrywide, refinanced with Chase and now make payments to AHMSI.   You fall behind and want a loan modification.  AHMSI rolls out the red carpet for a HAMP loan modification.  You sign away and make your trial payments.  You decide you can’t make the payments and you need to sell.  You get an offer and are ready to go to closing…but wait the Deed of Trust recorded on your home has one of the three previous banks and not AHMSI.   Tack on a new “loan modification agreement” signed by you and recorded by AHMSI saying you agree you owe a huge amount and that it is all owed to AHMSI.

Can you see where this is going?  Did AHMSI deliver to you a copy of the assignment of your Note from your previous lender?  Did Chase release the refinance Note?  These situations can be deal killers for selling the home.

-       The Bank Slayer