It is happening too often. Banks are foreclosing on too many military families. The Servicemembers Civil Relief Act is supposed to protect our men and women while they are on active duty. The last thing we want our men and women to think about is losing their homes while they are fighting our enemies in a foreign land.
Last week JP Morgan Chase admitted to wrongfully foreclosing on 14 military families and overcharging about 4,000 families. Under the Servicemembers Civil Relief Act (SCRA) the most a lender can charge on a mortgage is 6%. The bank said this was a mistake and will refund $2 million to the families. All this improper activity has lead Federal Prosecutors to launch an investigation.
Deutshce Bank also ran into problems when they foreclosed on military families. The bank foreclosed on a Michigan home, forcing the family of four to seek shelter with family and friends. The bank sold the house for $76,000.
In March 2009 a federal judge ruled that the foreclosure violated federal law. In simple terms the foreclosure was illegal. Remember that the foreclosure took place in 2004. So why is Sergeant Hurley, of the US Army, still fighting for his house?
“There is a fundamental disagreement over damages” was the response from the bank’s camp. There are too many cooks in the kitchen in this case. Saxon Mortgage is the lead in this case. This company services the mortgages. Saxon Mortgage is a subsidiary of Morgan Stanley and Morgan Stanley is the co-defendant with Deutshce Bank.
The bank wants to pay what the house is worth in today’s market. There is nothing fundamentally wrong with this argument. We all see what the recession has done to house values. So why not screw a soldier and his family.
Sgt. Hurley’s lawyers want punitive damages and rightfully so. This is the only way that banks will get the message. The law applies to everyone!
What is interesting in the two cases, JP Morgan Chase and Deutshce Bank, is how the law and our service men and women are viewed. JP Morgan Chase did the right thing. They issued refunds and reversed the foreclosures. Deutshce Bank on the other hand is willing to fight and prolong the issue.
My take on these specific cases is very simple. You break the law you pay a fine. The fine should be set at a minimum of $30,000. You break the law 10 times that’s $300,000.
The mindset of Deutshce Bank is similar to a shoplifter. He steals a loaf of bread and gets caught. So he gives the bread back and says “sorry”. This bank steals a house and doesn’t even want to say “sorry”. And they are still hanging onto the house.
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Many homeowners haven’t missed a mortgage payment yet, but still believe that they will lose their homes to foreclosure. There are living with fear and anxiety every day. If they could only get a handle on how events will unfold will make their lives less stressful.
Here is a timeline to help you if you are one of these homeowners.
First month you miss a payment.
Lender will contact you. This is a customer service type call.
Second month you miss another payment.
Lender will contact you again. Please take the phone calls and try to work out a deal.
Third month you miss another payment.
You will get a letter from the lender saying that the mortgage is delinquent. You have 30 days to bring the mortgage uptodate. This is called a ‘demand letter’ or a ‘notice to accelerate’. If you do not pay or stick to your agreement the lender may begin foreclosure.
Fourth month you miss another payment.
The lender sends the file to their lawyers. The lawyers send you a letter. You will incur some high fees and additional costs.
Sixth month and you haven’t resolved the mortgage.
The sheriff or public trustee sale is scheduled by the lawyer. This is the actual day of the sale. This is not your move out date. But it is close enough. If you do not have any money to give the lender then you should go ahead and start making plans. Find a place to stay for a short while and contact some friends to help you move out.
I strongly advise you to contact your lender and try and work out an arrangement. You should also talk to a housing counselor.
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Do you have a bank account? In the current world of online banking and high technology it is unheard of not to have an account. How can you function without a bank account? Millions of people conduct their financial business every day by utilizing alternative financial institutions.
The Center For Financial Services Innovation estimated that there are over 40 million U.S. households, about 106 million Americans, that are underbanked. CFSI added that this sector of the market spends over $13 billion on approximately 340 million transactions. These consumers patronize local companies for their financial needs such as check cashing, money orders, bill payment and international remittances.
The mainstream banks have previously overlooked this market. I believe that there is a prejudice at the root of the decision making by senior bank executives. Consumers in this market are seen as poor, immigrant, living in underserved neighborhoods, no social security numbers and no legitimate papers.
Mainstream banks have finally seen the writing on the wall. And that writing says big profits. They are examining several profit centers to replace the overdraft fees.
Prepaid cards.
In 2007 the Federal Reserve Payments Study estimated the over $26.76 billion was loaded onto 45 million prepaid cards in 2006. Since 2006 the prepaid card market has exploded. The Mercator Advisory Group, a leading research company in this area, released the Seventh Annual Open-Loop Prepaid Market Assessment study in August 2010. It showed that in 2009 the total load for all the prepaid card segments was $330.03 billion.
Government agencies have embraced the prepaid card market and see it as a safe channel to get money to American consumer who desperately need help. Social Security benefits are being loaded onto prepaid cards. Unemployment benefits are also loaded onto a prepaid card.
Small dollar credit.
Typically loans under $1,000 that are made to consumers and businesses are considered small dollar credit. To rate the credit risk, a lender would ask for a report from a company such as RentBureau, Pay Rent or Build Credit. The borrower would most likely not have a report with any of the traditional credit bureaus. If by chance there is a credit report it might be incomplete and lacking a history, or simple derogatory. Consumers need this service to fund purchases that require more than one pay check, or to meet emergencies.
Alternative credit.
Pay day lending brings in over $2 billion in fees on loan volume of $12 billion. Add cash checking fees of about $1.5 billion and we can see how attraction this market has become.
Local and international remittances.
Remittances account for about $50 billion annually and the fees generated are about $3 billion.Visa, Mastercard and Discovery see potential in the unbanked market, specifically the prepaid cards, and have lent their brands to the cards. This is a booming endorsement. We can expect more global companies to jump on the bandwagon in the near future.
Europe has shown tremendous growth in prepaid cards alone. The market is currently $22 billion annually. By 2017 this figure will explode to $156 billion according to a study by Boston Consulting Group. I might add that the study was commissioned by MasterCard Worldwide.
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December 6th, 2010
The housing crisis has brought out the best and the worse of American ingenuity and creativity. We have seen thousands of mortgage relief scams where companies promise to save your house from foreclosure. We have seen hundreds of community non-profits like NACA, that are brokering deals between the banks and homeowners. Now, we see squatters trying to claim abandoned houses.
On the surface it seems like a great idea. You need a house for you and your family, including the pets. You find a house. It’s abandoned…windows are broken, doors are smashed, the grass is two feet high, the water is cut off, the electricity is shut off, and the roof needs some work.
You are up for the challenge and you move in. You fix and repair and paint the house. You even pay the property taxes, and have the utilities connected.
The neighbors are happy. They can see some hope of re-vitalization returning to their street. Where half the houses were once vacant, now there are squatters working on three or four houses.
The city is happy because there is revenue from property taxes. Furthermore, crime is down in this area, resulting is less work for the EMS, the police and the fire department.
For many people and government agencies a squatter is a savior. However, many opponents still see squatters as leeches who want something for nothing. These opponents of squatters would prefer to have the squatters charged with trespassing and evicted. If we go this route it allows the houses to be vandalized and deteriorate. Houses on the same street and in the nearby vicinities will see their values plummet.
In Florida, squatters are utilizing an 1869 statute that says if a person takes a property and the owner does not claim the property in seven years, the squatter gets to keep the property.
It seems that real estate wheeling and dealing flourishes in Florida. Mark Guerette, the owner of Save Florida Homes Inc., has taken the squatting game to a new level. He has taken possession of 20 houses using the adverse possession argument. These houses he has rented at around $289 a month each. In return the sub-squatters (tenants) fix and maintain the properties. At peak, he had 17 houses rented.
I would like to mention that squatting is illegal. Mr. Guerette has been charged with fraud and if convicted can spend about 15 years in prison. Mr. Guerette, in his defense, has pointed out that the houses he selected had the large orange sticker plastered across the door. These stickers are generally placed there by the city and they indicated that the property was a "public nuisance".
It should also be noted that Mr. Guerrette notified the owners of the properties of his intentions. Nineteen of the owners and their banks did not respond.
Opponents of squatters feel that taking the squatters to court is very expensive. They also feel that the activity of renting houses that are not yours could open the floodgates to shady real estate scams. Furthermore, additional damage will be done to an already fragile housing market.
As an outside observer, with no axe to grind, I feel that the bigger issue is how to get rid of the tenants. The easy answer is, you keep them. The house is fixed. Give them a proper lease and let them redirect the rent to you. If they were paying $289 a month, be thankful, that’s more than you were getting before.
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November 30th, 2010
Is it time to pull the plug on Fannie Mae? Or should we continue to keep her alive with a new infusion of $2.5 billion? She is asking for $2.5 billion but we know this is a “ballpark” figure and the real number will be around $3.5 billion.
The taxpayers of America deserve a better deal for all the money they have thrown at Fannie Mae. The one glimmer of hope is the profit of $1.1 billion that the Federal government received in the third quarter. The taxpayers bailed out Fannie and Freddie and in return a dividend is received each quarter. My fear is that if the housing market continues its downward spiral, there will be no more dividend payments. Remember that Fannie Mae has lost money in 13 consecutive quarters. The excuse that Fannie gives is that the bad loans of 2005 through 2008 are the problem. Only 57% of the money is recouped on the sale of a house. For example, if the borrower owes $100,000 when they defaulted, only $57,000 is recovered when the house is sold.
Fannie Mae is promising that the portfolio of loan from 2009 onwards is good. Fannie stressed that the underwriting was solid and stringent.
On November 5th, Fannie Mae announced it was launching $7.5 billion new 2 year notes, due December 28, 2012. Why ask the taxpayers for more money when issuing a new note will get the job done?
If Fannie Mae is to continue, it should do so without contributing to the bankruptcy of America.
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November 8th, 2010
Of all loan modifications made at the banks, 22% end up in default. The figure for the government sponsored HAMP is only 11%. Why the big difference? HAMP has been able to lower the monthly payment by $608 on average. On the other hand, the banks are lowering the monthly payment by only $307.
Many homeowners are living paycheck to paycheck. Therefore the difference of $301 is huge. This amount is enough to push them over the edge into default.
Home Affordable Modification Program (HAMP) is a government program and it is very simple. Homeowners who are having trouble with their mortgages apply to the federal government for help. They have to meet certain criteria. If they qualify a “trial” modification is granted. During the trial modification period the homeowners must make their payment on time without failure. If this phase is successful then a permanent modification is given. Unfortunately less than 45% of trials move on to permanent loan modifications.
Under the banks’ system there is not a trial period. Therefore one can argue that many of the “failures” from the HAMP process are not counted under the bank system. This makes it difficult to compare the two modification systems.
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