Mortgage rates eye of Wall Street storm after S&P downgrade

Hand-wringing experts expected consumer interest rates to rise and the economic world to pretty much end in advance of 2012, but after the smoke cleared, investor confidence in U.S. Treasury bonds revealed the U.S. isn't a deadbeat.

by Broderick Perkins
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Deadline Newsroom - Contrary to overwrought expectations, mortgage rates moved down Monday, Aug. 8, the first business day after Standard & Poors downgraded the United' States credit rating from AAA to AA-plus.

Hand-wringing experts expected consumer interest rates to rise and the economic world to pretty much end in advance of 2012, but after the smoke cleared investor confidence in U.S. Treasury bonds revealed the U.S. isn't a deadbeat.

Erate.com reported the average annual percentage rate (APR) on conforming, 30-year, fixed-rate mortgages (FRMs) was 4.61 in its Aug. 2 report. By midday Aug. 8, the rate was down to 4.49 percent.

Whether mortgage rates will continue to fall due to the downgrade is anyone's guess. Between Wall Street's fear mongering collective and Washington, D.C.'s buck-passing political bullies, few seem to have the economic smarts necessary to come up with real answers to cure the nation's ailing economy.

The mortgage interest rate drop came after Standard & Poors went through with its warned downgrade to the nation's credit rating, as it chastised the nation's legislative branch as a dysfunctional family of ne'er-do-wells.

(See Brookings: "Is This Really The Worst Congress Ever?")

S&P made the move specifically because of legislators' political infighting, including the Tea Party's zero-tolerance for compromise and the failure of both sides to add or insist on revenue enhancing taxes to the shaky federal budget agreement, among several other reasons it had cited far in advance of the actual downgrade.

S&P said the toxic behaviors combined to reduce confidence in Washington's ability to get the budget deficit under control -- let along employment, economic growth and fiscal stability.

It's not something S&P and other raters seemed to consider during the run up to the crash, but so be it. Perhaps S&P and other raters are finally getting their house in order. The jury is still out there.

In any event, the downgrade created a panicked sell-off on Wall Street as the DOW Jones Industrial Average plunged 5.6 percent, falling some 630 points, to about 10,800, the lowest its been since the fall of 2008 and virtually matching the sixth largest one-day decline in DOW history.

The larger Wilshire 5000 lost $1 trillion on paper, falling 891 points, its third largest decline ever.

It wasn't as if any of the companies in either index really experienced any damage from S&P's downgrade, but as investors leaped from the closing windows of opportunity on Wall Street, others flocked to the bond market, pushing prices up and yields down. Mortgage rates are tied to bond yields and often move in lockstep with them.

On Aug. 8, the price of the 30-year U.S. Treasury bond jumped more than 3 points, while the benchmark 10-year note's price rose nearly 2 full points, and the 7-year note was up by more than a point.

The 30-year bond on Monday was yielding 3.69 percent, down from a Friday close at 3.85 percent, as the 10-year Treasury yield dropped from 2.57 percent to 2.36 percent, taking mortgage rates along for the ride.

The flight to the very Treasury bonds S&P downgraded, was nevertheless a flight to quality.

Government bonds typically represent the rate at which investing in them is considered risk-free, and, at $9.3 trillion, Treasury bonds is one of the deepest investment markets offering easy to buy and sell investments.

So, at least on Monday, mortgage interest rates actually benefited from the economic shenanigans that has the nation embroiled in uncertainty and frustration.

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Consumer watchdog opens amid efforts to defang the new agency

With the Consumer Financial Protection Bureau up and running, its Consumer Response Center is accepting credit card complaints on its website, ConsumerFinance.gov. Struggling homeowners can also get referrals to housing counselors via the Homeowners HOPE Hotline.

by Broderick Perkins
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Deadline Newsroom - Born of the massive Dodd-Frank Wall Street Reform Act, signed into law a year ago, the Consumer Financial Protection Bureau (CFPB) officially opened last week, it's plate full and future clouded by attempts to dilute the agency's power.

Without a director or full staff, the agency created to protect consumers when they sign up for a mortgage, credit card or other financial product, has already laid a strong foundation, a foundation a gang of bankers and Republicans are anxious to undercut.

Dissident Republicans already won the first battle, politically strong-arming the White House into choosing CFPB's creator and champion, Elizabeth Warren, not as it's director, but as a temporary, interim director, Special Advisor to the Secretary of the Treasury on the CFPB.

With a record of being one of the nation's toughest consumer advocates, Warren would have been the best and bravest choice. Unfortunately, President Obama bowed to pressure and nominated Former Ohio attorney general Richard Cordray to run the agency and appease Republicans who threatened to block Warren's nomination and shackle CFPB's progress.

With the CFPB up and running, its Consumer Response Center is accepting credit card complaints on its website, ConsumerFinance.gov. Struggling homeowners can also get referrals to housing counselors via the Homeowners HOPE Hotline.

The nation's first 21st-century consumer protection agency, the CFPB is the first new government agency embedded in social networking, using Facebook, Twitter stream, Flickr and YouTube to get the word in and out.

Over the coming months, the agency will expand its Consumer Response Center to handle complaints about other consumer financial products and services under its jurisdiction. The agency is also contacting large banks to put them on notice to follow the rule of consumer law, to let them know how the agency will supervise them and how it will enforce federal consumer financial laws.

"Above all, this means ensuring that consumers get the information they need to make the financial decisions they believe are best for themselves and their families -- that prices are clear up front, that risks are visible, and that nothing is buried in fine print. In a market that works, consumers should be able to make direct comparisons among products and no provider should be able to build, or feel pressure to build, a business model around unfair, deceptive, or abusive practices," wrote Warren on the bureau's blog.

The CFPB's role is three fold:

• Educate consumers to give them a first line of defense against abusive practices.

• Enforce federal consumer financial laws and supervise banks, credit unions, and other financial companies.

• Examine gathered and analyzed data to better understand consumers, financial services and consumer financial markets.

CFPB reveals some of the agency's initial efforts in "Building the CFPB: A Progress Report."

• The "Know Before You Owe Project" is a process for combining the complex and duplicative Truth in Lending Act and Good Faith Estimate mortgage disclosure forms into a single, useable form.

• CFPB has issued two new studies, the first study examines the variations between the credit scores creditors use and the scores sold to consumers by credit reporting agencies. The second report focuses on how a consumers remittance history could be used to enhance his or her credit score.

Much more is in store, including:

• Rules to implement the Privacy Act and the Freedom of Information Act, in order to establish a process for anyone who wants testimony or records from the CFPB for use in litigation. Also included are confidentiality rules, describing how the CFPB will treat information it obtains.

• Rules similar to those issued by the Federal Trade Commission and Securities and Exchange Commission that outline how CFPB will conduct investigations of federal consumer financial law violations.

• Rules stating procedures state officials should use to notify the CFPB of state actions or enforcement proceedings.

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EHLP helps employment-challenged homeowners

For many homeowners, loans from the new “The Emergency Homeowners’ Loan Program (EHLP)” will amount to a grant they won’t have to pay back. Unfortunately, there’s only so much EHLP to go around and you don't have much time to apply.

by Broderick Perkins
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Deadline Newsroom - More struggling homeowners are getting a small slice of the federal bailout pie, served up as a special no-interest loan of up to $50,000.

For many homeowners, loans from the new “The Emergency Homeowners’ Loan Program (EHLP)” will amount to a grant they won’t have to pay back.

Unfortunately, there’s only so much EHLP to go around.

Demand is expected to be so high, even if you are a qualified homeowner you will have to win a lottery to get one of the loans.

The $1 billion federal program is expected to help an estimated 30,000 distressed homeowners facing foreclosure because of unemployment or reduced employment, provided you can also demonstrate the loan will help you resume mortgage payments down the road.

The U.S. Department of Housing and Urban Development recently announced EHLP as the latest infusion from the “Dodd-Frank Wall Street Reform and Consumer Protection Act.”

Get the full scoop here: "EHLP Helps Distressed Homeowners"

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ACORN shellacking just plain nuts

Known for results-oriented, boots-on-the ground, in-your-face, confrontational indignation that brought the Ameriquest and Household International subprime predators to their knees -- before "subprime" was a household word -- ACORN would be in our corner right now, if it still existed.

by Broderick Perkins
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Deadline Newsroom - Largely unfounded and often rabid charges that smacked of McCarthyism, led to the demise of one of the nation's staunchest supporters of community development and fair housing.

Given the banking industry's continued betrayal of its customer base and persistent collusion with the still largely self-regulated financial industry, we could really use a champion like the Association of Community Organizations for Reform Now (ACORN), now.

You can bet if ACORN was alive today, it would be dug in at the corporate headquarters of the nation's largest banks for shoving homeowners over the cliff and then tossing boulders after them to keep them down.

ACORN would have sent troops to Wall Street to face off against financial giants and greedy speculators who made billions feeding on the hopes and American Dreams of homeowners.

Known for results-oriented, boots-on-the ground, in-your-face, confrontational indignation that brought the Ameriquest and Household International subprime predators to their knees -- before "subprime" was a household word -- ACORN would be in our corner right now.

Phoenix not rising

Instead, the now bankrupt ACORN finds no vindication in the release last week of the U.S. Government Accountability Office report "ACORN: Federal Funding and Monitoring". Like other studies the GAO report reveals there was little to substantiate the vast majority of charges that drove ACORN into the ground.

ACORN's admitted infractions and isolated failures were small potatoes compared to surreptitious "Inside Job" infractions conducted by an unbridled financial infrastructure of perpetuators responsible for spawning the worst recession since the Great Depression.

Charges against ACORN, related to voter registration fraud, voting fraud and federal funding violations, among others, began largely after ACORN spearheaded many efforts to register voters for the historic 2008 presidential election which catapulted Barack Obama into the role of the nation's first African American president.

At the time, the operation was also grappling with an internal $1 million embezzlement case it admittedly handled poorly.

During investigations into these matters, a new scandal surfaced when "hidden camera" videos purportedly revealed ACORN volunteers and employees offering tax advice on a proposed prostitution business.

ACORN blames "Republicans" and "conservative activists" for leading the charge to strip federal funding from what was perhaps the nation's largest grassroots community organization of low- and moderate-income people, often African-Americans.

At its height, ACORN boasted nearly a half million member families organized into more than 1,200 neighborhood chapters in about 75 cities across the nation. For 40 years, ACORN broke down barriers of discrimination and prejudice..

The controversy, stemming from nearly 50 federal state and local investigations, cost ACORN and its affiliates federal funding (more than $50 million from 2005 through 2009) and cast a shadow over its private fund-raising efforts.

Beating the charges

ACORN was first cleared of wrong doing in 2009, by the Congressional Research Service in an investigation requested by the U.S. House of Representatives Financial Service Committee.

The report "CRS: Association of Community Organizations for Reform Now (ACORN) " not only exonerated ACORN, but also questioned the constitutionality of the legislation used to withdraw ACORN's funding. Without due process, legislation that inflicts "attainder," a type of punishment, could be considered unconstitutional, the report said.

The CRS report also questioned the impunity of those performing "evidence-gathering" dirty-tricks in hidden-camera stings used to bring additional charges.

At about the same time, U.S. District Judge Nina Gershon likewise argued Congress violated the Constitution by illegally targeting the group and attempted to block U.S. officials from enforcing the funding ban.

Months later, in March 2010, she upheld that order saying it was "unmistakable that Congress determined ACORN's guilt before defunding it." She also said Congress damaged ACORN's reputation and its ability to raise funds in the process. Not only were federal funds cut, but major contributors, the Ford and Mott Foundations, cut off funding to ACORN.

The Second U.S. Circuit Court of Appeals later disagreed with the Gershon ruling, forcing ACORN to take its federal funding case to the Supreme Court.

Meanwhile, by March, 2010, both Brooklyn, NY prosecutors and an independent investigation by the California Attorney General's Office cleared ACORN of criminal wrong doing over the hidden camera videos, after determining the videos were heavily edited, manipulated and distorted to meet then tricksters' agenda.

Except for millions of dollars in lost federal funding and ACORN's demise, little proof of wrong doing has come from the dozens of investigations.

John Atlas' "Seeds of Change, The Story of ACORN, America's Most Controversial Anti-Poverty Community Organizing Group" (Vanderbilt University Press, $27.95) documents ACORN's rise and untimely fall.

Final chapter

The final ironic ACORN chapter is the latest exoneration by the GAO. The report says:

• Of 22 investigations of alleged election and voter registration fraud, most were closed without prosecution.

• One of eight investigations of alleged voter registration fraud resulted in guilty pleas and seven were closed without action due to lack of evidence.

• The Federal Election Commission (FEC) reported five closed matters – one resolved, one dismissed and the others dropped after FEC "found no reason to believe the violations occurred."

In March, this year, in one of the ACORN website's final blog entries by outgoing CEO Bertha Lewis "Vindication Doesn't Pay The Bills", Lewis writes:

"ACORN has faced a series of well-orchestrated, relentless, well-funded right wing attacks that are unprecedented since the McCarthy era. Our effective work empowering African American and low-income voters made us a target. The videos were a manufactured, sensational story that led to rush to judgment and an unconstitutional act by Congress. For ACORN as a national organization, our vindication on the facts doesn't necessarily pay the bills. I know that ACORN's dedicated community members will continue to speak out for justice and organize in their communities."

We can only hope.

Post mortem: On June 20, 2011, the U.S. Supreme Court refused, without comment, to review Acorn v. U.S., the advocacy group's attempt to revive its lawsuit claiming that Congress had acted unconstitutionally when it denied ACORN federal funds.

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Fannie Mae hones assistance for homeowners facing foreclosure

Click on my big head!

In a detailed set of new standards, Fannie Mae declares servicers must take a more consistent, time conscious and customer-centric approach to homeowners facing foreclosure. Fines put teeth in the new standards.

by Broderick Perkins
© 2011 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - If only the growing reams of new mortgage regulations, disclosures, standards and legal settlements would actually reach and aid the teeming throngs of financially struggling homeowners.

One of the latest attempts to get mortgage servicers (often lenders) to behave like they have customers' best interests at heart comes on the heels of a recent settlement that was supposed to cure some of the same ills.

In a detailed set of new standards, Fannie Mae declares servicers must take a more consistent, time conscious and customer-centric approach to homeowners facing foreclosure.

"We want homeowners to be able to understand their options when facing foreclosure, and we want servicers to reach homeowners early in the process, communicate frequently and clearly, and help homeowners avoid foreclosure," said Jeff Hayward, Senior Vice President of Fannie Mae's National Servicing Organization.

Read the full story: "Fannie Mae Hones Assistance for Homeowners Facing Foreclosure"

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Wall Street, not Fannie, Freddie to blame for housing, economic meltdown

Research from the Center for Responsible Lending (CRL) "Wall Street, Not Fannie Mae & Freddie Mac, Created & Led the Toxic Mortgage Market," says toxic subprime loans started the foreclosure crisis and the disaster spread to other mortgages approved without properly qualifying borrowers.

by Broderick Perkins
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Deadline Newsroom - A recent study puts much of the blame for the mortgage meltdown squarely at the feet of Wall Street, rather than the federal government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.

Research from the Center for Responsible Lending (CRL) "Wall Street, Not Fannie Mae & Freddie Mac, Created & Led the Toxic Mortgage Market," says toxic subprime loans started the foreclosure crisis and the disaster spread to other mortgages approved without properly qualifying borrowers.

"The facts show that Fannie Mae and Freddie Mac were followers, not leaders, in the events leading up to today's foreclosure epidemic," the report says.

"During the 2000s, subprime mortgage lending grew rapidly as Wall Street seized on the opportunity to invest in riskier, higher-interest mortgages. 'Securitization' ... made it possible for loosely-regulated lenders to make loans and then immediately sell them to private firms that created mortgage-backed securities."

CRL's report says:

• GSEs were prohibited from buying subprime mortgages because the loans were outside the prescribed GSE guidelines. Subprime mortgage-backed securities were created in the private sector by Wall Street firms.

• GSEs did purchase subprime mortgage-backed securities as investments, but not in a volume that matched Wall Street purchases.

• GSEs eventually guaranteed and created investments with "Alt-A" loans which went to relatively wealthier borrowers with higher credit scores. The loans did have risky features, such as limited documentation. These investments are primarily why the GSEs were placed into conservatorship. GSEs investments were generally less risky than Wall Street's, but the private market and the GSEs share responsibility for supporting the loans.

• Mortgage loans purchased by Fannie Mae and Freddie Mac - including loans to lower-income borrowers - are performing better than those on the private market. As of June 2010, 13.35 percent of GSE loans to borrowers with credit scores under 660 were 90 or more days delinquent or in foreclosure, compared to 28 percent for subprime loans, according to Mortgage Bankers Association statistics.

• Affordable housing loans weren't the problem. GSEs' losses were generated by risky loans, primarily Alt-A loans that generally went to borrowers with higher incomes.

• GSEs' support of the Alt-A market, in a drive for profit and market share, actually weakened their performance on meeting affordable housing goals.

• The vast majority of subprime loans, 94 percent of them, were made by lenders who were not subject to the Community Reinvestment Act (CRA). The CRA covers banks and thrifts, which didn't make many subprime loans.

• Abusive loan terms were far more responsible for the foreclosure crisis than risky borrowers.

"Recent studies have shown that, comparing borrowers of similar risk characteristics, loans with sensible terms had significantly lower foreclosure rates than explosive subprime loans made by non-bank lenders," CRL's report says.

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Housing counselors thumbs down on mortgage modification operations

The U.S. Government Accountability Office' (GAO) report, "Troubled Asset Relief Program: Results of Housing Counselors Survey on Borrowers’ Experiences with the Home Affordable Modification Program (HAMP) ," is an unsettling revelation of workplace incompetence that borders on malpractice.

by Broderick Perkins
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Deadline Newsroom - Housing counselors are wringing their hands after giving a stout vote of no confidence to mortgage modification makers.
That's not surprising.

Work performance conducted by mortgage servicers, if a new survey is any indication, should be enough to get them roundly fired and quickly replaced in today's workplace, but they just continue not to work for their money.

At least government transparency is working.

The U.S. Government Accountability Office' (GAO) report, "Troubled Asset Relief Program: Results of Housing Counselors Survey on Borrowers’ Experiences with the Home Affordable Modification Program (HAMP) ," is an unsettling revelation of workplace incompetence bordering on malpractice.

More than three out of four housing counselors surveyed about their experiences with a $50 billion government sponsored (read taxpayers' money) mortgage modification program, HAMP, said their clients' overall experiences with the program ranged from "negative" to "very negative."

The culprits are both the mortgage servicers for their shoddy work and the government for not enforcing the guidelines.

After Congress established the $700 billion Troubled Asset Relief Program (TARP), $50 billion in TARP funds were allocated in 2009 to help struggling homeowners avoid foreclosure. Unfortunately, during the first two years of the program, more homeowners were denied or canceled from trail modifications than those who received permanent modifications.

Along with others critical of HAMP, GAO's report is its third attempt to study the problematic U.S. Treasury program and make recommendations to improve it.

In the current study, which calls for sanctions against mortgage servicers who don't get the job done, GAO surveyed nearly 400 housing counselors from NeighborWorks' National Foreclosure Mitigation Counseling Program (NFMC).

The survey found:

• Roughly 76 percent of the counselors said borrowers looking for a mortgage modification suffered a "negative" or "very negative" experience.

• Approximately 40 percent of counselors who provided written comments said they experienced difficulties working with servicers.

• Some 39 percent of counselors said mortgage servicers regularly lose sensitive personal financial documents and repeatedly request that homeowners resubmit them. In addition, over 78 percent of the counselors ranked "servicer lost the borrower's documentation" as one of the three highest challenges they face assisting homeowners.

Servicers appear to be passing the buck on the issue.

• One of the most common servicers' reasons for canceling trial modifications is insufficient documentation, but the U.S. Treasury can't determine if borrowers have not submitted the required documentation or if servicers lost or misplaced it.

• A whopping 86 percent of counselors said servicers often miss the mandated 30-day deadline for notifying homeowners that they've been approved or rejected for a modification, and don't get around to the job for several months to as long as seven months.

• Trial modifications are supposed to last only three months, but many drag on for six months or more. HAMP guidelines require that borrowers successfully complete a 90-day trial period, during which they make all the required payments on time before they can become eligible for conversion to a permanent modification. Nearly all of the counselors surveyed (96 percent) said trial periods typically lasted longer than 3 months, and 50 percent of these counselors said that trial periods typically lasted 7 months or more.

Some 60 percent of servicers were found not to be complying with HAMP guidelines, prompting counselors to insist that the Treasury enforce sanctions on servicers that did not comply.

"The Treasury told us that it had asked servicers to rectify issues associated with noncompliance and in some cases had withheld financial incentives, but had not yet finalized consequences for noncompliance," the GAO report said.

Counselors also cited the need for Treasury to require mortgage modification servicers to make more timely decisions (51 percent) and to ensure that servicers worked with borrowers who were not yet 60 days delinquent (41 percent).

Borrowers who are not helped by HAMP may be helped by non-HAMP, or proprietary modifications, which may offer greater flexibility, if they get to them in time.

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Unsung hero community groups save neighborhoods

Get offbeat! Click my head!

"Implementing the Neighborhood Stabilization Program (NSP): Community Stabilization in the NeighborWorks Network" is the NeighborWorks America's report detailing a dozen "Yes, we can!" case studies about the super heroic efforts of community groups that kept neighborhoods alive during their darkest hour.

by Broderick Perkins
© 2010 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Against all odds created by the deepest recession since the Great Depression, a network of community organizations beat back bad times and saved a host of distressed neighborhoods -- often block-by-block and home-by-home.

"Implementing the Neighborhood Stabilization Program (NSP): Community Stabilization in the NeighborWorks Network" is the NeighborWorks America's report detailing a dozen "Yes, we can!" case studies about the super heroic efforts of community groups that kept neighborhoods alive during their darkest hour.

The studies reveal the power behind the National Community Stabilization Trust's "5 Cs of stabilization" a strategy used to rescue neighborhoods submerged in foreclosures, at a time when money was tight, resources were slim and the line for help went out the door.

The trust facilitates transferring foreclosed and abandoned properties from banks to local housing organizations. The homes are "recycled" for reuse to keep neighborhoods stable.

The "Cs" include comprehensiveness, a plan that addresses all destabilizing forces in the community; concentration, targeting for maximum impact; collaboration to include a broad array of partners with a strong focus on residency; capacity from organizations with demonstrated ability in the effort; and capital, especially new sources of capital.

Here's a sampling of the neighborhoods saved by the work of NW agencies.

• Home HeadQuarters, Inc., Syracuse, NY - The agency collaborated with local residents and a wide range of stakeholders to focus community stabilization and revitalization efforts on a 15 to 20-block area known as the SALT District. Using a combination of funding, the agency acquired and redeveloped 90 foreclosed, vacant and abandoned properties.

• Housing and Neighborhood Development Services, Inc., Orange, NJ - This group worked with nonprofit, for-profit and city agencies to acquire and redevelop foreclosed inventory, first by acquiring the mortgages on 47 foreclosed properties housing 92 units.

• Neighborhood Development Services, Inc., Ravenna, OH - In the small city of Barberton, this agency helped acquire a 24-unit property from foreclosure and redeveloped it into an attractive community asset with affordable housing units. The agency collaborated with local, county and state agencies to acquire capital and worked with residents in the process of designing the improvements for the property.

• Neighborhood Housing Services of Orange County, Anaheim, CA - The agency worked with nonprofit, municipal and for-profit groups to obtain capital to acquire, renovate and re-sell nearly two dozen foreclosed homes to eligible buyers.

• Neighborhood Housing Services of Kansas City, Kansas City, MO - This agency became a one-stop shop for identifying properties, providing first mortgage loans, developing scope of rehab work, managing construction, assisting buyers with obtaining down payment assistance and closing the loans on 30 properties.

• Neighborhood Housing Services of South Florida, Ft. Lauderdale, FL - The agency worked with nonprofits to apply for and implement funding from city and county governments and to redevelop 90 foreclosed homes.

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

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Federal consumer watchdog digging into mortgage disclosures

Your new consumer watchdog agency is asking you, consumers, and mortgage professionals to participate in getting this right. This is a sterling example of social networking at its finest. The agency wants you to take a look at two new mortgage disclosure forms and provide feedback, telling the government exactly what you think. They need all the help they can get.  DVD to the right explains, in vivid detail, why the sky fell and why CFPB was necessary. 

by Broderick Perkins
© 2010 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Chronic confusion about home loans has prompted a new federal consumer agency to attempt what has been impossible -- create mortgage disclosures that clearly explain the true cost of borrowing.

The new Consumer Financial Protection Bureau (CFPB) recently released two draft mortgage disclosure forms designed to take some of the hair pulling and teeth gnashing out of learning what your mortgage really costs.

The consumer watchdog agency is asking you, consumers, and mortgage professionals to participate in getting it right. This is a sterling example of social networking at its finest. The agency wants you to take a look at the two forms and provide feedback, telling the government exactly what you think.

"Know Before You Owe," is an example of the new consumer watchdog's effort to put true clarity in "transparency" when it comes to financial disclosure forms.




Mortgage disclosures are a top priority for many reasons.

• Buying a home is the most expensive acquisition or investment most consumers will ever undertake. A home is often a consumer's or family's most valuable asset. You have a right to know what your home truly will cost.

• Ignorance, due to poor disclosures (in addition to outright deception, as well as consumers' own lack of due diligence) gets some of the blame for housing's crash and the worst recession since the Great Depression.

• Consumers have been complaining about mortgage disclosures and the difficulty they have understanding a home loan contract for eons.

"Most consumers have a tough time wading through all the fine print typically found on mortgage documents and other financial disclosure forms," said Norma Garcia, senior staff attorney for Consumers Union, the nonprofit publisher of Consumer Reports.

Among other elements, CFPB's forms include a clear statement, explaining that the borrower is under no obligation to choose a loan product. That helps take away undue influence which has been common in the mortgage lending process.
"This statement will help encourage consumers to shop and compare products, which will have the added benefit of increasing competition among lenders for borrowers' business," Garcia said.

Chronic confusion

A litany of studies reveal just how little consumers know about mortgages.

• Five years ago, just about the time the nation discovered Chicken Little wasn't crying "Wolf!" the AFL-CIO and BankRate.com issued studies that revealed mortgage consumers were confused, concerned and craving more regulatory protection.

The AFL-CIO found 73 percent of adjustable rate mortgage (ARM) holders, didn't have a clue how much their monthly mortgage payment will increase or decrease the next time their rate adjusts. Nearly half, 49 percent, said they weren't very informed about their mortgage's terms and conditions. One in five did not know their current interest rate.

Bankrate.com found more than one in three homeowners didn't even know what kind of mortgage they had, a fixed-rate mortgage (FRM) or an ARM.

• A November 2010, Consumer Reports national poll found that 76 percent of respondents wanted the CFPB to make clearer mortgage and financial disclosures a priority. The majority, 84 percent who had applied for or received a loan or credit card in the past 12 months indicated difficulty with financial disclosures; 31 percent described the disclosures as not clear or easy to understand.

• Early this year a MortgageMatch survey noted the mortgage application process was so excruciating, 21 percent said the ordeal was more stressful than waiting to hear if they got a job. Technical jargon was too much for 21.6 percent of those surveyed and 20.7 percent said it was a challenge to find a lender who was easy to work with. More than 32 percent of survey respondents ranked the application process more challenging than getting the mortgage itself (23 percent) or negotiating the sale price on the home (25.3 percent).

• Finally (but probably not), this month, after years of attempts to overhaul the mortgage industry, not only isn't greater transparency inducing consumers to shop around for mortgages, Zillow Mortgage Marketplace found many home buyers are still miserably in the dark about mortgages.

The Zillow-surveyed group was wrong 46 percent of the time when asking basic questions about mortgage information. More than half, 57 percent of prospective home buyers did not understand how ARMs work. Nearly half, 45 percent, believed they should always buy mortgage discount points. More than one third, 34 percent, did not understand that lender fees vary by lender and are negotiable.

"The draft mortgage disclosure forms prepared by the CFPB will help borrowers compare loans more easily and help eliminate surprises at closing and during the life of the loan. But it's important to remember that consumers need strong protections against shady mortgage practices not just improved disclosure," she added.

For sure.


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© 2010 DeadlineNews.Com

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You are reading a sample of "News that really hits home!" now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Under the DeadlineNews Group umbrella:

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
• National Real Estate Examiner
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• National Offbeat News Examiner

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Mortgage maze still leaves home buyers in a haze

Bed bugs get own web site(s)

Forty-four percent of housing consumers admitted they aren't confident in their mortgage knowledge or the mortgage process. The surveyed group also answered basic questions about mortgage information wrong 46 percent of the time.

by Broderick Perkins
© 2010 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - It's not just that credit is tight and incomes are light.

After years of overhauling the mortgage industry with reams of regulatory bans, counseling mandates, prohibitions and disclosures, too many home buyers still don't have a clue about home loans.

Zillow Mortgage Marketplace, with Ipsos, surveyed prospective home buyers, asking them about their knowledge of mortgages and mortgage facts.

They barely got a passing grade.

Forty-four percent admitted they aren't confident in their mortgage knowledge or the mortgage process.

The surveyed group also answered basic questions about mortgage information wrong 46 percent of the time.

After years of similar studies it appears that mortgage maze confusion remains chronic.

Both produced almost a half decade ago, the AFL-CIO-commissioned "Homeowners Confused, Worried About ARMs (adjustable rate mortgages)" and BankRate.com's "Mortgage Ignorance Rampant," reveal how American's have had a love-hate relationship with mortgages for years.

Earlier this year, a Move.com survey found consumers frustrated and confused about the mortgage process.

Zillow reveals people remain mystified and distrustful of the mortgage industry and that's not helping the pallid home buying market.

"Most people wouldn't jump out of a plane if they didn't know how to use a parachute, yet each year many buyers commit to the largest loan they will take out in their lifetimes without understanding essential information about mortgages," said Zillow Mortgage Marketplace Director, Erin Lantz.

Zillow found:

• More than half (57 percent) of prospective home buyers who were polled did not understand how adjustable rate mortgages (ARMs) work. The majority of home buyers believe ARM rates always reset higher after five years. In reality, interest rates adjust to the prevailing rate after five years, as they've done recently for those who purchased with 5/1 ARMs five years ago, according to Erate.com.

• One-third (34 percent) of those surveyed, who were prospective home buyers, did not understand that lender fees are negotiable and that they vary by lender. They believed lenders are required by law to charge the same fees for credit reports and appraisals. Home buyers can shop around for the best fees.

• Nearly half (45 percent) of polled prospective home buyers believe that they should always buy mortgage discount points when obtaining a mortgage. Not necessarily. Mortgage discount points are prepaid interest. The decision to buy them should depend on how long you intend to own the home. You might not remain in the house long enough to break even after buying points, Zillow explained.

• More than half (55 percent) of prospective home buyers in the study did not understand that mortgage rates vary throughout the day. Mortgage rates can change rapidly, similar to stock market prices, according to Zillow. Shop around for rates and keep in touch with your lender.

• More than one-third (37 percent) of prospective home buyers who were polled said that pre-qualifying for a loan means they have secured financing. "Pre-qualification" is only the earliest step in the mortgage application process. It's when a lender approximates how much you can afford, but may not run your credit or examine documentation to verify your information. Only after the lender has approved your loan application -- without condition -- can you be sure the lender is committed to making the loan.

• More than two in five (42 percent) of the polled prospective home buyers did not understand that Federal Housing Administration (FHA) loans are available to all buyers. Instead, they believe only first-time buyers qualify. FHA loans, the subprime better-idea, have become more difficult to obtain, but they can cost less for many buyers, including repeat buyers with low to average credit scores and with down payments of less than 20 percent.

"By simply spending a few hours researching how a mortgage works, and by shopping around for the most competitive rates and fees, buyers can save a lot of money," Zillow's Lance said.

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© 2010 DeadlineNews.Com

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You are reading a sample of "News that really hits home!" now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Under the DeadlineNews Group umbrella:

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
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• National Offbeat News Examiner

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CRL lists top mortgage servicing abuses

Dance moves women want

The cost of doing business in mortgage lending includes finding more and more ways to separate you from what's in your wallet and regulations are typically too little, too late.

by Broderick Perkins
© 2010 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Think federal regulations are making mortgage lenders behave?
Do you believe mortgage lenders have seen the light and want to make your experience as low cost as possible?

Have you been told the mortgage lending trade is looking for ways to cut your costs?

Bullocks.

Fugedaboudit.

Getting a home loan is an adversarial proposition. It's you against them.

The cost of doing business in mortgage lending includes finding more and more ways to separate you from what's in your wallet and regulations are typically too little, too late.

The Center For Responsible Lending found 10 ways mortgage lenders try to generate fees at your expense.

• 1. Misapplied payments. Even when payments are made on time, mortgage servicers "mistakenly" reject the check or apply it to the wrong account. The result is unjustified late fees and often other penalties as well. For homeowners, misapplied payments are a huge headache; for loan servicers, misapplied payments mean a chance for more income.

• 2. Illegal fees. It's not legal to charge the homeowner when the loan company pays for property monitoring or price opinions from brokers (BPO), but they do.

• 3. Two-faced "assistance." Many homeowners who are actively working with their mortgage servicer to work out their loan are surprised to learn that the company is also actively pursuing foreclosure, something called "dual tracking."

• 4. Blocked refinances. Loan servicers don't like to lose the steady income flowing from their mortgages, so it's in their best interests to stall attempts to refinance with a different company. Some loan servicers have refused to provide loan payoff information, preventing refinances and even home sales.

• 5. Squelched legal rights. Loan companies often include "waivers" with their loan modifications, which essentially say, "If you accept this modification, you give up your right to pursue any legal actions against us no matter what egregious acts we commit."

• 6. Botched taxes and insurance. Many mortgages have an escrow account for taxes and insurance that the loan company manages -- or not. When the company fails to pay these expenses on time, the homeowner is stuck with the penalties. And some companies require expensive hazard insurance (to cover damage from accidents, storms, etc.) even when insurance is already in place.

• 7. Zipped lips (no communication). When loan servicers believe a homeowner is late on a mortgage, it's important to send a notice. Sometimes they do, sometimes they don't.

• 8. Whirlwind foreclosures. Each state has laws governing the foreclosure process and when a lender can initiate foreclosure. In the rush to foreclose, some loan companies ignore key steps required by law.

• 9. Crazy foreclosures. This one is hard to believe, but it happens: the loan servicer begins foreclosure proceedings even though the homeowner is current on the mortgage.

• 10. Robo-signing and other fraud. Loan companies fail to review key documents or falsify court documents used to evic -- often because the companies haven't kept accurate records of ownership, payments and escrow accounts that would enable legal foreclosures.

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© 2010 DeadlineNews.Com

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Get "News that really hits home!" for your Web site or blog from the DeadlineNewsGroup.Com.

You are reading a sample of "News that really hits home!" now available from several beats and published in a growing number of locations.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.

Under the DeadlineNews Group umbrella:

Perkins is managing editor of HomeAway.com's Gulf Coast Response Center.

Perkins was the first Examiner to cover three beats for the Examiner.com news service:
• National Real Estate Examiner
• National Consumer News Examiner
• National Offbeat News Examiner

Other DeadlineNews Group Feeds are available from DeadlineNews.Com.

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

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