By Sara Lepro

Reports of lenders repossessing the wrong home are further tarnishing the banking industry’s image, already bruised by bailouts and bonuses.

The mix-ups have been perpetuated by the sheer number of foreclosures being processed today as well as the various layers of communication involved. Addresses and other information passed from one department to another, or from a contractor to a subcontractor, can get garbled along the way.

“It’s what you call a new weakness,” said Joe Bada, chief executive of Five Brothers Mortgage Co. Services and Securing Inc., a Warren, Mich., company that inspects and manages foreclosed properties for lenders. “There’s just so much happening at the same time. The means of communicating haven’t been refined. Information is not moving fast enough from one department to the other.”

Though such gaffes are rare, they have happened enough times to lead at least one major servicer to rethink and retool its default-management process. Bank of America Corp., the nation’s largest servicer, is updating its contractor-training tools and adding a step when securing a property to ensure that the right home receives the repossession notice.

B of A “rekeys” – changes the locks – on about 16,000 properties a month, said Rebecca Mairone, the Charlotte company’s head of servicing. In the last seven months, B of A is aware of just 11 mistakes. That gives it an accuracy rate of about 99.99%.

Still, B of A has been burned. Many of the more recent stories in the news about foreclosure mistakes have involved the company.

There’s the case of Alan Schroit, for example, who filed a lawsuit against B of A in January claiming the lender mistakenly seized his Galveston, Texas, vacation home. According to the suit, Schroit did not have a mortgage with B of A, or any other lender. His case in federal court in Texas is still pending. Similar incidents involving B of A have been reported in Spring Hill, Fla., in January and Trenton, N.J., in December.

Overall, B of A admits there was room for improvement.

“There were big mistakes that happened in the past,” Mairone said. “As a result of that, we really tightened our process.”

B of A “took a deep dive” on the 11 cases to understand what went wrong and how to improve on the process, she said. Most of the mistakes, the company discovered, happened at the contractor level and usually involved the field service representative being dispatched to the wrong property.

B of A works with “hundreds and hundreds” of contractors around the country, Mairone said. And most of those contractors hire their own subcontractors, so as in a game of telephone, it’s easy for the instructions to get jumbled.

B of A is not the only company to blunder in this area.

In July 2008, a story surfaced about an Austin family whose possessions were given away to thrift stores after a JPMorgan Chase & Co. contractor, Field Asset Services Inc., seized their home and emptied their house. The home had been headed to foreclosure, but the proceedings were never stopped after the family bought the home. “The foreclosure attorney did not communicate to the client that the property had been sold to a third party,” said Dale McPherson, the president and CEO of Field Asset Services in Austin. “So the client then communicated to us that they needed to get it ready for resale.” JPMorgan spokesman Tom Kelly said the company has since reached “an amicable settlement” with the family.

The reported mistakes made during the foreclosure process are statistically minuscule considering that there were 315,716 foreclosure filings on homes around the country in January alone, according to the latest data from RealtyTrac Inc. “The likelihood of securing the wrong property on a normal inspection probably happens less than one out of a thousand times,” said Marty Foster, senior vice president of loan servicing at PHH Corp., a top-10 mortgage servicer. “And a wrongful-eviction process is probably one out of every 10,000 times.”

But “it’s such a bad perception problem for [banks],” said Glenn Selig, founder of Publicity Agency in Tampa. “It’s such a great example for the consumer that it’s ‘a big bank against the little guy.’”

Cheryl Lang, the president of Integrated Mortgage Solutions, a default management company in Houston, said the problem often comes down to using inexperienced or newly hired contractors who are not familiar with a lender’s guidelines. “It sounds like it might be an easy thing, but experience plays a big role in making things right,” she said.

B of A has updated the checklist its contractors use when seizing properties. The list now includes a detailed description of the property in addition to the address.

By April, B of A also will require the contractor to call the servicer and describe the home to a representative to ensure the descriptions match. “Before, they just dispatched with the orders, and there was no handshake back,” Mairone said. Now, “the rep on the phone … walks through the process with the vendor. They’re standing at the property when they’re doing this.”

Once B of A confirms the contractor has the right home, it gives him or her an authorization number. That number is also included on the sticker that is placed on the front door, with a toll-free number that the homeowner can call.

B of A has also assigned about 50 employees, some of them new hires, to a new 24-hour hotline for homeowners and contractors.

Outdated loan information can also lead to mistakes. “The status of the loan can literally change daily,” said Alan Jaffa, chief operating officer of Safeguard Properties Inc., a Valley View, Ohio, company that lenders hire to manage foreclosed properties.

Safeguard, which works for some of the country’s largest servicers, has access to its clients’ databases, so it can check the status of the loan right up to the point of securing the property.

“It’s possible that even if we found the property vacant on a Friday, on Monday, they could have had conversations with their servicer,” Jaffa said. “We would never have known that if we hadn’t looked in the system.”

Determining whether a home is vacant can be tricky. The homeowner may be away on an extended vacation, or in the process of moving and still have possessions in the home. To address this issue, PHH implemented a control about a year and a half ago that requires its field service contractor to give a homeowner a three-day notice before securing a property. “The notice is really a precaution,” Foster said.

McPherson at Field Asset Services said photo evidence is especially important when determining whether a property is vacant. He said his contractors take about 120 photos per job. If there is personal property in the home and it appears to be worth more than $500, his company submits the photos to the client, which makes the final decision on whether the property is removed. “You can’t be too careful,” he said. “And you can’t have too much documentation.”

Sara Lepro is a reporter for American Banker.

Home Prices Up 5% Year-Over-Year: Clear Capital

New data released by Clear Capital Thursday shows that home prices nationally are up 5.0 percent compared to February 2009.

The quarter-over-quarter price change for the numbers through last month was flat at 0.0 percent, indicating a softening during the winter months. But Clear Capital noted that the year-over-year price variations have been in positive territory for two months straight, and the company said it expects another big price boost to come when home sales pick up before the contract deadline for the homebuyer tax credit.

“If the increase in demand that preceded the end of the last tax credit is any indication, home prices may dip only slightly into negative territory before getting an added boost before the April tax credit deadline,” said Dr. Alex Villacorta, senior statistician for Clear Capital.

All four U.S. regions posted very consistent quarterly price changes in February, according to Clear Capital’s analysis, with only the Northeast showing a decline of 1.4 percent.

On a year-over-year basis, just the West had a drop, and it was a mere 0.5 percent. Prices in the Midwest skyrocketed 13.8 percent compared to February 2009.

Clear Capital says February’s year-over-year price gains speak volumes about the improved market picture today compared to the first months of 2009, when credit was limited, nearly all properties were rapidly losing value, and REOs flooded the market as banks faced the risk of failure.

While the current supply of foreclosed homes is significant and the swollen pipeline for loan resolution is feeding concerns over shadow inventories, Clear Capital says demand for discounted REOs by investors and new homebuyers has buoyed prices well into the winter and should continue into the spring. The company noted, though, that this demand has been muted by the typical slowdown in winter sales, pushing REO saturation to 26.1 percent – a 1.3 percent increase over January.

“We observed an expected increase in REO saturation this month, as the flow of foreclosures continued to come into the market, while traditional non-distressed sales wait to be listed in the spring and summer months,” Villacorta explained.

Clear Capital says while the risk of additional REO inventories arriving later in 2010 should not be taken lightly, the company suspects this inflow will arrive with a stronger springtime and summer buying season, helping to ease the shock to the marketplace.

“Although many markets have seen a slow down in price gains, I’m encouraged that prices have remained positive through the first two months of the year despite all the negative economic news and threat of more REOs hitting the markets,” Villacorta said.

New Orleans Woman Charged With Fraud on Recovery Program

By Jennifer Harmon, National Mortgage News
February 17, 2010

Elizabeth Holiday, 38, a resident of New Orleans, was charged with theft of government funds in a two-count bill of information relating to fraudulent applications she made to the Louisiana Road Home Program and the Federal Emergency Management Agency for financial assistance during the aftermath of Hurricane Katrina.

According to the bill of information, both the Louisiana Road Home Program and FEMA made disaster assistance money available to those whose primary residence was destroyed by Hurricanes Katrina and Rita.

Court documents say Holiday applied for and received a Road Home grant of $54,567 and a FEMA grant of $21,382 for residential property located at 4927 Pecan St., New Orleans, which she owned but used as a rental property at the time Hurricane Katrina struck.

It is alleged that Holiday fraudulently represented that she was a resident of the property at the time of the storm.

If convicted of both counts, U.S. attorney Jim Letten says Holiday faces a maximum term of imprisonment of 10 years, a fine of up to $250,000 and a maximum of three years of supervised release, as to each count. Holiday would also be required to pay restitution to the Louisiana Road Home Program and FEMA.

California Sees Dramatic Decline in Foreclosure Activity
California foreclosure activity plummeted in December, especially when looked at on a daily average basis, according to the monthly California Foreclosure Report recently released by ForeclosureRadar, a Website devoted to tracking every California foreclosure.

Notices of default dropped 17.5 percent in aggregate, but they actually dropped 32.5 percent on a daily average basis. This percentage difference is due to that fact that December had 22 days on which documents were recorded, versus only 18 in November. In addition, notice of trustee sale filings dropped 23 percent. ForeclosureRadar said this is not simply a regular season decline, as it has not seen a similar drop in recent years.

“The dramatic drop in foreclosure activity may have been a Christmas gift to homeowners,” said Sean O’Toole, founder and CEO of ForeclosureRadar. “However, given rising mortgage delinquencies, it is becoming increasingly clear that foreclosure activity no longer fully represents market realities.”

On an average daily basis, cancellations only increased 3.5 percent. Given the Obama administration’s drive to make trial loan modifications under the Home Affordable Modification Program permanent, this was a smaller increase than expected. Based on the timing of these cancellations, ForeclosureRadar believes 21 percent were cancelled due to statutory requirement that a foreclosure sale be held within one year, thus forcing a cancellation. In addition, tracking Website estimates 61.9 percent were likely due to some form of loan workout, and 17.1 were more likely the result of a filing error.

On a month-to-month basis, pre-foreclosure properties and foreclosure properties scheduled for sale decreased, but year-over-year these inventories saw huge gains. In December, pre-foreclosure properties fell 0.4 percent from the prior month but jumped 55.12 percent from December 2008. In addition, foreclosure properties scheduled for sale fell 2.64 percent from November but surged 117.52 percent year-over-year. However, REO properties did the opposite. Compared to November, REO properties increased 3.41 percent in December but plummeted 34.89 percent from the prior year.

Foreclosures that went back-to-bank declined 28 percent, and those that sold to third parties fell 41.8 percent. A significant decline in foreclosure discounting by lenders appears to be the reason for such a dramatic drop in sales to third parties, ForeclosureRadar said. For most of the last year lenders discounted the opening bid from the amount that they were owed by nearly 40 percent, but in December, that discount dropped to 33.7 percent. In addition, the percentage of sales that were discounted declined from nearly 90 percent in December 2008 to just 75 percent in December 2009.

Home Prices Appreciate 25% This Decade Even with Slump

After the biggest housing boom and bust in U.S. history, prices of existing homes managed to increase by only 25% over the past 10 years, according to the National Association of Realtors. The Realtors reported that median home values rose from $137,600 in November 1999 to $172,600 in November 2009 or 25%. At the peak of the market, the median house price hit $230,300 in July 2006. The latest forecast by NAR economists shows that the median house price will rise 3.6% in 2010 to $178,900, after falling 12.8% in 2009. The economists expect existing home sales will rise 10.8% in 2010 to 5.71 million from 5.15 million in 2009.

DETROIT MAN TO BE SENTENCE ON FRAUDULENT PAPERWORK TRAIL

IN SALE OF CHURCH

Tracy Carmichael, 46, Detroit, Michigan was convicted after a 4 day jury trial in connection with a fraudulent scheme to obtain an over $149,000 mortgage on a church property located on 11731 Mount Elliot, Detroit. Carmichael was found guilty as charged of eleven felony counts: Embezzlement over $100,000; Forgery (4 counts), U&P (4 counts); False Pretenses over $20,000; and Money Laundering 2nd degree.

As previously reported on Mortgage Fraud Blog, between May and June, 2007, Carmichael allegedly offered to sell the Temple of God Deliverance Mount Elliot property to a female as an investment property. He represented that he would handle all of the paperwork, manage the property and give her the payments for the mortgage company. The victim later discovered that all documents conveying the property to her were false. The rightful owners never authorized Carmichael to sell the property and discovered their signatures were forged on the documents.

Assistant Prosecutor Abed Hammoud tried the case before Judge Ulysses Boykin of the Third Circuit Court Criminal Division. The defendant represented himself with the assistance of counsel Allan Saroki. Judge Boykin remanded the defendant and he is currently in the Wayne County jail awaiting sentencing on January 5, 2010.

This case was investigated and charged by the Wayne County Deed Fraud Task Force. The members of the task force are Register Bernard J. Youngblood

“Cash for Caulkers” could mean $12K per home

• By Steve Hargreaves, CNNMoney.com staff writer
• On 6:24 pm EST, Tuesday December 8, 2009

Cash for Caulkers could mean $12K per home
President Obama proposed a new program Tuesday that would reimburse homeowners for energy-efficient appliances and insulation, part of a broader plan to stimulate the economy.
The administration didn’t provide immediate details, but said it would work with Congress on crafting legislation. Steve Nadel, director at the American Council for an Energy-Efficient Economy, who’s helping write the bill, said a homeowner could receive up to $12,000 in rebates.
The proposal is part of the President’s larger spending plan, which also includes money for small businesses, renewable energy manufacturing, and infrastructure.
We know energy efficiency “creates jobs, saves money for families, and reduces the pollution that threatens our environment,” Obama said. “With additional resources, in areas like advanced manufacturing of wind turbines and solar panels, for instance, we can help turn good ideas into good private-sector jobs.”
The program contains two parts: money for homeowners for efficiency projects, and money for companies in the renewable energy and efficiency space.
The plan will likely create a new program where private contractors conduct home energy audits, buy the necessary gear and install it, according to a staffer on the Senate Energy Committee and Nadel at the American Council for an Energy-Efficient Economy.
Big-ticket items like air conditioners, heating systems, washing machines, refrigerators, windows and insulation would likely be covered, Nadel said.
Consumers might be eligible for a 50% rebate on both the price of the equipment and the installation, up to $12,000, said Nadel. So far, there is no income restriction on who is eligible. That would mean a household could spend as much as $24,000 on upgrades and get half back.
Homes that take full advantage of the program could see their energy bills drop as much as 20%, he said. The program is expected to cost in the $10 billion range.
It’s not clear how the home efficiency plan would be administered – the government may issue rebates to consumers directly, homeowners might get a tax credit, or the program could be run via state agencies.
If consumers have to spend a lot of money up front to get the credit, it could throw a wrench in the works, David Kreutzer, an energy analyst at the Heritage Foundation, told CNN.
“This will not be something that’s attractive to people who are having trouble already making their budget payments month to month or week to week,” he said.
To keep consumers from having to spend thousands of dollars before getting reimbursed, Nadel said, one idea is to have contractors or big box retailers pay part of the cost up front.
Fraud issues could also come up, Kreutzer said.
“Any program that is going to run through a third party and is going to distribute billions of dollars needs to have lots of checks and balances to make sure there’s not abuse,” he said.
Nadel noted that as a way to guard against fraud, contractors would have to be certified to participate.
Energy company boost
Obama’s new spending plan also calls for renewable energy companies to get additional support. That could come in the form of loan guarantees – basically, money the government uses to secure loans for startups.
In the original stimulus bill passed earlier this year, $6 billion was earmarked for such loan guarantees. But then lawmakers took away $2 billion to fund Cash for Clunkers – the popular program that paid people to turn in their old cars.
The $4 billion from the original bill has funded about $40 billion in loans, said the staffer on the Senate Energy Committee. Meanwhile, firms are hoping for another $4 billion in loan guarantees, since they have another $40 billion worth of projects that need funding.
A bill on energy efficiency reimbursements already has supporters in the Senate.
“Not only will [such legislation] increase our energy security and transform our energy infrastructure to a modern, clean and efficient one,” Senate Energy Committee Chairman Jeff Bingaman, D-N.M., wrote in a recent op-ed column in the Hill, a Capitol Hill newspaper. “But it also will position the United States to lead in the development of clean energy technologies.”

Refinancing Application Surge May Reflect Rate Rise Nudging Borrowers

An increase in the average 30-year fixed mortgage rate for the first time in over a month during the week ending Dec. 4 could be responsible for an increase in refinance applications during the period, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. A rate rise sometimes causes a rush to refinance as borrowers may see it as a sign rates are rising and they need to lock in immediately. A relative improvement in unemployment put upward pressure on rates Dec. 4. During that week, the MBA’s Market Composite Index, a measure of overall mortgage loan application volume, increased 8.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 54% compared with the previous week, which was a shortened week due to the Thanksgiving holiday. The Refinance Index increased 11.1% from the previous week and the seasonally adjusted Purchase Index increased 4% from one week earlier. The increase in purchase applications reflected a 10% increase in applications for government mortgages and a 0.2% decrease in conventional mortgage applications, both on a seasonally adjusted basis. The share of refinance activity increased to 74.4% of total applications, up from 72.1% the previous week. The adjustable-rate mortgage share of activity decreased to 4.7% from 4.8%. The average contract interest rate for 30-year fixed-rate mortgages, which for the previous week was at its lowest point since May of this year, increased from 4.79% to 4.88%, with points increasing to 1.17 from 1.00 (including the origination fee) for loans with an 80% percent loan-to-value ratio, the association reported. The increase ended a run of six consecutive weeks of decline in the average rate. The average contract interest rate for 15-year FRMs came off of its lowest point ever increasing by 6 basis points, to 4.33%. For one-year adjustable-rate loans, rates decreased by 1 bp to 6.55%. The MBA stopped disclosing index values with the July 31 data release. The MBA can be found online at http://www.mortgagebankers.org.

as reported in the National Mortgage News 12-09-09

Freddie: Rates Hit Another New Low
The weekly average for the 30-year fixed-rate mortgage that dominates the market had fallen again to yet another record low at 4.71%, according to the most recent Freddie Mac Primary Mortgage Market Survey. That average rate for a 30-year fixed-rate mortgage during the week ending Dec. 3 was the lowest seen since Freddie started tracking the rate in 1971. It was 4.78% the previous week and 5.53% a year ago. The average 15-year FRM rate, which Freddie has been tracking since 1991, also dropped to a new record low. It was 4.27% during the most recent week, 4.29% the previous week and 5.77% a year ago. In contrast, the average rate for a five-year hybrid Treasury-indexed adjustable-rate mortgage inched up during the most recent week to 4.19% from 4.18% the week previous. This rate was 5.77% a year ago. The average one-year Treasury ARM rate during the most recent week, at 4.25%, was higher than the average five-year rate during that time but down compared to the rate for the same type of loan the week previous. During the previous week, the average one-year Treasury ARM rate was 4.35%. A year ago this rate was 5.02%. Points in the most recent week were 0.7 for 30-year FRMs and 0.6 for the three other types of mortgages. “Interest rates for 30-year and 15-year fixed-rate mortgages fell for the fifth consecutive week to an all-time record low while the average rate on five-year Arms hovered near its record set in the previous week,” said Frank Nothaft, Freddie Mac vice president and chief economist. “In addition, interest rates on 30-year and 15-year fixed mortgages thus far in 2009 averaged one percentage point below their respective average in 2008.”  These rates are average for Freddie Mac loans with a loan amount of  $300,000 or more for a single family owner occupied purchase or refinance with an excellent credit score.  Loan to value ratio is assumed to be no more than 80%.

Pending Home Sales Hit Highest Mark in More than 3 Years: NAR

The National Association of Realtors (NAR) said Tuesday that its index of home sales contracts is up yet again, representing the ninth straight month that pending sales have recorded a rise – the longest run of increases since NAR began tracking sales agreements back in 2001.

The trade group’s Pending Home Sales Index showed an increase in signed contracts of 3.7 percent in October compared to September.

Perhaps even more noteworthy is that the latest reading is the highest on record since March 2006 and is nearly 32 percent above October 2008. The rise from a year ago is the biggest annual increase ever posted for NAR’s pending sales index.

Although the pending home sales numbers don’t always turn into tangible closed transactions – according to NAR they’ve been thwarted as of late by new appraisal rules – we’re still exceeding what the association deems as customary stats.

Lawrence Yun, NAR’s chief economist, says based on the country’s demographics, existing-home sales should be in the range of 5.5 million to 6.0 million annually. Based on the trade group’s existing-home sales report last month, the industry is currently moving properties at an annual rate of 6.1 million.

According to Yun, the gain is primarily due to the federal government’s popular $8,000 tax credit for first-time buyers, seeing as how the annual sales rate was well below the 5-million mark before the homebuyer tax credit stimulus was passed.

“This means the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future,” Yun said.

Yun cautioned, though, that home sales could dip in the months ahead. “The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months. Given the lag time, we could see a temporary decline in closed existing-home sales from December until early spring when we get another surge,” Yun explained.

Yun projects that as inventories continue to decline and balance is gradually restored between buyers and sellers, housing conditions will become self-sustaining and prices in most areas will begin to stabilize around the middle of 2010.