“The Most Rewarding Part of My Job”

By: Denitra Braham, Housing Counselor

The most rewarding part of my job is when I assist a person who comes in seemingly hopeless and I help them create a new outlook on their circumstances.
I had the pleasure of assisting an elderly homeowner, Grace*transition from her home and into a senior living facility. When Grace first came in she was insistent about keeping her home, but I knew she couldn’t afford it and she had negative equity, so would not qualify for a reverse mortgage.
I explained to her that it was impossible for her to keep the home, but that she was in no way a failure for no longer being able to make the payments. I told her that she had worked hard her whole life and created a home for her children and herself and now it was time for her to relax and enjoy life stress free. I could tell that she was disappointed, but I encouraged her to take some time to think about our conversation and that I would proceed any way she decided to go.
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Grace called me a few days later and said she mulled over what we discussed and was able to recognize that transitioning to senior housing would be the best move for her. I connected her with several contacts and resources for senior living and helped her complete the paperwork for a deed in lieu.
At first finding senior accommodations seemed bleak, but the deed in lieu was in progress and time was limited. After 5 months of diligent searching, it did not look like Grace would be able to find an apartment in a retirement home in time. I made some calls to her mortgage company and Grace was persistent in her search as well. Then after another month, everything fell into place.
Grace was able to secure an apartment in the senior retirement home she had originally chosen with a rent of $187.She received her deed in lieu with $10,000 for her transition through the Home Affordable Foreclosure Alternatives program (HAFA), and was given an additional 6 months in her home to pack up and move.
She called me and thanked me for sticking in there with her and encouraging her to make the best decision for her situation. This was one of the most rewarding experiences I have ever had.
*name changed

The Baltimore Homeownership Preservation Coalition

The Baltimore Homeownership Preservation Coalition (BHPC) and the Public Justice Center have teamed up to launch a citywide renters’ rights campaign called “Landlord Foreclosed? Renters Have Rights”.  The campaign illustrates how homeowners are not alone in their struggles against foreclosure; renters too are confronting a similar plight.  According to the BHPC, approximately 40% of all started foreclosures are for investor-owned residential properties.

The campaign provides tips for renters whose landlords are facing foreclosure, as well as how to avoid loan scams and how to report mortgage and foreclosure fraud. Please see their recommendations below and visit their website for further information regarding the Renters’ Rights Campaign.

If you are a renter whose landlord is facing foreclosure:

•Open all mail addressed to “occupant” or “current resident”, especially if it comes from a court, law firm, bank or real estate agent.

•Pay your landlord rent until you receive notice from the new buyer after the foreclosure is complete.

•Seek legal advice before accepting a “cash for keys” deal (when the bank offers you a sum of money to vacate the property immediately).

•Contact the not-for-profit Public Justice Center for trustworthy and FREE legal advice at (410) 625-9409. (The link of BHPC’s website for the Public Justice Center doesn’t work, so use this one: http://www.publicjustice.org/our-work/tenant-advocacy)

To avoid loan scams, know the signs:

Do not trust anyone who:

•Guarantees to stop foreclosure.

•Instructs you not to contact lender, lawyer, housing or credit counselor.

•Collects fee before providing service.

•Accepts payment only by cashier’s check or wire transfer.

•Encourages leasing of home to “buy back over time”.

•Requires mortgage payments be made to them, rather than lender or servicer.

•Asks for deed or title to be transferred to them.

•Offers to buy house for cash at fixed price not set by market.

•Offers to fill out paperwork on your behalf.

•Pressures you to sign paperwork you haven’t thoroughly read or don’t understand.

BHPC recommends checking out Neighborworks America’s Loan Modification website that has more information about knowing the signs that you’re being scammed and how to protect yourself. Their site is: http://www.loanscamalert.org/

If you think you’ve been a victim of mortgage or foreclosure fraud, report it to the Maryland Office of the Commissioner of Financial Regulation by calling 1-888-784-0136. BHCP also has a page dedicated to avoiding foreclosure scams on their site.

The BHPC is a partnership in which nonprofit, governmental, and professional entities collaborate to prevent or lessen the effects of foreclosure on Baltimore families and neighborhoods. Membership is free for both organizations and individuals who are committed to preventing foreclosures and stabilizing neighborhoods that are dealing with significant changes caused by the current housing crisis.

St. Ambrose Housing Aid Center also provides a great deal of support to families in danger of losing their homes. The Foreclosure Prevention Division actively promotes continuing homeownership through education and reform. This group of counselors and attorneys identify predatory activities and unfair mortgages, and provide legal representation to clients who are victimized by fraudulent refinancing or home improvement scams in addition to helping those who encounter other home ownership issues. To receive free home ownership counseling, education, and other services at St. Ambrose, please call 410-366-8550. St. Ambrose also recommends the Consumer Tips for Avoiding Mortgage Modification Scams and Foreclosure Rescue Scams developed by the Office of the Comptroller of the Currency.

AIG Levels Claims Against BoA for Losses Tied to Mortgage Bonds

Image Source: New York Times

American International Group’s lawsuit against Bank of America was widely reported yesterday, as news outlets revealed that the financial firm initiated the suit in an effort to recover more than ten billion dollars in losses resulting from asset-backed securities they purchased from the bank.  According to the New York Times’ financial reporters Gretchen Morgenson and Louise Story, AIG “claims that Bank of America and its Merrill Lynch and Countrywide financial units misrepresented the quality of the mortgages placed in securities and sold to investors,” say inside sources.

As many of you many now know, BoA has faced intense scrutiny over the last several weeks.  A few weeks back, we covered the controversy clouding the bad loan settlement the bank negotiated with investors, in which BoA managed to secure a tremendously favorable outcome.  Just a few days ago, Morgenson penned a follow up piece documenting New York Attorney General Eric Schneiderman’s decision to challenge the settlement.  Apparently, Schneiderman takes issue with a number of the settlement’s terms, particularly those that preclude private litigants who may have suffered from the bank’s troubled loans from making a further claim.

The settlement has prompted other investors, like AIG, to join in on the litigation against the bank.  As Morgenson and Story’s article points out, BoA has encountered 25 suits related to the financial crisis thus far, many more than any other American bank.  Moreover, the journalists correctly tie this ongoing litigation into a broader theme: the federal government’s inability to successfully prosecute members of the banking industry.

Citing legal scholars and the insiders at the Justice Department, the writers imply that the lack of government intervention may be the result of the higher standard of proof necessary to secure a criminal conviction.  This notion has been buttressed by the fact that federal prosecutors were unable to deliver a conviction against Washington Mutual and Countrywide, two banks that have been involved in Justice Department investigations. These failures, unfortunately, create a situation in which investors must regulate the banks through litigation, which is extraordinarily costly and inefficient for all parties involved.

Whether the suit has any merit is a question in and of itelf—BoA rebuts AIG’s claims by arguing that the securities at issue appeared safe to both parties, and that their decline was the result of an unexpected depression in the housing market.  BoA further contends that “AIG is the very definition of an informed, seasoned investor,” and that they fully assumed the risk in purchasing the bank’s potentially high yield securities.

As we have stated several times, the underlying theme that constitently presents itself throughout the media analysis of BoA’s pre-courtroom saga is the lack of regulation in the securities industry.  While it is unclear as to which industry player has the upper hand here, all bear some fault—BoA for marketing the securities in the first place, AIG for creating a market for them, the ratings agencies for ensuring their legitimacy, and perhaps most of all, the government for failing to regulate.  Had these toxic assets not hit the market in the first place, the transaction and subsequent dispute would never had occurred and the economy may be much better off.  Along with it, our clients, many of whom had mortgages resold to Wall Street banks before the crisis, would have been better off, too.

From WBAL: “Candidates Vow to Rehab Vacant Property”

Image Source: WBAL

The network apparently asked mayoral candidates to weigh in on the issue.  From what we can tell, they received at least one response, from Frank Conaway, Sr., pasted below:

We need to conduct triage on our inventory of vacant and blighted properties. Properties that are in viable locations should be fixed if they are city owned, or acquired through condemnation if they are privately owned and repaired for occupancy. In areas where the neighborhoods are on the borderline between viability and failure, we should have a broader strategy to acquire multiple properties and rehab them in groups. We need to acknowledge that there are some houses that are not suitable for rehab. These properties should be razed. No one in Baltimore has wanted to deal with this reality, but the truth is that some areas are beyond repair and need to be redone from the ground up.

HuffPost: “Rats Spread as Baltimore Fights Foreclosures”

Earlier today, The Huffington Post, one of the nation’s most popular news sites, drew attention to some of the ongoing research of Matthew Kachura and the Baltimore Neighborhood Indicators Alliance–the Post covered BNIA’s study cataloguing the increased presence of rats in Baltimore City since the foreclosure crisis began.  From the article:

The rise in rats is an example of the declining quality of life in some sections of the city as foreclosures and vacant properties have begun to take their toll.

Since 2003, rat incidents in his majority-black city of nearly 621,000 are up more than 300 percent, according to the Baltimore Neighborhood Indicators Alliance-Jacob France Institute at the University of Baltimore. There were more than 37,000 reports of rats in 2009, data show.

The rate of dirty streets and alleys is up nearly 250 percent since 2003, according to the research institute.

Like urban centers across the country, Baltimore is fighting foreclosures with fewer resources at a time when home prices are still declining and a rise in home seizures remains a constant threat. While home prices shot up during the bubble, boosting neighborhoods that had been slowly making progress, the precipitous decline has wrecked what were up-and-coming sections of the city.

Baltimore rats have long commanded a storied reputation for their pervasiveness, a notion that has been internalized by residents and non-residents alike.  Thoughts and comments on this long present nuisance, as well as perceptions about whether the rat rate is, indeed, increasing, are welcome.

The Debt Ceiling and Housing

Source: Center for American Progress

August 2nd.  The day looms over the American public drearily, as failed negotiations leading up to the imposing government debt deadline make the possibility that the United State will default on its debt all the more likely.  We have heard from pundits and economists that the consequences would be devastating, that inflation would soar and unemployment would also increase, all while spiraling the U.S. economy into a double-dip, “U-shaped” recession.  The consequences of default on some facets of the U.S. economy seem more apparent than others, like the demand for government issued securities and the market for our bonds.  Among all of the apocalyptic speculation about what would happen if we defaulted, however, little commentary has emerged focusing on the housing market.

However, Christian Weller of the Washington-based Center for American Progress, a left-of-center think tank, had already analyzed the effects that a potential default would have on the housing market as early as last May. Now, Weller’s analysis seems all too apropos, as default increasingly looks like it could be a real possibility.  Back in May, long before most analysts even considered a default scenario, Weller wrote in a CAP brief that “if Congress fails to raise that ceiling then the U.S. housing market would most likely experience a severe double-dip contraction marked by lower housing sales and depressed home prices.”  It turns out, albeit not surprisingly, that the potential downgrade of treasury securities and the depressed market for government issued bonds could have a devastating effect on the housing market as well.

The brief goes on to outline six main contentions as to what a default would mean for housing: 1) mortgage interest rates will rise more than U.S. Treasury rates; 2) mortgage rate will remain high for some time; 3) new home sales could drop to record lows; 4) existing home sales will decrease;  5) housing prices will drop in the wake of fewer sales; and finally, 6) the economy will suffer.

Throughout the analysis, a subtly consistent point emerges: mortgage rates are directly tied to treasury interest rates, and thus, higher treasury interests would translate to higher mortgage rates.  Because U.S. government debt is perceived to be an almost risk-free investment, a default would very likely increase the interest rate on U.S. Treasury bonds.  As the table above shows, the correlation with between increased debt and higher mortgage rates are staggering.

But what’s worse, according to Weller, “the assumption is that even if the debt ceiling is not raised in August, members of Congress will eventually come to a budget agreement to pay for the government’s operations and pay the outstanding debt.”  However, even a temporary default will have an impact a major, perhaps permanent impact on interest rates, as investors, for the first time, will associate risk with U.S. debt.

While all of this may come across as overly abstract and theoretical, the effect that a default will have on the housing market, and more specifically, on St. Ambrose and the Baltimore community, will be huge.  To name just one example, much of revenue that helps fund our operation here in Baltimore comes from home sales [hyperlink], as our inventory of competitively-priced, high quality homes in the Baltimore area has long been an asset building and neighborhood stabilizing resource for low and middle income homeowners of Baltimore City.  With higher mortgage rates, however, fewer and fewer families would realistically be able to secure a home loan that may fund even our modest properties.  This fact coupled with the recent news that a median income Baltimore resident may be unable to afford a Baltimore home makes the prospect of a default significant.

Beyond this, our foreclosure prevention department, which is swamped with cases, would certainly have to shoulder an increase in clients.  More foreclosure and less affordable housing means more vacant properties, depressed mean home values in neighborhoods, and depleting household equity for Baltimore families.  In total, the effect on our community would be devastating, and we hope that our two major political parties will find a way to stave off this disaster.  Time will tell.

What’s Up with Bank of America’s Bad Loan Settlement??

Late last month, Bank of America, one the nation’s largest mortgage servicers, entered into a settlement agreement with multiple investors, in what has been hailed as one of the most significant settlements involving mortgage-backed, toxic assets since the onset of the financial crisis.  At $8.5 million, the settlement, at least on its face, seems to present an optimistic message for investors, who can now maintain some measure of hope that legal remedies exists for the opaque, sometimes fraudulent securities on which they spent their money.

But a closer look at the agreement reveals a different picture.  While $8.5 million may be a convincing figure to some, the value of the mortgages held by the Bank of America totals at about $172 million, meaning that Bank of America secured a deal in which they were obligated to pay back less than five cents on every dollar.  This statistic has prompted many, including New York Attorney General Eric Schneiderman, to demand more information about the settlement.  Schneiderman and other critics suspect that the deal was put together hastily and unfairly: the New York Times reports that the investors involved in the settlement hold interest in merely one quarter of the 172 million in assets.  Moreover, because of the legal parameters of such a settlement, the deal would have a comprehensive effect, foreclosing claims from investors and individuals that may hold interest in the BoA loans but were not privy to the settlement negotiations.

More specifically, the settlement involves loans held by a BoA subsidiary, Countrywide Financial, which BoA purchased in late 2008 under what was apparently a disaster mitigation circumstance.  While BoA has every incentive to get rid of the Countrywide loans, given their toxicity and total lack of profitability, they neglect to consider the far-reaching policy effects that the deal will have.  Most conspicuously, the settlement will almost certainly accelerate foreclosure processes, which will impose devastating consequences on families.  These foreclosures will have broader economic ramifications.  According to Times columnist Paul Krugman, the settlement:

“would just accelerate foreclosures, and if more families were evicted from their homes, that would mean more homes offered for sale — an increase in supply. An increase in the supply of a good usually pushes that good’s price down, not up. Why should the effect on housing go the opposite way?”

Indeed, as Krugman writes, this settlement presents yet another example of letting bankers of the hook.  Furthermore, the Countrywide mess and the subsequent short sale of the firm to BoA indicates the crucial need for greater regulation of asset-backed securities, the danger of which is now well documented.  The deal will certainly affect our job at here at St. Ambrose, where our foreclosure prevention team negotiates with banks everyday in an effort to stymie foreclosures.  Settlements like this one set a precedent of “going easy on the banks,” as Krugman writes, enabling them to feel that they are beyond legal remedies for honest negotiation.  Such settlement will, in other