GSE Execs Say Defined Foreclosure Timelines Are Necessary
Tuesday, December 13th, 2011 | Uncategorized | No Comments
Representatives from both Fannie Mae and Freddie Mac upheld the companies’ practice of assessing penalties against servicers who fail to meet defined timelines for processing foreclosures.
Speaking to mortgage professionals at the Five Star MPact Conference in Dallas, Steve Clinton, Freddie Mac’s SVP of single-family operations, said “clearly the better outcome for both Fannie and Freddie is to keep the borrower in the home” with a loan modification offered early in the default process.
But as Edward Seiler, a director in Fannie Mae’s National Servicing Organization, acknowledged, sometimes servicers are faced with a difficult decision – sometimes “a borrower just shouldn’t be in that home,” Seiler said.
In such a situation, it’s critical that servicers complete the foreclosure process in a timely manner to clear bad loans from the pipeline and limit losses for the GSEs and taxpayers, according to the companies’ execs.
Rep. Elijah Cummings (D-Maryland) recently began inquiring about policies in place at Fannie and Freddie that fine servicers when they don’t complete a foreclosure action within the window of time established by the GSEs’ servicing guidelines.
Cummings says internal records show the GSEs assessed $150 million in fines against servicers last year for not processing foreclosures fast enough.
“I am concerned that these penalties, at least some of which were ordered by the Federal Housing Finance Agency (FHFA), may have contributed to widespread abuses by mortgage servicing companies and law firms attempting to meet arbitrary deadlines to expedite foreclosures,” Cummings said in a letter sent last month to Edward DeMarco, acting director of FHFA.
Cummings cites a June 2010 report from FHFA’s Office of Conservatorship Operations which concluded that “servicers, attorneys, and other supporting personnel were overloaded with the volume of foreclosures … documentation problems were evident, and law firms … were not devoting the time necessary to their cases.”
Clinton and Seiler stress that the foreclosure timeline mandates come into play only after all loss mitigation options are exhausted.
“Our biggest problem was loans from a year and two years ago were just sitting there,” stagnant in the foreclosure pipeline, Clinton said.
Fannie Mae and Freddie Mac have synchronized their individual foreclosure timeline requirements with the coordinated Servicing Alignment Initiative that went into effect October 1.
Clinton notes that the timelines and penalties have been in place for some time, but with the newly enacted guidelines, the GSE have aligned their parameters in order to help simplify and standardize procedures for their servicers.
“We don’t want the money” from penalties, Clinton said, “we want the behavior,” in terms of servicer compliance with both foreclosure prevention and foreclosure processing procedures.
In today’s environment of mass default, Clinton says the industry needs mass loss mitigation – effective procedures, standardized evaluations, and timely resolutions.
(Source: dsnews.com)
Should Fannie, Freddie Help Pay for Tax Relief?
Monday, December 12th, 2011 | Uncategorized | No Comments
Congress is considering tapping troubled mortgage giants Fannie Mae and Freddie Mac for cash — and that has the real-estate industry upset.
Major real estate industry groups on Thursday urged lawmakers to reject an attempt to raise money to renew a payroll-tax cut by raising fees charged by Fannie and Freddie, the mortgage giants that have been under government control for more than three years.
A move to do so is afoot on Capitol Hill. The idea was floated by the so-called super-committee on deficit reduction, where it appeared to have bipartisan support as an uncontroversial — and politically painless — way for lawmakers to raise money.
However, the real-estate groups say it would be a mistake to pay for the tax break through raising fees that the government-controlled mortgage-finance companies charge lenders. Doing so, they argue, would violate the purpose of those fees — to compensate for losses on bad mortgages.
The fees “should not be diverted for purposes unrelated to the safety and soundness of the housing finance system,” wrote the Mortgage Bankers Association, National Association of Home Builders and National Association of Realtors in a letter sent Thursday to Sen. Bob Casey (D., Pa.), the author of the tax package.
Instead, the lobbying groups say those fees should be used to reduce losses at Fannie and Freddie, whose rescue three cost taxpayers $151 billion to date. Those fees should “continue to be used solely for the purpose of minimizing the loss exposure of these government-sponsored enterprises,” they wrote.
Democratic and Republican leaders have expressed support for extending payroll-tax cuts and jobless benefits that expire at the end of the year. But the parties have split on how to offset the costs. If they don’t act, the employee payroll tax that funds Social Security is scheduled to increase by two percentage points, to a rate of 6.2% from 4.2%.
April Mellody, a spokeswoman for Mr. Casey, defended the idea of hiking the Fannie and Freddie fees. Doing so “would protect taxpayer funds and assist in revitalizing the private mortgage market,” she said.
Fannie and Freddie buy up mortgages and package them into investments sold with a guarantee that investors will be paid even when borrowers default. Last year, the two companies charged, on average, a fee of 0.26 percentage point of the loan’s value for every loan they guaranteed.
Senate Democrats have proposed to raise $38 billion by increasing those fees. They would rise by at least 0.125 percentage point on average, and that money would be deposited in the U.S. Treasury.
Sen. Johnny Isakson (R., Ga.), a key ally of Realtors, said in an interview that he was taken aback by the proposal. “Everybody’s saying we need to get rid of Fannie and Freddie, and we’re legislating more fees…to help underwrite the costs of a payroll tax holiday,” he said. “I don’t really know what the thought process is.”
An Obama administration official, however, said the Senate Democrats’ proposal is consistent with the White House goal of winding down Fannie and Freddie and attracting private capital into the housing market without harming consumers.
(Source: Wall Street Journal)
Bill Would Replace GSEs with Temporary Government-Owned Entity
Monday, December 12th, 2011 | Uncategorized | No Comments
Sen. Johnny Isakson (R-Georgia) has thrown yet another idea into the mix for reforming the housing finance system.
Isakson, himself a former real estate agent for 30 years, introduced legislation Thursday that would wean the secondary market off government support and pay taxpayers back for the bailout of Fannie Mae and Freddie Mac.
Isakson’s bill would replace Fannie and Freddie with a new, temporary government-backed program to securitize high-quality mortgages, the senator explained. The legislation mandates that this transitional program be turned over to the private sector after 10 years.
The bill also creates a mechanism to repay taxpayers for the full amount of bailout money that’s been funneled to Fannie Mae and Freddie Mac since the two mortgage financiers were placed into conservatorship in September 2008. So far, the GSEs have required just over $150 billion in taxpayer support.
In addition, the legislation creates a new, self-funding catastrophic fund which Isakson says will protect taxpayers from having to bail out another housing collapse during the 10-year transition period before the new government-backed securitization entity is privatized.
“This legislation is a detailed roadmap to change the unsustainable course we’re on in which the American taxpayers have been bailing out the mortgage industry to the tune of hundreds of billions of dollars,” Isakson said. “My bill will shut down Fannie Mae and Freddie Mac through an orderly transition, and it will repay the taxpayers.”
Isakson spent more than three decades in the real estate business, beginning his business career in 1967 when he opened the first Cobb County, Georgia office of a small, family-owned real estate business, Northside Realty. Isakson later served as president of Northside for 20 years.
The full text of Isakson’s Mortgage Finance Act of 2011 is available online.
(Source: dsnews.com)
GMAC Counters Lawsuit with Decision to Pull Lending in Massachusetts
Tuesday, December 6th, 2011 | Uncategorized | No Comments
Ally Financial’s GMAC Mortgage says it will stop doing business with third-party lenders in Massachusetts.
The announcement was made just one day after the state’s attorney general said she has filed a lawsuit against GMACand four other mortgage servicers over documentation and recording errors related to foreclosures.
GMAC Mortgage said Friday that it will cease purchasing new mortgage loans in the Commonwealth of Massachusetts that are originated by correspondent lenders and wholesale brokers, effective Monday, December 5.
“GMAC Mortgage has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable,” the company said in a statement.
GMAC intends to continue to service its existing customers and honor its contractual obligations as a servicer.
“The company is disappointed that it can no longer participate in offering certain financing options in Massachusetts,” GMAC said, “however, it has an obligation
to manage risks and deploy capital in an appropriate manner and in a way that protects the investment of the U.S. taxpayer.”
GMAC is still 74 percent owned by the federal government as a result of bailouts following the financial crisis.
On Thursday, Massachusetts Attorney General Martha Coakley announced that she has filed a lawsuit againstGMAC, as well as Bank of America, Citi, JPMorgan Chase, and Wells Fargo.
The complaint alleges the companies used fraudulent documents in foreclosure proceedings, foreclosed without holding the actual mortgage, and failed to provide loan modifications promised to Massachusetts homeowners.
Mortgage Electronic Registration System, Inc. (MERS) and its parent company, Merscorp Inc., are also named as defendants.
The lawsuit follows more than a year of negotiations with the banks over a 50-state settlement focused around the issues of fraudulent documents, including robo-signing.
“In order to do business in Massachusetts, GMAC has to follow the law before foreclosing on homeowners,” Coakley said in a statement issued in response to GMAC’s decision.
“With today’s action, it appears GMAC has acknowledged it has a problem following those laws and being held accountable for doing so,” Coakley added.
Gina Proia, a spokesperson for GMAC, says the attorney general’s statement is “incorrect.”
“GMAC Mortgage is currently operating in full compliance with the law. Any suggestion related to past activity will be heard before the court, and we are confident in our ability to prevail,” Proia said.
(Source: dsnews.com)
Enter your information in the form below and click the "Submit" button to start receiving Jeff Watson's emails regarding events affecting real estate investors and get a free ebook, "How To Build Your Dream Team."
Email Marketing You Can Trust
Share on Facebook
We respect your email privacy. I take your privacy very seriously-your information is NEVER shared.**
Recent Posts
