BofA settlement pushes up home default notices

[hvactec]

NEW YORK — It's no secret that Bank of America wants to put its mortgage-related woes behind it. But it appears that a key $8.5 billion settlement with large investors is playing a role in pushing many more people into foreclosures.

The number of homes across the country that received an initial default notice - the first step in the foreclosure process - jumped 33 percent in August from July, the foreclosure listing firm RealtyTrac reported last week. It was the largest monthly increase since August 2007, right after the housing bubble had burst.

Now a preliminary analysis reveals the largest escalation of foreclosures came from Bank of America. Just in California, default notices sent by Bank of America soared 96 percent in August from the previous month.

The dramatic rise is particularly evident in certain California towns and cities. For instance, notices surged 95 percent in Fresno and 76 percent in Sacramento.

Bank of America says that taking action on its foreclosure pipeline will set the stage for a housing market recovery. However, consumer advocates say Bank of America and the other lenders are ramping up foreclosures without cleaning up shoddy paperwork practices, which led to a moratorium in foreclosures last October.

"Bank of America has a ticking time bomb in its books and it needs to show investors that it is moving," said Ira Rheingold, an attorney and executive director of the National Association of Consumer Advocates.

" 'Does that mean it has improved its practices?' No. But Bank of America is in a desperate place," said Rheingold.

On June 29 the Charlotte, N.C. bank struck an $8.5 billion settlement with a group of large investors- including Pimco, the New York Fed and Blackrock- who claimed the bank had sold them poor quality investments based on faulty mortgages. The settlement is still subject to court approval; a decision is expected in November. Several other investors and homeowners have also filed objections with the court to block the settlement.

Bank of America spokesman Richard Simon said the bank's increased foreclosure actions had nothing to do with the settlement. Instead it stems mainly from a return to more timely filings on new defaults. He also noted that the bank has improved quality controls and was moving homes into foreclosure "only after all other options with homeowners have been exhausted."

Clearing the backlog of foreclosures and defaulted loans is a key part of the terms of the settlement. Bank of America has to reduce the number of risky mortgage loans and find third-party companies that can help speed up the process. This includes helping homeowners modify loans or herding defaulted loans into foreclosure sales.

The bank's actions to start clearing the backlog started from the date the settlement was signed, said Scott Humphries, a partner at law firm Gibbs & Bruns, which represented investors in the settlement. "It does not have to wait for court approval," he said.

Read more: BofA settlement pushes up home default notices | AP Business Headlines | Dallas Business...

 

[waltky]

Obama workin' hard to save the day an' peoples homes...

Obama administration mulling paydowns to prevent foreclosures
10/26/11 - The Obama administration is mulling ways to promote principal paydowns of mortgage loans to help struggling homeowners prevent foreclosures, according to House Democrats who met with a top housing regulator Wednesday.

Edward DeMarco, the acting director of the Federal Housing Finance Agency (FHFA) – the independent agency that regulates Fannie Mae and Freddie Mac – is weighing a proposal to allow bankrupt homeowners to temporarily pay down their principal balance, interest-free, in an effort to reduce negative equity, the Democrats said. DeMarco, according to the Democrats, said the strategy “has a lot of promise” and “strikes me as being responsible.” He told the 19 Democrats with whom he met that he would weigh the proposal and get back to them within two weeks, the lawmakers said. A spokesperson for the FHFA declined to comment on Wednesday's meeting.

The Democrats said encouraging principal paydowns would go a long way toward stabilizing the volatile housing market. "If Mr. DeMarco actually works with us to implement this proposal, it would be an important step to address this crisis," Rep. Elijah Cummings (Md.), senior Democrat on the House Oversight and Government Reform Committee, said in a statement following the meeting. Sponsored by Rep. Zoe Lofgren (D-Calif.), the Democrats' proposal would allow underwater homeowners who file for Chapter 13 bankruptcy to skip interest payments for five years. Instead, all of their monthly mortgage payments would go toward paying down the principal balance. In return, homeowners would agree to settle any pending claims against their mortgage servicers.

"Coordination with the bankruptcy process would make these reductions more likely to succeed than other types of loan modifications, while also limiting the program to those who truly need it," Lofgren and a long list of California Democrats wrote in an Oct. 12 letter to President Obama promoting the idea. Many Democrats have been at odds with the administration over its housing policy for years – a conflict that gained greater attention this year after the high-profile Cummings joined the fight. Earlier this week, the FHFA sought to improve its anti-foreclosure efforts with a number of reforms to the Home Affordable Refinance Program (HARP), a 2009 designed to help underwater homeowners obtain cheaper loans.

MORE