Tag Archives: Freddie Mac

Whistleblower Files Charges Against Looting Of Freddie Mac Scheme

Obama administration looted investors to fund Obamacare

WASHINGTON, D.C. – A whistleblower who filed last week a formal complaint with the Federal Housing Finance Authority (FHFA) Office of Inspector General (OIG) provided Infowars.com with a document leaked from Freddie Mac that proves both Freddie Mac and Fannie Mae are currently out-of-compliance with Security and Exchange Commission (SEC) filing requirements.

The whistleblower – a CPA who worked in risk management for Freddie Mac from 2014 to 2016 – explained to Infowars.com the leaked internal document was created by Freddie Mac auditors in the preparation of Freddie Mac’s 2015 filing with the SEC of the Government Sponsored Entities (GSEs) Form 10-Q and 10-K – two SEC forms that require auditors to review and management to submit a comprehensive financial summary of the entity’s performance.

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“Freddie Mac management was and is aware that the GSEs equity shares have no value due to the Net Worth Sweep (NSW) but have not disclosed this in any public filing, including not in their 10-Q and 10-K filings,” the whistleblower told Infowars.com.

“At a minimum, Freddie Mac management is complicit with FHFA in the erosion of the property rights of shareholders and likely complicit in securities fraud with FHFA, as Freddie Mac’s management has not disclosed to the public that they are aware Freddie Mac equity has zero value.”

The NWS traces to Aug. 17, 2012, the Federal Housing Financial Agency and the Department of Treasury engineered an amendment to the Senior Preferred Stock Purchase Agreements through which Treasury had invested in Fannie and Freddie to allow the U.S. Treasury to grab ALL Fannie and Freddie earnings, regardless how large Fannie and Freddie’s profits might be.

“The document leaked from Freddie Mac is an internal memo prepared by the auditors (either internal or external) to management discussing their thresholds for materiality for their testing,” the whistleblower explained. “This document was prepared for a ‘review’ (the level below an audit in terms of assurance) and is done in conjunction of filing quarterly SEC filings like the 10-Q.”

“The auditors would have met with management for interviews to allow the auditors to gain an understanding of the organization itself, its operations, financial reporting, and known fraud or error.”

On Page 8 of the leaked report, the Freddie Mac auditors and management write: “We see no value in the common shares or the junior preferred shares as the Net Worth Sweep dividend effectively prohibits Freddie Mac from rebuilding capital despite the return to operating profitability.”

No similar statement from the auditors and management of the GSE effectively considered Freddie Mac as headed toward a situation where the Treasury had robbed Freddie Mac of all shareholder value by confiscating some $260 billion from Freddie Mac and Fannie Mae since 2012 by sweeping all earnings under the NWS from the GSEs into the Treasury’s general fund.

“This is shocking because SEC regulations required the auditors and management of Freddie Mac, when reporting the GSEs audited financial statements (including 10-K and 10-Q Forms) to report their financials not as a ‘going concern,’ but as a liquidation,” the Whistleblower stressed. “Additionally, Freddie Mac management states in the report, ‘The Treasury, which holds a warrant to purchase nearly eighty percent of our common stock, has recommended that our company be wound down.”

“FHFA, as an independent agency, has a fiduciary responsibility to Freddie Mac as it ‘has all rights of stockholders’ and therefore, FHFA as an independent agency, should not be taking direction from another agency,” the Whistleblower emphasized.

“Freddie Mac management was and is aware that the equity shares have no value due to the net worth sweep but have not disclosed this in any public filing,” the Whistleblower concluded.

“At a minimum, Freddie Mac management is complicit with FHFA in the erosion of the property rights of shareholders and likely complicit in securities fraud with FHFA as Freddie Mac’s management has not disclosed that they are aware the equity has zero value.”

By Gerome Corsi | Infowars

ACKMAN: The US government is perpetrating ‘the most illegal act of scale’ with Fannie and Freddie

Bill Ackman

Bill Ackman, the founder of Pershing Square Capital

by Julia La Roche.

Hedge fund titan Bill Ackman, the founder of $19 billion Pershing Square Capital Management, slammed the US government on Tuesday night for keeping all of the profits from mortgage guarantors Fannie Mae and Freddie Mac.

Ackman called it “the most illegal act of scale” he has ever seen the US government do.

Ackman spoke on Tuesday evening during a panel at Columbia University for the launch of Bethany McLean’s new book “Shaky Ground.” McLean and former Fannie Mae CEO Frank Raines were also panelists. Ackman, however, did most of the talking.

During the financial crisis, Fannie and Freddie needed massive bailouts and were taken over by the government. It’s been seven years since the financial crisis and the companies are still in a state of conservatorship. Today, the government-sponsored enterprises (GSEs) make billions in profits, all of which goes directly to the Treasury.

Ackman, the largest shareholder of Fannie and Freddie, and other investors are suing the US government for taking property for public use without just compensation.

“And there is no way they will not be allowed to stand, from a legal point of view. And the reason for that is if the US government can step in and take 100% of profits of a corporation forever, then we are in a Stalinist state and no private property is safe — and take your money out of every financial institution, put it into gold or bitcoin and just get the hell out because we’re done, maybe the clothes on your back, but other than that nothing is safe,” he said.

A stands outside Fannie Mae headquarters in Washington February 21, 2014. REUTERS/Kevin Lamarque

            A man stands outside Fannie Mae in Washington

In Ackman’s view, Fannie and Freddie are vital to the US economy. Right now, he said, the biggest threat to the US middle class is rising rental rates.

“If you don’t own a home, and you’re a member of the middle class, you have a problem,” he said. “This is the biggest threat to the middle class livelihood is that your cost of living, the roof over your head is not fixed, it’s floating.”

Ackman said that Fannie and Freddie were set up to make middle class housing more accessible. Together, they have enabled widespread availability and affordability with the 30-year, fixed-rate, pre-payable mortgage—a system that’s been in place for 45 years.

Ackman said he’s optimistic about the future of Fannie and Freddie. He has said before that with the right reforms they could be worth a lot more. He has given the GSEs a price target ranging between $23 and $47, which is well above the current $2 range.

Watch the full panel below:

Read more in Business Insider

America’s Home Buyers Being Targeted as Washington’s ‘Pay-For’ Piggy Bank

Would-be home buyers recently averted a major price hike by the narrowest of margins. No, this potential hike had little to do with the wholesale cost of building materials, the cost of borrowing capital, a scarcity of inventory, or the transaction costs of builders, Realtors or lenders. Rather, the latest proposed tax on new homeowners was designed to cover the cost of maintaining our nation’s bridges and roads.

Wait a second — what, if anything, does highway spending have to do with the cost of a residential mortgage? If you guessed “absolutely nothing at all” you’d be correct. Unless, of course, you happen to be a member of the 114th Congress. In that case, America’s newest class of would-be homeowners represents something similar to years past when homeowners were taxed to cover things like the payroll tax reduction extension.

In the Washington of today — similar to past occasions, the American homeowner is all-too-often referred to as a “pay for.”

In this case, various members of Congress sought an offset for a proposed $47 billion federal highway spending bill.

As crazy as it sounds, the latest unsuccessful home ownership “pay-for” proposal isn’t the first time such a plan has been considered. In fact, if you bought a home after December 2011 with a mortgage purchased by Fannie Mae and Freddie Mac, you’re already paying for much more than the cost of a place to live.

The Temporary Payroll Tax Cut Continuation Act of 2011 — H.R. 3765 of the 112th Congress charged new homeowners an additional 10 basis points in guarantee fee costs over the life of a 30-year mortgage. The proceeds were intended to help cover an increase in a two-month extension of the payroll tax credit and also unemployment compensation payments to long-term unemployed workers for roughly two months, from mid-December 2011 until February 29, 2012.

The law states that loan guarantee fees at Fannie and Freddie will rise “by not less than an average increase of 10 basis points for each origination year or book year above the average fees imposed in 2011 for such guarantees.” This means that an estimated $36 billion in additional fees collected over 10 years will be used to offset $33 billion in up-front costs tallied by a mere eight weeks of payroll tax deductions and unemployment insurance.

Kap / Spain, Cagle Cartoons

Of course none of this has anything to do with the financial health of Fannie Mae and Freddie Mac or the creditworthiness of the individual borrower, but it directly impacts the cost of a new home purchase or refinance. It happened because there’s value in home ownership — value that some congressional leaders think can be taxed for almost anything.

The recent flurry of loan guarantee fee increases at Fannie Mae and Freddie Mac (three times in just over four years) has nothing to do with the risk expected within the overall portfolios of loan business purchased by either of the two mortgage guarantor giants Fannie Mae or Freddie Mac during this time frame. The overall creditworthiness of loan portfolios purchased by both Fannie Mae and Freddie Mac has risen significantly over the last six years. In fact, both GSEs carry loan portfolios with aggregate average FICO scores well in excess of the average American. Yet, loan guarantee fees at Fannie Mae and Freddie Mac have skyrocketed by more than 160 percent over the exact same time period.

One reason for the recent rise in “g-fee” expenses has to do with congressional spending packages brokered by both parties for all sorts of concerns. Add to this equation the simple fact that the GSEs themselves are essentially a government-controlled duopoly, and one can understand exactly how the last six years of guarantee fee hikes came to pass.

Fannie Mae and Freddie Mac both currently operate under federal conservatorship administered by the Federal Housing Finance Agency (FHFA). Now in its 84th consecutive month, this “temporary” conservatorship has continued for almost seven years with no proposed plan for a future model. Freddie Mac declared over $8 billion in profits in 2014 alone. Fannie Mae recently declared profits of $4.6 billion in the brief April-through-June time period of 2Q 2015 by itself. Meanwhile, home buyers, cities, communities and the lenders and real estate agents that support the home ownership market have continued to struggle to recover from the housing financial crisis.

Keep in mind, the true cost of capital for Fannie Mae and Freddie Mac alike, is essentially zero — they are “conservatees” of the federal government. The notion of passing the cost of capital to the consumer, much like a private sector bank would, simply does not apply in the same sense.

The damage that a deliberate yet unwarranted campaign of GSE guarantee fee has done to American home ownership is clear. With wrongheaded policies such as these, it is easy to understand how the U.S. home ownership rate has dropped to the lowest level in almost 50 years.

It bears mentioning that not everyone on Capitol Hill is interested in using your nest egg as their fiscal piggy bank. Various members of Congress from both political parties have stood in unison to say “enough.” Republican Senator Bob Corker of Tennessee recently joined Democratic Senator Mark Warner of Virginia in authoring an open letter to Senate Majority Leader Mitch McConnell (R) and Senate Minority Leader Harry Reid (D) in opposition to the “homes for highways” pay-for gambit.

“Each time guarantee fees are extended, increased or diverted for unrelated spending, homeowners are charged more for their mortgages and taxpayers are exposed to additional risk,” said Senators Corker and Warner. Exactly.

It took a (rare) bipartisan effort led by Senators Corker and Warner to publicly shame Congress into upholding the same measure prohibiting such g-fee “pay-for” deals that they themselves passed only months ago.

It has happened before, and it will undoubtedly happen again. It’s just too easy, and it makes almost everyone happy. Everyone except the unsuspecting homeowner, that is. Various constituent groups get whatever spending item they’re after today, fiscal watchdogs get the satisfaction of knowing that at least someone, somewhere, is on the hook to pay the added cost. The problem is, if you’re in the market to buy a home in the foreseeable future or planning to refinance your existing home loan, that “someone” will most likely be you.

Prospective new homeowners have all sorts of pressing concerns to consider. Strapping the cost of a federal highway spending bill onto their backs by way of artificially inflated loan guarantee fees paid over the life of a 30-year mortgage shouldn’t be one of them.

Read more by Garrick T. Davis in The Huffington Post

Energy Workforce Projected To Grow 39% Through 2022

The dramatic resurgence of the oil industry over the past few years has been a notable factor in the national economic recovery. Production levels have reached totals not seen since the late 1980s and continue to increase, and rig counts are in the 1,900 range. While prices have dipped recently, it will take more than that to markedly slow the level of activity. Cycles are inevitable, but activity is forecast to remain at relatively high levels.  

An outgrowth of oil and gas activity strength is a need for additional workers. At the same time, the industry workforce is aging, and shortages are likely to emerge in key fields ranging from petroleum engineers to experienced drilling crews. I was recently asked to comment on the topic at a gathering of energy workforce professionals. Because the industry is so important to many parts of Texas, it’s an issue with relevance to future prosperity.  

 

Although direct employment in the energy industry is a small percentage of total jobs in the state, the work is often well paying. Moreover, the ripple effects through the economy of this high value-added industry are large, especially in areas which have a substantial concentration of support services.  

Petroleum Engineer

Employment in oil and gas extraction has expanded rapidly, up from 119,800 in January 2004 to 213,500 in September 2014. Strong demand for key occupations is evidenced by the high salaries; for example, median pay was $130,280 for petroleum engineers in 2012 according to the Bureau of Labor Statistics (BLS).  

Due to expansion in the industry alone, the BLS estimates employment growth of 39 percent through 2022 for petroleum engineers, which comprised 11 percent of total employment in oil and gas extraction in 2012. Other key categories (such as geoscientists, wellhead pumpers, and roustabouts) are also expected to see employment gains exceeding 15 percent. In high-activity regions, shortages are emerging in secondary fields such as welders, electricians, and truck drivers.  

The fact that the industry workforce is aging is widely recognized. The cyclical nature of the energy industry contributes to uneven entry into fields such as petroleum engineering and others which support oil and gas activity. For example, the current surge has pushed up wages, and enrollment in related fields has increased sharply. Past downturns, however, led to relatively low enrollments, and therefore relatively lower numbers of workers in some age cohorts. The loss of the large baby boom generation of experienced workers to retirement will affect all industries. This problem is compounded in the energy sector because of the long stagnation of the industry in the 1980s and 1990s resulting in a generation of workers with little incentive to enter the industry. As a result, the projected need for workers due to replacement is particularly high for key fields.

The BLS estimates that 9,800 petroleum engineers (25.5 percent of the total) working in 2012 will need to be replaced by 2022 because they retire or permanently leave the field. Replacement rates are also projected to be high for other crucial occupations including petroleum pump system operators, refinery operators, and gaugers (37.1 percent); derrick, rotary drill, and service unit operators, oil, gas, and mining (40.4 percent).  

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Putting together the needs from industry expansion and replacement, most critical occupations will require new workers equal to 40 percent or more of the current employment levels. The total need for petroleum engineers is estimated to equal approximately 64.5 percent of the current workforce. Clearly, it will be a major challenge to deal with this rapid turnover.

Potential solutions which have been attempted or discussed present problems, and it will require cooperative efforts between the industry and higher education and training institutions to adequately deal with future workforce shortages. Universities have had problems filling open teaching positions, because private-sector jobs are more lucrative for qualified candidates. Given budget constraints and other considerations, it is not feasible for universities to compete on the basis of salary. Without additional teaching and research staff, it will be difficult to continue to expand enrollment while maintaining education quality. At the same time, high-paying jobs are enticing students into the workforce, and fewer are entering doctoral programs.  

Another option which has been suggested is for engineers who are experienced in the workplace to spend some of their time teaching. However, busy companies are naturally resistant to allowing employees to take time away from their regular duties. Innovative training and associate degree and certification programs blending classroom and hands-on experience show promise for helping deal with current and potential shortages in support occupations. Such programs can prepare students for well-paying technical jobs in the industry. Encouraging experienced professionals to work past retirement, using flexible hours and locations to appeal to Millennials, and other innovative approaches must be part of the mix, as well as encouraging the entry of females into the field (only 20 percent of the current workforce is female, but over 40 percent of the new entries).

Industry observers have long been aware of the coming “changing of the guard” in the oil and gas business. We are now approaching the crucial time period for ensuring the availability of the workers needed to fill future jobs. Cooperative efforts between the industry and higher education/training institutions will likely be required, and it’s time to act.

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Single Family Construction Expected to Boom in 2015

https://i0.wp.com/s3.amazonaws.com/static.texastribune.org/media/images/Foster_Jerod-9762.jpgKenny DeLaGarza, a building inspector for the city of Midland, at a 600-home Betenbough development.

Single-family home construction is expected to increase 26 percent in 2015, the National Association of Home Builders reported Oct. 31. NAHB expects single-family production to total 802,000 units next year and reach 1.1 million by 2016.

Economists participating in the NAHB’s 2014 Fall Construction Forecast Webinar said that a growing economy, increased household formation, low interest rates and pent-up demand should help drive the market next year. They also said they expect continued growth in multifamily starts given the nation’s rental demand.

The NAHB called the 2000-03 period a benchmark for normal housing activity; during those years, single-family production averaged 1.3 million units a year. The organization said it expects single-family starts to be at 90 percent of normal by the fourth quarter 2016.

NAHB Chief Economist David Crowe said multifamily starts currently are at normal production levels and are projected to increase 15 percent to 365,000 by the end of the year and hold steady into next year.

The NAHB Remodeling Market Index also showed increased activity, although it’s expected to be down 3.4 percent compared to last year because of sluggish activity in the first quarter 2014. Remodeling activity will continue to increase gradually in 2015 and 2016.

Moody’s Analytics Chief Economist Mark Zandi told the NAHB that he expects an undersupply of housing given increasing job growth. Currently, the nation’s supply stands at just over 1 million units annually, well below what’s considered normal; in a normal year, there should be demand for 1.7 million units.

Zandi noted that increasing housing stock by 700,000 units should help meet demand and create 2.1 million jobs. He also noted that things should level off by the end of 2017, when mortgage rates probably will  rise to around 6 percent.

“The housing market will be fine because of better employment, higher wages and solid economic growth, which will trump the effect of higher mortgage rates,” Zandi told the NAHB.

Robert Denk, NAHB assistant vice president for forecasting and analysis, said that he expects housing recovery to vary by state and region, noting that states with higher levels of payroll employment or labor market recovery are associated with healthier housing markets

States with the healthiest job growth include Louisiana, Montana, North Dakota, Texas and Wyoming, as well as farm belt states like Iowa.

Meanwhile Alabama, Arizona, Nevada, New Jersey, New Mexico and Rhode Island continue to have weaker markets.

OCWEN Fakes foreclosure Notices To Steal Homes – Downgrade Putting RMBS at Risk

foreclosure for sale

by Carole VanSickle Ellis

If you really would rather own the property than the note, take a few lessons in fraud from Owen Financial Corp. According to allegations from New York’s financial regulator, Benjamin Lawsky, the lender sent “thousands” of foreclosure “warnings” to borrowers months after the window of time had lapsed during which they could have saved their homes[1]. Lawskey alleges that many of the letters were even back-dated to give the impression that they had been sent in a timely fashion. “In many cases, borrowers received a letter denying a mortgage loan modification, and the letter was dated more than 30 days prior to the date that Ocwen mailed the letter.”

The correspondence gave borrowers 30 days from the date of the denial letter to appeal, but the borrowers received the letters after more than 30 days had passed. The issue is not a small one, either. Lawskey says that a mortgage servicing review at Ocwen revealed “more than 7,000” back-dated letters.”

In addition to the letters, Ocwen only sent correspondence concerning default cures after the cure date for delinquent borrowers had passed and ignored employee concerns that “letter-dating processes were inaccurate and misrepresented the severity of the problem.” While Lawskey accused Ocwen of cultivating a “culture that disregards the needs of struggling borrowers,” Ocwen itself blamed “software errors” for the improperly-dated letters[2]. This is just the latest in a series of troubles for the Atlanta-based mortgage servicer; The company was also part the foreclosure fraud settlement with 49 of 50 state attorneys general and recently agreed to reduce many borrowers’ loan balances by $2 billion total.

Most people do not realize that Ocwen, although the fourth-largest mortgage servicer in the country, is not actually a bank. The company specializes specifically in servicing high-risk mortgages, such as subprime mortgages. At the start of 2014, it managed $106 billion in subprime loans. Ocwen has only acknowledged that 283 New York borrowers actually received improperly dated letters, but did announce publicly in response to Lawskey’s letter that it is “investigating two other cases” and cooperating with the New York financial regulator.

WHAT WE THINK: While it’s tempting to think that this is part of an overarching conspiracy to steal homes in a state (and, when possible, a certain enormous city) where real estate is scarce, in reality the truth of the matter could be even more disturbing: Ocwen and its employees just plain didn’t care. There was a huge, problematic error that could have prevented homeowners from keeping their homes, but the loan servicer had already written off the homeowners as losers in the mortgage game. A company that services high-risk loans likely has a jaded view of borrowers, but that does not mean that the entire culture of the company should be based on ignoring borrowers’ rights and the vast majority of borrowers who want to keep their homes and pay their loans. Sure, if you took out a mortgage then you have the obligation to pay even if you don’t like the terms anymore. On the other side of the coin, however, your mortgage servicer has the obligation to treat you like someone who will fulfill their obligations rather than rigging the process so that you are doomed to fail.

Do you think Lawskey is right about Ocwen’s “culture?” What should be done to remedy this situation so that note investors and homeowners come out of it okay?

Thank you for reading the Bryan Ellis Investing Letter!

Your comments and questions are welcomed below.


[1] http://dsnews.com/news/10-23-2014/new-york-regulator-accuses-lender-sending-backdated-foreclosure-notices

[2] http://realestate.aol.com/blog/2014/10/22/ocwen-mortgage-alleged-foreclosure-abuse/

http://investing.bryanellis.com/11703/lender-fakes-foreclosure-notices-to-steal-homes/


Ocwen posts open letter and apology to borrowers
Pledges independent investigation and rectification
October 27, 2014 10:37AM

Ocwen Financial (OCN) has taken a beating after the New York Department of Financial Services sent a letter to the company on Oct. 21 alleging that the company had been backdating letters to borrowers, and now Ocwen is posting an open letter to homeowners.

Ocwen CEO Ron Faris writes to its clients explaining what happened and what steps the company is taking to investigate the issue, identify any problems, and rectify the situation.

Click here to read the full text of the letter.

“At Ocwen, we take our mission of helping struggling borrowers very seriously, and if you received one of these incorrectly-dated letters, we apologize. I am writing to clarify what happened, to explain the actions we have taken to address it, and to commit to ensuring that no borrower suffers as a result of our mistakes,” he writes.

“Historically letters were dated when the decision was made to create the letter versus when the letter was actually created. In most instances, the gap between these dates was three days or less,” Faris writes. “In certain instances, however, there was a significant gap between the date on the face of the letter and the date it was actually generated.”

Faris says that Ocwen is investigating all correspondence to determine whether any of it has been inadvertently misdated; how this happened in the first place; and why it took so long to fix it. He notes that Ocwen is hiring an independent firm to conduct the investigation, and that it will use its advisory council comprised of 15 nationally recognized community advocates and housing counselors.

“We apologize to all borrowers who received misdated letters. We believe that our backup checks and controls have prevented any borrowers from experiencing a foreclosure as a result of letter-dating errors. We will confirm this with rigorous testing and the verification of the independent firm,” Faris writes. “It is worth noting that under our current process, no borrower goes through a foreclosure without a thorough review of his or her loan file by a second set of eyes. We accept appeals for modification denials whenever we receive them and will not begin foreclosure proceedings or complete a foreclosure that is underway without first addressing the appeal.”

Faris ends by saying that Ocwen is committed to keeping borrowers in their homes.

“Having potentially caused inadvertent harm to struggling borrowers is particularly painful to us because we work so hard to help them keep their homes and improve their financial situations. We recognize our mistake. We are doing everything in our power to make things right for any borrowers who were harmed as a result of misdated letters and to ensure that this does not happen again,” he writes.

Last week the fallout from the “Lawsky event” – so called because of NYDFS Superintendent Benjamin Lawsky – came hard and fast.

Compass Point downgraded Ocwen affiliate Home Loan Servicing Solutions (HLSS) from Buy to Neutral with a price target of $18.

Meanwhile, Moody’s Investors Service downgraded Ocwen Loan Servicing LLC’s servicer quality assessments as a primary servicer of subprime residential mortgage loans to SQ3 from SQ3+ and as a special servicer of residential mortgage loans to SQ3 from SQ3+.

Standard & Poor’s Ratings Services lowered its long-term issuer credit rating to ‘B’ from ‘B+’ on Ocwen on Wednesday and the outlook is negative.

http://www.housingwire.com/articles/31846-ocwen-posts-open-letter-and-apology-to-borrowers

—-
Ocwen Writes Open Letter to Homeowners Concerning Letter Dating Issues
October 24, 2014

Dear Homeowners,

In recent days you may have heard about an investigation by the New York Department of Financial Services’ (DFS) into letters Ocwen sent to borrowers which were inadvertently misdated. At Ocwen, we take our mission of helping struggling borrowers very seriously, and if you received one of these incorrectly-dated letters, we apologize. I am writing to clarify what happened, to explain the actions we have taken to address it, and to commit to ensuring that no borrower suffers as a result of our mistakes.

What Happened
Historically letters were dated when the decision was made to create the letter versus when the letter was actually created. In most instances, the gap between these dates was three days or less. In certain instances, however, there was a significant gap between the date on the face of the letter and the date it was actually generated.

What We Are Doing
We are continuing to investigate all correspondence to determine whether any of it has been inadvertently misdated; how this happened in the first place; and why it took us so long to fix it. At the end of this exhaustive investigation, we want to be absolutely certain that we have fixed every problem with our letters. We are hiring an independent firm to investigate and to help us ensure that all necessary fixes have been made.

Ocwen has an advisory council made up of fifteen nationally recognized community advocates and housing counsellors. The council was created to improve our borrower outreach to keep more people in their homes. We will engage with council members to get additional guidance on making things right for any borrowers who may have been affected in any way by this error.

We apologize to all borrowers who received misdated letters. We believe that our backup checks and controls have prevented any borrowers from experiencing a foreclosure as a result of letter-dating errors. We will confirm this with rigorous testing and the verification of the independent firm. It is worth noting that under our current process, no borrower goes through a foreclosure without a thorough review of his or her loan file by a second set of eyes. We accept appeals for modification denials whenever we receive them and will not begin foreclosure proceedings or complete a foreclosure that is underway without first addressing the appeal.

In addition to these efforts we are committed to cooperating with DFS and all regulatory agencies.

We Are Committed to Keeping Borrowers in Their Homes
Having potentially caused inadvertent harm to struggling borrowers is particularly painful to us because we work so hard to help them keep their homes and improve their financial situations. We recognize our mistake. We are doing everything in our power to make things right for any borrowers who were harmed as a result of misdated letters and to ensure that this does not happen again. We remain deeply committed to keeping borrowers in their homes because we believe it is the right thing to do and a win/win for all of our stakeholders.

We will be in further communication with you on this matter.

Sincerely,
Ron Faris
CEO

YOU DECIDE

Ocwen Downgrade Puts RMBS at Risk

Moody’s and S&P downgraded Ocwen’s servicer quality rating last week after the New York Department of Financial Services made “backdating” allegations. Barclays says the downgrades could put some RMBS at risk of a servicer-driven default.

http://findsenlaw.wordpress.com/2014/10/29/ocwen-downgraded-in-response-to-ny-dept-of-financial-services-backdating-allegations-against-ocwen/

Assisted-Living Complexes for Young People

https://i1.wp.com/www.cenozoico.com/wp-content/uploads/2013/12/Balcony-Appartment-Outdoor-Living-Room-Ideas-1024x681.jpg

by Dionne Searcey

One of the most surprising developments in the aftermath of the housing crisis is the sharp rise in apartment building construction. Evidently post-recession Americans would rather rent apartments than buy new houses.

When I noticed this trend, I wanted to see what was behind the numbers.

Is it possible Americans are giving up on the idea of home ownership, the very staple of the American dream? Now that would be a good story.

What I found was less extreme but still interesting: The American dream appears merely to be on hold.

Economists told me that many potential home buyers can’t get a down payment together because the recession forced them to chip away at their savings. Others have credit stains from foreclosures that will keep them out of the mortgage market for several years.

More surprisingly, it turns out that the millennial generation is a driving force behind the rental boom. Young adults who would have been prime candidates for first-time home ownership are busy delaying everything that has to do with becoming a grown-up. Many even still live at home, but some data shows they are slowly beginning to branch out and find their own lodgings — in rental apartments.

A quick Internet search for new apartment complexes suggests that developers across the country are seizing on this trend and doing all they can to appeal to millennials. To get a better idea of what was happening, I arranged a tour of a new apartment complex in suburban Washington that is meant to cater to the generation.

What I found made me wish I was 25 again. Scented lobbies crammed with funky antiques that led to roof decks with outdoor theaters and fire pits. The complex I visited offered Zumba classes, wine tastings, virtual golf and celebrity chefs who stop by to offer cooking lessons.

“It’s like an assisted-living facility for young people,” the photographer accompanying me said.

Economists believe that the young people currently filling up high-amenity rental apartments will eventually buy homes, and every young person I spoke with confirmed that this, in fact, was the plan. So what happens to the modern complexes when the 20-somethings start to buy homes? It’s tempting to envision ghost towns of metal and pipe wood structures with tumbleweeds blowing through the lobbies. But I’m sure developers will rehabilitate them for a new demographic looking for a renter’s lifestyle.

FHA Is Set To Return To Anti-House-Flipping Restrictions


House flippers buy run-down properties, fix them up and resell them quickly at a higher price. Above, a home under renovation in Amsterdam, N.Y. (Mike Groll / Associated Press)

Can you still do a short-term house flip using federally insured, low-down payment mortgage money? That’s an important question for buyers, sellers, investors and realty agents who’ve taken part in a nationwide wave of renovations and quick resales using Federal Housing Administration-backed loans during the last four years.

The answer is yes: You can still flip and finance short term. But get your rehabs done soon. The federal agency whose policy change in 2010 made tens of thousands of quick flips possible — and helped large numbers of first-time and minority buyers with moderate incomes acquire a home — is about to shut down the program, FHA officials confirmed to me.

In an effort to stimulate repairs and sales in neighborhoods hard hit by the mortgage crisis and recession, the FHA waived its standard prohibition against financing short-term house flips. Before the policy change, if you were an investor or property rehab specialist, you had to own a house for at least 90 days before reselling — flipping it — to a new buyer at a higher price using FHA financing. Under the waiver of the rule, you could buy a house, fix it up and resell it as quickly as possible to a buyer using an FHA mortgage — provided that you followed guidelines designed to protect consumers from being ripped off with hyper-inflated prices and shoddy construction.

Since then, according to FHA estimates, about 102,000 homes have been renovated and resold using the waiver. The reason for the upcoming termination: The program has done its job, stimulated billions of dollars of investments, stabilized prices and provided homes for families who were often newcomers to ownership.

However, even though the waiver program has functioned well, officials say, inherent dangers exist when there are no minimum ownership periods for flippers. In the 1990s, the FHA witnessed this firsthand when teams of con artists began buying run-down houses, slapped a little paint on the exterior and resold them within days — using fraudulent appraisals — for hyper-inflated prices and profits. Their buyers, who obtained FHA-backed mortgages, often couldn’t afford the payments and defaulted. Sometimes the buyers were themselves part of the scam and never made any payments on their loans — leaving the FHA, a government-owned insurer, with steep losses.

For these reasons, officials say, it’s time to revert to the more restrictive anti-quick-flip rules that prevailed before the waiver: The 90-day standard will come back into effect after Dec. 31.

But not everybody thinks that’s a great idea. Clem Ziroli Jr., president of First Mortgage Corp., an FHA lender in Ontario, says reversion to the 90-day rule will hurt moderate-income buyers who found the program helpful in opening the door to home ownership.

“The sad part,” Ziroli said in an email, “is the majority of these properties were improved and [located] in underserved areas. Having a rehabilitated house available to these borrowers” helped them acquire houses that had been in poor physical shape but now were repaired, inspected and safe to occupy.

Paul Skeens, president of Colonial Mortgage in Waldorf, Md., and an active rehab investor in the suburbs outside Washington, D.C., said the upcoming policy change will cost him money and inevitably raise the prices of the homes he sells after completing repairs and improvements. Efficient renovators, Skeens told me in an interview, can substantially improve a house within 45 days, at which point the property is ready to list and resell. By extending the mandatory ownership period to 90 days, the FHA will increase Skeens’ holding costs — financing expenses, taxes, maintenance and utilities — all of which will need to be added onto the price to a new buyer.

Paul Wylie, a member of an investor group in the Los Angeles area, says he sees “more harm than good by not extending the waiver. There are protections built into the program that have served [the FHA] well,” he said in an email. If the government reimposes the 90-day requirement, “it will harm those [buyers] that FHA intends to help” with its 3.5% minimum-down-payment loans. “Investors will adapt and sell to non-FHA-financed buyers. Entry-level consumers will be harmed unnecessarily.”

Bottom line: Whether fix-up investors like it or not, the FHA seems dead set on reverting to its pre-bust flipping restrictions. Financing will still be available, but selling prices of the end product — rehabbed houses for moderate-income buyers — are almost certain to be more expensive.

kenharney@earthlink.net. Distributed by Washington Post Writers Group. Copyright © 2014, Los Angeles Times

U.S. To Ease Repurchase Demands On Bad Mortgages

Mel WattMelvin Watt, director of the Federal Housing Finance Agency, outlined ways in which his agency would clarify actions it takes against bankers on loans that go bad. (Jacquelyn Martin / Associated Press).

by E. Scott Reckard, John Glionna & Tim Logan

Hoping to boost mortgage approvals for more borrowers, the federal regulator of Fannie Mae and Freddie Mac told lenders that the home financing giants would ease up on demands that banks buy back loans that go delinquent.

Addressing a lending conference here Monday, Melvin Watt, director of the Federal Housing Finance Agency, outlined ways in which his agency would clarify actions it takes against bankers on loans that go bad after being sold to Freddie and Fannie.

The agency’s idea is to foster an environment in which lenders would fund mortgages to a wider group of borrowers, particularly first-time home buyers and those without conventional pay records.

To date, though, the agency’s demands that lenders repurchase bad loans made with shoddy underwriting standards have resulted in bankers imposing tougher criteria on borrowers than Fannie and Freddie require.

A lot of good loans don’t get done because of silly regulations that are not necessary. – Jeff Lazerson, a mortgage broker from Orange County

Those so-called overlays in lending standards, in turn, have contributed to sluggish home sales, a drag on the economic recovery and lower profits on mortgages as banks reduced sales to Fannie and Freddie and focused mainly on borrowers with excellent credit.

Watt acknowledged to the Mortgage Bankers Assn. audience that his agency in the past “did not provide enough clarity to enable lenders to understand when Fannie Mae or Freddie Mac would exercise their remedy to require repurchase of a loan.”

Going forward, Watt said, Fannie and Freddie would not force repurchases of mortgages found to have minor flaws if the borrowers have near-perfect payment histories for 36 months.

He also said flaws in reporting borrowers’ finances, debt loads and down payments would not trigger buy-back demands so long as the borrowers would have qualified for loans had the information been reported accurately.  And he said that the agency would release guidelines “in the coming weeks” to allow increased lending to borrowers with down payments as low as 3% by considering “compensating factors.”

The mortgage trade group’s chief executive, David Stevens, said Watt’s remarks “represent significant progress in the ongoing dialogue” among the industry, regulators and Fannie and Freddie. Several banks released positive statements that echoed his remarks.

Others at the convention, however, said Watt’s speech lacked specifics and did little to reassure mortgage lenders that the nation’s housing market would soon be back on track.

“The speech was horribly disappointing,” said Jeff Lazerson, a mortgage broker from Orange County, calling Watt’s delivery and message “robotic.”

“They’ve been teasing us, hinting that things were going to get better, but nothing new came out,” Lazerson said. “A lot of good loans don’t get done because of silly regulations that are not necessary.”

Philip Stein, a lawyer from Miami who represents regional banks and mortgage companies in loan repurchase cases, said the situation was far from returning to a “responsible state of normalcy,” as Watt described it.

“When the government talked of modifications in the process, I thought, ‘Oh, this could be good,'” Stein said. “But I don’t feel good about what I heard today.”

Despite overall improvements in the economy and interest rates still near historic lows, the number of home sales is on pace to fall this year for the first time since 2010 as would-be buyers struggle with higher prices and tight lending conditions

Loose underwriting standards–scratch that, non-existent underwriting standards–caused the mortgage meltdown. If borrowers are willing to put down just 3% for their down payment, their note rate should be 0.50% higher and 1 buy-down point. The best rates should go to 20% down payments.

Once-torrid price gains have cooled, too, as demand has subsided. The nation’s home ownership rate is at a 19-year low.

First-time buyers, in particular, have stayed on the sidelines. Surveys by the National Assn. of Realtors have found first-time owners making up a significantly smaller share of the housing market than the 40% they typically do.

There are reasons for this, economists said, including record-high student debt levels, young adults delaying marriage, and the still-soft job market. But many experts agree that higher down-payment requirements and tougher lending restrictions are playing a role.

Stuart Gabriel, director of the Ziman Center for Real Estate at UCLA, said he’s of a “mixed mind” about the changes.

On one hand, Gabriel said, tight underwriting rules are clearly making it harder for many would-be buyers to get a loan, perhaps harder than it should be.

“If they loosen the rules a bit, they’ll see more qualified applicants and more applicants getting into mortgages,” he said. “That would be a good thing.”

But, he said, a down payment of just 3% doesn’t leave borrowers with much of a cushion. If prices fall, he said, it risks a repeat of what happened before the downturn.

“We saw that down payments at that level were inadequate to withstand even a minor storm in the housing market,” he said. “It lets borrowers have very little skin in the game, and it becomes easy for those borrowers to walk away.”

Selma Hepp, senior economist at the California Assn. of Realtors, said lenders will welcome clarification of the rules over repurchase demands.

But in a market in which many buyers struggle to afford a house even if they can get a mortgage, she wasn’t sure the changes would have much effect on sales.

“We’re still unclear if we’re having a demand issue or a supply issue here,” said Hepp, whose group recently said it expects home sales to fall in California this year. “It may not have an immediate effect. But in the long term, I think it’s very positive news.”

Watt’s agency has recovered billions of dollars from banks that misrepresented borrowers’ finances and home values when they sold loans during the housing boom. The settlements have helped stabilize Fannie and Freddie, which were taken over by the government in 2008, and led many bankers to clamp down on new loans.

Fannie and Freddie buy bundles of home loans from lenders and sell securities backed by the mortgages, guaranteeing payment to investors if the borrowers default.

scott.reckard@latimes.com

john.glionna@latimes.com

tim.logan@latimes.com

Reckard and Logan reported from Los Angeles; Glionna from Las Vegas

‘1,000 Shades of Non-QM’: Home Lenders Court Niche Borrowers

By Kate Berry, National Mortgage News    Nonstandard. Atypical. Irregular. One-off.

These are just a few of the terms that mortgage lenders have coined to describe loans that do not meet the Consumer Financial Protection Bureau’s definition of an ultra-safe “qualified mortgage.”

Since the CFPB’s mortgage rules went into effect in January, some mortgage lenders and investors have been desperately trying to figure out how to originate loans that fall outside the definition.

Non-QM loans offer lenders the potential to earn the kind of profits last seen during the heady days of subprime lending. At a time when loan volumes have plummeted, lenders can charge consumers significantly higher mortgage rates for these products. The profit potential would be even greater if the loans eventually get pooled together, securitized and sold to investors.

“Mortgage bankers are looking to find other sources of business in order to remain profitable or to get back to profitability,” says Michele Perrin, a principal at Perrin & Associates, a warehouse lending advisory firm in Tustin, Calif. “Everybody is looking for financing for non-QM loans.”

Many lenders are wading into the non-QM space by initially offering loans to self-employed borrowers, foreign nationals and borrowers with blemished credit from a past short sale or foreclosure. Some lenders also are focusing on specific property types like condominiums that do not meet standards set by Fannie Mae or Freddie Mac.

“There will be 1,000 flavors of non-QM like 1,000 shades of gray,” says Brian Hale, the CEO of Stearns Lending, in Santa Ana, Calif. “I believe all lenders will have to do some portion of their volume in the non-QM space. It’s easy to race in and there’s no shortage of demand because there are an awful lot of customers that don’t fit the QM box.”

But non-QM loans come with significant legal risks. The “ability to repay,” rule, a crucial provision of the Dodd-Frank Act, requires that lenders consider eight specific underwriting factors to verify the borrower’s income.

Failure to do so can result in possible criminal liability, fines of $5,000 per day, enforcement actions by federal and state agencies, and civil and class action lawsuits by individual borrowers. Borrowers have three years to bring a legal action against a lender for potential violations of the ability to repay rule and also can raise a defense to a foreclosure years down the road.

Lenders are dividing the market into various niches that they deem safe enough to compensate for legal dangers. Most are identifying well-qualified borrowers with ample assets but income that might be difficult to document.

“I think you’ll find that non-QM loans are pristine loans otherwise that could be challenged on the ability to repay rule,” says Raymond Natter, a partner at the law firm of Barnett Sivon & Natter, who conceded that “nonbank lenders might be more comfortable with a riskier business model.”

Of course, the nation’s top banks originally claimed they would not make any non-QM loans, but they all have continued to make interest-only jumbo mortgages to wealthy borrowers. Such loans are held on bank balance sheets and tend to have very low default rates. Interest-only loans are excluded from being considered ultra-safe “qualified mortgages” because borrowers often face payment shock once they are required to start paying principal, typically after five to seven years of paying just interest.

Non-QM lenders are replicating the playbook of banks that naturally gravitated toward interest-only and jumbo loans to borrowers with lots of reserves and income.

“They’re not making an IO loan to a part-time Wal-Mart worker who lives paycheck to paycheck,” says Michael Kime, the chief operating officer at W.J. Bradley Mortgage, a Colorado lender. “Banks feel grounded to defend the non-predatory nature of the loan. How do we identify underserved markets, make responsible loans and have enough of them to get…deal flow?”

This month, W.J. Bradley will start originating nonagency condo loans. Many condominiums are tied up in litigation or have too many unoccupied units that make them ineligible for sale to Fannie Mae or Freddie Mac. Mortgages on certain mixed-use commercial and residential properties also can’t be sold to the government-sponsored enterprises and exemplify the types of niche non-QM loans W.J. Bradley will originate from now on, Kime says.

“We’re wringing our hands at the opportunity,” he says. “How do we parlay the same logic a bank is using into a nonbank securitization?…The real issue is ability-to-repay: Are you [the lender] behaving in a predatory manner or are you originating assets to reasonable borrowers?”

A handful of lenders and investors are lining up to originate nonagency, non-QM loans. They include Caliber Home Loans, an Irving, Texas, lender owned by private equity firm Loan Star Funds, and Legg Mason Inc.’s bond firm Western Asset Management, which plans to buy non-QM loans from lenders.

Perrin is working with non-QM lenders including some hard-money lenders that are offering short-term financing at rates ranging from 11% to 13% to individual investors who are buying and flipping properties. The biggest hurdle, she says, is trying to get warehouse lines of credit.

“Warehouse lenders do not want to be anywhere near the origination piece of the transaction,” says Perrin. “They do not want to be potentially sued and most of these firms believe attorneys will be lining up to sue non-QM lenders.”

Some warehouse lenders are considering creating special purpose entities that would serve as a buffer between them and the originating lender as a shield from being sued, Perrin says.

Non-QM lending is still in the very early stages and many lenders believe it will evolve as lenders become more comfortable with the litigation risk.

“You’re going to have non-QM, it’s just another asset to throw in there along with reperforming and nonperforming securitizations,” says Michele Patterson, a senior director at Kroll Bond Rating Agency.

Still, the lack of a secondary market take-out for lenders, the dearth of available capital and historically low interest rates, which make the risks harder to justify, are all headwinds for non-QM loans.

Finding a catchy moniker also would help.

“We started internally calling these nonprime loans but that has a connotation of subprime, and you can’t call them alt-A because of the stigma,” says Kime, referring to alternative-A, a boom-era subcategory of loans that had less than full documentation and lower credit scores but higher loan-to-value ratios.

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