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.

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.

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.

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.”

“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.

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.

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.

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.

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.

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.

More than 20 percent of foreclosure listings thus far in 2010 in the Dallas area were for houses with more debt than the appraised tax value. That’s a very large increase from the same period in 2009. This is not only a problem for the homeowner, but also for the lender, who usually cannot resell the house for the amount they have invested in the mortgage and other costs.

According to the newspaper, “Recent studies estimate about 15 percent of all Dallas-area homeowners with mortgages owe more than their house is worth. They either paid too much for the property or, more likely, values have fallen in their neighborhoods due to distressed property sales and high inventories of unsold homes.”

If you have questions about foreclosure, please contact our law firm. We’ll be glad to visit with you.

Dallas-Fort Worth area home foreclosures for 2009 fell to their lowest level in three years. But the almost 12 percent drop doesn’t mean that fewer North Texans are threatened with losing their homes. Indeed, the number of D-FW homeowners with a loan in default is at a record high, and foreclosure filings continue to grow. Actual foreclosure sales have fallen, though, because many lenders are negotiating longer with borrowers and delaying foreclosures for months, a close look at the data shows.

“There are an awful lot of problem loans out there that should be foreclosed on and are not,” said George Roddy, who heads Foreclosure Listing Service of Addison, which tracks foreclosures in 19 Texas counties. “Perhaps they think if they delay long enough, the situation will work itself out. ”Yes, foreclosures are down, but it’s artificial.”

Last year, lenders sold 18,637 homes at foreclosure auctions in Dallas, Tarrant, Collin, Denton and Rockwall counties. That’s down from 21,174 forced sales in 2008 and 19,102 in 2007, according to a Dallas Morning News analysis of Foreclosure Listing Service’s numbers. More than 65 percent of the loans on foreclosed homes were made between 2005 and 2009. The average loan balance was about $130,000.

Along with avoiding the bad publicity from throwing thousands more homeowners out of their houses, lenders postpone taking ownership of the property because it can cost them. By some estimates, it costs a lender $50,000 to foreclose on a home.

Recent reports showed that the ratio of Texans behind on their mortgage payments has risen to more than 10 percent for the first time. In the Dallas-Fort Worth area, about 6 percent of homeowners with loans at the end of 2009 had missed three consecutive mortgage payments. Even in cases where borrowers are that far behind, many mortgage companies – spurred by government programs – are attempting to modify the debt and avoid foreclosure.

So far, there’s no indication that foreclosure filings and home mortgage payment delinquencies will decline in 2010. So far this year, home foreclosure filings in the D-FW area are up 22 percent from the first quarter of 2009. About 15 percent of Dallas-area homeowners with mortgages owed more than their house was worth at the end of 2009, according to a new report from First American CoreLogic. That makes them much more likely to walk away from their homes if they’re caught in a cash squeeze.

In June, HAMP officials began conducting rigorous reviews of mortgage servicers, and have now started a “second look” program, under which servicers’ decisions to approve or deny HAMP modifications will be scrutinized. Compliance officers are also analyzing HAMP-modified loans to track error rates with servicers.

Government officials have tried to stimulate the rate of modifications several times. The Treasury Department has set a goal of 4 million mortgage modifications by 2012, but estimates indicate that only about half that number will actually be modified.

Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said, “The best lobbyists we have for getting bankruptcy legislation passed are the servicers who are not doing a very good job of getting mortgages modified.” He may insert a cramdown provision into legislation that would overhaul the financial system, which would allow bankruptcy judges to lower the balances on mortgages to the market value of the property and set new interest rates. That bill will become a top priority in early 2010.

Loan Resolution Corp. chief operating officer Travis Olsen said one of the top 10 servicers has hired his firm to manage the short sale process. “We will take their borrowers who have been denied a home retention plan and hand-hold them during the rest of the process,” he said. The COO also noted that his Scottsdale, Ariz.-based pre-foreclosure asset-management company has received requests for bids from several top-five servicers.

Treasury is expected to provide incentives for servicers to conduct short sales and share some of the costs of paying off second lien holders. “The final details of the [short sale] program are being finalized, and will be announced as soon as completed,” HUD assistant secretary David Stevens told a congressional panel on Wednesday (Sept. 9).

In a short sale, the lender agrees to accept a loss on the sale of the property and forgive the remaining balance on the mortgage. If a short sale doesn’t work, the next stop is foreclosure. It usually takes LRC a couple of days or weeks to complete a short sale after the buyer makes an offer, while the timeline for servicers can be 60-120 days. “We can sometimes approve short sales the same day the offer is received,” Mr. Olsen said.

About one-third of option ARMS are already in default, and it is expected that 600,000 option ARMS will reset within the next four years. According to Barclays Capital, 81% of the option ARMs originated in 2007 are expected to default, with many ending in foreclosure. Barclays projects that banks will lose $112 billion on option ARMs written from 2005 to 2007.

Although reverse mortgages have been available in Texas for more than 10 years, only about 7,000 were taken out in 2008. However, that number is increasing as older baby boomers and other seniors discover this way to free up their home equity to serve present or future cash needs.

The homeowner continues to live in the home, pay property taxes, and pay homeowner’s insurance. But the reverse mortgage lender will give the homeowner the equity and pay off any existing mortgage. The new lender will have a first lien on the property.

Reverse mortgages can take several forms — a lump sum, a monthly payment, a combination of both, or a line of credit. The loans are not suitable for everyone, and to make it work, seniors should have at least 50% equity in their homes.

The economic stimulus package passed in January 2009 increased the cap on reverse mortgages to $625,500, but that limit is in effect only until the end of 2009, when Congress will reconsider what the cap will be. The stimulus package also reduced the origination fee to 2% on the initial $200,000 of the home’s value and 1% on the rest, up to a cap of $6,000. But even with that reduction, there are significant costs to obtaining a reverse mortgage, including origination fees, title costs, appraisal fees, and all the normal closing costs of a regular mortgage.

Several reputable organizations offer counseling and information about reverse mortgages, including the AARP and the National Reverse Mortgage Lenders Association.

The study found that the cure rate for prime loans dropped to 6.6% as of July 2009, from an average of 45% for the years 2000 through 2006. The cure rate of Alt-A loans fell from 30.2% to 4.3%, and for subprime loans fell from 19.4% to 5.3%.

Cure rates have plunged despite the Obama administration’s prodding of banks to ease the terms of mortgages for millions of borrowers to try to prevent foreclosures. Barclays Capital projects that the number of foreclosed homes for sale will peak at 1.15 million in mid-2010, up from an estimated 688,000 as of July 1, 2009.

The information covers a wide range of consumer issues, including debt collection, frauds and scams, identify theft, mortgage fraud, price gouging, and tenants’ rights, and each topic is explained in an easy to understand format.

While it is often necessary to consult an attorney to take specific action in an individual case, the information available from the Office of the Attorney General is a good starting place to educate yourself about your consumer rights under the laws of the State of Texas and the Federal government.

Many people falsely believe that FHA loans are available only for first-time buyers or those with perfect credit. Both of those misconceptions are untrue. FHA loans are not limited to first-time buyers and even those with damaged credit can qualify for such a loan.

One of the factors that makes FHA loans so popular is the low down payment required – only a payment of 3.5% from the borrower’s own funds is required. The funds can come from savings, a checking account, or retirement funds, or from gifts to the borrower by a relative or other party. Customers with credit scores between 620 and 740 may be able to obtain a better rate, lower fees, and lower mortgage insurance costs with an FHA loan as compared to conventional loans.

While FHA does require a borrower to show an overall history of repaying obligations in a timely manner, it does allow for less than perfect credit in some cases. Even if a borrower has a bankruptcy in their past, they may be able to obtain an FHA loan. If two years have passed since the borrower had a Chapter 7 case and there have been no late payments on the borrower’s credit report since that time, an FHA loan may be obtainable. If a Chapter 13 case has been completed and discharged, an FHA loan can be obtained immediately if the preceding 12 bankruptcy payments were made on time. It is even possible for a borrower to obtain an FHA loan during a Chapter 13 bankruptcy, if trustee payments have been made on time and the trustee and the court approve the incurrence of the new debt.

FHA loans are also assumable, which will make a home more sellable later. Another advantage is the streamlined refinancing procedure should a buyer later wish to convert the loan into a more favorable one later.

More information concerning FHA loans is available from the website of the Federal Housing Administration.