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 Mortgage Investors Win First Round

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Peter Miller, Writing/Editing

Date: August 20, Number of Replies: 13


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Hi --


 
An enormously important court case has now been decided in New York. In basic terms the question is whether "safe harbor" legislation signed in March allows loan servicers to modify loans -- even when such modifications harm investors.

 
A judge has ruled that the question can go to court and that the "safe harbor" language may not eliminate contractual claims by mortgage investors. The effect of this decision is likely to mean a substantial slowdown in loan modification efforts because of the liability that could arise if the servicer in this case (Countrywide, now Bank of America) loses.

 
I have posted more information as well as the judge's decision. See:

 
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Lindy Hall Licensed Real Estate Agent,  Houston,  TX

Date: August 20

Thanks Peter....
Hmm, I have to feel sorry for that judge. Talk about playing Solomon. I can see both sides of that coin. But I guess I'd have to side with the investors... they should have the last say.

It would be lovely if they agreed to help the borrowers, but I don't think it should be mandated... unless there were contracts in place, giving the servicers those modification rights from the beginning. How could we know what kind of contracts exist between all the various servicers and investors...

Then again, if the servicers are doing things contrary to the investors' best interest, they'd likely be able to sue (or break the contract) under several other legal remedies.... more than one way to skin a cat.

Seems like if they (investors) agree to modifying, that they should get some tax breaks for their losses (or deferred revenue)... perhaps the gov't could sweeten the deal for them in some ways, to encourage co-operation.

Lindy in Houston

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Peter Miller Writing/Editing

Date: August 21

Hi --


 
Lindy writes and says regarding loan servicers and mortgage investors that "it would be lovely if they agreed to help the borrowers, but I don't think it should be mandated... unless there were contracts in place, giving the servicers those modification rights from the beginning. How could we know what kind of contracts exist between all the various servicers and investors..."

 
This is the key point. Is a contract a contract -- or not?

 
By lobbying Congress to pass a "safe harbor" provision that would protect servicers from being sued, servicers effectively were able to modify the terms of many pooling and servicing agreements. These PSAs limit the right of servicers to modify loans -- except if the servicers are willing to buy the mortgages they wanted to change.

 
What the servicers want is to be able to modify loan terms without liability. This is the equivalent of a listing agreement to sell a home for $500,000 but which the broker can actually sell for any price, say $9. Such an agreement would make no sense to any real estate owner -- or any mortgage investor.

 
As you can see from the decision, the judge saw what was happening.

 

 
This case gets us back to some balance between the loan owners and servicers, a balance that was tilted with the passage of the "safe harbor" language in March.

 
If we're going to do things retroactively, then we ought to go back five years and review every loan application that has resulted in foreclosure and jail the loan officers, underwriters and lenders who profited if such mortgages were improperly originated. While we're at it, we ought to do the same with the securities ratings companies and securities brokers who sold them. Auditing all loans which have failed in the past five years would increase employment levels, another benefit for the country....

 
All the best,

 
Peter G. Miller

 
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Steele Propp Licensed Real Estate Agent,  Minneapolis,  MN

Date: August 21

If we're going to do things retroactively, then we ought to go back five years and review every loan application that has resulted in foreclosure and jail the loan officers, underwriters and lenders who profited if such mortgages were improperly originated. While we're at it, we ought to do the same with the securities ratings companies and securities brokers who sold them. Auditing all loans which have failed in the past five years would increase employment levels, another benefit for the country....
Of course, let's not forget the borrowers that fudged on their applications. Or the politicos that lowered standards and then lied to us about how everything was fine at Freddie Mac and Fannie Mae and then... whoops, ran out of jail space.
Steele

Steele V. Propp
Foreclosure Specialist/ Loss Mitigator
Bank Owned Property Division
Schatz Group Real Estate
1009 Mainstreet
Minneapolis, MN 55343
(612) 325-6764 Direct Line/Cell
(952) 938-2593 Office
(952) 938-3831 Fax
mailto:SteeleP@aol.com

Access Hundreds of Twin City Bank Owned Homes
http://www.MinnesotaForeclosureNetwork.com

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Peter Troetti Real Estate Lender,  Danbury,  CT

Date: August 24

To Steele in Minnesota:
Regarding your comment about jailing loan officers for making these loans that went into foreclosure because we originated the loans
 

How about the real estate agents who coerced loan officers to make the loan or they would not get another referral from him/her? Where should they go?
 

Peter Troetti
Sr. Motgage Officer
Homestead Funding Corp
Danbury, CT
203 791-1736 Ext. 314
Cell: 203-770-9195
http://www.homesteadfunding.com/
pages/originator/showOrigDetails.asp?
origId=211
 

 

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Steele Propp Licensed Real Estate Agent,  Minneapolis,  MN

Date: August 25

To Steele in Minnesota:
Regarding your comment about jailing loan officers for making these loans that went into foreclosure because we originated the loans

How about the real estate agents who coerced loan officers to make the loan or they would not get another referral from him/her? Where should they go?

Peter,
You might want to actually read the post I wrote as opposed to the quote in bold print above it that was made by another. I was the one that said buyers who lied on their applications and politicians should join in the blame game.
But while we are filling up the jails, sure, why not real estate agents as well...
Of course, there is a disturbing trend in foreclosures that has nothing to do with exotic loans or ARMs or lowered lending standards. Those are the newest wave of "regular" mortgages that are going into foreclosure.
Largely due to job loss. Be interesting how the blame game will played out here.
Steele

Steele V. Propp
Foreclosure Specialist/ Loss Mitigator
Bank Owned Property Division
Schatz Group Real Estate
1009 Mainstreet
Minneapolis, MN 55343
(612) 325-6764 Direct Line/Cell
(952) 938-2593 Office
(952) 938-3831 Fax
mailto:SteeleP@aol.com

Access Hundreds of Twin City Bank Owned Homes
http://www.MinnesotaForeclosureNetwork.com

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Peter Miller Writing/Editing

Date: August 25

Hi --


Peter T. -- writing about the jailing of loan officers for making toxic loans that subsequently went into foreclosure because the origination process was materially defective -- asks, "how about the real estate agents who coerced loan officers to make the loan or they would not get another referral from him/her? Where should they go?"

To answer this question one would first have to know if the loan officer had a congenital inability to utter such phrases as "no," "get lost," or "the borrower is my client and I have a fiduciary obligation to protect his interests."

All the best,

Peter G. Miller


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Kathy Fuhriman

Date: August 25

I have not know too many lenders who have acted like they have a fiduciary duty to any borrower. Many a lender I have run across who are motivated more by the yield spread premium or would lock the borrowers into ARM's so they can ensure repeat business in two-three years when the adjustment hit. Don't get me wrong, a good lender is worth their weight in salt but I have kicked to the curb several whose only motivation is their OWN interest.

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Cesar Salamanca.gri,trc,epro. Licensed Real Estate Broker,  Miami,  FL

Date: August 25

writing about the jailing of loan officers for making toxic loans that subsequently went into foreclosure because the origination process was materially defective -- asks, "how about the real estate agents who coerced loan officers to make the loan or they would not get another referral from him/her? Where should they go?"


The law is the law and every body should work and abide by the law with NO EXCUSES.

Sincerely
Cesar A. Salamanca.
Lic. Real Estate Broker®
GRI®.SSC.TRC.e-PRO®
C1first Realty, Inc
Miami,FL.33186
Direct.305-790-1338.
Fax# 888-569-0591.
C1firstRealty@Gmail.com
Cesar@RealtorCesar.com
www.C1first.com
www.TampaRealtorCesarS.com


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Louise Creager Licensed Real Estate Broker,  B ellvue,  CO

Date: August 26

There are still people out there continuing the trend. It's up to those of us who are ethical to counsel our clients honestly. I was recently at a networking event where a loan officer introduced herself and said she could get "anyone" to qualify as a first time home buyer and take advantage of the $8000 tax credit, if they are buying a home his year. Where will it end? Obviously I won't be using this persons services or promoting their company.
Cheers!
Louise Creager
Broker Associate e-PRO
Coldwell Banker
970.217.6843 cell
FAX: 970.416.6806
"What I thought was an end turned out to be a middle.
What I thought was a brick wall turned out to be a tunnel… "
- Tony Hoagland



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