The Obama government has launched the Making Home Affordable programme. Lenders are being encouraged to be more proactive in helping the foreclosure victims so that their homes are saved and foreclosures are avoided. It was expected that by it millions would be benefited.
The finance industry is being criticized for not following up the matter speedily and sincerely. As a corrective step the government is planning to highlight the names of those who have failed in implementing the modification programme. The two biggest offenders are Bank of America and Wells Fargo. There are 31 mega financial bodies that have participated in the mortgage modification programme. They have taken billions from the federal government as bailout funds. They are worried about their public image – understandably so. To some extend they are enforcing the plan and the government is in a position to put more pressure on them.
There are reports coming in that Freddie Mac will be conducting random audits to find out if the borrowers are being informed regarding them being qualified for the plan. Efforts are also being taken to see that the house owners under threat from foreclosure are not being denied participation in the modification programme. Michael Barr of the Treasury commented, “We want to go faster. There are a bunch of servicers that are lacking in performance. They have to lift their game.”
The programme was initially optimistic about helping millions who were under the cloud of foreclosures. It was hoped that through the plan the monthly mortgage amount would be lowered. But although recently some speed has been noticed the numbers helped hardly scratch the surface of the problem.
The new programme is not welcomed by the lenders. As such it is financially better for them to foreclose and sell the property.
Meanwhile as per predictions foreclosures are marching ahead. During the first half of this year 1.5 million households have got foreclosure notices. The sheer magnitude of the numbers is making help difficult. It is anybody’s guess how many of this 1.5 million actually qualify for assistance. There are many who cannot manage even lowered modified amounts – so far gone are they in their financial troubles.
It is imperative for the financial entities to act and to follow the school maxim that ‘No Child is Left Behind.’ Nobody who qualifies for help should be denied it. Already many who could have got assistance have lost their homes.
It is the tiny drops that make the ocean. The foreclosure of a single borrower followed by another and then another running into millions has opened up the floodgates – so much so that the crisis has led to the questioning of the validity of the dollar as international reserve currency.
Instead of the dollar it is suggested that the reserve currency should be the SDRs or Special Drawing Rights of the IMF. In reality it would mean that the unipolar world that was functioning since the fall of the Soviet Union in 1991 would now be replaced by a multi-polar global economic era with toned down globalization.
Till 1914 the currencies of the world were expressed in gold terms. Since gold was always limited, the countries could not issue currency over and above their gold holding. The first main power to go off the gold standard was Britain in 1914 so as to be free to fund its military spending during World War I. But in 1925 Churchill returned to the gold standard.
After the close of World War I the dominant power in the world was USA. From 1946 to 1971 the rates of exchange were fixed relating to the USA dollar. Gold prices were pegged down at $35 per ounce. France made use of this to exchange dollars for gold and this depleted the gold holdings of USA. This apart USA found itself embroiled in heavy expenditures like Great Society programme of Johnson and the Vietnam War. This made Nixon remove the fixed price facet causing massive numbers of dollars to start circulating.
Since then most of global trade and monetary transactions have been expressed through dollars. The size, power and increasing productive power of USA gave the rest of the world confidence to rely on the dollar. They began parking extra funds in American treasury bonds and various other kinds of investments. This ceaseless inflow of funds allowed Bush to merrily go on spending far in excess of the country’s revenues. This led to massive increase in liquidity.
The Federal Reserve stuck to its policy of low interest rates and allowed the economy of USA to grow and grow. There was employment all round and frenetic construction activity. It was the great bubble. There were huge purchases through credit cards and banks as well as other financial institutions dizzily indulged in speculation. Not to be left behind the mortgage firms began to play around with new types of financial tools.
Then everything went bust!
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Foreclosure victims in Georgia are hopeful about new legislation that would help mortgage problems and also in matters related to electricity and health issues. Consumer advocates are feeling upbeat about this year’s package of laws.
The ongoing recession has made the legislators extremely sensitive to the pressures coming from the financial sector. Most the lawmakers are feeling it personally – mainly those whose business enterprises have been falling or those who are seeing many in their constituents getting laid off.
A one-time committee that has been put up in the previous year to study the bankruptcy issues was chaired by Senator Ed Tarver. In June Senator Bill Hamrick chaired a Senate Banking Committee that listened to testimony about companies claiming to rescue foreclosure victims. This gave rise to the necessity of initiating laws to provide protection to the consumers from these types of scams.
The Senate Research Office noted that unstable or risky loans were the results of “poor underwriting practices.” The ARM (adjustable-rate-mortgage) is a typical example and invariably ended up in default.
While the consumer groups were upbeat about the legislation that Harmrick had sponsored, they were not happy with other bills relating to the electricity rates of Georgia and matters connected with health insurance. Allie Wall of a consumer advocacy group described the legislation as a mixed bag.
The Senate Bill 57 wants brokers to be sure that the borrowers are able to repay the mortgages they are taking. Brokers are also forbidden to pocket bonuses for selling loans with high interest.
Senate Bill 146 puts pressure on speedy procession of registration of property so that the house owners who are trying to sell the unit so as to avoid foreclosure, will be unable to do so because of lengthy time taken by the county clerk.
Another bill – SB 140 (initiated by Hamrick) would have given protection to the tenants residing in a foreclosed unit. They would have to be given prior warning and sufficient time to make alternative arrangements for shifting. Unfortunately it did not see the light of day.
Although the majority in the full Senate voted in favour of the two bills there were many senators whose interests were conflicting with the provisions of the bill, said Senator Vincent Fort (Democrat – Atlanta). He said, “It is troubling that so many legislators who have banking interests were voting on bills about banking and abusive lending.”
Georgia foreclosure houses by Top Counties
There are many workshops being held across the country to educate and help foreclosure victims. Dough White has lost his job and is facing the grim prospect of losing his house on South Hill. He attended a workshop along with 100 other residents of Pierce County seeking help and advice on how to tackle the problem of unmanageable mortgage payments and impending foreclosure notices.
The workshop was set up at Tacoma Campus in The Evergreen State College. It instructed the participants on how to budget and balance their incomes with expenditure, access social services and understand the intricacies of the foreclosure process.
Most of the participants however mainly wanted to speak individually with a counselor or the representative of a lender. The homeowners had been asked to bring with them their papers relating to their loan, pay stubs and tax. It would enable productive discussion on financial alternatives with the lenders or with a counselor (state approved).
White came with the foreclosure notice that he had received three weeks previously. He had many questions to ask. At the time of receiving the notice he was not sure about how to react and respond. 57-year-old White said that he was hoping to be able to shift to a low cost re-mortgage on his house. This house has been his home for the last 30 years. He bemoaned that he never gone through such an experience hitherto.
Many people recounted the struggle they had been facing trying to keep up with mortgage payments since losing their jobs in the previous year. One of them was Kim West (53). She had lost her work last September and was now defaulting on her house in North End Tacoma. In the beginning she had tried to work out a deal with her lender but unless one fell behind in payments the lenders were not willing to talk. She remarked, “It’s kind of a Catch-22”.
The workshop was sponsored jointly by The City of Tacoma, the Department of Financial Institutions (State) and many other community groups.
Till 2nd March Tacoma had noted 1,404 foreclosed units. There are now 2,500 residential house owners of Tacoma over 30 days lagging behind in their mortgage payments according to Ric Teasley the divisional manager of Tacoma’s Housing. He said, “So many people are suffering through foreclosure. They don’t know where to turn. By coming here they can see what some of their options are. Their options may not be good, but at least they’ll have a chance to speak to somebody and find out.”
Washington Foreclosure Listings by Top Cities
The situation is grim. Foreclosure victims cannot be saved without state assistance. The legislators should try to act immediately to access in depth the mortgage practices that have been hurting the borrowers.
Sale of new residential houses in Atlanta has fallen by 52% during the last twelve months. February saw the biggest number of foreclosure postings and the unemployment figures made a record last January. One eighth of all mortgage holders in Georgia are now either in or about to enter foreclosure.
The General Assembly cannot be expected to sit back and wait hoping for the free market to correct itself. The state government was responsible for setting the stage for this economic debacle. It did nothing to stop the predatory lending when it had the chance. But now it must resolve the woes.
Frank Alexander is a law professor and has authored “Georgia Real Estate Finance and Foreclosure Law.” He said about the state, “By acting in the ways it can act and in ways consistent with other states, the General Assembly can reduce the depth of the harm and the length of the harm to our housing market.” The legislators however are continuing to dither. 72 of these legislators have close financial links with the banking industry. If they do not do anything then “Our foreclosures will continue higher for longer, and the consequences to our market will be far worse,” further added Alexander.
The Georgia Generally Assembly has always dismissed the matter of foreclosures as personal tragedies and put the blame on the borrowers for taking loans in an irresponsible manner. It was alleged that borrowers walked into houses they could ill afford without properly reading the terms of the loans. In 2003 it took on a more harsh tone when the Republicans that had gained a majority repealed the 2002 Fair Lending Act. The latter prohibited many lending activities that are now being blamed for the collapse of today that has ultimately led to recession.
Georgia is now holding 8th position in the foreclosure race while adjacent North Carolina ranks 33rd. This is mainly because of its stringent lending regulations.
Foreclosures are now gnawing into real estate prices that are telling on consumer spending patterns, loss of constructions jobs and reduction in tax collection. Despite the area being cursed with dotted foreclosed houses the state is still humming and hawing about strong anti foreclosure measures.
Georgia foreclosures for sale by Top Counties
Against the background of growing resistance against foreclosures, steps are being taken to provide assistance to the foreclosure victims and their families. In the forefront are enforcement personnel, community leaders and the house owners. A broad based civil disobedience is taking shape in New York and also in different cities to give support to those families who refuse to obey the eviction orders.
ACORN boldly launched this programme with a heated rally last Friday starting from Brooklyn Church. It will also roll out from a minimum of 22 cities during the forthcoming weeks. The families refusing to accept eviction orders will remain connected through telephone, websites and text messages. Volunteers will come and stand beside them even at the risk of courting arrests.
The chief organizer of ACORN, Bertha Lewis said, “You want to haul us out to jail? Fine. Let the world see how government has been ineffective. Politicians have helped banks, but they haven’t helped families in the way that it’s needed, and these families are now saying, enough is enough.”
During the initial stages of the foreclosure crisis many were under the impression that the borrowers were largely responsible for it. It was the result of irresponsible planning of people who did not think of the consequences of living beyond their means. But with foreclosures spreading like an epidemic across the country mauling the middle-class in particular, the blame has moved from the borrowers to the lenders – the giants in the financial world who issued these predatory loans. But they have gained by receiving billions in federal bailout funds.
This has led to a growing feeling of resentment, which is gathering momentum, that the ordinary Americans have been deserted and left to manage their own predicament. ACORN is the organized face of this frustration. The victims are no longer packing up and leaving but they are taking a stand with their backs to the wall.
On 9th February one such victims scribbled his anger on the roof of his foreclosed house – “I Want 2 Be Heard.” He locked himself up in the house when the officials came to evict him and surrendered after few hours but not without making his point.
Last October a lady in San Diego tied herself up with chains in her front porch after her lender refused to negotiate the loans She continued to remain in her house even after receiving a second eviction notice.
New York Bank Foreclosures by Top Counties
The district attorney’s court at Suffolk is charging a man from West Islip for cheating foreclosure victims of $2.5 million. Thomas Spota the District Attorney said, “What we’re seeing in Suffolk County is an explosion of fraud involving, depending on the scheme, every facet of the mortgage process.” The probe has caused 27 arrests and 9 indictments to be made since June this year.
The latest case centres on Louis LaDonna aged 39 who has pleaded not guilty to 13 counts including grand larceny. LaDonna has been accused of inflating house values in West Islip, Lindenhurst and Babylon. He has been operating through his firm LaDonna Properties. His attorney William Keahon contended that the case was not strong as it was based on the documents given to him by the District Attorney’s office. He is sure that it will not be possible for the latter to prove their points of accusation.
It has been alleged that from 2006 to 2007, LaDonna made contacts with foreclosure victims and found them “straw buyers”. The latter are bogus and pretend to purchase the house, said the prosecutors. For this these fictitious buyers are paid something ranging from $10,000 to $20,000 for their acting. LaDonna was also in cahoots with appraisers to inflate the value of all the units to something much above its real worth. Thomas Spota revealed these facts at a press conference.
By producing faked documents that over stated their earnings and assets these phony purchasers qualified for mortgages that did not require down payments. After completion of the transactions the lenders (Mortgage-It and First Franklin Financial Corp) made the requisite payment to LaDonna for the properties. The lenders were given only two or three mortgage payments causing them to proceed with foreclosure.
LaDonna has been released on a bail worth $750,000. He will have to reappear in court on 4th February 2009.
Recently Maire Poulard, aged 50 of East Quogue as well as 49-year-old Frank Spindel of Miller Place have been arrested on charges of larceny. Spindel was the mortgage broker of Poulard and helped her set up a straw buyer to buy a house of her choice priced at $1.2 million. Brokers are being accused of “making this thing work at any cost”, said Maureen McCormack of the economic crime bureau in the office of the District Attorney.
Massachusetts Bank Foreclosures by Top Counties
With the foreclosure menace continuing unabated many measures are being taken at the federal, state and local levels to tackle the menace. Foreclosures have caused a general slump in the economy that has led to rise in unemployment.
Recently President Bush signed a law that will allow for extension of unemployment benefits through the stretch of Christmas holidays. Simultaneously the important lenders will put on hold foreclosures until New Year. By doing so Bush was trying to ease the pressure on the economy because of job losses. It will give seven weeks of extra relief to the unemployed – the total grace period running into 46 weeks. The new law will offer thirteen additional weeks of unemployment benefits for workers without jobs in those states where the rate of unemployment was unusually high. It will total up to 59 weeks of grace.
Mortgage giants like Fannie Mae and Freddie Mac said that they had sent notices to all their servicing agencies to put on hold all foreclosure proceedings from Thanksgiving Day till 9th January 2009. The statement read, “Freddie Mac servicers and foreclosure attorneys were told to contact as quickly as possible an estimated 6,000 borrowers with foreclosure sales scheduled between November 26, 2008 and January 9, 2009. If the property is occupied, the servicers and foreclosure attorneys will halt the sale.”Fannie Mae is optimistic that the step will benefit a minimum of 10,000 foreclosure victims. They will now be able to continue to stay in the houses that are their homes. This pause will give time to the lenders to negotiate new agreements with those borrowers who are not being able to be current on their mortgages.
Prior to this other banking and mortgage entities had declared that they too would be undertaking similar steps.
Earlier this month Citigtroup announced that it was imposing a moratorium on a majority of its foreclosures. Approximately it will benefit 500,000 of its clients at risk from foreclosures. The moratorium will give time for both parties to come to a more realistic, mutually beneficial understanding.
J.P. Morgan Chase said that it would speed up the modification of mortgage loans worth about 110 billion dollars. It will of assistance to 650,000 householders who will now get a fair chance to save their houses from foreclosure.
Bank of America declared during the first week of October that it would be modifying mortgages that will positively affect 400,000 householders who had taken loans from Countrywide Financial Corporation. The latter has recently been taken over by Bank of America.
Bank Foreclosures by Top States
The obvious question on the lips of everyone is how the $700 billion package will help the ordinary foreclosure victim. The basic idea was that with money flowing into the banks and financial bodies would flow out as loans and people will get help. Investor and consumer confidence would be regained and everything will be hunky dory and picture perfect.
Moving away from the original schedule, Henry Paulson, secretary of the Treasury said that the money would be used to pep up consumer spending by granting loans to students, beefing up credit cards and easing loans for buying automobiles. This will keep well greased the wheels of the economy without a pause. But the three auto giants, Ford, General Motors and Chrysler are far from happy with this. They want cash of about $25 billion at least to keep running. The danger is that with the shutting down of Detroit millions would become jobless and the supply chain of dealers of auto parts will get disrupted. This will worsen recession.
The FDIC is suggesting that the government spend $24 billion to guarantee mortgages. This will directly help 1.5 million house owners threatened by foreclosures. Each state and city is demanding their share of the cake. Meanwhile grants to universities and colleges have slumped.
It appears that recession is more dangerous and worse than terrorism. The latter is manipulated by man can be limited if not controlled. As in Indonesia it can be totally eliminated. But global recession (although admittedly having its seeds in malfunctioning of banks and mortgage houses in USA) is something beyond control and pulling down country after country with it. The Prime Minister of India, Manmohan Singh aptly said, “Emerging market countries were not the cause of this crisis, but they are amongst its most affected victims.” This raises a good question – if Pakistan slips into bankruptcy, who will be blamed? Taliban or Uncle Sam?
Seven years ago there was no international summit after the 9/11 episode. Today with developed and emerging countries accounting for 85% of the global economy there is a scramble to bailout the world. Apparently the international monetary fund is going to be restructured but the real aim is to thaw the international credit line through various stimulating packages in different nations so that the ordinary American can once more start shopping. The source of the trouble – foreclosures, remains a forgotten history to be borne silently by the homeless.
Bank Foreclosures by Top States
The government is mulling over plans to help about three million foreclosure victims simulating example set by FDIC. Broadly the idea is to lower interest rates. As yet no final deal has been reached and talks could still come to a halt. The government is planning to use $50 billion from recently passed bail out package to guarantee $500 billion worth of mortgages.
Most probably the loan modifications would lower rates of interest for a five-year span according to sources close to the plan makers. If set into motion this plan would be the most forceful of all the plans launched so far to contain the foreclosure crisis. Read the rest of this entry »
