Once again, homeowners facing foreclosure are falling victim to abusive practices in the handling of their mortgage, but this time the overpromising and under delivering can be attributed to entities other than the banks – mortgage servicers.
As the name suggests, “mortgage servicers” are entities that handle and service mortgage loans. A recent trend in the mortgage industry, is for banks to contract with mortgage servicers to collect payments, manage loan modifications, and handle foreclosures on loans which the bank originated. Mortgage servicers, such as Nationstar and Ocwen, have seen their influence in the mortgage-servicing market rise 3 percent in the last few years, as they now have more than 17 percent of the mortgage servicing market.
Déjà Vu of injustice
Along with this increase in business came mountains of paperwork and responsibility. As a result of the banks contracting the servicing of waves and waves of mortgage loans to mortgage servicers, the mortgage servicers bit off more than they could chew and have overpromised and underdelivered.
Complaints from homeowners have flooded the offices of federal and state regulators and firms like ours, Oppenheim Law. In fact, more than half of the 187,818 complaints filed with the Consumer Financial Protection Bureau involved mortgage problems, with a vast majority of them concerning activities conducted by servicers.
Mortgage servicers wrongdoings:
- Billing of improper fees
- Wrongly denying loan modifications
- Failing to provide adequate customer service
- Failing to process mortgage payments in a timely manner
- Failing to honor trial modifications with prior servicers, and
- Robo-signing of foreclosure documents without verifying information
These are just a few of the injustices that homeowners have experienced at the hands of mortgage servicers across the country. Does this sound familiar? It should, because these are the same malfeasances that the nation’s largest banks committed against homeowners in its handling of millions of mortgages facing foreclosure.
New federal regulations were enacted on the heels of Ocwen Loan Servicing reaching a $2.1 billion settlement with the consumer bureau in December 2013. In January, the federal government issued a new set of rules, much like those put in place to better regulate banks after the 2012 $26 billion National Mortgage Settlement, attempting to govern mortgage servicers.
Adjust the business model
The hope is that these new regulations will hold non-bank entities, such as mortgage servicers, accountable for servicing and foreclosure abuses, thereby forcing the servicers to adjust their business model and technology to properly service the loans they undertake.
Roy Oppenheim, foreclosure and real estate defense attorney. Legal blogger and founder of the South Florida Law Blog.
Oppenheim Law’s practice areas include real estate and defending homeowners and investors from foreclosure, arranging short-sales, loan modifications, commercial litigation, and business related matters. Roy is also the creator of the South Florida Law Blog,named the best business and technology blog by the Sun-Sentinel. Connect with Roy on Twitter, Facebook, LinkedIn and YouTube .
Food for thought for those still underwater
There is a silver lining to the foreclosure crisis for those that chose not to go underwater—namely, more people who actually were in foreclosure are now buying again.
How many are actually able to purchase
Unfortunately, the government and housing market does not keep track of the specific real estate numbers. Nevertheless, because of the foreclosure crisis many who never thought that they would get a second chance at the American Dream of buying a home are now.
How are these homeowners doing it
Simply put: Chances of home ownership depend upon the silver lining. Reports indicated that for those who went bankrupt and added the foreclosure in their bankruptcy have to wait four years. Folks that sold via short sale need to wait two years. How one got rid of the distressed property and one’s current financial status are relevant to the bank’s review.
The great irony
The great irony is that those who were shunned by the banks are now bolstering demand for home purchase. The same lenders that were unwilling to work out loan modifications or waive deficiencies are now willing, given the circumstance, to lend again to those so shunned. The economy is and will continue to be aided by those who were formerly in foreclosure.
As we have said all along, we all should be able to realize the American Dream of home ownership. Perhaps now the banks are beginning to realize that each case should be reviewed on its merits before summarily making decisions that have wide ranging implications.
In a recent article, Paul Owers from the Sun Sentinel explains that, “depending on credit scores homeowners can get new mortgages without waiting seven, two or even one year before qualifying for another mortgage.”
Furthermore; most importantly, for those who chose to hang onto their underwater property at all cost and let it drag them under may want to reconsider their strategy and take note of their fellow neighbors who threw in the towel a few years ago.
Real estate and foreclosure defense attorney, Roy Oppenheim left Wall Street for Main Street, founding Oppenheim Law along with his wife Ellen in 1989 in Fort Lauderdale, Florida. He also is vice president of Weston Title and creator of the South Florida Law Blog, named the best business and technology blog by the South Florida Sun-Sentinel. Follow Roy on Twitter at @OpLaw or like Oppenheim Law on Facebook.
The following article was published in the Daily Business Review and written by Samantha Joseph for the DBR. The South Florida Law Blog has republished select exerpts with quotes from Roy Oppenheim, Oppenheim Law.
Foreclosure: New law empowers lenders
New Wave of Short Sales
A new wave of short sales could be part of the fallout from Florida’s Fair Foreclosure Act as property owners move to mitigate losses under the law that gives both new powers and new responsibilities to lenders, real estate brokers say.
The law took effect July 1, months after state lawmakers allotted millions of dollars to accelerate cases clogging court dockets.
South Florida has been a hotbed for distressed properties for years since the housing crash. Miami ranked among the top 10 metro areas in the country for foreclosures in 2013, according to Irvine, Calif.-based RealtyTrac. Broward County foreclosure filings rose 11 percent in 2013, while December’s count was 30 percent higher than November’s numbers, public records show.
The Florida statewide foreclosure average is 944 days, or about 2.6 years. It is is the third-longest timeline in the country, behind New York (1,029) and New Jersey (999).
With more than 350,000 cases on dockets across Florida, the state ranks third in the nation behind New York and New Jersey for longest foreclosure timelines, according to RealtyTrac.
Among the changes is a provision that allows lenders to collect rental income on residential properties—a strategy previously available only for commercial buildings.
“What was happening in commercial is now happening in residential,” said Roy Oppenheim, co-founder and senior partner at Oppenheim Law in Weston. “It might accelerate the foreclosure process because if people can’t collect the rent, they might not continue to defend the case.”
Under the new law, lenders can file foreclosures at the same time they submit these motions without waiting for the outcome of the first hearing. With real estate values rebounding, brokers say lenders now have a new incentive to use this tool.
2014 Game Changer
But while the Fair Foreclosure Act empowered lenders, it also imposed new requirements that slowed filings.
“One game changer: Banks now have to prove they own the note and show how they came to own it and in what capacity they’re foreclosing on it,” Oppenheim said. “That’s a problem for the banks. In the past the law firms didn’t know in what capacity their clients were foreclosing. They used to keep it very ambiguous, but that’s no longer working.”
Pacing Thrown Off
Last year when state lawmakers allotted about $31 million to bolster Florida’s foreclosure process by adding judges, support staff and technology, the move was meant to speed up the legal process.
It helped ease the backlog as property values pushed upward.
But the new focus on speed wasn’t necessarily a good thing for bankers who had already timed the repossession process to avoid flooding the market with foreclosed properties they would have to maintain.
Click here to read the entire DBR article by Samantha Joseph, Daily Business Review
Written by Roy Oppenheim for the South Florida Law Blog.
Photo Courtesy of Craig Watson Photography
As 2014 continues to move along, one disturbing trend on the horizon is the re-emergence of Wall Street’s presence into the residential housing market. This time however it’s a horse of a different color and it could mean trouble.
During the last economic cycle, Wall Street provided easy money to anyone with a pulse, then bundled up these mortgages, and called the sacks of garbage Grade A securities as they were sold off to unsuspecting investors around the world as well as here at home.
Now eight years later we are seeing a variation on an old theme amid froth and bubble. This time instead of serving the investors with a monthly stream of income based on purported mortgage payments, Wall Street is providing investors with a security backed by the rental income of single-family homes.
A New Real Estate Bubble
Some fear turmoil and trouble with justification that we may be inflating a new real estate bubble. While sales and prices of homes have jumped in the past few years, Wall Street has set in stone a new plan. Investment bankers are chomping at the bit to finance investors anywhere from large, private equity firms to mom-and-pop landlords, who are purchasing foreclosed homes, fixing them up, and renting them out.
Wall Street has estimated the potential financing opportunities in real estate for this rental industry as high as $1.5 trillion, even in its beginning stages. Even a few members of Congress are apprehensive of the possibility of facing another credit bubble.
Over the last two years, around 200,000 single-family homes were purchased by large investors and are now being rented out. Private equity giants attracted a multitude of investors with a $479 million bond by selling the first single-family rental securitization last year. Mutual funds and insurance companies purchased smaller pieces of the bond, which are secured by rent flowing from the purchased homes. Even with numerous investors flooding the market, the rental business still consists primarily of mom-and-pop landlords who own and manage a small number of rental units. Taking that into consideration, private equity giants like Blackstone Group and Cerberus Capital Management have started companies that lend to small and medium-sized investors to provide cheap financing.
Securitization of Rents
People who want to buy a home may find themselves outbid by investors with deep pockets. Without proper mechanisms to oversee this new securitization of rents, we will likely head down a similar, troubling path.
Securitization could provide resurgence to Wall Street’s mortgage machine, helping to recover from the past financial crisis. Single-family rental bonds are estimated to total as much as $7 billion this year with the potential of growing to about $20 billion a year. This does not come without concern. Securitization will allow landlords to invest as little as 25 percent equity into their properties, taking on loans to cover the rest. This is a drastic difference from the typical 40 percent equity banks require for investment properties.
On one hand, securitizing debt can offer landlords leverage to buy even more home. However, if those larger landlords take on more debt than they can handle, there is a possibility they may feel pressured to flood the housing market by selling off all of their properties.
“With the country’s financial stability already on shaky ground, market concerns may become more prevalent should debt financing significantly increase, or if investor owned homes significantly increases in certain housing markets.”
Furthermore, the development of single-family rental securitization could threaten market stability. For now, there is plenty of profit to be made but there is no telling if rental securitization is forming a new market bubble to create new froth in troubled waters.
From Wall Street to Main Street, Roy Oppenheim is a Florida real estate attorney focusing on foreclosure defense and loss mitigation.
He is a guest legal blogger for Yahoo! Homes and comments regularly on real estate law and policy in the national media. Oppenheim Law reports the highest rating (A-V) conferred by Martindale Hubbell Law Directory, the most respected directory of lawyers and law firms in the U.S. He is also the creator of the South Florida Law Blog,named the best business and technology blog by the South Florida Sun-Sentinel. Follow Roy on Twitter at @OpLaw or like Oppenheim Law on Facebook.
Tomorrow, 1/24/14…the Daily Business Review will be holding a “View from the Bench” in Palm Beach County. It will be the first one that they are holding in Palm Beach. Originally, I was invited to be the moderator of one of the panels. Tom Ice, another foreclosure defense attorney, was the sponsor of that event.
As reported by the Palm Beach Post, I will not be the moderator and the Ice Firm has for good reason withdrawn its sponsorship.
What happened is an unfortunate footnote to the nature of foreclosure jurisprudence in the State of Florida and probably the nation. As a backdrop, last fall, our firm was the exclusive sponsor of a Daily Business Review sold-out event at the Performing Arts Center in Broward County addressing foreclosures. I gave the keynote address and also served as one of the panelists. Amanda Lundergan was the moderator. After the conclusion of the event, the Review representatives told me that the event was one of their best events and in fact they wanted to put another one on for the end of the year.
Fast forward. The event on Friday is supposed to be a continuation of the discussion that was had at the “View from the Bench” Oppenheim Law sponsored. That will not be the case. As reported by the Palm Beach Post a number of the judicial panelists felt uncomfortable with “an attorney” serving as moderator. The fact is… the questions are pre-vetted, already.
Why will Ice Firm and Oppenheim law not be attendance tomorrow? Because in the streets of the Bronx we call that ‘unbridled censorship’ or ‘chutzpah’ and at the Supreme Court we would call that a ‘form of prior restraint.’ Either way this kind of interference in the free discourse of ideas between the public, judiciary, and the bar is unacceptable.
In fairness to the Review, after the Palm Beach Post article ran, I was called and asked to serve on one of the other panels. Unfortunately, I will not be able to serve due to other commitments.
I must say that I am extremely disappointed at the turn of events that have occurred particularly in light of the fact that the last panel discussion in the fall was extremely useful both to the bar and the bench. Issues addressing the five-year statute of limitations, the statute of repose, improper decorum by judges and attorneys were discussed in candor. Chief judge of Broward County, Peter Weinstein, was there and was very candid about the pressure that he and his fellow judges are under not only from their docket but also from the legislature, the governor, as well as the Supreme Court to try and resolve this foreclosure crisis.
I think the event made us all understand the enormous stress and pressure that the judiciary experiences from all sides in attempting to resolve this crisis, regardless how it started or is to blame. I of course continued to focus on the fact that expediency can never trump justice, fairness, and equity.
There are times when it feels–and it still feels like– the judicial system is the baby being thrown out with the bath water. It is important for the judiciary to understand how they are perceived. How the public perceives the “bench” is as important as the public trying to understand how the bench perceives the public.
At the end…shame on all of us.
In the trenches,