Per Bank of America “we are offering enhanced relocation assistance payments in which qualified homeowners who initiate a short sale without an offer could be eligible to receive $2,500 – $30,000* in relocation assistance and owe no more on their mortgage with the sale of their property.”

The terms of the relocation assistance are as follows:  The relocation assistance payment is calculated based on the appraised value of the homeowner’s property. The total amount will be no less than $2,500, but no more than $30,000. The payment will be delivered at the time of closing if the homeowner complies with all terms and conditions of the Short Sale Agreement, which includes but are not limited to the following: a full walk-through appraisal must be completed and the homeowner must satisfy all junior liens and provide clear title for the property (the relocation assistance payment can be used to clear those liens). The short sale must close by September 26, 2013.  If the homeowner does not comply with all terms and conditions of the Short Sale Agreement, they will not receive the relocation assistance payment. The amount of any deficiency and relocation assistance will be reported to the Internal Revenue Service (IRS) on the appropriate 1099 Form or Forms. We suggest that the homeowner contact the IRS or their tax preparer to determine if they have any tax liability.

Source:  Bank of America

(Reuters) – In July 2009, Roy and Sheila Bowers refinanced the mortgage on their suburban ranch home in Topeka, Kansas. The couple wanted to take advantage of the low interest rates that were all the rage at the time.

Roy, a truck driver, and Sheila, a former hotel housekeeping supervisor, knew their new loan from Wells Fargo would enable them to save $198.86 a month – a nice chunk to help with gas and groceries.

But what the Bowers never imagined was that their old loan, the one Wells Fargo told them was paid off, would resurrect itself, trashing their credit report, scotching their son’s student loans and throwing the whole family into foreclosure. All, they say, even though they didn’t miss a single mortgage payment.

The Bowers are not alone.

More and more, homeowners say that mortgages they thought were dead and buried are springing back to life, sometimes haunting them all the way into foreclosure.

“It’s the most egregious manifestation of an industry that’s seriously broken,” said Ira Rheingold, a lawyer who is the executive director of the National Association of Consumer Advocate.

Diane Thompson, an attorney with the National Consumer Law Center, says she has defended hundreds of foreclosure cases, and in nearly all of them, the homeowner was not in default. “The record-keeping on the part of the mortgage servicers is not to be trusted.”

The problems grew from a lot of sloppy recordkeeping that began during the housing boom, when Wall Street built a quick-and-dirty back-office operation to process mortgages quickly so lenders could sell as many loans as possible. As the loans were later sold to investors, and then resold around the world, the back office system sidestepped crucial legal procedures.

Now it’s becoming clear just how dysfunctional and, according to several state attorneys general, how fraudulent the whole system was.

Depositions from “affidavit slaves” depict a surreal, assembly-line world in which the banks and their partner firms hired hair stylists, fast-food kids and Wal-Mart floor workers, paying them $10 an hour, to pose as bank vice presidents, assistant secretaries and corporate attorneys.

These “robosigners” became a national sensation in the fall of 2010 when it was revealed that they faked titles, forged documents and backdated affidavits so they could make up for the bypassed procedures and foreclose on properties.

They passed around notary stamps as if they were salt. They did all of this, they testified, without verifying a single word in any of the documents – as is required by law.

And it was all done, they say, to foreclose on as many homeowners as fast as possible.

No one collects statistics on wrongful foreclosures, or how many people are facing the phantom mortgage debts. But as the industry enters its fifth year of unwinding its mortgage morass, consumer groups, homeowner attorneys and foreclosure-fraud investigators say they are seeing more cases where people who don’t owe the banks a dime are getting ensnared in the same hell as those who have missed payments.

They add that such problems are likely to intensify. Former industry employees have testified that they knowingly pushed through foreclosures on the wrong people.

It all casts a pall over a housing market in worse condition than it was during the Great Depression. By some estimates, 12.5 percent of U.S. homes with mortgages are either in foreclosure or the loans are at least 30 days past due, representing about $1 trillion in value.

“This is an epic problem that the economy hasn’t even begun to digest,” said Florida foreclosure analyst Lisa Epstein.

In some cases, mortgages that were supposed to die off in a refinancing are popping back up, while in others, the loans were paid in full. Homeowners who pay off their houses through bankruptcy programs are also falling prey.

So are homeowners who never even had a mortgage to begin with.

Homeowners say the banks’ repo men sometimes even show up at work. Banks also hector them with threatening letters and phone calls. “It scared the hell out of him,” said a Houston lawyer whose client was the target of such efforts. “He was absolutely spooked,” lawyer Barry Brown said.

So was Shantell Curtis of Utah. She showed up at her accountant’s office last year only to learn that she had been sued for foreclosure on a house she had sold years before. Bank of America reported the delinquency to credit bureaus, tarring Curtis’s credit. It turned out the entire saga stemmed from a bank coding error. The amount the bank falsely alleged Curtis still owed on her mortgage? One dollar.

Vietnam vet Dwight Gaines fell behind on his payments on his Birmingham, Alabama, home. Gaines paid off his entire mortgage, plus all the fees and expenses he owed the bank in March 2010, as a part of a Chapter 13 bankruptcy plan. But Bank of America kept sending Gaines notices that he still owed $6,842.37. Nearly two years later, Gaines is still fighting the bank in court.

“In my experience, if I had not sued Bank of America, they would have eventually placed Mr. Gaines in foreclosure although he had completely paid his mortgage,” said Gaines’ lawyer, Wesley Phillips.

Bank of America spokewoman Jumana Bauwens said the bank is working to resolve the Gaines situation. She also said that “these situations pre-date a review of our foreclosure procedures which took place in the fall of 2010. At the time, we identified areas of our process that needed to be improved, and we have been making those improvements.”

The reincarnating mortgage is only the latest development in the megabanks’ mortgage debacle, a scandal that has made them the target of a mounting pile of investigations and lawsuits. Though a settlement with most of the U.S. attorneys general may be imminent, a rogue group of AGs has peeled off to launch their own investigations.

One of those AGs, New York’s Eric Schneiderman, is a part of the U.S. Justice Department task force announced by President Obama in his State of the Union address on Tuesday night.

Up until Obama’s announcement, the federal government’s response to the alleged financial misconduct was in the form of an independent review of the banks overseen by the federal Office of the Comptroller of Currency. But critics have labeled the OCC review as a farce rife with conflicts of interest.

The OCC spokesman, Bryan Hubbard, disputed that claim, saying the OCC has gone to great lengths to ensure that the independent consultants hired by the banks to review their procedures would report to regulators, not the banks. “During the selection process of the independent consultants and law firms, regulators rejected some proposed consultants and law firms to prevent conflicts of interest,” said Hubbard.

Such reviews are supposed to gather information from homeowners like Jennifer Wilson, a former nursery school teacher from Philadelphia. Wilson settled a wrongful foreclosure case with Wells Fargo in June 2010. That month, court records show, Wells Fargo filed a satisfaction of mortgage document noting that the $8,000 loan on Wilson’s home had been paid in full.

But more than a year later, on December 8, 2011, Wilson, who is disabled and lives below the federal poverty line, answered her door to see a process servicer brandishing foreclosure warning papers from Wells Fargo. The bank’s letter warned Wilson that she owed 57 months of late payments, plus expenses, totaling $18,407.55. If she did not pay within 30 days, the bank said, it would sue for foreclosure.

“I thought I’d been punked,” said Wilson. Even more bizarrely, one day later, a different process server from a different company showed up on Wilson’s door and handed over the exact same papers Wilson had received the day before.

“We see a lot of cases like this, where they are trying to collect even though there is no mortgage,” said Wilson’s lawyer, Jennifer Schultz. “Once the system has marked you as delinquent, there’s just this massive machinery that takes over. There are people whose lives are destroyed by the system, and there’s no way to fix it.”

“We are working with her to resolve this matter as quickly as we can,” Wells Fargo spokesman Jim Hines said.

Some critics say the stories indicate a pattern of systemic wrongdoing. That is one allegation lobbed in a December lawsuit against the banks brought by Massachusetts Attorney General Martha Coakley, who is among the handful of attorneys general that split off from the broader AG settlement group.

For the Bowers of Topeka, it all started in July 2009, when they refinanced their home with Wells Fargo. As is standard in a refinance, the couple used the proceeds from their new loan to pay off their old loan, with Security National Mortgage Company.

On July 6, 2009, Wells Fargo sent the Bowers a letter with a header in all caps at the top that stated: “CONFIRMATION OF LOAN PAYOFF.” The letter opened by saying: “Congratulations! We are pleased to inform you that we have processed the funds necessary to pay your loan in full.”

At the same time, Wells Fargo also sent a certificate of satisfaction to the Bowers local recorder of deeds in Shawnee County, Kansas. That notice certified that the Bowers’ old loan of $184,222.00 had been paid off.

As the Bowers had hoped, their interest rate dropped from 7 percent on the old loan to 4.875 percent on the new one. The couple say they paid their new mortgage early each month.

But what the Bowers didn’t know is that, five months later, the banks’ private mortgage recording service filed an “Erroneous Release of Mortgage” document on the Bowers’ loan with the Shawnee County Recorder’s Office. The filing stated that the Bowers’ first mortgage “has not been fully paid, nor satisfied, nor discharged, but, instead, continues to exist.”

The document was signed by a robosigner, the Bowers’ attorney alleges.

One month later, the Bowers noticed that the loan number and interest rate on their mortgage statement had mysteriously changed. Wells Fargo was now charging them the old 7 percent rate – and it hit them with more than $3,000 in late fees.

Thus began the family’s descent into their mortgage ordeal. Sheila Bowers says she called Wells Fargo over and over and finally learned that the bank was now alleging that the couple’s refinance never went through, and so the bank was reverting to the terms of the original mortgage.

To Wells Fargo, it was as if the refinance had never occurred. Yet Wells Fargo then reported two mortgages to the credit bureaus. That lowered the couple’s credit score to the point where they couldn’t obtain their son’s new student loans.

“We only ever got one bill,” said Sheila Bowers. “But they kept telling us we had two mortgages.”

The Bowers couldn’t find a lawyer who would take their case, especially since they could pay so little. But through friends, they knew an owner of a Topeka mortgage brokerage company who was also an attorney: Donna Huffman. It turned out Huffman was defending just such cases. “I’m a lender suing lenders,” said Huffman. “I fought to put people in homes, and now I’m fighting to keep them.”

Huffman sued, alleging that the bank was making the Bowers pay for its mistake. Wells Fargo response, in court papers, was that the Bowers failed to sign all the paperwork necessary for the refinance to go through. But the Bowers say they signed every document that the bank gave them. The bank also says in court papers that the Bowers never attended a closing. But the Bowers say the bank never told them they needed to do so.

What made the story even more strange to the Bowers is that when Sheila Bowers called the Federal Housing Administration to get help, the FHA, in a letter filed in court papers and dated October 19, 2010, told her that the loan Wells Fargo was trying to collect on did not exist. Instead, the FHA said it had documentation showing that the Bowers’ original loan “was terminated on July 1, 2009, by prepayment,” suggesting that Wells Fargo did pay it off. As far as the FHA was concerned, the loan that Wells Fargo was enforcing didn’t exist.

Despite the misunderstanding, the Bowers continued to send in their mortgage payment to Wells Fargo, with the amount for the new, refinanced loan, every month. They hoped the entire ordeal would one day get cleared up. But in November 2010, Wells Fargo rejected the Bowers payment and sent it back. The next month, five days before Christmas, the bank foreclosed. The family then stopped sending in payments. They continue to live in limbo in their house as they fight for resolution.

Wells Fargo spokesman Jim Hines said: “The allegations, we feel, are baseless. We feel we are entitled to protect our lien interest because the promissory note has never been paid and the note and the (original) mortgage are in default.”

To this day, the Bowers say they have no idea where all the mortgage payments they sent in after they got their new loan went.

“Nobody seems to know,” said Sheila Bowers. “It’s a mystery.”

Source:  Reuters

That figure, provided to Reuters by tracking firm CoreLogic, represents about one out of 10 home loans made during that period.

It is a sobering indication the U.S. housing market remains deeply troubled, with home values still falling in many parts of the country, and raises the question of whether low-down payment loans backed by the FHA are putting another generation of buyers at risk.

As of December 2011, the latest figures available, 31 percent of the U.S. home loans that were in negative equity – in which the outstanding loan balance exceeds the value of the home – were FHA-insured mortgages, according to CoreLogic.

Many borrowers, particularly since late 2010, thought they were buying at the bottom of a housing market that had already suffered steep declines, but have been caught out by a continued fall in prices in wide swaths of America.

Even for loans taken out in December – less than four months ago and the last month for which data is available – nearly 44,000 borrowers, or about 7.5 percent of the total, now find themselves under water.

“The overwhelming majority of the U.S. is still seeing home prices decline,” said CoreLogic senior economist Sam Khater. “Many borrowers continue to be quickly wiped out.”

The problem is not uniform around the country. In some areas, such as Washington, D.C., Miami and parts of northern California, prices are on the rise.

CoreLogic predicts the overall U.S. housing market will finally bottom out this year.

And the number of homeowners falling under water each month has decreased significantly since the peak of the financial crisis in 2008 and early 2009.

Still, Khater said, since October 2010 average home prices have fallen 7.4 percent. Overall, CoreLogic data shows that 11.1 million, or 22.8 percent, of U.S. residential properties with a mortgage are in negative equity, unchanged from the summer of 2010.

According to the S&P/Case-Shiller 20-city composite index, which tracks home values in 20 major U.S. metropolitan areas, U.S. home prices were down 3.5 percent in February from a year earlier and are now at their lowest level since late 2002. Over the past 12 months, 15 of the 20 major metropolitan areas monitored saw declines.

CoreLogic says a significant factor causing recent home loans to slide under water has been the availability of government-insured mortgages that require only a small down payment.

These loans, insured by the FHA, require a down payment of as little as 3.5 percent of the purchase price, providing only a small cushion of protection against a drop in home prices that could drive a borrower into negative equity.

“This is creating a new wave of underwater borrowers,” said Gary Shilling, a veteran financial analyst and well-known housing market bear. “We have all three branches of government trying to keep people in four bedroom houses who can’t afford chicken coops.”

The U.S. Federal Reserve, in a report delivered to Congress in January, estimated that 12 million American homeowners had negative equity. Of those, the Federal Reserve said, 3 million were borrowers with FHA-insured loans.

CoreLogic’s Khater said: “Low down payment lending in a weak housing market and weak economy begs the question whether we are setting up the FHA to have a multitude of failures down the line.”

Jason Opalka took out an FHA-backed loan on his two-bedroom property in the suburbs of Orlando, Florida, in August 2010. He was helped by Certified Mortgage Planners of Orlando, who negotiated the FHA-backed loan with the lender, Freedom Mortgage, based in New Jersey.

Opalka was refinancing another FHA-backed loan he had obtained in 2008, for $196,000, then at an interest rate of over 6 percent.

Under the refinancing, he borrowed $192,278 at an interest rate of 4.5 percent. Opalka, looking at the paperwork, is still surprised at the down payment he had to make in 2010, for a property valued at the time for little more than the loan was worth and in which he had almost no equity.

His down payment was just $3,000 – or about 1.5 percent of the total loan.

Less than two years later, local real estate estimates now value Opalka’s home at no more than $110,000.

“I’m at least $80,000 under water,” Opalka told Reuters. “We never expected to go under water. We never expected prices to fall like they have. We definitely didn’t see this coming. If I’d known this, we probably would have rented.”

Florida has seen one of the greatest drops in house values since the housing crash of 2008, 30 percent on average since October 2010 and over 50 percent since the height of the bubble in 2006, according to Case-Shiller.

FHA-insured loans were begun during the Great Depression and have traditionally been used to enable lower income Americans to get mortgages.

Historically, FHA loans accounted for 8 percent to 12 percent of the mortgage market. According to the FHA, this rose to 30 percent in late 2009 and to about 50 percent for first-time buyers at the height of the financial crisis.

FHA officials say they are deliberately reducing their market share of loans as the private sector increases its lending. The agency share of home loans is today down to about 25 percent, and will continue to fall, officials say.

Charles Coulter, a deputy assistant secretary in the U.S. Department of Housing and Urban Development, which oversees the FHA, said it was the FHA’s mission to provide affordable housing, particularly in times of financial crisis when private sector financing dries up.

“We are the only opportunity for borrowers who can’t come up with a 5, 10 or 20 percent down payment to get a home,” Coulter said.

He said the size of down payments was “an important risk parameter, it’s something we have been evaluating and a factor we will continue to evaluate.”

Coulter said beginning in 2009, FHA took a number of steps to tighten qualification standards for the government-insured loans.

In January 2009, the minimum down payment for an FHA loan rose from 3 percent to 3.5 percent, and the upfront premium for mortgage insurance has also been raised.

In October 2010, only borrowers with a credit score of 580 or above could get a loan with a 3.5 percent down payment. Those with credit scores between 500 and 579 faced a 10 percent down payment. Those with credit scores below 500 do not qualify for an FHA loan.

FHA officials say the credit score of the agency’s average borrower is 700.

A Fair Isaac Corporation score – known as FICO and the standard evaluation of creditworthiness in the United States. – of less than 620 is usually considered sub-prime.

Manny Bongiovanni, a mortgage broker in Phoenix, who has processed mainly FHA-backed loans in recent years, said most such loans were issued at a 30-year, fixed low interest rate.

“Most of the people I have dealt with have ended up paying less on their monthly mortgage payments than they were when they rented. The good thing is, we have got lots of young families into these homes.

“And if they stay put, they will eventually get equity.”

Source:  Reuters

U.S. Bankruptcy Court for Utah Clerk David Sime said the court received a total of 4,149 filings during the first three months of this year, down from the 4,639 bankruptcy petitions from the same period a year ago.

“Filings were down during the first quarter but it is anyone’s guess if that will continue through the rest of this year,” Sime said.

The trend, though, may be in Utah’s favor.

Although bankruptcy filings in Utah for all of 2011 were up 2 percent, the volume did plateau last summer and trended downward the rest of the year.

Nationally, bankruptcy filings decreased 12 percent in the first quarter this year, according to the American Bankruptcy Institute, a nonprofit Virginia-based research organization that tracks insolvency filings and the issues surrounding them.

ABI Executive Director Samuel J. Gerdano said with the economic recovery still weighted down by the distressed housing market and high unemployment, consumers and businesses are continuing to trim their debt.

“We expect that the 2012 bankruptcy totals will be less than last year as companies and families remain vigilant in cutting costs and shoring up their balance sheets,” Gerdano said.

Despite the first quarter decline, though, Utah bankruptcy numbers remain extraordinarily high with the state claiming the fourth highest filing rate per capita in the country — 5.87 petitions for every 1,000 residents.

The average nationwide per capita bankruptcy-filing rate for the first three months of 2012 was 4.06 petitions for every 1,000 people, according to the ABI.

Of the 4,149 Utah consumers who sought bankruptcy court protection from their creditors during the first three months of the year, 34 percent filed for Chapter 13, according to the U.S. Bankruptcy Court for Utah. Chapter 13 gives consumers — typically wage earners — the opportunity to formulate a plan to repay their obligations over time.

The remaining 66 percent filed for Chapter 7, which involves a trustee liquidating a debtor’s assets and distributing the proceeds to creditors.

From down in the trenches, Salt Lake City bankruptcy attorney Len Carson said he is not seeing any sign the economy is improving despite all the talk that things are getting better.

“What I am seeing are individuals and families who file Chapter 13 bankruptcy petitions in the hopes that they can repay their missed mortgage over a five-year period,” he said. “Others are using Chapter 7 as a way to liquidate their debt because they are fed up with the stress.”

Source:  Salt Lake Tribune

(Deseret News)  SALT LAKE CITY — The rate of foreclosures in Utah fell significantly during the first quarter of this year — the fifth straight quarter of year-over-year decrease.

According to a new report, the Beehive State has seen its rate of default filings drop nearly 50 percent in first three months of 2012 compared to the same period last year.

The RealtyTrac U.S. Foreclosure Market Report for the first quarter of 2012 showed that the rate of Utah foreclosure filings — default notices, scheduled auctions and bank repossessions — decreased 49 percent from the first quarter of 2011 and declined 18 percent from February 2012.

Despite the decrease, Utah still had the ninth highest foreclosure rate in the nation with one in every 198 households registering a default filing. Nevada reported the highest rate at one in every 95 households, followed by California at one in 103 households, Arizona was third with one in 106, Georgia at one in 119 and the Sunshine State of Florida ranked fifth with one in 123 households reporting a foreclosure filing. Rounding out the 10 worst foreclosure rates were Illinois at No. 6, Michigan ranked seventh, followed by Colorado at No. 8, Utah and Wisconsin ranked 10th.

The nationwide average foreclosure rate was one in 230 households.

Utah’s relatively streamline foreclosure process has aided in the state’s ability to reduce its overall default rate and foreclosure volume, said Daren Blomquist, RealtyTrac marketing and communications manager.

Foreclosure filings were reported on 572,928 properties during the quarter, down 2 percent from the previous quarter and down 16 percent from the first quarter of 2011, the report stated. The first quarter total was the lowest quarterly total since the fourth quarter of 2007.

“The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated,” said Brandon Moore, chief executive officer of RealtyTrac. “There are hairline cracks in the dam, evident in the sizable foreclosure activity increases in judicial foreclosure states over the past several months, along with an increase in foreclosure starts in many judicial and non-judicial states in March.”

The dam may not burst in the next 30 to 45 days, he said, but it will eventually, and everyone downstream should be prepared — in terms of new foreclosure activity and new short sale activity.

Read Full Story Here

Jenkins’ decision widens the split on the federal bench over legal questions about whether Bank of America’s ReconTrust unit has been illegally foreclosing on Utah homeowners. It also ups the stakes by declaring that a rule issued by the Comptroller of the Currency is contrary to Congress’ intent in passing laws that govern national banks.

U.S. District court judges have ruled on opposite sides of the question over whether Bank of America’s unit ReconTrust has been legally foreclosing on homes in Utah

Federal judges Ted Stewart and David Sam had previously held that under federal laws, ReconTrust could carry out foreclosures in Utah under its own name and that it is governed by the laws of Texas, where it was headquartered, and not Utah law.

Two other judges — Dee Benson and Clark Waddoups — have come to the same conclusion as Jenkins. With the split on the local bench, the 10th Circuit Court of Appeals in Denver probably will be asked to make a definitive ruling.

In a detailed and sharply worded decision, Jenkins labeled as “fantasy” arguments that ReconTrust exercises its duties in a foreclosure at its Texas headquarters and is, therefore, is governed by Texas law.

“The [default] notice is filed in Utah,” Jenkins wrote. “The sale is conducted in Utah, often on the steps of the local county courthouse. Those acts do not occur in Texas.”

Under Utah law, only a local attorney or a title insurance company can carry out foreclosures in the state, but ReconTrust had been doing so under its own name, actions that spawned numerous lawsuits.

Like other states, Utah was hit by a tsunami of foreclosures after the real estate bubble burst in 2007.

From 2007 through 2011, 56,863 foreclosure auctions took place in Utah, according to RealtyTrac, a real estate data research company. From 60 percent to 80 percent of those foreclosures were conducted by ReconTrust, depending on the county, according to the estimate of one homeowner activist.

Jenkins reached back to the early 20th century legislative history to conclude that Congress intended national banks to comply with state statutes for actions such as those undertaken by ReconTrust.

But going further, the senior judge declared that the Controller of the Currency, the agency that regulates national banks, had overreached when it promulgated the rules relied on by ReconTrust for its arguments that Texas law governs its foreclosures in Utah.

“There are 50 states. Each has its own Legislature and each its own set of laws relating to state-chartered banks. Texas does not pass Utah banking laws. Utah does not pass Texas banking laws,” Jenkins wrote.

Bank of America representatives and attorneys for ReconTrust did not reply to two emails seeking comment.

But Abraham Bates, one of the attorneys who represents the homeowners involved in the lawsuit, said he would be “highly surprised” if ReconTrust does not appeal. He also said Jenkins’ ruling will echo beyond Utah.

“This is a decision that’s going to have a long-lasting imprint, not just on the way foreclosures are conducted in the state of Utah, but for foreclosure attorneys all across the country,” said Bates.

With Jenkins’ decision, Bates said attorneys pursuing a proposed class-action lawsuit against ReconTrust would ask Stewart to reconsider his recent decision that tossed out that action.

The Utah Attorney General’s Office has sought to intervene in another case involving ReconTrust in which Sam ruled against the homeowners.

Source:  The Salt Lake Tribune

Advocates for the victims of improper foreclosures are crying foul. They have a point.

It is true that Utah homeowners will receive another $149 million in direct aid from the settlement. That money is supposed to be used to provide modified loans, including reduced principal and refinancing. Those whose loans have already been foreclosed may be eligible for $2,000 payments.

But the Legislature has taken most of the money that will go to the state government and dumped it into the common pot. The exceptions to that are $1.75 million that was appropriated to charities that help the homeless. Another $2 million is going to the Utah Attorney General’s Office to hire more people to investigate and prosecute mortgage fraud and other financial fraud.

At least some of that $22 million should have been used to help people who are still wrestling with banks over foreclosures that the people who owe the banks believe are improper. There have been widespread reports in the past of customers who have been unable to contact the outfits that service their mortgages to get even basic information about their payment status and whether the holder of the loan plans to foreclose or would entertain an offer to modify the loan.

The Utah Housing Coalition asked the Legislature for funds to hire counselors to help people who believe their loans have been foreclosed improperly or who are upside down in their loans. Housing organizations have had to lay off some 19 counselors who were previously funded by economic stimulus money from the federal government. That would have been a logical use for a portion of the state’s $22 million.

The foreclosure rate has tipped downward lately in Utah, but it may not stay that way. Some experts speculate that once the banks have the settlement behind them, they will accelerate the pace of foreclosures once again.

The foreclosure settlement is not free money. It amounts to damages to help right a wrong. The Legislature should have treated it that way, not as free money or a lottery prize to be spent any way the winner decides.

Source:  The Salt Lake Tribune

Fewer than 1,000 borrowers in Arizona, Nevada and New York will be enrolled in the test program, which began this week. Those selected will transfer the title of their homes back to BofA and have their mortgage debt forgiven.

The homeowners can rent the homes for up to three years at or below their area’s market rental rate. The rental payments will be less than the borrowers’ mortgage payments, the bank said. And they will not have to pay property taxes or homeowner’s insurance.

The program, called “Mortgage to Lease,” uses an old but increasingly popular technique for lenders. It’s called a “deed in lieu of foreclosure.” It occurs when homeowners turn over the deed to their house to their lender because they can’t make the monthly payments.

The technique was used during the Great Depression but fell out of favor after the 1930s.

The trick will be to find homeowners who are struggling with bloated mortgage payments but who have enough steady income to safely make smaller rental payments.

Foreclosures can be pricey and time-consuming for lenders, which have been seeking alternative ways to cut costs. The average foreclosure takes nearly two years to complete, according to Florida-based Lender Processing Services, and costs nearly $78,000, according to a congressional estimate.

BofA says it’s targeting homeowners who are at “considerable risk” of foreclosure; have high loan balances relative to their home’s value; have exhausted all loan modification programs; and have been delinquent on their mortgage payments for more than 60 days.

“If this evolves from a pilot into a more broadly based program, we also see potential benefits from helping to stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market,” said Ron Sturzenegger, a Bank of America executive.

BofA, the nation’s second-largest bank and the largest mortgage servicer in Utah, said it will eventually sell the homes to investors. If successful, the program could be expanded to include real-estate investors who buy homes at risk of foreclosure and keep the homeowners as tenants.

Foreclosures surged in February across half of U.S. states, according to RealtyTrac, which follows foreclosure filings. Banks are wrestling with a backlog of homes with mortgages that had gone unpaid yet remained in limbo because of delays involving a government probe into foreclosure abuses.

That investigation ended last month with a landmark $25 billion settlement among states, the federal government and the nation’s five biggest mortgage lenders.

Nevada has the nation’s highest foreclosure rate as of February. One in every 278 households in the state had received a foreclosure-related filing, twice the national average, according to RealtyTrac.

Arizona ranks third, behind California. New York has not been as hard hit, with one in every 4,604 households receiving a foreclosure-related filing.

Source:  The Salt Lake Tribune