Bank of America, Chase, Wells Fargo, Citigroup and Ally Financial (GMAC) have been (and still are) cheating taxpayers by wrongfully foreclosing and then claiming millions of dollars in reimbursements from HUD, FHA & other governmental bodies for losses on mortgage loans.

Why won’t you let the dog sniff your locker?

As the article below shows, these banksters resist all attempts to uncover the truth about what is really going on behind the curtain – instead offering up billions to sweep the problems under the rug.  Doesn’t that just smell wrong?  Why would anyone offer BILLIONS to just look the other way if you hadn’t done anything wrong?

This just affects the deadbeats who don’t pay their mortgage, right?

A frequent comment we hear is, “Hey those deadbeats that can’t pay their mortgage deserve to be foreclosed.”  Yes, some folks are deadbeats or what we call predatory borrowers but most are not.  Most folks have had life hit them in the mouth and are just looking for some relief.   Many are not looking for a handout and are willing to sell their home and walkaway.

Almost every month we have a family walk into our office, who is CURRENT and not in default but their mortgage account is jacked up.  For instance, they paid their property taxes but the bank paid them as well (erroneously) and now won’t accept their regular mortgage payment unless they also send them money for the mis-paid taxes.   Or how about the military families that were foreclosed while they were deployed overseas – in direct violation of the law.

The article below from the Huffington Post points out the consistent, rampant and willful way in which these large banks enrich themselves not just the expense of the deadbeat or the honest law abiding borrower whose account is jacked up but every tax paying citizen in America.

Whether or not you or someone who you know is struggling with their mortgage situation, the shameful acts of some of the largest banking institutions in America needs to stop.  We all suffer.

- The Bank Slayer

Confidential Federal Audits Accuse Five Biggest Mortgage Firms Of Defrauding Taxpayers

http://www.huffingtonpost.com/2011/05/16/foreclosure-fraud-audit-false-claims-act_n_862686.html

WASHINGTON — A set of confidential federal audits accuse the nation’s five largest mortgage companies of defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans, four officials briefed on the findings told The Huffington Post.

The five separate investigations were conducted by the Department of Housing and Urban Development’s inspector general and examined Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, the sources said.

The audits accuse the five major lenders of violating the False Claims Act, a Civil War-era law crafted as a weapon against firms that swindle the government. The audits were completed between February and March, the sources said. The internal watchdog office at HUD referred its findings to the Department of Justice, which must now decide whether to file charges.

The federal audits mark the latest fallout from the national foreclosure crisis that followed the end of a long-running housing bubble. Amid reports last year that many large lenders improperly accelerated foreclosure proceedings by failing to amass required paperwork, the federal agencies launched their own probes.

The resulting reports read like veritable indictments of major lenders, the sources said. State officials are now wielding the documents as leverage in their ongoing talks with mortgage companies aimed at forcing the firms to agree to pay fines to resolve allegations of routine violations in their handling of foreclosures.

The audits conclude that the banks effectively cheated taxpayers by presenting the Federal Housing Administration with false claims: They filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents.

Two of the firms, including Bank of America, refused to cooperate with the investigations, according to the sources. The audit on Bank of America finds that the company — the nation’s largest handler of home loans — failed to correct faulty foreclosure practices even after imposing a moratorium that lifted last October. Back then, the bank said it was resuming foreclosures, having satisfied itself that prior problems had been solved.

According to the sources, the Wells Fargo investigation concludes that senior managers at the firm, the fourth-largest American bank by assets, broke civil laws. HUD’s inspector general interviewed a pair of South Carolina public notaries who improperly signed off on foreclosure filings for Wells, the sources said.

The investigations dovetail with separate probes by state and federal agencies, who also have examined foreclosure filings and flawed mortgage practices amid widespread reports that major mortgage firms improperly initiated foreclosure proceedings on an unknown number of American homeowners.

The FHA, whose defaulted loans the inspector general probed, last May began scrutinizing whether mortgage firms properly treated troubled borrowers who fell behind on payments or whose homes were seized on loans insured by the agency.

A unit of the Justice Department is examining faulty court filings in bankruptcy proceedings. Several states, including Illinois, are combing through foreclosure filings to gauge the extent of so-called “robo-signing” and other defective practices, including illegal home repossessions.

Representatives of HUD and its inspector general declined to comment.

The internal audits have armed state officials with a powerful new weapon as they seek to extract what they describe as punitive fines from lawbreaking mortgage companies.

A coalition of attorneys general from all 50 states and state bank supervisors have joined HUD, the Treasury Department, the Justice Department and the Federal Trade Commission in talks with the five largest mortgage servicers to settle allegations of illegal foreclosures and other shoddy practices.

Such processes “have potentially infected millions of foreclosures,” Federal Deposit Insurance Corporation Chairman Sheila Bair told a Senate panel on Thursday.

The five giant mortgage servicers, which collectively handle about three of every five home loans, offered during a contentious round of negotiations last Tuesday to pay $5 billion to set up a fund to help distressed borrowers and settle the allegations.

That offer — also floated by the Office of the Comptroller of the Currency in February — was deemed much too low by state and federal officials. Associate U.S. Attorney General Tom Perrelli, who has been leading the talks, last week threatened to show the banks the confidential audits so the firms knew the government side was not “playing around,” one official involved in the negotiations said. He ultimately did not follow through, persuaded that the reports ought to remain confidential, sources said. Through a spokeswoman, Perrelli declined to comment.

Most of the targeted banks have not seen the audits, a federal official said, though they are generally aware of the findings.

Some agencies involved in the talks are calling for the five banks to shell out as much as $30 billion, with even more costs to be incurred for improving their internal operations and modifying troubled borrowers’ home loans.

But even that number would fall short of legitimate compensation for the bank’s harmful practices, reckons the nascent federal Bureau of Consumer Financial Protection. By taking shortcuts in processing troubled borrowers’ home loans, the nation’s five largest mortgage firms have directly saved themselves more than $20 billion since the housing crisis began in 2007, according to a confidential presentation prepared for state attorneys general by the agency and obtained by The Huffington Post in March. Those pushing for a larger package of fines argue that the foreclosure crisis has spawned broader — and more costly — social ills, from the dislocation of American families to the continued plunge in home prices, effectively wiping out household savings.

The Justice Department is now contemplating whether to use the HUD audits as a basis for civil and criminal enforcement actions, the sources said. The False Claims Act allows the government to recover damages worth three times the actual harm plus additional penalties.

Justice officials will soon meet with the largest servicers and walk them through the allegations and potential liability each of them face, the sources said.

Earlier this month, Justice cited findings from HUD investigations in a lawsuit it filed against Deutsche Bank AG, one of the world’s 10 biggest banks by assets, for at least $1 billion for defrauding taxpayers by “repeatedly” lying to FHA in securing taxpayer-backed insurance for thousands of shoddy mortgages.

In March, HUD’s inspector general found that more than 49 percent of loans underwritten by FHA-approved lenders in a sample did not conform to the agency’s requirements.

Last October, HUD Secretary Shaun Donovan said his investigators found that numerous mortgage firms broke the agency’s rules when dealing with delinquent borrowers. He declined to be specific.

The agency’s review later expanded to flawed foreclosure practices. FHA, a unit of HUD, could still take administrative action against those firms for breaking FHA rules based on its own probe.

The confidential findings appear to bolster state and federal officials in their talks with the targeted banks. The knowledge that they may face False Claims Act suits, in addition to state actions based on a multitude of claims like fraud on local courts and consumer violations, will likely compel the banks to offer the government more money to resolve everything.

But even that may not be enough.

Attorneys general in numerous states, armed with what they portray as incontrovertible evidence of mass robo-signings from preliminary investigations, are probing mortgage practices more closely.

The state of Illinois has begun examining potentially-fraudulent court filings, looking at the role played by a unit of Lender Processing Services. Nevada and Arizona already launched lawsuits against Bank of America. California is keen on launching its own suits, people familiar with the matter say. Delaware sent Mortgage Electronic Registration Systems Inc., which runs an electronic registry of mortgages, a subpoena demanding answers to 75 questions. And New York’s top law enforcer, Eric Schneiderman, wants to conduct a complete investigation into all facets of mortgage banking, from fraudulent lending to defective securitization practices to faulty foreclosure documents and illegal home seizures.

A review of about 2,800 loans that experienced foreclosure last year serviced by the nation’s 14 largest mortgage firms found that at least two of them illegally foreclosed on the homes of “almost 50″ active-duty military service members, a violation of federal law, according to a report this month from the Government Accountability Office.

Those violations are likely only a small fraction of the number committed by home loan companies, experts say, citing the small sample examined by regulators.

In an April report on flawed mortgage servicing practices, federal bank supervisors said they “could not provide a reliable estimate of the number of foreclosures that should not have proceeded.”

The review of just 2,800 home loans in foreclosure compares with nearly 2.9 million homes that received a foreclosure filing last year, according to RealtyTrac, a California-based data provider.

“The extent of the loss cannot be determined until there is a comprehensive review of the loan files and documentation of the process dealing with problem loans,” Bair said last week, warning of damages that could take “years to materialize.”

Home prices have fallen over the past year, reversing gains made early in the economic recovery, according to data providers Zillow.com and CoreLogic. Sales of new homes remain depressed, according to the Commerce Department. More than a quarter of homeowners with a mortgage owe more on that debt than their home is worth, according to Zillow.com. And more than 2 million homes are in foreclosure, according to Lender Processing Services.

Rather than punishing banks for misdeeds, the administration is now focused on helping troubled borrowers in the hope that it will stanch the flood of foreclosures and increase consumer confidence, officials involved in the negotiations said.

Levying penalties can’t accomplish that goal, an official involved in the foreclosure probe talks argued last week.

For their part, however, state officials want to levy fines, according to a confidential term sheet reviewed last week by HuffPost. Each state would then use the money as it desires, be it for facilitating short sales, reducing mortgage principal, or using the funds to help defaulted borrowers move from their homes into rentals.

In a report last week, analysts at Moody’s Investors Service predicted that while the losses incurred by the banks will be “sizable,” the credit rating agency does “not expect them to meaningfully impact capital.”

************************* Shahien Nasiripour is a senior business reporter for The Huffington Post.

H.R. 6133, “Prompt Decision for Qualification of Short Sale Act of 2010″ has been offered in the House but will it go anywhere?

Kudos to the National Association of Realtors for their support of a housing initiate that could help the mortgage/housing crisis, if it passes AND has some teeth.

We don’t need another sissy HAMP/HAFA-like program that offers “guidelines” for servicers and doesn’t provide punishment and remedies for home owners.

I’m not holding my breath yet. But it is a start.

- The Bank Slayer

Short Sale House

NAR Hails Bill to Hasten Lender Response to Short Sale Requests

Homeowners who are underwater with their mortgage may find that relief is on the way from a bill strongly supported by the National Association of Realtors® that would impose a deadline on lenders to respond to short-sale requests.

The legislation, H.R. 6133, “Prompt Decision for Qualification of Short Sale Act of 2010,” was offered yesterday in Congress by U.S. Reps. Robert Andrews (D-N.J.) and Tom Rooney (R-Fla.). The bill would require lenders to respond to consumer short sale requests within 45 days.

“The short sale, which requires lender approval, is an important instrument for homeowners who owe more than their home is worth,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “While the lending community has worked to improve the size and training of their short sales staffs, they still have a long way to go on improving response times.”

“As the leading advocate for homeownership issues, NAR believes that quicker attention to the short sales process is vital to help homeowners who are underwater and their communities, as well as the nation’s economy,” said Golder.

The number of potential short sale properties is rising across the country. According to NAR data, in the second quarter of 2010, Nevada, California, Florida and Arizona are states where significant shares of all properties on the market are potential short sales: 32 percent, 28 percent, 27 percent and 24 percent, respectively.

“Unfortunately, homeowners who need to execute a short sale are severely hampered because lenders (loan servicers) are unable to decide whether to approve a short sale within a reasonable amount of time. Potential homebuyers are walking away from purchasing short sale property because the lender has taken many months and still not responded to their request for an approval of a proposed short sale price. Many consumers have mentioned that the delay in short sale price approval exceeds 90 days, and in many cases never arrives,” Golder said.

She commended Reps. Andrews and Rooney for their efforts on the bill and urged Congress to pass the bill quickly

FYI..if your short sale is an FHA loan then tell everyone to sit tight unless the buyers are ready to counter up to the FULL amount of the bank’s counter or the Agreement To Participate letter.

When your short sale offer is less than HUD wants then you must request a variance to be approved – based upon the specific conditions such as different comps.

This process has been getting slower over the past several week and now we know why…we finally got in writing the reason…

***Please note….HUD’s system for variances has been down for 3 weeks.  HUD is processing variance manually….it is taking around 2 wks to get a response.

Tax dollars as work again.

- The Bank Slayer

The Obama Administration has announced their newest plan to slow the pace of foreclosures and help borrowers who can no longer afford their homes.

The plan calls for $2 billion to be directed to the Administration’s list of the “hardest hit areas”; while HUD is going to chip in another $1 billion to “other areas”.

The program will work through a variety of state and non-profit entities and will offer a declining balance, deferred payment “bridge loan” (zero percent interest, non-recourse, subordinate loan) for up to $50,000 to assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months.

Yes, you heard it right you can now apply to get up to two years worth of “free” money.

Of course, all of the details are not in place but what we know thus far is there are certain stipulations to qualify including but I’m sure not limited to:

1. Be at least three months delinquent in their payments and have a reasonable likelihood of being able to resume repayment of their mortgage payments and related housing expenses within two years;
2. Have a mortgaged property that is the principal residence of the borrower, and eligible borrowers may not own a second home;
3. Demonstrate a good payment record prior to the event that produced the reduction of income.

Oh, one other noteworthy item…Texas is not on the “hardest hit list” so don’t bother applying.

Maybe we’ll get lucky and end up on the “other areas” list for which HUD is accepting applications.

Below is the official press release from HUD.  Take a peek at which areas are getting our tax dollars.

- The Bank Slayer

WASHINGTON – The Obama Administration today announced additional support to help homeowners struggling with unemployment through two targeted foreclosure-prevention programs. Through the existing Housing Finance Agency (HFA) Innovation Fund for the Hardest Hit Housing Markets (the Hardest Hit Fund), the U.S. Department of the Treasury will make $2 billion of additional assistance available for HFA programs for homeowners struggling to make their mortgage payments due to unemployment. Additionally, the U.S. Department of Housing and Urban Development (HUD) will soon launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance – for up to 24 months – to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition.

“We remain committed to helping struggling homeowners, and this program will provide additional assistance to states hit hardest by unemployment,” said Assistant Secretary for Financial Stability Herb Allison. “This is part of the Administration’s comprehensive housing policy that has helped to stabilize a fragile housing market and allows responsible homeowners the chance to reduce their monthly mortgage payments to affordable levels.”

“HUD’s new Emergency Homeowner Loan Program will build on Treasury’s Hardest Hit initiative by targeting assistance to struggling unemployed homeowners in other hard hit areas to help them avoid preventable foreclosures,” said Bill Apgar, HUD Senior Advisor for Mortgage Finance. “Together, these initiatives represent a combined $3 billion investment that will ultimately impact a broad group of struggling borrowers across the country and in doing so further contribute to the Administration’s efforts to stabilize housing markets and communities across the country.”

Hardest Hit Fund

President Obama first announced the Hardest Hit Fund in February 2010 to allow states hit hard by the economic downturn flexibility in determining how to design and implement programs to meet the local challenges homeowners in their state are facing.

Under the additional assistance announced today, states eligible to receive support have all experienced an unemployment rate at or above the national average over the past 12 months. Each state will use the funds for targeted unemployment programs that provide temporary assistance to eligible homeowners to help them pay their mortgage while they seek re-employment, additional employment or undertake job training.

States that have already benefited from previously announced assistance under the Hardest Hit Fund may use these additional resources to support the unemployment programs previously approved by Treasury or they may opt to implement a new unemployment program. States that do not currently have Hardest Hit Fund unemployment programs must submit proposals to Treasury by September 1, 2010 that, within established guidelines, meet the distinct needs of their state.

The states eligible to receive funds through this additional assistance, along with allocations based on their population sizes, are as follows:

HUD Emergency Homeowners Loan Program

This new program will complement Treasury’s Hardest Hit Fund by providing assistance to homeowners in hard hit local areas that may not be included in the hardest hit target states. Those areas are still being determined.

The program will work through a variety of state and non-profit entities and will offer a declining balance, deferred payment “bridge loan” (zero percent interest, non-recourse, subordinate loan) for up to $50,000 to assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months.

Under the program, eligible borrowers must:

1. Be at least three months delinquent in their payments and have a reasonable likelihood of being able to resume repayment of their mortgage payments and related housing expenses within two years;
2. Have a mortgage property that is the principal residence of the borrower, and eligible borrowers may not own a second home;
3. Demonstrate a good payment record prior to the event that produced the reduction of income.

HUD will announce additional details, including the targeted communities and other program specifics when the program is officially launched in the coming weeks.

The US Department of Housing and Urban Development (HUD) removed the 1% origination fee cap on loans insured by the Federal Housing Agency (FHA), according a mortgagee letter sent out this week.

HUD made the change to remain consistent with the Real Estate Settlement Procedures Act (RESPA), which will require mortgage lenders to disclose to borrowers a single origination fee on the Good Faith Estimate (GFE) and the HUD-1 Settlement Statement.   The regulations go into effect Jan. 1, 2010

Under RESPA, the single origination charge on the GFE and HUD-1 must include all administrative and processing fees related to the origination of the loans, including compensation for both the mortgage lender and broker. HUD recognized the bundled charge would exceed the 1% cap, according to a statement from the law firm K&L Gates.

To match the changes of FHA regulations, HUD will no longer limit the amount of the origination fee charged to FHA borrowers.

Great the new changes RESPA has rolled out allow the lenders/brokers to jack up the Origination Fee.  Now brokers can whack you a few points for origination AND pick up some Yield Spread kickbacks.  This makes me sick.

The FHA will expect lenders to charge “fair and reasonable” fees and will monitor them to ensure FHA borrowers are not overcharged, and FHA commissioner David Stevens intends to issue additional guidance on fee limitations, according to the letter.

Yeh right, fair and reasonable.  I have looked at well over 1,000 HUD settlements statements where brokers were supposed to be “fair and reasonable” but in fact they were limited by law to the amount they could charge for some types of loans.  You know what we found…they don’t care and many look for any angle to skirt the law.  Wow, no need for that anymore, now we don’t have a limit.

Thanks to Jon Prior @ HousingWire for this tip.

- The Bank Slayer

One of the fears that homeowner have is whether they will be able to secure a new loan to purchase a home in the future after short selling the current one.  The answer is yes.  In fact, the Department of Housing and Urban Development (HUD) released a letter to lenders regarding borrower eligibility for a new Federal Housing Administration (FHA) mortgage after pursuing a short sale.

According to the letter (available to download here) and effective immediately, while borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement specifically “to take advantage of declining market conditions” or “to purchase another property at a reduced price”; they are cleared for a new FHA-insured mortgage if they were current on their previous mortgage and other debts at the time of the short sale and if the proceeds from the short sale served as payment in full.  These points are KEY!!!

Realtors, take note…if your seller needs to pursue a short sale and is still current, the sale will need to be handled differently than if they are in default.   Example, If a borrower executes a short sale while in default on their mortgage they will not be eligible for a FHA-insured mortgage for three years from the date of the pre-foreclosure sale.   But some lenders will make exceptions if the default was due to circumstances beyond the borrower’s control such as the death of the primary wage earner.  But this needs to be documented and handled diligently during the transaction.

It also means that anyone eligible for the Home Affordable Foreclosure Alternatives program (HAFA) would not be eligible for a new FHA-insured mortgage for three years.  Thanks to Jon Prior at HousingWire for this timely info.

-          The Bank Slayer