Safeguard Properties

What’s After HAMP? MBA Proposes Loan Modification Program

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Investor Update
September 23, 2016

“One Mod: Principles for Post-HAMP Loan Modifications”

The Mortgage Bankers Association revealed a new program proposal on Friday that is designed to be successor program to the Home Affordable Modification Program, which is scheduled to wrap up at the end of this year.

The new program, “One Mod: Principles for Post-HAMP Loan Modifications,” draws upon the experiences of lenders familiar with HAMP to formulate universal principles that should be applied to a future program, the MBA stated in its announcement.

Through the program, eligible borrowers can receive at least a 20% payment reduction while also not having to undergo to the “excessive documentation requirements that have caused hardship for HAMP applicants.”

Both HAMP and the Home Affordable Refinance Program were originally launched in 2009 to provide relief to borrowers by lowering their monthly payments. Although both were set to expire on Dec. 31, 2013, both have since continuously moved around, with HAMP slated to end this year and HARP on Sept. 30, 2017.

Currently, the Federal Housing Finance Agency already created new refinance product that it is set to launch toward the end of 2017 that falls along the same lines as HARP, but there isn’t one for HAMP.

The Future of Loss Mitigation Task Force, a diverse MBA working group consisting of representatives from 20 member companies, developed this new proposal to try and fill the void when HAMP ends. The Task Force is co-chaired by Alex McGillis of Quicken Loans and Erik Schmitt of JPMorgan Chase.

“MBA’s task force recognizes that the industry, borrowers and investors need a successor to HAMP that is consistent and can be widely scaled,” said Pete Mills, senior vice president of residential policy and member services at the Mortgage Bankers Association.

“Application of the Task Force’s principles and the ‘One Modification’ or ‘One Mod’, will go a long way towards offering deep payment relief for struggling homeowners and a positive economic outcome for investors,” Mills continued. “We look forward to continued discussions with government agencies, the GSEs and other stakeholders about these principles and the proposal.”

According to the MBA, One Mod incorporates four guiding themes that drive successful loss mitigation programs: accessibility, affordability, sustainability and transparency. For more details from the MBA on the program check here.

 “The primary focus of this proposal is to provide a path that can help as many families as possible retain homeownership by improving the customer experience and providing deep and meaningful payment relief.  The One Mod program offers a simple and transparent solution to struggling homeowners in need of assistance,” said Erik Schmitt, product executive for mortgage banking at Chase.

Mike Malloy, vice president of Servicing for Quicken Loans, also commented on the news saying, “Developing One Mod was a tremendous collaborative effort by lenders and other stakeholders, big and small, to develop a simpler and more streamlined process that provides meaningful help to those who are under serious hardship.”

Source: HousingWire

State Spotlight: Florida Court Decision May Bring Difficulties for Servicers

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Industry Update
September 26, 2016

Recently, a court case in Florida has caused controversy due to its potential to cause difficulty for servicers in the disposition of foreclosed properties. This particular case, Ober v. Town of Lauderdale-By-The-Sea, brings into question the application of Florida’s lis pendens statute to liens placed on property between a final judgment of foreclosure and the judicial sale. The court’s decision determined that liens placed on a property during that period of time are not extinguished by the statute.

In Ober v. Town of Lauderdale-By-The-Sea, a municipality recorded seven liens on the property, relating to code violations between 2009 and 2011. The case notes that each violation occurred after the loan entered final judgment in 2009. The property was sold in 2012, with a certificate of title being issued. The municipality argued that the lis pendens should be deemed to terminate on the date of final judgment, which would mean that it would not extinguish the relevant liens placed on the property subsequent to final judgment. The court agreed and determined that “a lis pendens bars liens only through final judgment, and does not affect the validity of liens after that date, even if they are before the actual sale of the property.”

The result of this case could present a challenge to servicers in Florida that take possession of distressed properties via the foreclosure process. The gap period between the time that final judgement is entered in the foreclosure and the sale date is left exposed to the possibility that municipal bodies could place a lien on the property, complicating its alienability.

The case is pending appeal.

Source: DS News

Proposed Bill Aims to Amend Consumer Financial Protection Act

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Legislation Update
September 15, 2016

Summary:

CFPB Data Accountability Act

This bill amends the Consumer Financial Protection Act of 2010 to prescribe requirements for the consumer complaint website the Consumer Financial Protection Bureau (CFPB) must establish.

The CFPB may only make consumer complaint information available to the public on the website in an aggregated format and after taking steps to ensure that proprietary, personal, or confidential consumer information is not made public.

The CFPB must verify any consumer complaint information where the complaint alleges a violation of a law, regulation, or contractual agreement between a consumer and a covered person who offered or provided the consumer financial product or service.

The CFPB may only make such information available if the CFPB accompanies it with statistics on how many consumer complaints it receives regarding the particular consumer financial product or service compared to the total number of consumers making use of that consumer financial product or service.

The CFPB shall comply with all guidelines issued by the Office of Management and Budget pursuant to the Treasury and General Government Appropriations Act, 2001, as enacted by the Consolidated Appropriations Act, 2001, to ensure and maximize the quality, objectivity, utility, and integrity of information (including statistical information) disseminated by federal agencies in fulfillment of the Paperwork Reduction Act.

Source: CONGRESS.GOV (H.R. 5413 full text)

Proposal Aims to Improve Foreclosure Process Tracking

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Legislation Update
September 15, 2016

The state Office of Court Administration has opened a period for public comment on an administration proposal to require two new pieces of paperwork in settlement conferences required by New York courts in residential foreclosures.

The new “intake” and “status” forms are designed to better track progress the parties are making during settlement conferences that OCA says can often require several meetings over several months.

A memorandum in support of the proposal from Judge Sherry Klein Heitler, chief of planning and policy at OCA, said that with no current status update requirements, it can be difficult to tell if parties are progressing toward settlements that will allow debtors to avoid foreclosures and keep their homes.

The reports, to be filed after each settlement conference, also should help improve the continuity of the sessions, Heitler said.

“The forms will be particularly helpful to unrepresented litigants as well as to banks who in many cases utilize per diem counsel” at foreclosure proceedings, Heitler’s memo said.

The mandatory settlement conferences were introduced in 2008 as the foreclosure crisis accelerated in some parts of the state, especially Long Island and New York City. New York is a judicial foreclosure state, where foreclosures must go through the court system.

There were 98,000 foreclosures in New York state in 2015, and 51,900 so far in 2016 through August, according to OCA.

Heitler said the proposed paperwork requirement was developed in discussions with judges, court clerks and lawyers for lenders, consumers and legal services groups.

OCA will accept public comments until Nov. 1. Comments should be sent to rulecomments@courts.gov or to John McConnell, Counsel, Office of Court Administration, 25 Beaver St., 11th floor, New York, NY 10004.

Source: New York Law Journal

Policy Shifts Reflect Servicing’s Post-Crisis Priorities

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Industry Update
September 6, 2016

Editor’s Note: This article is part of the National Mortgage News 40th Anniversary Special. Click here to see more from the report.

Mortgage servicing has undergone a dramatic transformation in response to the housing crisis. The business practices and new regulations shaping this transformation fundamentally changed how servicers interact with borrowers by requiring extensive loss mitigation options to ensure that servicers exhaust all options before moving forward with foreclosing on a borrower.

Going forward, a focus on the consumer will define how servicers approach their business and regulators oversee their operations.

“We’ve had standard assistance programs for customers before, like repayment plans and forbearance,” said Janice Kay “JK” Huey, senior vice president of foreclosure and asset management at Wells Fargo.

“But then as more loans were starting to go into default, we saw Treasury get involved in helping us develop, as well as Fannie and Freddie and HUD, their own programs,” she continued. “They wanted to make sure we were doing all that we could to help customers stay in their homes.”

Even as short-term measures wind down and servicers reduce their staffing levels in step with declines in delinquency and default rates, the regulations and strategies implemented to address the unprecedented foreclosure crisis will help servicers more adequately respond to the next market downturn. And given the cyclical mortgage industry, the question of a future downturn isn’t “if,” but “when.”

“Twenty years from now, we’ll probably go through another two or three cycles,” Huey said.

The challenge, Huey said, lies in maintaining underwriting standards that adequately protect lenders and investors from unnecessary risks without being so restrictive that consumer can’t qualify for loans.

“What we’ve tended to see, particularly over the last 10 or 12 years, is when you get too tight, then you get too lax. How do we find the right balance to make sure that there’s steadiness in the market?” Huey said.

The regulatory response to the subprime mortgage crisis has been markedly different from the actions that regulators took in the wake of the savings and loan crisis in the late 1980s and early 1990s.

“I’d say definitely there was more of a consumer focus this time,” said Huey, a 35-year veteran of the mortgage industry, who experienced both crises firsthand.

“In the S&L crisis, regulators were just making sure they liquidated the S&L and sold off the mortgage operation. You didn’t see the focus on the consumer as much as what was the S&L doing and was it able to survive,” said Huey, a native of Texas, where the S&L crisis hit the hardest.

“In this case, while there were takeovers of the banks, in some cases, to ensure that they had the assets to support the liabilities, regulators were then focused on what caused this and what’s going on in the mortgage side of the business that could have caused the demise of the bank.”

This difference is perhaps best exemplified by the formation of the Consumer Financial Protection Bureau and the wide-reaching effect that the agency has had on monitoring both depository and nonbank mortgage lenders and servicers.

“While we’ve been a very regulated industry, especially on the banking side, there became a lot more regulatory focus on what servicers and lenders were doing,” in response to the subprime crisis, Huey said.

Because banks were already subject to Office of the Comptroller of the Currency regulation, the adjustment to CFPB oversight was different for nonbanks in the mortgage industry.

“That was something new I think for nonbanks, and CFPB is very engaged in looking at shops to make sure that we’re doing what’s right for the consumer,” Huey said.

While the volume of new defaults and backlog of foreclosures are both in decline, the regulatory focus on consumers is also present on the local level, as servicers work with county and municipal governments to address concerns about neighborhood blight stemming from foreclosed and vacant properties.

“The volumes are starting to come down and a lot of the focus that you’re seeing now is working on how do we help restabilize those communities?” Huey said.

As housing market and overall economic conditions continue to improve, the servicing sector will go through another transition. Years of historically low interest rates may help keep borrowers from refinancing current loans. But as existing borrowers buy new homes and new consumers enter the mortgage market, portfolio retention strategies and adapting offerings to meet the demands of younger generations will be crucial.

“You need to market on the ability to provide the tools to meet the demands of the consumer and what they want today,” said Huey. And through all of those changes, Huey expects regulators will continue to maintain their focus on consumers.

“I don’t think we’ll ever see less regulation,” said Huey. “There’s going to be so much focus on making sure that what we’re doing is right for the consumer. Who can argue with that?”

Source: National Mortgage News

Loan Modifications Increase as Foreclosure Sales Decrease

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Industry Update
September 15, 2016

HOPE NOW, the voluntary, private sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors, has released its July 2016 loan modification data which stated for the month of July, total non-foreclosure solutions (the combination of total loan modifications, short sales, deeds in lieu and workout plans) were approximately 112,000. This compares to approximately 25,000 completed foreclosure sales for the month. The report states that this is a ratio of more than four mortgage solutions for every foreclosure sale.

“As we turn to the second half of 2016, we remain pleased with the commitment of mortgage servicers to assist homeowners who are facing mortgage issues,” Eric Selk, Executive Director of HOPE NOW. “Our latest data report indicates that while delinquency continues to decline to pre-crises norms, there still remains a population of homeowners who need assistance. While our July 2016 data declined in many solution fields compared to the previous month, we are encouraged by the decline of actual foreclosures.”

The report states that included in that total solutions figure were an estimated 35,000 permanent loan modifications. This total includes modifications completed under both proprietary programs and the government’s Home Affordable Modification Program (HAMP). Of the permanent loan modifications completed in the month of July, the report shows that an estimated 23,000 were through proprietary programs and 12,081 were completed via HAMP. Additionally, of the 23,000 proprietary modifications completed in July, 46 percent, or 10,437, reduced the monthly principal and interest payment by 10 percent or more. Since HOPE NOW began reporting data in 2007, the total number of non-foreclosure solutions is over 25 million and the number of permanent loan modifications is 7.9 million.

“When looking at our July 2016 data compared to a year ago, completed modifications actually increased, so despite various conditions, the situation of thousands of homeowners improved,” says Selk. “The 112,000 foreclosure alternative solutions in July 2016 brings the life to date total since 2007 to approximately 25.5 million solutions. This is nearly four times the number of completed foreclosure sales (6.5 million) in the same time frame.”

Approximately 35,000 loan modifications were reported to be completed in July in contrast with 42,000 in June of 2016. This is a decrease of approximately 17 percent. Likewise, approximately 35,000 loan modifications were completed in July 2016 compared to 34,000 in July 2015. This was a reported increase of approximately 3 percent.

The report also states that approximately 5,700 short sales were completed in July 2016 compared to 6,300 in the month prior. This represents a decrease of approximately 10 percent. Short sales were reported to have approximately 5,700 completed in July 2016 in contrast to 7,700 in July 2015, a decrease of 26 percent.

Approximately 1,400 deeds in-lieu were completed in July. This is a 16 percent decrease from the 1,700 completed in June. Approximately 1,400 deeds in-lieu were completed in July 2016. This is a decrease of 6 percent from 1,500 in July 2015.

Foreclosure starts reduced 5 percent month over month to approximately 51,000 in July from 54,000 in June. Foreclosure starts were approximately 51,000 in July 2016 compared to 51,000 in July 2015. This number was reported to be virtually unchanged.

Additionally, foreclosure sales were reportedly about 25,000 in July from 29,000 in June. This was a decrease of 12 percent month over month. Likewise, foreclosure sales were approximately 25,000 in July 2016. This is compared to 28,000 in July 2015 which was a decrease of 9 percent.

“While the data trends certainly suggest that the market is recovering, there remains areas where assistance is still needed,” says Selk. “HOPE NOW continues to focus our efforts in several of these regions including Florida, Georgia, New Jersey and California.

Source: DS News

Additional Resource:
HOPE NOW (Data Report: July 2016 [pdf])

Legislators Mull New Fee to Help Combat Blight

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Legislation Update
September 22, 2016

HARRISBURG — Counties could underwrite demolition work by levying a new fee on recorded deeds under a bill gaining momentum in the remaining weeks of the legislative session.

The House Urban Affairs Committee approved Wednesday a Senate-passed bill aimed at ridding neighborhoods of abandoned and dilapidated buildings that contribute to the spread of blight.

The measure, sponsored by Sen. David Argall, R-29, Tamaqua, would give counties the option of tacking a fee up to $15 for recording deeds and mortgages with the revenue earmarked for a county demolition fund.

County officials would have to submit plans for demolition work and annual reports to the state Department of Community and Economic Development under an amendment added to the bill.

On the panel, Rep. Frank Farina, D-112, Jessup, voted for the bill. Rep. Jerry Knowles, R-124, Tamaqua, voted against it.

If enacted, counties potentially could generate as much as $14 million annually for demolition work if the top $15 fee is levied uniformly, according to an analysis by the Senate Appropriations Committee.

This bill faces House floor and Senate votes to agree with amendments before moving to Gov. Tom Wolf’s desk for signing into law.

Lawmakers enacted one or two laws to combat blight during each session in recent years.

Rep. Scott Petri, R-178, Richboro, the urban affairs chairman, said lawmakers, real estate agents, builders and housing advocates are negotiating where agreement can be reached on blight bills.

Mr. Petri said discussions continue with legislation to speed up the foreclosure of vacant and abandoned properties, but he called it a “tough process.”

Mr. Argall and Sen. John Blake, D-22, Archbald, sponsored a bill to fast-track foreclosure to get the property in the hands of responsible owners quicker.

Source: The Times-Tribune

Additional Resource: SB 486 (full text)

Governor Cuomo Announces Proposed Regulation to Hold Banks and Mortgage Servicers Accountable for Maintaining “Zombie Properties”

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Legislation Update
September 28, 2016

Proposed Regulation Advances Sweeping Legislation Signed by Governor Cuomo to Combat the Blight of Vacant and Abandoned Properties

Governor Andrew M. Cuomo today announced that the Department of Financial Services has proposed a regulation that mandates banks and mortgage services report vacant and abandoned properties in accordance with the new law. The proposal comes on the heels of a law signed by the Governor in June that curbs the threat posed to communities by “zombie properties” by expediting foreclosure proceedings, improving the efficiency and integrity of the mandatory settlement conferences, and obligating banks and mortgage servicers to secure, protect and maintain vacant and abandoned properties before and during foreclosure proceedings. The new law goes into effect on December 20, 2016.

“Abandoned homes are a blight on New York communities, and the longer they are allowed to fall in disrepair, the lower property values for entire neighborhoods are dragged down,” Governor Cuomo said. “This regulation is another step toward combatting the scourge of vacant and neglected properties, and will ensure that banks and mortgage servicers are held fully accountable for complying with their obligations under this new law.”

Superintendent of Financial Services Maria T. Vullo said, “Under Governor Cuomo’s leadership, New York passed groundbreaking “Zombie” legislation that will provide real relief to communities all across the State. DFS will take necessary and appropriate action to make sure this law is followed and those responsible are held accountable.”

Under the law, bank and mortgage servicers must complete an inspection of a property subject to delinquency within 90 days and must secure and maintain the property where the bank or servicer has a reasonable basis to believe that the property is vacant and abandoned. Banks and mortgage servicers are required to report all such vacant and abandoned properties to the Department of Financial Services and submit quarterly reports detailing their efforts to secure and maintain the properties and any foreclosure proceedings. If the Department of Financial Services determines that a property that has been deemed vacant and abandoned is not being properly maintained by the relevant bank or mortgage servicer, the Superintendent will exercise her authority to hold the bank or mortgage servicer accountable. Violations are subject to a civil penalty of $500 per day per property.

The proposed regulation is subject to a 45-day notice and public comment period following the October 12, 2016 publication in the New York State register before its final issuance.

The regulation is part of several provisions that will help to prevent New Yorkers from losing their homes and address the scope of unoccupied and ill-maintained properties, which based on voluntary reporting, is estimated to be over 6,000. Under the new law, reporting by banks and mortgage servicers is now mandatory, and the number of abandoned homes is anticipated to be even higher. The law also requires the creation of a zombie hotline to allow New Yorkers to report vacant or abandoned properties. New Yorkers can contact the Department of Financial Services hotline at (800) 342-3736 or online at www.dfs.ny.gov to report vacant or abandoned properties.

ADDITIONAL INITIATIVES TO COMBAT ZOMBIE PROPERTIES

The “zombie properties” legislation signed into law by the Governor in June also includes measures to assist homeowners facing mortgage foreclosure, improve the efficiency and integrity of the mandatory settlement conferences, and establishes a pre-foreclosure duty to maintain on mortgagees, create an expedited foreclosure process for vacant and abandoned properties, create an electronic vacant property registry, and establish a Consumer Bill of Rights.

Additionally, the FY 2017 State Budget invests nearly $20 billion for comprehensive statewide housing and homelessness action plans. Over the next five years, the $10 billion housing initiative will create and preserve 100,000 affordable housing units across the State, and the $10 billion homelessness action plan will create 6,000 new supportive housing beds, 1,000 emergency beds, and a variety of expanded homelessness services.

As part of the Governor’s ongoing efforts to assist future homebuyers and existing homeowners, this investment includes more than $100 million in available funds to help new homebuyers purchase and renovate “Zombie” properties and support existing low- and middle-income homeowners with major repairs and renovations. Funding is available through the New York State Homes and Community Renewal to establish the new Neighborhood Revitalization Program and provide grants for not-for-profit organizations and municipalities throughout the state to rehabilitate, repair and improve homes.

Source: Office of New York Governor Andrew M. Cuomo

Ganging Up on Blight

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Legislation Update
September 8, 2016

Blight in Pennsylvania’s older cities is such a fundamental problem that more than 20 bills have been introduced in the current state legislative session dealing with different aspects of it.

Lawmakers, who have given themselves only nine days to deal with pending legislation after taking a seven-week vacation, should make a priority of several of those bills.

Foremost among them is a bill sponsored by Democratic state Sen. John Blake of Lackawanna County and Republican state Sen. David Argall of Schuylkill County. It would speed the foreclosure process on vacant and abandoned properties without jeopardizing property rights.

The bill would establish specific definitions for what constitutes abandoned and vacant properties. To jump-start a foreclosure process, a municipal code officer or local court could declare a property abandoned or vacant under the statute, thereby enabling the lender holding the mortgage to begin foreclosure faster than otherwise would be possible. According to Blake, the bill could reduce the foreclosure process from more than the average 500 days to fewer than 300 days.

That change could help fight blight in several ways. Most important is that it could help get more vacant properties into the hands of new owners, and back on the tax rolls, before they deteriorate beyond the point of no return. That is especially so in places, like Lackawanna County, that have established innovative land banks to help restore fallow properties to productive purposes. And, in cases where properties have badly deteriorated, the new foreclosure timetable could hasten demolition and head off blight.

The Legislature should pass the bill and Gov. Tom Wolf should sign it into law.

But Blake pointed out an even more important initiative. He called for the restoration of full funding for the Elm Street and Main Street programs, and other community redevelopment efforts, that was reduced or eliminated as government revenues plummeted amid the Great Recession.

While building community arsenals against blight, the state and federal governments also should help fund follow-up redevelopment.

Source: Standard-Speaker

Additional Resources:
Pennsylvania General Assembly (SB 1191 full text)

Pennsylvania State Senate (Senate Co-Sponsorship Memoranda)

Safeguard Properties Fast-Track Legislation Resource Center

What Will Loan Modifications Look Like After HAMP?

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Industry Update
August 23, 2016

During the Great Recession millions of homeowners went through the foreclosure process or the process of modifying their mortgages, either directly through banks or with the help of federal programs like the Home Affordable Modification Program (HAMP). Additionally, some homeowners saw the value of their homes plummet, leaving them underwater. But according to CoreLogic, since the crisis, foreclosures have slowed, and the total number of underwater homes has dropped by half from 11.6 million in 2011 to 4.3 million last year.

A recent report from Credit.com, though notes this is not to say the housing market is out of the water, or that consumers who have trouble paying their mortgages don’t need help navigating the process. Solutions span forbearance and modifications to home-disposition options, and each of these is complicated.

“The foreclosure prevention programs established by Treasury, HUD and FHFA in response to the financial crisis have transformed the way in which the mortgage servicing industry has interacted with and assisted struggling homeowners,” Mark McArdle, Deputy Assistant Secretary for the Office of Financial Stability. “While MHA and other crisis-era homeowner assistance programs are ending, their impact will endure. Servicers and investors will need to leverage new or existing loss mitigation programs, but they should build on the best practices and guiding principles that have led to positive outcomes for all parties.”

The Consumer Financial Protection Bureau issued non-binding guidelines for mortgage services when dealing with at-risk homeowners. This comes right around the time that HAMP is coming to an end thus the Bureau refers to the guidelines as instructions for “Life After HAMP.”

“We aim to help consumers avoid foreclosures, which upset their personal and financial lives,” CFPB Director Richard Cordray said in a press release. “The modification program was put in place to provide alternatives to foreclosure. Our principles will serve as helpful guardrails for servicers, investors and regulators to consider as we continue to protect consumers who are struggling to pay their mortgages.”

The report from Credit.com states that the CFPB believes consumers are on more solid footing today than they were before the recession. It notes that these new rules make future mass defaults less likely. However, the report notes that the Bureau states, “there is ample opportunity for consumer harm if loss mitigation programs evolve without incorporating key learnings from the crisis.” The report says the CFPB identified four overriding principals that financial institutions should follow when dealing with at-risk homeowners including affordability, accessibility, sustainability, and transparency. Credit.com says the Bureau cites the main goal of the guidelines to preventing “avoidable foreclosures.”

Source: DS News