Hundreds of FBI agents and federal prosecutors could be hired to investigate the estimated 5,000 mortgage fraud claims that are reported every month if a new Senate bill becomes law, reports The Associated Press (“Senate Votes to Hire Hundreds More FBI Agents, Prosecutors to Tackle Mortgage Fraud Cases,” April 28, 2009).

“As foreclosures menace more and more hardworking homeowners, they become more desperate for help,” said Senate Majority Leader Harry Reid, D-Nev. “Unfortunately, schemers, swindlers, and scam artists are all too happy to pounce.”

To protect homeowners from such scams, the proposed legislation would allow the government to hire 160 special FBI agents dedicated to investigating mortgage fraud, along with 200 support staff. According to current data, despite the doubling of caseloads in the last three years, the FBI has fewer than 250 special agents devoted to financial fraud cases.

Under the proposal, the Justice Department would also be allowed to hire an additional 200 prosecutors and civil enforcement attorneys as well as 100 support staff.

Although the bill — sponsored by Sens. Patrick Leahy, D-Vt., and Chuck Grassley, R-Iowa — may end up costing more than $265 million a year for the next two years, supporters, including President Obama, say that the legislation would more than pay for itself, reports The Associated Press. Regulators anticipate that the large number of fines and penalties that would result from more aggressive government investigations would subsidize the new legislation.

If approved, the measure would go into effect beginning Oct. 1, 2009, and would cover the 2010 and 2011 budget years.

Popularity: 4% [?]

Homeowners are more likely to lose their homes to foreclosure because they’ve lost their jobs than because their loan payments have become unmanageably high, according to a new study by the Boston Federal Reserve that is raising doubts about the effectiveness of the government’s new loan modification program (“Unemployment: Big Factor in Home Defaults,” Reuters, April 13, 2009).

The study revealed that consumers are also more likely to default on their home loans if their home values plummet than if their mortgage terms are unfavorable. That finding led Boston Federal Reserve economists to conclude that policies directly aimed at providing aid to unemployed homeowners may be more effective at helping homeowners avoid foreclosure than the loan modification and refinance policies outlined in President Obama’s home rescue plan.

Under the government plan, certain homeowners who are underwater on their mortgages would be able to get a government-subsidized mortgage loan modification through their lender, while other homeowners who have little or no equity would be able to refinance their home loans.

“Foreclosure-prevention policy should focus on the most important source of defaults” including unemployment, the economists wrote in the study.

They said that homeowners would be better served by a government plan that supplements an unemployed homeowner’s lost income with loans and grants, though the report didn’t outline details for this type of strategy.

Government Program Questioned

Although government officials believe that the housing crisis can be attenuated, “by changing the terms of ‘unaffordable’ mortgages,” Boston Federal Reserve economists point out that policies targeting the modification of home loans “face important hurdles in addressing the current foreclosure crisis.”

Chief among those hurdles is how effective Obama’s loan modification program will be at preventing foreclosures and how many homeowners will actually be able to refinance their homes at today’s record-low interest rates in one of the most stringent credit markets in years.

While the Obama administration estimates that the loan modification plan will help around 9 million homeowners stay in their homes and that some 7 to 9 million homeowners may be eligible to refinance, both options may end up helping far fewer homeowners than expected.

In order to refinance, homeowners must owe no more on their mortgage than 5 percent more than what their home is worth and those homeowners trying to modify their mortgages must still have enough income to make a reduced loan payment to qualify.

Hundreds of thousands of homeowners who reside in Nevada, Florida, Michigan, and Arizona — where property values have plummeted by as much as 45 percent — won’t qualify for the government loan modification program. They may, however, benefit from the unemployed homeowner plan highlighted in the Boston Federal Reserve report, if it ever becomes reality.

Popularity: 6% [?]

President Obama is encouraging homeowners to take advantage of record-low, 4.78-percent mortgage rates by refinancing their homes as soon as possible, The Associated Press reports (“Obama: Timing Right for Millions to Refinance,” April 9, 2009).

“The main message we want to send today is there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates,” Obama said at a recent photo opportunity at the White House. “That is money in their pocket.”

While the president highlighted the “good news” of such low mortgage interest rates and their potential to help more homeowners refinance, Housing and Urban Development Secretary Shawn Donovan cautioned that interest rates on most home loans will probably still fall even further than their current lows.

“I think you will see them continue to come down, based on everything that we’re doing, but recognize that they’ve already started to make a big difference,” Donovan said at a recent press conference promoting the president’s plan to rescue the housing market.

She commented that home purchases are up by 20 percent since the president’s February unveiling of the housing rescue plan, an indicator that the new government program — set up to help consumers modify their mortgages or refinance their homes — may already be positively affecting the housing market.

President Obama said that the government’s new strategy to help homeowners has contributed, at least in part, to the “recent surge in refinancing,” however Obama warned homeowners who are looking to avoid foreclosure through refinancing options or through other mortgage modification methods to be on the lookout for scams.
“If somebody is asking you for money up front before they help you with your refinancing,” he said, “it’s probably a scam.”

Popularity: 4% [?]

Although the nation’s housing market is in dire straits, a different sort of real estate boom may be taking shape: mortgage loan modifications (“A Different Kind of Real Estate Boom: Loan Modifications,” the Ann Arbor Business Review, March 18, 2009).

New government loan modification incentives, a tight credit market, and millions of homeowners facing foreclosure have all created a huge unmet demand for private mortgage loan modification services.

In some cases the only way for homeowners to avoid foreclosure is to have their mortgages modified, said Gibran Nicholas of the CMPS Institute, a company that trains mortgage professionals, particularly in the states where property values have dropped sharply — Michigan, Arizona, Florida, California, Nevada — and where a greater number of homeowners now owe more money on their home than what their property is worth.

But when, Nick Demeester, a supervisor of the housing group at Michigan-based nonprofit GreenPath Debt Solutions, has been asked if there is an adequate supply of qualified mortgage loan modification companies and counselors to meet this demand, his response has been “Right now, no.”

Although his organization has seen an increase in lenders’ willingness to modify mortgage loans, Demeester said, “We have not seen a lot of deferring of principle,” one of the most effective ways lenders can modify a homeowner’s mortgage. Instead, he said, lenders have preferred to move homeowners from an adjustable-rate mortgage to a fixed-rate loan or to extend the length of the loan, from 30 to 40 years, for example.

Nicholas stated that the potential boom in loan modifications is largely dependent on whether lenders choose to take part in President Obama’s new voluntary loan modification plan — a strategy that rewards lenders with incentives for altering mortgage terms for homeowners.

If lenders begin participating in the president’s program, “The Obama plan is going to create a lot of work for loan modification services,” Nicholas said. The only question is which companies will be getting that business.

Popularity: 6% [?]

If you’re facing eviction or foreclosure or if you’ve already been evicted or lost your home to foreclosure, you’re not alone, and you could soon get government aid thanks to a new program created under the American Recovery and Reinvestment Act. (more…)

Popularity: 5% [?]

One part of President Obama’s $75 billion housing bailout plan that deals with “judicial modifications” has received the support of some lawyers and consumer advocates who feel it may be just the push lenders need to ramp up home loan modification efforts, reports the Dallas Morning News (“Threat of Judges Changing Mortgage Terms May Motivate Lenders,” Feb. 23, 2009). (more…)

Popularity: 5% [?]

Four of the nation’s biggest banks have announced a moratorium on foreclosures for the next few weeks while they await the details of President Obama’s $50 billion financial stability plan to stem foreclosures for homeowners, the Associated Press reports (more…)

Popularity: 5% [?]

The Office of Thrift Supervision — the government agency responsible for regulating more than 800 savings and loans that hold a large portion of the nation’s mortgage loans — has asked its lenders to put a temporary moratorium on foreclosures, The Washington Post reports (“Regulator Calls for Lenders to Stop Foreclosures For Now,” Feb. 11, 2009). (more…)

Popularity: 3% [?]

Executives from the nation’s top banks told the House Financial Services Committee on Wednesday that the government’s $700 billion Troubled Asset Relief Program – which was intended to use tax-payer dollars to help rescue distressed financial institutions – is working, despite criticism that it has done little to encourage banks to lend (“Bank CEOS Tell US House Panel They’re Lending,” Dow Jones Newswires, Feb. 11, 2009). (more…)

Popularity: 6% [?]

If you’re one of the 5 million to 6 million homeowners who is behind on your mortgage and facing foreclosure, or you’re headed that way with little idea of what to do next, there are several things you can still do to try to avoid losing your home: (more…)

Popularity: 3% [?]