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Fewer Dallas-Area Homeowners Late on Loans

Published on August 22, 2011 by Robert A. Kraft

Dallas-area late mortgage rates are continuing to decline, according to an article in the Dallas Morning News:

In May, 4.8 percent of local residents with a loan on their home were 90 days or more behind in their payments.

That’s down from 5.51 percent a year earlier and 6.08 percent in early 2010, researchers at CoreLogic Inc. said Wednesday.

The Dallas-area late loan level is slightly higher than the Texas average of 4.47 percent but significantly less than the nationwide delinquency rate of 7.29 percent, the California-based firm said.

The number of homeowners seriously behind in their payments has gone down in each of the last four months in the Dallas area.

Although more Dallas-area homeowners are keeping up with their payments, the percentage of homes actually in foreclosure inched up in May. CoreLogic found that 1.52 percent of homes were in foreclosure, compared with 1.45 percent in May 2010.

The nationwide foreclosure rate was also up slightly at 3.45 percent.

New Rule Will Give Some Consumers Free Access to Credit Scores

Published on July 19, 2011 by Robert A. Kraft

Columnist Pamela Yip, of the Dallas Morning News, wrote this week about a new federal rule that will allow certain consumers free access to their credit scores. Unfortunately, the rule applies mostly to people who have been denied credit, so you really don’t want this to happen to you. But if your credit is denied, you will now have the opportunity to learn more about the reasons for the denial. Here are excerpts from the column:

Starting Thursday, consumers denied credit will be better able to learn why.

That’s when a new rule goes into effect requiring lenders to give you a free copy of your credit score if your application for credit is turned down or you don’t receive the best available interest rate.

Consumers “will actually be able to see their credit score, which has been very difficult for consumers to do,” said John Ulzheimer, president of consumer education at SmartCredit.com. “If the lender pulled a 720, you’re going to get a 720.”

For this, you can thank the Fair Access to Credit Scores Act of 2010.

Previously, consumers only had limited access to the score that lenders used to evaluate your credit, Ulzheimer said.

“If you applied for a mortgage and got turned down, or didn’t get the best interest rate, you would get your credit score for free,” he said. “As long as you applied for a mortgage, you got your score.”

Now things will be different. Here are the circumstances under which you will get a free credit score in addition to when you apply for a mortgage, Ulzheimer said:

You apply for credit and a credit score is used to set the terms of the account.

You’re denied credit based on a credit score.

You’re approved for credit but under less favorable terms.

Your credit card company raises your annual percentage rate because of your credit score.

The lender also must tell you the factors that pulled down your score — such as late payments or maxed out credit cards — and where your score ranks nationally. It also will tell you how to get a copy of your credit report for free.

“The ruling only applies to lenders,” said Bill Hardekopf, chief executive of LowCards.com, a credit-card information website. “If a utility, telephone company or insurance agency has a special scoring system, it does not have to provide a free credit score.”

However, there is one exception to that, Ulzheimer said. “The exception is if the proprietary score uses only information from a credit bureau, then it must be disclosed.”

“For the first time, consumers will get a clear understanding of how they are judged by lenders,” Hardekopf said.

This should force consumers to really think about how they can improve their credit.

“Are they going to be realistically close to being able to qualify for something or are they really so far away that they should hang up [hope] for a loan and really focus on improving their credit?” Ulzheimer said.

The first and most important step you can take to improve your credit score is to pay your bills on time.

“Even if you only pay the minimum, pay your bills on time because late and missed payments are the easiest ways to lower your credit score,” Hardekopf said.

Secondly, pay off your debt.

“High balances and high debt ratios drag down credit scores,” Hardekopf said. “Your debt balance should be less than one-third of your available credit.”

Hardekopf suggests consumers with a good payment history contact their creditors and ask for lower interest rates.

“Then use what you saved in interest to pay down your balances,” he said.

So use this new law to punch up your finances — and your credit score.

Texas Senate Approves Two Bills To Place Oversight On Payday Lending Industry

Published on May 24, 2011 by Robert A. Kraft

Senators took the plunge into payday lending rules Monday, approving two bills that bring some oversight to the largely unregulated industry in Texas.
Sen. John Carona, R-Dallas, said the legislation represents a “very, very delicate compromise” between consumer groups and the payday and auto title lending industry.
The legislation by Rep. Vicki Truitt, R-Keller, would require more disclosures by lenders about their fees and force the companies to obtain licenses and report data to a state agency. The first measure passed, 27-3, and the second vote was 28-2.
Sen. Wendy Davis, D-Fort Worth, and Sen. Royce West, D-Dallas, pushed for stronger regulation and a cap on fees. The Truitt proposals don’t cap fees, which can often reach 500 percent.
Those who take out payday loans and cannot pay them off roll them over, incurring even more fees and sometimes falling into a cycle of debt.
“Historically, Texas has taken a hands-off approach to the regulation of this industry,” Davis said in an impassioned speech, urging senators to think of those who get trapped in rolled-over loans. “They’re poor, they’re voiceless and they’re not here in the halls of the Capitol.”
Davis and West said they wanted to add several amendments to the legislation but decided not to in most cases so as not to endanger the bills’ passage. Davis said the bills make “the smallest little advancement” but also include some steps backward.
“If we don’t pass something, we will simply set us back two more years,” Carona said. He said there will be further examination of the industry before the next legislative session in 2013.
Consumer groups like Texas Impact, AARP and the Baptist Christian Life Commission backed the bills, as did the Consumer Service Alliance of Texas, an industry group.
A third bill by Truitt with more stringent restrictions on the lenders didn’t garner industry support and died in the House. The two surviving bills, which were amended in the Senate, now head back to the House for final approval.

The Dallas Morning News reported today that theTexas Legislature is beginning to take action regarding payday lenders. Here are the opening paragraphs of the article:

Senators took the plunge into payday lending rules Monday, approving two bills that bring some oversight to the largely unregulated industry in Texas.

Sen. John Carona, R-Dallas, said the legislation represents a “very, very delicate compromise” between consumer groups and the payday and auto title lending industry.

The legislation by Rep. Vicki Truitt, R-Keller, would require more disclosures by lenders about their fees and force the companies to obtain licenses and report data to a state agency. The first measure passed, 27-3, and the second vote was 28-2.

Sen. Wendy Davis, D-Fort Worth, and Sen. Royce West, D-Dallas, pushed for stronger regulation and a cap on fees. The Truitt proposals don’t cap fees, which can often reach 500 percent.

Those who take out payday loans and cannot pay them off roll them over, incurring even more fees and sometimes falling into a cycle of debt.

“Historically, Texas has taken a hands-off approach to the regulation of this industry,” Davis said in an impassioned speech, urging senators to think of those who get trapped in rolled-over loans. “They’re poor, they’re voiceless and they’re not here in the halls of the Capitol.”

General Bankruptcy Law in Texas

Published on April 11, 2011 by Robert A. Kraft

No one initiates a business plan assuming it will fail in future and they will end up filing for business bankruptcy. People in Texas can opt for debt settlement Texas which is  a fruitful way to get rid of a surmounting debt for individual as well as for business. However, things change with the passage of time, and a time comes when exercising your bankruptcy options becomes the last resort for you or your business.

The formal bankruptcy resolutions are mainly based on federal law, but government can incorporate state-by-state variations as well. For example, the state of Texas abides by its bankruptcy laws very closely to the baseline federal statutes. Chapter 7, Chapter 13, and Chapter 11, are the ways used to resolve debt related issues in Texas. However these three legal categories to discharge debts are quite different from each other in execution and impact on the debtor. Weigh and consider the ramifications and bankruptcy consequences of different laws before you make the final decision of filing for bankruptcy in Texas.

Chapter 7 Bankruptcy

Chapter 7, bankruptcy is also known as “liquidation bankruptcy.” Here a trustee is hired to liquidate all nonexempt assets and disburse the proceeds to creditors in order to resolve all outstanding claims. As a result, the business gets rid of all financial obligations and is given a financial fresh start.  However it has certain pitfalls as well. The effect of Chapter 7 bankruptcies stays on the debtor’s credit report for at least 6 to 7 years and the debtor face significant challenges while attempting to secure new business capital or personal loans in the upcoming years.

Chapter 13 bankruptcy

A chapter 13 bankruptcy is referred to as “wage-earner plan,” and permits the debtors to methodically restructure the debtor’s business plan and catch up on bills. Here the debtor can keep the assets in dispute and execute a court-controlled payment plan. This is quite helpful for mid-level debtors who have cumulative debts of less than $100,000 in unsecured debt, and more than $350,000 in secured debt, but corporations and partnerships can not be benefited much by this plan as they are not allowed to participate. This plan can help the debtor complete and close out any payment plan comparatively earlier, minimize the damage to the debtor’s credit rating to some extent, and above all increase the future value of their business.

Chapter 11 Bankruptcy

When a troubled business decides that it is unable to service its debt or pay its creditors, the most obvious bankruptcy option it looks for is Chapter 11 bankruptcy. In Chapter 11, the Bankruptcy Code governs the process of reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is a financial reorganization procedure mostly used by corporations and partnerships. Because the Chapter 11 cases can drag on for years, a creditor is given the right to file its own plan for the reorganization of his or her company. This plan is an attempt to stay in business while a bankruptcy court supervises the outstanding claims and details how each of these claims will be treated. The claim must also project how the company would be benefited if it were allowed to keep its assets from being liquidated. Chapter 11 is planned to preserve a viable business that otherwise would be lost in a liquidation. The plan materializes only when the creditors approve the plan with majority vote.

In addition to these bankruptcy laws, there is one more bankruptcy process in Texas, known as involuntary bankruptcy. Here the creditors get the right to compel the debtor to enter into bankruptcy by filing a formal petition with the court. Once your business goes through the trials and tribulations of a bankruptcy, make sure you do not repeat the same financial blunders again, and lead a secure financial life in the future.

Texas Senate Panel Passes Bill to Safeguard Military Families Against Foreclosure

Published on March 21, 2011 by Robert A. Kraft

Earlier this month a committee of the Texas Senate passed a bill that will be a great relief to many military families. The bill, which would protect active-duty military personnel from losing their homes to homeowners associations, was detailed in an article in the Dallas Morning News. Here are excerpts:

Federal law protects acting service members from foreclosure without a court order. But HOAs say they aren’t always aware of a homeowner’s military status.

The measure, which now goes to the full Senate, would require that HOAs ask in their debt notices whether the homeowner or spouse serves in the armed forces.

“The intent is simply to improve the communication process,” said Sen. Leticia Van de Putte, D-San Antonio, the bill’s sponsor.

Sen. Royce West, chairman of the Intergovernmental Relations Committee, called it a “good, one-shot bill.” West, D-Dallas, said he hoped it meant lawmakers would finally “get something done” on HOAs this session.

Both homeowner supporters and HOA representatives applauded it. But Michael Clauer, whose situation prompted the bill, said it wasn’t enough.

Clauer was stationed in Iraq when he learned an HOA had foreclosed on his home. His wife, suffering from depression over his deployment, had fallen behind on their dues. May Clauer did not open the warning letters sent by the HOA.

She learned of the foreclosure when the new owner tried to evict her and her children. Their $300,000 home had sold at auction for $3,201. The Clauers sued and received their house back last year.

“By just focusing on the military aspect, it really doesn’t help the situation,” he said. “There are still too many ways to circumvent and get someone’s home.”

Clauer said he appreciates the intent of HOAs — to protect the aesthetics of neighborhoods and maintain property values — but considers their foreclosure rights too onerous.

HOAs must provide notice in certified mail before they foreclose on a home but rarely need court orders. HOA advocates say foreclosure authority is the only way to ensure homeowners pay their dues.

The bill now goes to the full Senate, and quick passage is predicted. In the House, similar bills have been discussed, including some requiring associations to obtain a court order before foreclosing and eliminating HOA liens on property. Backers are optimistic that a final version will be worked out.

Lawmakers to debate value of payday loans

Published on March 7, 2011 by Robert A. Kraft

The Texas Legislature is considering clamping down on payday loan companies,and closing a giant loophole that has allowed these business to continue operating as they did before the last “clapdown” law was passed. Here is an article from the Houston Chronicle that discusses the situation in some details:

Bills that would prohibit companies from charging fees to arrange short-term consumer loans are scheduled to be heard by the Senate’s Business and Commerce Committee. Similar legislation has been drafted in the House.

Critics contend payday lenders get around state usury laws by charging exorbitant fees to arrange the loans with third-party lenders, rather than making the loans directly. Those charges can amount on an annual percentage rate basis to more than 500 percent.

The bills threaten the livelihood of such companies, known as credit service organizations, or CSOs, charged Rob Norcross, spokesman for the Consumer Service Alliance of Texas, which represents the industry.

“The bill(s) as written would prohibit credit service organizations from charging a fee for arranging a small, short-term loan,” Norcross said. “If you want to make it illegal to provide (that) service … they are going to be forced to close their doors.”

State Sen. Wendy Davis, a Fort Worth Democrat who authored one of the bills, denied she’s trying to run the lenders out of business.

“It’s an issue of making sure that vulnerable people are not preyed upon in a predatory way,” Davis said. “I’m hearing from people who are finding themselves literally in a debtors’ prison as a consequence of these loans.”

Borrowers can roll the loans over if they can’t repay them on the due date, but Davis said that often lands them in deeper financial trouble because of the additional fees tacked on.

By operating under the state’s CSO laws, payday lenders are not subject to rate and fee caps that govern consumer loans under Texas Finance Code.

The CSOs charge a fee, which can range from $20 to $30 for each $100 borrowed, to arrange the loans. The lender generally charges 10 percent annual interest on each loan.

“It’s an access to credit issue for our customers,” Norcross said. Many of them don’t have access to credit through banks or credit unions. “This is their least expensive option for financial emergencies.”

Similar legislation never made it out of committee two years ago. This time around, Davis said, the various bills have support from both parties.

The Rise and Fall of a Foreclosure King

Published on February 17, 2011 by Robert A. Kraft

A fascinating article was recently published, at Yahoo News among other places, about a Florida lawyer known as the “Foreclosure King” for the sheer volume of foreclosures processed by his firm. Many homeowners were evicted because of these foreclosures, and it now appears that most of them were wrongfully evicted. The law firm not only did the paperwork improperly, they essentially gave up all pretense of following proper procedure. One clerical worker was signing as many as 1000 foreclosure documents each day, without verifying any of them. Here are excerpts from the article:

During the housing crash, it was good to be a foreclosure king. David Stern was Florida’s top foreclosure lawyer, and he lived like an oil sheik. He piled up a collection of trophy properties, glided through town in a fleet of six-figure sports cars and, with his bombshell wife, partied on an ocean cruiser the size of a small hotel.

When homeowners fell behind on their mortgages, the banks flocked to “foreclosure mills” like Stern’s to push foreclosures through the courts on their behalf. To his megabank clients — Bank of America, Goldman Sachs, GMAC, Citibank and Wells Fargo — Stern was the ultimate Repo Man.

The worse things got for homeowners, the better they got for Stern.

That is, until last fall, when the nation’s foreclosure machine blew apart and Stern’s gilded world came undone. Within a few months, Stern went from being the subject of a gushing magazine profile to being the subject of a Florida investigation, class-action lawsuits and blogger Schadenfreude that, at last long, the “foreclosure king” was dead.

The rise and fall of Stern, now 50, provides an inside look at how the foreclosure industry worked in the last decade — and how it fell apart. It also shows how banks, together with their law firms, built a quick-and-dirty foreclosure machine that was designed to take as many houses as fast as possible.

Almost from the beginning, Stern faced trouble. In 1998, he was named in a class-action lawsuit alleging that he padded fees on foreclosed homeowners. Stern settled for $2.2 million. According to legal testimony at the time from a Fannie Mae official, Fannie was warned about troubles at the Stern firm. But Fannie continued referring cases to Stern. Fannie Mae spokeswoman Amy Bonitatibus says, “At all times, Fannie Mae has had a reasonable expectation that our servicers and the law firms adhere to proper procedures and conduct under the law. In instances where we learn that servicers or law firms are not adhering to our requirements or applicable law, we immediately engage and take appropriate action, which may include termination.”

None of the accusations stalled the firm’s steroidal growth. After the economy crashed in the fall of 2008 and ravaged the housing market, Florida, along with Nevada, Arizona and California, became foreclosure central. Stern’s caseload rose from 15,000 foreclosures in 2006 to 70,400 in 2009. His staff tripled to more than 1,200. To keep up with demand, Stern set up offices in the Philippines. When the U.S. staff responsible for entering bank data in the foreclosure files logged off, the offshore workers logged on.

With so many foreclosures flooding in, Stern’s firm couldn’t keep up. Stern took shortcuts by hiring the young and cheap. “The girls would come out on the floor not knowing what they were doing,” says Tammie Lou Kapusta, who worked in Stern’s foreclosure department in 2008 and 2009. “Mortgages would get placed in different files. They would get thrown out. There was just no real organization when it came to original documents.”

Employee depositions paint a picture of a firm under constant pressure from the banks to move faster. The longer it took to foreclose, the more money the banks stood to lose. Like so many in the industry, Stern had a strategy to cope with all the volume and velocity: robo-signing. One employee testified that Stern’s chief lieutenant, a one-time file clerk named Cheryl Samons who rose to become the firm’s chief operating officer, signed as many as 1,000 foreclosure affidavits a day without reading a single word. The employee said Samons’ hand got so tired that she told three other employees to forge her signature. Samons also signed numerous mortgage assignments with a notary stamp that didn’t even exist at the time of signing. Notary stamps are only valid for four years. The only way Samons could have signed mortgage assignments at the time they were supposedly notarized was if she had been capable of time travel.

In October, one by one, the megabanks started to withdraw their cases from Stern’s firm. Fannie fired Stern on Oct. 22. Stern’s staff of 1,200 has dwindled to 200.

The firm’s fall has spawned more chaos in Florida’s circus-like foreclosure courts. A slew of homes Stern foreclosed on that sold for $240,000 each during the credit bubble sold at auction as orphaned cases for $200. Recently, even the most infamous “rocket docket,” in Lee County, where judges were reported to have signed off on a foreclosure every 30 seconds, ground to a virtual standstill as the Stern firm withdrew from case after case. Some of Stern’s remaining lawyers show up court with greasy hair, fleece jackets and food-stained clothing. As for Stern, if federal and state prosecutors file criminal charges, he could end up in prison.

Meanwhile, Stern’s payment on his $12 million line of credit with Bank of America is late. So is the rent on his headquarters.

He’s now in default.

Dallas Council Urged to Limit Payday Lending Sites

Published on January 28, 2011 by Robert A. Kraft

This is old news by now, but I still think it’s important, and I’ve just delayed posting about it. Last month the Dallas City Council was encouraged by representatives from the United Way, the AARP, Friendship West Baptist Church, and CitySquare to limit the expansion of payday lending stores in poor areas of Dallas.

The representatives believe the payday loan companies prey on poor, under-educated citizens by lending them money at outrageous interest rates and by charging high fees. Dallas is home to more than 200 payday-lending or check-cashing stores, with most of them located south of the Trinity River.

The payday loan industry has powerful lobbyists in Austin, and they have given thousands of dollars to legislators. So the odds are slim that any state-wide laws will be passed to further regulate these businesses. However, through zoning, individual cities can limit these companies from setting up shop within a certain distance from a similar store, or within a certain distance from a major highway.

FTC Sues Three Dallas Debt Settlement Firms

Published on December 6, 2010 by Robert A. Kraft

The Federal Trade Commission has accused three Dallas debt settlement companies of making deceptive claims about the results they achieve for consumers who are deeply in debt. The FTC claims the companies said that if consumers enrolled in their programs they could erase 30 to 60 percent of their credit card debt and be debt-free in a matter of months. However, the FTC says the companies “rarely negotiate settlements for all accounts entered into the debt relief service by consumers.”

The companies sued by the FTC are Debt Consultants of America Inc., Debt Professionals of America Inc. and Financial Freedom Processing Inc., formerly known as Financial Freedom of America Inc. All three deny any wrongdoing.

According to the FTC, the companies charged consumers upfront administrative fees, monthly maintenance fees, negotiation fees and, in some instances, a cancellation fee. As a result, even when the companies negotiated a debt settlement “in numerous instances, consumers’ account balances increase from the time of enrollment to the time of settlement.”

Because of a controversy over debt settlement companies, the FTC is enforcing a new rule that prohibits debt settlement companies from collecting fees in advance until they’ve shown effective results for their clients.

2010 Was a Record High Year for Foreclosure Filings in Dallas-Fort Worth

Published on November 22, 2010 by Robert A. Kraft

This year set a record for foreclosure filings in North Texas. The good news is that the rate of increase over 2009 is much less than in the previous two years. This may be an indication that the situation is settling down, and that 2011 may not set a new record. The Dallas Morning News detailed this in a recent article. It’s possible to know the final figures for 2010 even before the year ends, because the deadline for December filings has passed. Here are a few highlights from the article:

For all of this year, 63,835 homes have been posted for foreclosure in the four-county area, Foreclosure Listing Service said. That’s only 4 percent higher than 2009’s total. Foreclosure postings in North Texas were up more than 20 percent in 2009 and 17 percent in 2008.
“The rate of increase has slowed, and it looks like 2010 is kind of the pivotal year as far as foreclosures here are concerned,” said George Roddy, president of the Addison-based foreclosure-tracking firm. “But they are still going to be high into 2011.”
The biggest increase in home foreclosure filings this year was in Denton County, which was up 10 percent from 2009. Dallas County residential foreclosure filings rose only 2 percent for 2010.
For December’s auctions, almost 6,100 North Texas homes are threatened with foreclosure – 16 percent more than a year earlier. It was only the third month in 2010 that postings topped 6,000.
The mortgage data showed that more Texans fell behind on their home payments in the third quarter. Almost one in 10 of the state’s residents with home loans was at least one month late at the end of September, the Mortgage Bankers Association said. That’s slightly higher than the nationwide home loan delinquency rate, which was 9.39 percent in the third quarter.
Mortgage economists aren’t looking for a substantial improvement in late loan payments and foreclosures until the economy grows stronger.
“Most often, homeowners fall behind on their mortgages because their income has dropped due to unemployment or other causes,” said Michael Fratantoni, the Mortgage Bankers Association vice president of research and economics, in the report.
“As we anticipate that the unemployment rate will be little changed over the next year, we also expect only modest improvements in the delinquency rate.”

For all of this year, 63,835 homes have been posted for foreclosure in the four-county area, Foreclosure Listing Service said. That’s only 4 percent higher than 2009’s total. Foreclosure postings in North Texas were up more than 20 percent in 2009 and 17 percent in 2008.

“The rate of increase has slowed, and it looks like 2010 is kind of the pivotal year as far as foreclosures here are concerned,” said George Roddy, president of the Addison-based foreclosure-tracking firm. “But they are still going to be high into 2011.”

The biggest increase in home foreclosure filings this year was in Denton County, which was up 10 percent from 2009. Dallas County residential foreclosure filings rose only 2 percent for 2010.

For December’s auctions, almost 6,100 North Texas homes are threatened with foreclosure – 16 percent more than a year earlier. It was only the third month in 2010 that postings topped 6,000.

The mortgage data showed that more Texans fell behind on their home payments in the third quarter. Almost one in 10 of the state’s residents with home loans was at least one month late at the end of September, the Mortgage Bankers Association said. That’s slightly higher than the nationwide home loan delinquency rate, which was 9.39 percent in the third quarter.

Mortgage economists aren’t looking for a substantial improvement in late loan payments and foreclosures until the economy grows stronger.

“Most often, homeowners fall behind on their mortgages because their income has dropped due to unemployment or other causes,” said Michael Fratantoni, the Mortgage Bankers Association vice president of research and economics, in the report.

“As we anticipate that the unemployment rate will be little changed over the next year, we also expect only modest improvements in the delinquency rate.”

Lenders Still Pursue Foreclosures While in Modification Talks

Published on November 2, 2010 by Robert A. Kraft

The Washington Post (10/30, Elboghdady, 605K) reports, “Across the country, struggling homeowners are increasingly tripped up by mortgage lenders that press ahead with foreclosures regardless of any effort they make to provide borrowers with relief on unaffordable mortgages. … Mortgage companies have established a dual-track approach toward troubled homeowners, negotiating with them over loan modifications while trying to seize their homes. Top government officials have been urging lenders to redouble their efforts at modifying burdensome loans,” but “mortgage companies, however, have continued to pursue this two-track strategy, with a widening toll especially on those homeowners who have been trying to resolve their mortgage difficulties before they snowball.”

“Underwater” homeowners a drag on economy. The Los Angeles Times (11/1, Lee, Times, 681K) reports “a bigger problem” than the post-2008 wave of foreclosures “may turn out to be the millions of Americans who are still faithfully paying their mortgages, but on houses worth far less than before the bubble burst.” With home prices “stagnant in much of the country, payments on mortgages that are underwater could absorb billions of dollars that might be used for other forms of consumer spending – a drag on family finances, the housing market and the overall economy. And the drag could persist for years.” Of the “estimated 15 million homeowners underwater, about 7.8 million owed at least 25% more than their properties were worth in the first quarter of this year, according to Moody’s Analytics’ calculations of Equifax credit records and government data.”

Foreclosure crisis gains defaulting homeowners equivalent of $2.6B per month. The Wall Street Journal (11/1, Whitehouse) reports on the potential for many people to benefit from the foreclosure crisis by being able to continue living in their homes for free, calling the situation something of an unintentional stimulus. The piece notes that banks and mortgage bond investors will face costs from the crisis, though the homeowners in arrears will collectively gain by some $2.6 billion per month.

Paperwork scandal extends to general debt collection industry. The New York Times (11/1, Segal) reports on the large numbers of signatures required to be made manually by employees of large banks and accounting firms, relating this to the recent foreclosure document crisis, and noting that banks “have been under siege in recent weeks for widespread corner-cutting. … But lawyers who defend consumers in debt-collection cases say the banks did not invent the headless, assembly-line approach to financial paperwork. Debt buyers, they say, have been doing it for years. ‘The difference is that in the case of debt buyers, the abuses are much worse,’ says Richard Rubin, a consumer lawyer in Santa Fe, N.M. ‘At least when it comes to mortgages, the banks have the right address, everyone agrees about the interest rate. But with debt buyers, the debt has been passed through so many hands, often over so many years, that a lot of time, these companies are pursuing the wrong person, or the charges have no lawful basis.’” The Times explains that there are millions of debt collection affidavits filed across the country, and that the FCC says that documentation problems are “legion.”

NYTimes says banks profiting from foreclosures. The New York Times (11/1, 1.01M) says in an editorial that “what makes the latest scandals” in banks’ foreclosure practices “so outrageous is that even after the financial meltdown and taxpayer bailout- and all those vows about accountability – the regulators are still behind the curve. The fundamental problem is that the banks’ drive to profit from the foreclosure process is all too often at odds with the interests of mortgage investors, homeowners and the economy’s health.” That is “a big reason that the Obama administration’s antiforeclosure effort, with its voluntary participation by banks, has fallen so short.”

From the American Association for Justice news release.

Wells Fargo to Refile 55,000 Foreclosure Cases

Published on October 28, 2010 by Robert A. Kraft

The AP (10/27) reports Wells Fargo “admitted Wednesday it made mistakes in the paperwork for thousands of foreclosure cases and promised to fix them.” The “San Francisco-based bank said it plans to refile documents in 55,000 of the cases by mid-November. The company said not all those cases included errors but didn’t say how many thousands did.”

Bloomberg News (10/27, Griffin) reports Wells Fargo, “which has proceeded with home seizures while rivals including Bank of America Corp. and JPMorgan Chase & Co. delayed theirs, said today in a statement that it found some lapses during a review of its processes. The bank will begin filings in 23 states immediately and aims to complete them by mid-November, subject to local laws, according to the statement.”

The New York Times (10/28, Dash) reports bank officials “maintained that the underlying information in the loan files was accurate and that the bank had not improperly foreclosed on any troubled homeowners.” The Washington Post (10/28, Cha) reports Wells Fargo had denied “for weeks that it was affected by the problems that forced other major lenders to temporarily freeze foreclosures.” The Financial Times (10/28, Kapner) also reports the story.

Homeowner lawsuits over foreclosures on rise. The New York Times (10/28, Martin, Rich) reports as lenders “have reviewed tens of thousands of mortgages for errors in recent weeks, more and more homeowners are stepping forward to say that they were victims of bank mistakes — and in many cases, demanding legal recourse.” Some homeowners “say the banks tried to foreclose on a house that did not even have a mortgage. Others say they believed they were negotiating with the bank in good faith. Still others say that even though they are delinquent on their mortgage payments, they deserve the right to due process before being evicted.”

Foreclosure lawyers attend “boot camp” on foreclosure cases. Bloomberg News (10/28, Gopal) reports, “Consumer lawyers have been traveling to a remote 160-acre farm in the mountains of western North Carolina since 2006 to network, drink Scotch and prepare for legal combat in foreclosure and bankruptcy cases.” The farm plays host to “a four-day boot camp where they learn how to protect their clients’ assets by exploiting the mistakes of creditors. Attendees these days are especially keen on strategies to fend off mortgage lenders and servicers seeking to seize their clients’ homes.” O. Max Gardner III, “a 65-year-old bankruptcy litigator and grandson of a North Carolina governor,” owns the farm and teaches the attendees. Gardner, Bloomberg adds, “was using flaws in mortgage servicing to stave off lenders years before cases involving shoddy paperwork spurred this month’s investigation of the industry by the attorneys general of all 50 states. He charges $7,775 for the program, which covers 3,000 pages of materials, lodging, food and unlimited wine, beer and single-malt Scotch.”

From the American Association for Justice news release.

Mortgage Relief Effort Has Fallen Woefully Short

Published on October 26, 2010 by Robert A. Kraft

The CBS Evening News reported that the Administration’s “foreclosure prevention plan was labeled a failure today by a government watchdog. Of the 1.3 million people the Treasury claims to have helped, the Inspector General of TARP said fewer than half have actually received permanent loan modifications.”

Politico (10/26, Aujla) also reports that a report from TARP IG Neil Barofsky “criticizes TARP for failing to save enough struggling homeowners from foreclosure. … ‘The most specific of TARP’s Main Street goals, “preserving homeownership,” has so far fallen woefully short,’ the report said.”

Treasury reports new low in mortgage modifications. The New York Times (10/26, Streitfeld, Appelbaum) reports, “Only 28,000 defaulting borrowers received permanent loan modifications in September, the Treasury Department said,” which “was the lowest number since last fall when the program to help struggling homeowners stay in their homes was just getting started. … The data from the government’s signature effort to help homeowners get new mortgages — formally called the Making Home Affordable Program — shows a program whose effects are, at least for the moment, dwindling.” Paul Willen, senior economist at the Federal Reserve Bank of Boston, “said Monday that the series of government programs aimed at helping borrowers avoid foreclosure amount to ‘three years of failed policy.’”

Bernanke: Fed probing banks’ foreclosure processes. The CBS Evening News (10/25, lead story, 2:35, Mason) reported that the Fed “is putting the mortgage mess under the microscope.” Fed chair Bernanke was shown saying: “We are looking intensively at the firm’s policies, procedures, and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures.” CBS noted that Bernanke “says more than 20% of borrowers are underwater.”

The AP (10/26, Aversa) reports that “in remarks to a housing-finance conference” in Arlington, Virginia, Bernanke said “federal banking regulators are examining whether mortgage companies cut corners on their own procedures when they moved to foreclose on people’s homes. … Preliminary results of the in-depth review into the practices of the nation’s largest mortgage companies are expected to be released next month.”

According to the Financial Times (10/25, Braithwaite), Bernanke also cautioned that “more than 20 per cent of borrowers owe more than their home is worth, and an additional 33 per cent have equity cushions of 10 per cent or less, putting them at risk should house prices decline much further.” According to Bernanke, “With housing markets still weak, high levels of mortgage distress may well persist for some time to come.”

Bloomberg News (10/26, Lanman) notes that “after discussing foreclosures,” Bernanke “devoted much of his remarks to the Fed’s housing-market efforts, such as studies, conferences and events serving troubled borrowers.” According to Bloomberg, Bernanke’s remarks “build on New York Fed President William Dudley’s Oct. 19 remarks that the central bank is working with other regulators to review foreclosure practices, governance and documentation at mortgage servicers.”

Bair: “warning signs” were missed by regulators. The Los Angeles Times (10/26, Puzzanghera) reports that at the same conference, FDIC chair Sheila Bair “admitted” that “regulators should have foreseen a wave of suspect foreclosure paperwork coming.” Bair is quoted as saying, “In retrospect, there were warning signs that servicing standards were eroding. Those signs should have caused market participants and regulators alike to question current practices. … We should have been asking how servicers were able to achieve such efficiencies without sacrificing quality,” but, “sadly, those questions were not asked.”

Reuters (10/26, Clarke, Costa) notes that Bair also warned that “the litigation generated by this issue could ultimately be very damaging to our housing markets by prolonging those foreclosures that are necessary and justified.”

Mortgage processors face scrutiny. The Washington Post (10/26, A11, Cha) reports, “The more banks foreclosed on homes, the more a little-known company in Florida called Lender Processing Services saw its revenue and stock price soar. For a fee, the Jacksonville company would locate and assemble the documents necessary for a lender to foreclose on a borrower who defaulted on a mortgage. Working on behalf of the biggest names in the industry, including J.P. Morgan Chase, Bank of America and Citigroup, LPS says it handles more than half of all foreclosures in the country,” but “amid reports of shoddy and possibly fraudulent paperwork, LPS as well as a handful of other document processors and law firms are coming under scrutiny for the criminal investigations into the foreclosure debacle.”

Lawsuits allege lenders sabotaged mortgage modification efforts. The Los Angeles Times (10/26, Reckard) reports, “Financially strapped homeowners struggling to obtain mortgage modifications are taking their frustrations to court, accusing banks and loan servicers of misleading them or breaking promises to help them hold on to their homes.” According to the Times, “The lawsuits go to what” HUD Secretary Donovan “has described as the heart of the government’s anti-foreclosure efforts: ensuring that banks work in good faith from the start to help borrowers. … A theme of the lawsuits filed by homeowners is that banks have denied permanent modifications to borrowers who make their payments on time and otherwise hold up their end of the agreements.”

NYTimes calls on the Administration to slow the foreclosure process. The New York Times (10/26), in an editorial, says the Administration “needs to ensure that the taxpayers’ interests come first. Until now, the White House has focused far more energy on shoring up the banks — a stance that may have made sense in the thick of the financial crisis but is increasingly suspect now. … The White House needs to work with Congress to ensure that no foreclosures proceed — not just those with questionable paperwork — without homeowners’ first being offered fair and timely loan modifications.”

From the American Association for Justice news release.

White House Reiterates Opposition to Foreclosure Moratorium

Published on October 13, 2010 by Robert A. Kraft

USA Today (10/13, Armour) reports that yesterday, the Administration “rejected calls for a nationwide moratorium on foreclosures because of concerns it could cause broader harm to the housing recovery” although “a freeze on foreclosures is still widening.” White House press secretary Robert Gibbs “did say the White House supports a multi-state investigation into foreclosures and the mortgage industry.” HUD Secretary Shaun Donovan “said investigations into flawed paperwork were initiated as soon as concerns came to light.” Donovan is quoted as saying, “As soon as we understood the issues, we began a comprehensive look.”

State AGs to probe robo-signer allegations. The AP (10/13) reports that about 40 state attorneys general “are preparing to launch a joint investigation into the mortgage industry over the foreclosure-document mess. If the states have their way, mortgage companies will have to revamp the way they handle foreclosures, pay penalties for violations and expand help to homeowners on the verge of foreclosure.” The AGs are “already weighing the outlines of a potential settlement with the industry, said Iowa Attorney General Tom Miller, who will lead the investigation. The inquiry will be announced Wednesday morning.” Miller “said one idea being discussed is to create an independent monitor to review whether banks have fixed their problems.” Howard Glaser, a mortgage industry consultant in Washington, said the attorneys general “are trying to step in and make policy where the federal government has failed to do so.”

GMAC, Wells Fargo reviewing foreclosures. The AP (10/13, Veiga, Zibel) reports GMAC Mortgage and Wells Fargo “are reviewing foreclosures as public officials heighten pressure on the industry over allegations that they made errors in documents used to evict homeowners.” GMAC “said Tuesday that it has enlisted legal and accounting firms to conduct independent reviews of its foreclosure procedures” throughout the US, while Wells Fargo “said it would review pending foreclosures for potential defects in response to requests from lawmakers and public officials.” Wells Fargo also said “it has not turned up any evidence of problems. ‘We have no plans to initiate a foreclosure moratorium,’” company spokeswoman Vickee Adams said.

From the American Association for Justice news release.

Obama Administration Doesn’t See Need for Blanket Foreclosure Moratorium

Published on October 12, 2010 by Robert A. Kraft

The New York Times (10/12, B1, Appelbaum) reports that the “swelling outcry over fast-and-loose foreclosures has thrust the Obama administration back into the uncomfortable position of sheltering the banking industry from the demands of an angry public.” While “senior Congressional Democrats join the calls for a national moratorium on foreclosures,” the White House “once again is arguing against punishing the industry, just as it did in 2009 amid the outcry over the unbreakable habit of paying large bonuses. ‘Irresponsible banks need to be held accountable, but if we have not found a problem with a bank’s process we do not believe that we should impose a moratorium where that can hurt the market and hurt individual buyers,’” said HUD Secretary Shaun Donovan. According to the Times, the Administration’s “basic logic has not changed since it took office in the depths of the financial crisis: Hitting the financial industry, officials argue in private and in public, hurts the broader economy. A moratorium on foreclosures may provide short-term political satisfaction in an overheated election climate, but the administration fears it will only delay the inevitable and necessary process of forcing many Americans out of homes they cannot afford.”

The Wall Street Journal (10/12, Whelan, Simon) reports although many US lawmakers have called for a national moratorium on home foreclosures, Administration officials are not endorsing such a move. Secretary Donovan said that some servicers “need to suffer the consequences for their irresponsible actions,” but added, “Where we have not found problems with particular servicers…we do have some risk of going too far.”

Meanwhile, the AP (10/11, Fram) reported White House adviser David Axelrod “questioned the need Sunday for a blanket stoppage of all home foreclosures, even as pressure grows on the Obama administration to do something about mounting evidence that banks have used inaccurate documents to evict homeowners.” Axelrod said, “It is a serious problem. … I’m not sure about a national moratorium because there are in fact valid foreclosures that probably should go forward’ because their documents are accurate.” The AP adds that Attorney General Eric Holder “said that the government is looking into the matter, and Democratic lawmakers urged bank regulators and the Justice Department to probe whether mortgage companies violated laws in handling foreclosures.”

The Hill (10/11, Needham) reports the White House “is pressing for banks to move quickly to determine whether mistakes were made in foreclosure documentation to avoid delays that could hinder the housing market’s recovery.” Axelrod “urged caution in calling for a nationwide moratorium on foreclosures ‘because there are, in fact, valid foreclosures that probably should go forward where the documentation and paperwork is proper.’ ‘But we are working closely with these institutions to make sure that they expedite the process of going back and reconstructing these and throwing out those that don’t work,’” he said Sunday.

fFrom the American Association for Justice news release.

Lawmakers Call for Investigation of Foreclosure Errors

Published on October 6, 2010 by Robert A. Kraft

The AP (10/6, Zibel) reports that on Tuesday, House Speaker Nancy Pelosi and more than 30 other Democratic lawmakers from California “urged bank regulators and the Justice Department to probe whether mortgage companies violated any laws in handling foreclosures and borrowers’ requests for loan assistance.” The lawmakers sent the letter to Attorney General Eric Holder, Federal Reserve Chairman Ben Bernanke and Acting Comptroller of Currency John Walsh. A Federal Reserve spokesman “said the central bank will respond to the letter. Representatives for Holder and Walsh declined to comment.” Separately, Sens. Robert Menendez (D-NJ) and Al Franken (D-MN) called on the Government Accountability Office to “examine whether federal regulators overlooked problems” at mortgage companies, while Sen. Jeff Merkley (D-OR) “urged the Treasury Department and the Department of Housing and Urban Development to launch their own investigations.”

The Huffington Post (10/6, Delaney) adds that Sen. Menendez also “sent letters to Bank of America, JPMorgan Chase, GMAC, and 117 mortgage servicing companies demanding to know what they’ve done in light of the paperwork scandal.” Meanwhile, Michael Steel, a spokesman for House Minority Leader John Boehner (R-OH), “said, ‘At a time when economic uncertainty and unemployment are putting great pressure on homeowners and the housing market, it is imperative that we get all of the facts about this situation, and quickly.’”

The Washington Post (10/6, Dennis, Cha) says that the letter from the California Congressional delegation “puts pressure on the Obama administration to get more involved on a matter that it so far has said little about publicly” and would “likely to stoke cries for a broad moratorium on foreclosures across the country.” A Treasury spokesman “Tuesday said the agency had asked Ally’s management to look into the matters, adding that ‘formal investigations are best done by independent, third-party regulators.’”

AFP (10/6) says the letter “came as already-fragile US financial firms are facing a raft of law suits and potential fines after three major mortgage lenders admitted to mishandling thousands of home foreclosures.” Attorney generals “in six states are already investigating claims by borrowers that lenders have committed errors in the foreclosure documentations.”

From the American Association for Justice press release.

Dallas-Fort Worth Home Listings Rise 15 Percent in Past Year

Published on September 16, 2010 by Robert A. Kraft

This is a great time to be shopping for a house in Dallas, but not such a great time to be trying to sell one. As reported by the Dallas Morning News, residential sales listings in Dallas have grown almost five percent in the past three months. Here are article excerpts:

The number of houses on the market is 15 percent higher than a year ago, the latest statistics from the Realtors’ Multiple Listing Service show.

“When you look at year-over-year inventory counts, we’re much higher, and most sellers don’t want to first list their properties for sale in August or September,” said Altos Research vice president Scott Sambucci. “This would indicate that the new sellers hitting the market are going to be distressed or bank foreclosures to an extent.

“But banks are smart – they aren’t going to just throw a bunch of inventory on the market during a seasonally slow time of year,” Sambucci said. “So while some of the inventory is REO [real-estate owned], not all of it is.”

Record-low interest rates and bargain home prices are no doubt prompting some owners to try to unload their current houses so they can move.

Dallas sales agent Barry Hoffer says it’s a case of “sellers wanting to move up and take advantage of favorable home values and the lowest interest rates that we have seen in decades.”

Hoffer, who works at Ebby Halliday Realtors, said some listings are left over from the peak summer sales market.

Whatever the reason, single-family home sales listings in North Texas have topped 42,000 – the highest level since August 2008 and up from a low of 31,589 last December.

Looking nationwide, the number of homes listed for sale with real estate agents has grown in the last three months by almost 9 percent in Houston, 8.5 percent in Los Angeles and 7 percent in San Francisco.

The increase in home listings is coming at a time of year when seasonal buying begins to slow.

And this year – because of the April expiration of the federal housing tax credits – home sales in North Texas and elsewhere are down sharply from a year ago.

Maybe that’s why home listing prices are falling. Altos Research says they have dropped about 1.7 percent in the last three months in the cities they survey.

In the Dallas area, list prices in the MLS have fallen an average of more than 3 percent during the last 90 days, the California-based research firm found.

With Payday Loans, Poor Get the Loans, Firms Get the Payday

Published on August 16, 2010 by Robert A. Kraft

That was the headline of a recent lengthy article in the Dallas Morning News. I urge anyone considering a payday loan to read the entire article. It may change your mind. These are the opening paragraphs:

On July 2, a 74-year-old Dallas widow named Yvonne Sands received her monthly Social Security check of $1,360. Shortly after 7:30 a.m., she withdrew money from the bank and drove off to renew four payday loans with annual percentage rates of about 250 percent to more than 300 percent.

In the past year, Yvonne Sands of Dallas has paid more than twice as much in fees as the $1,850 she borrowed in four payday loans. A separate loan had a 660 percent interest rate. ‘I’m just trying to dig myself out of this hole I’m in,’ she said.

Sands can’t afford to pay back the loans all at once, and they come due every month. So each month, she takes out new loans to pay for the old ones, shelling out nearly $400 in fees in the process.

Over the last year, Sands has paid more than $4,200 in fees on those four loans – far more than the $1,850 she received in principal. And that’s not counting fees on two other loans she paid off earlier this year, one of which carried an annual rate of about 660 percent.

“I’m just trying to dig myself out of this hole I’m in,” Sands said.

For better or worse, millions of Americans like Sands borrow billions of dollars a year from payday lenders. Catering to low- and middle-income customers, payday lenders provide quick cash to just about anyone with a checking account and a steady income.

Consumer Lawsuits Against Bill Collectors Skyrocket

Published on July 6, 2010 by Robert A. Kraft

McClatchy reports, “Since the recession hit in 2007, federal lawsuits filed under the Fair Debt Collection Practices Act have more than doubled, while complaints about problem collectors have skyrocketed.” Attorney Sergei Lemberg, whose “firm has filed about 1,500 such lawsuits in the past three years,” said, “I think debt collectors have become more aggressive by necessity because folks just have less money.” He added, “And consumers are more likely to think legal when they’re being cornered.” Jack Gordon, the president of WebRecon, “a website that tracks…filings for the collections industry,” said that “the spike in lawsuits” is linked to internet ads from plaintiffs’ lawyers. Gordon said that “costs are an even bigger driver in the lawsuit surge,” as it’s often “cheaper for collection agencies to settle rather than fight a case.”

From the American Association for Justice press release.

Fed Adopts Rules to Protect Credit Card Customers

Published on June 29, 2010 by Robert A. Kraft

The Federal Reserve adopted new rules this month aimed at protecting credit card customers from getting hit by high late payment charges and other penalty fees. The Dallas Morning News ran a good article on the new rules, and here are excerpts:

The rules respond to public and congressional outrage over practices by credit card companies.

They bar credit card companies from charging a penalty fee of more than $25 for paying a bill late. They prohibit credit card companies from charging penalty fees that are higher than the dollar amount associated with the customer’s violation. They also ban so-called “inactivity” fees when customers don’t use the account to make new purchases and they prevent multiple penalty fees on a single late payment.

The rules take effect on Aug. 22.

In addition, the rules require companies to reconsider interest rates imposed on customers since the start of last year. Some lenders pushed through rate increases ahead of the first phase of sweeping new credit-card protections, which took effect earlier this year. Those first set of rules were designed to protect customers from sudden hikes in interest rates.

“The new rules require that late payment and other penalty fees be assessed in a way that is fairer and generally less costly for consumers,” said Fed Governor Elizabeth Duke, the central bank’s point person on the rules. “Card issuers must also reevaluate recent interest rate increases, and, if appropriate, reduce the rate,” she added.