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untanglingwebs
El Supremo
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Fannie Mae promises to keep families in homes, but instead pressures banks to foreclose
1:26 AM, Aug. 14, 2011 |
BY JENNIFER DIXON
Last summer, Fannie Mae executives decided the mortgage giant was “suffering delays in the processing of its foreclosures.”
These documents reveal how Fannie Mae addressed those delays, including a letter to GMAC Mortgage spelling out its new policies to assess compensatory fees and require banks to get its written permission to delay foreclosure sales on loans more than 12 months in arrears. The records also include letters to six lenders setting performance goals for the third quarter of 2010.
Tell us your story
Have you been through the nightmare of foreclosure? Have you struggled to get help from the federal government's Making Home Affordable programs or the Hardest Hit Fund? Do you have a tale to tell? E-mail your story, 300 words or less, along with your e-mail address and phone number, to getpublished@freepress.com or by using the "Submit News" tab on the Free Press smartphone app. We'll select the best and share them on freep .com .
First of three parts
Inside Fannie Mae: Confidential records show how Fannie Mae breaks the rules | How metro Detroit homeowners can get help | Who are Fannie Mae and Freddie Mac? | Programs for financially troubled homeowners haven't helped much to date | One family's story of heartbreak in mortgage scandal | How this report was compiled | Accountability, answers are lacking
In early December, a senior executive at Fannie Mae assured members of the Senate Banking Committee in Washington that the mortgage giant was doing everything possible to address the foreclosure crisis.
"Preventing foreclosures is a top priority for Fannie Mae," Terence Edwards, an executive vice president, told the panel. "Foreclosures hurt families and destabilize communities."
But confidential documents obtained by the Free Press show that Fannie Mae has pushed an agenda at odds with those public assurances.
The records cover Fannie Mae's foreclosure decisions on more than 2,300 properties, a snapshot from among the millions of mortgages Fannie handles nationally. The documents show Fannie Mae has told banks to foreclose on some delinquent homeowners -- those more than a year behind -- even as the banks were trying to help borrowers save their houses, a violation of Fannie's own policy.
Fannie Mae has publicly maintained that homeowners would not lose their houses while negotiating changes to mortgages under the federal Home Affordable Modification Program, or HAMP.
The Free Press also obtained internal records revealing that the taxpayer-supported mortgage giant has told banks that it expected them to sell off a fixed percentage of foreclosed homes. In one letter sent to banks around the country last year, a Fannie vice president made clear that Fannie expected 10%-12% of homes in foreclosure to proceed to sale.
Taken together, the documents offer an unprecedented window into how Fannie decides whether to allow borrowers to exhaust all options to keep their homes. "It's scary, it really is," said Leisa Fenton of Clarkston, who is among an untold number of people whose homes were sold in foreclosure even though they had been assured their homes were safe while they sought mortgage relief from Washington.
Her family's home was sold at auction in October. "We just keep praying the Lord is going to work it out," she said.
Alan White, a law professor at Valparaiso University and a leading national expert on the foreclosure crisis, reviewed the records for the Free Press and said they show Fannie Mae -- which is regulated by the Federal Housing Finance Agency -- is sabotaging the nation's foreclosure prevention efforts and helping drive down home values.
"Fannie just wants to clean up its balance sheet and get these loans off the books while taxpayers are eating these losses," White said, referring to the multibillion-dollar federal bailout of Fannie Mae in 2008 and the rising cost to taxpayers.
"And Treasury and the FHFA are letting them get away with it. It's a huge waste. Wealth is being destroyed, people are losing houses needlessly, and taxpayers are losing money."
Fannie Mae officials declined to be interviewed and would not address the issues raised in the records obtained by the Free Press, including a lengthy series of questions provided by e-mail.
But a former Fannie Mae executive, Javid Jaberi, whose name is on some of the documents, said the internal records merely reflect an effort by Fannie Mae to get banks to respond more quickly when loans are delinquent, even if that means pushing some foreclosed homes to sale.
In an interview Wednesday, Jaberi said there is plenty of blame to go around. Borrowers often didn't understand their options. Banks weren't doing enough to help borrowers to get mortgage relief. And HAMP's documentation rules, he said, were too complex.
"Everyone is to blame," Jaberi said, including Fannie Mae.
Fannie spokesman Andrew Wilson said in a statement Fannie is "committed to preventing foreclosures whenever possible."
"We encourage homeowners to reach out as early as possible ... to pursue modifications and other foreclosure prevention solutions."
Various lenders -- Bank of America, GMAC Mortgage, CitiMortgage and Chase -- would not discuss Fannie's policies.
Records reveal foreclosure tactics
Fannie Mae and many of the nation's top banks have faced considerable criticism for doing little to stem foreclosure sales, which grew by 1.6 million last year. Investigations by other news media outlets showed that Fannie Mae (and the banks that directly service home loans) help only a sliver of people promised relief, and often delay or bungle applications for modifications. Other reports showed Fannie has punished banks that were too slow to foreclose.
The documents obtained by the Free Press indicate, for the first time, that Fannie wasn't simply indifferent to helping homeowners, but launched a concerted effort to force seriously delinquent borrowers from their homes.
Fannie's foreclosure policy -- what an August 2010 document calls "our new delay initiative" -- focused on homeowners more than 12 months late on their mortgages, including people actively negotiating loan modifications. That stance conflicts with the government's (and Fannie's) rules, which are meant to insulate people while they seek loan relief under HAMP.
Mortgage companies, of course, can't wait forever for delinquent borrowers to catch up on their payments. But critics argue that Fannie Mae's confidential foreclosure policy is not only at odds with its public assurances, but adds to the inventory of vacant homes across the nation and lowers property values for everyone.
According to White, the Valparaiso professor, foreclosing on a home typically costs Fannie Mae far more than a successful loan modification. But, he and others say, Fannie is willing to absorb higher losses because it knows taxpayers -- not Fannie Mae -- will eventually reimburse the loss.
Since 2008, when the government took over Fannie Mae and its sister company, Freddie Mac, the mortgage giants have cost taxpayers $141 billion, with estimates that the bill could eventually reach as high as $389 billion.
Fannie Mae and Freddie Mac are significant players in the foreclosure crisis; they own or guarantee more than half of all existing single-family mortgages and about two-thirds of all new U.S. home mortgages. Fannie also administers the U.S. Treasury Department's $29.9-billion foreclosure prevention initiative -- Making Home Affordable, which includes HAMP -- that was launched by President Barack Obama in 2009.
Everyone loses
Fannie Mae doesn't lend directly to homeowners. It buys loans from banks, guarantees them, and relies on the banks to service the loans directly. Fannie funds its mortgage investments by issuing debt securities in domestic and international capital markets.
Fannie Mae, according to rules outlined on its Web site, has told banks that service its loans that they "should not proceed with a foreclosure sale" until a borrower has been evaluated for a loan modification under HAMP. That squares with HAMP's written rules, which forbid banks from completing foreclosures without first weighing a person's eligibility for a modification.
According to RealtyTrac, which tracks U.S. foreclosures, 1.6 million homes were sold in foreclosure last year, including 78,704 in Michigan. It's unclear from the records how many could have kept their homes had Fannie not enacted its confidential foreclosure policy.
Metro Detroit leaders say Fannie Mae's actions are destabilizing neighborhoods and driving down home values. They pleaded with federal regulators to help.
"Local governments are trying to keep people in their homes and keep property values up, and here you have a government bureaucracy ripping (those efforts) to shreds," said Wayne County Executive Robert Ficano.
"It doesn't make sense."
Adam Taub, a Southfield lawyer who works with people trying to save their homes, said Fannie is "being very, very aggressive, very proactive, in trying to kick people out. ... They're putting a lot of pressure on" the banks.
He said he had several cases in which banks were willing to modify loans but Fannie Mae was unwilling to cooperate. He said he had no way to know whether Fannie's policy affected those cases.
"They're making their books look better, and making neighborhoods look worse, and that hurts everybody's property values," Taub said.
The confidential records reviewed by the Free Press include notations on more than 2,300 homes in which banks asked Fannie to delay foreclosure sales while homeowners sought modifications or other relief, including short sales -- in which a lender lets the borrower sell a home for less than what is owed.
In one instance, from August 2010, Bank of America requested a 45-day delay for a Wisconsin homeowner who owed $124,610 and was 32 months delinquent. The bank said the borrower was applying for a loan modification through HAMP and "it appears that all financial documents have been received and we are waiting for an underwriter to be assigned."
Fannie Mae's response: "Per our new delay initiative, any loan over 12 months deliq must be on an active payment plan with monthly payments coming in. Therefore, this request to postpone is declined. Please proceed to sale."
IndyMac Mortgage Services sought a delay for a Hawaii borrower who provided all records required by HAMP. The homeowner, 22 months behind, owed $412,225. Fannie: "Proceed with foreclosure."
The records do not identify any homeowners by name.
Wilson, the Fannie Mae spokesman, would not address these or other specific documents, saying only that Fannie evaluates delay requests case by case and has approved some delays "if the situation warranted it."
Indeed, Fannie officials approved some brief delays, records show -- with conditions.
In October, Bank of America sought a delay for a California borrower who was 24 months behind, owed $230,449 and had filled out a HAMP loan package. Fannie agreed to delay sale until early November, but noted:
"BANK OF AMERICA RESPONSIBLE FOR ALL FEES/COSTS ASSOCIATED WITH THIS POSTPONEMENT DUE TO DELAY IN PROCESSING ... DOCS TIMELY."
Meg Burns, chief of policy at FHFA, which oversees Fannie Mae, said foreclosure sales are delayed "all the time. We suspend foreclosure processing all the time. ... There are plenty of postponements."
Burns said if anyone is to blame for home losses, it's the banks for not dealing sooner with homeowners.
FHFA officials also noted that Fannie and Freddie are adopting new rules in October that provide incentives and penalities to encourage servicers to work with delinquent borrowers at an early stage.
Edward DeMarco, FHFA's acting director, has said the new policies should give homeowners a greater understanding of the process and minimize taxpayer losses by ensuring loans are serviced efficiently and fairly.
FHFA also noted that since Fannie and Freddie were taken into conservatorship, they have completed more than 900,000 loan modifications.
Fannie Mae's foreclosure policy is also being applied to seriously delinquent borrowers in programs other than HAMP, records show.
In one case last October, Bank of America sought a delay for a Michigan borrower seeking a loan modification who owed $65,542 and was two years behind, but whose finances were improving.
"Borrower is reflecting positive monthly cash flow of $914.77 and may be able to afford a modified payment," the bank wrote. Fannie refused, noting the lengthy delinquency: "Proceed to sale."
Ira Rheingold, executive director of the National Association of Consumer Advocates, said, "It's rarely in anyone's best interest to kick out a struggling homeowner who is trying to stay in their home, particularly in cities like Detroit whose housing market is devastated."
He said it's absurd Fannie is taking actions "devastating to the homeowners and communities they're supposed to be serving. It really is obscene."
Jamison Brewer, a lawyer with Michigan Legal Services in Detroit, said Fannie's actions are contrary to what borrowers seeking modifications are being told -- that foreclosure sales are put on hold while they apply for HAMP.
"Our tax money went into Fannie," he said. "It's just ridiculous."
Requests for short sale delays are likewise being denied, the internal records show.
In October, Bank of America sought a delay for a California borrower who owed $416,786, was 13 months behind, and trying to close a short sale. "LOAN IS IN DOCUMENT COLLECTION PHASE," the bank noted. "FILE HAS HAD 0 PREVIOUS POSTPONEMENTS." Fannie Mae declined, noting simply, "Too delinquent."
Sticking taxpayers with the losses
White, the Valparaiso professor, said Fannie's decision to target homeowners who are more than a year delinquent doesn't allow for changes in some people's financial situations, such as a new job or higher pay.
He is among a bipartisan collection of critics who say Fannie is less concerned with helping homeowners than in pushing the cost of troubled mortgages to taxpayers.
For example, White said, if a home with a $200,000 mortgage is foreclosed and Fannie nets $80,000 from its sale, Fannie loses $120,000. But because Congress authorized the Treasury Department to reimburse Fannie as part of the government's takeover, taxpayers eat the losses.
"Fannie would rather foreclose all the bad and marginal mortgages now, even at very high loss rates, while losses are on the taxpayer, so that when it is once again a private company, these risky mortgages will be gone, and will not result in losses for its shareholders," he said.
"Treasury and Congress have given Fannie a blank check, but Fannie knows the checkbook will be taken away sooner or later."
Fannie Mae has made it difficult in other ways for borrowers to keep their homes.
Take the case of a woman represented by lawyer Lorray Brown of the Michigan Poverty Law Program.
The Eaton County woman lost her home in foreclosure and was facing eviction when she persuaded a bank to lend her $170,000 to buy the property back from Fannie Mae. Brown said Fannie initially rejected her client's offer, insisting on the full $184,000 the woman owed -- $14,000 more than the woman could raise.
Fannie did not accept the woman's offer until January, after months of wrangling. Had Fannie Mae won the fight, it would certainly have spent more than $14,000 on legal fees and foreclosures costs while displacing a family and leaving another home vacant.
Fannie lawyers referred questions to headquarters, which declined to comment.
Well before Edwards, the Fannie Mae executive, testified before the Senate committee that the mortgage giant was doing all it could to prevent foreclosures, Fannie Mae was making plans to punish banks that were not selling foreclosed homes quickly enough, records show. The records obtained by the Free Press buttress documents reported by the Washington Post earlier this year.
"Fannie Mae is suffering delays in the processing of its foreclosures," according to one unsigned, Aug. 31, 2010, memo. The memo, a "talking points" summary for Fannie Mae management, outlined its plans to fine banks for delaying foreclosure on seriously delinquent homeowners.
As an example, the memo notes, a bank would be fined $5,218 at the time of foreclosure on a house with a mortgage balance of $121,000 and 22 months late.
The memo said Fannie Mae was initially targeting mortgages 18 or more months delinquent to "scrub and clean up servicers' existing portfolios."
In a June 18, 2010, letter, Jaberi, then Fannie Mae's vice president, also cited fines in a letter to GMAC.
"Fannie Mae urges you to begin more closely managing delays in the processing of our foreclosure cases as soon as possible," Jaberi wrote, adding: "You must keep the contents of this letter and the requirements confidential."
In the interview Wednesday, Jaberi confirmed that versions of that letter went to all banks that serviced Fannie Mae mortgages.
Fannie Mae also sent letters in June 2010 warning at least six lenders that Fannie projected and expected "approximately 10%-12% of monthly foreclosure inventory will go to sale."
Bert Ely, a banking consultant based in Alexandria, Va., who reviewed the letters for the Free Press, said they show Fannie "wants to force these default situations into a foreclosure sale" and raised questions about whether Fannie is setting arbitrary targets.
"When you have a uniform approach like that, it makes you wonder whether they are just pushing action by the servicers irrespective of local market conditions," he said.
Kurt Eggert, a law professor at Chapman University in Orange, Calif., who has testified before Congress on mortgage issues, said it's unrealistic to expect banks to hit uniform targets because "they have a different mix of mortgages. ... And some are much better at modifying mortgages than others."
Jaberi denied that Fannie took a cookie-cutter approach with banks. Fannie was merely "trying to create a dialogue between Fannie Mae and the servicer. ... These are nonperforming assets and need to be resolved. ... We were putting more pressure on the servicers to do their jobs."
Alys Cohen, staff attorney for the National Consumer Law Center, noted that Fannie threatened no punishment to banks that denied a loan modification to qualified homeowners, but did threaten to punish banks that didn't foreclose fast enough.
"That results in many qualified homeowners ending up in foreclosure," she said. |
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Sun Aug 14, 2011 11:17 am |
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untanglingwebs
El Supremo
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Inside Fannie Mae: Confidential records show how Fannie Mae breaks the rules
By JENNIFER DIXON
| FILED UNDER -
Local News
/ Michigan |
1:22 AM, Aug. 14, 2011 |
Confidential records obtained by the Free Press show that Fannie Mae pressed lenders to foreclose on homeowners, even if they were negotiating for a loan modification — a violation of the government’s own rules.
Those rules tell banks they “may not refer a loan for foreclosure sale or proceed with a foreclosure sale” while homeowners are seeking loan changes under the federal Home Affordable Modification Program, which was designed to provide mortgage relief.
The confidential records are at odds with that promise. They directed banks to foreclose on mortgages more than 12 months delinquent, regardless of whether homeowners were applying for relief. Other documents show that Fannie Mae made clear to banks that Fannie expected a certain percentage of delinquent borrowers to lose their homes.
What Fannie told banks
The Free Press obtained copies of more than 2,300 requests from various banks asking Fannie Mae for permission to delay foreclosure sales. These excerpts show two requests from Bank of America and Fannie Mae’s response, which reveals a directive to deny postponements when borrowers are more than 12 months delinquent, even when homeowners are negotiating loan modifications.
Foreclosure targets
In this June 2010 letter to PNC, a Fannie Mae vice president, Javid Jaberi, outlines third-quarter projections for the bank. Fannie Mae officials “project and expect” roughly 10%-12% of the bank’s monthly foreclosure inventory to be sold in the third quarter. Jaberi said in an interview that the letters reflect an effort by Fannie Mae to get banks to respond more quickly when loans are delinquent, even if that meant pushing some homeowners seeking changes to their loans to foreclosure sale.
Related PDF: This excerpt is from the second of six letters Fannie Mae sent to different banks.
Fannie's foreclosure costs exceed debt
This internal Fannie Mae memo, labeled confidential, shows how far Fannie Mae is sometimes willing to go to foreclose on a home. In this case, Fannie (FNMA) spent $27,000 to foreclose on a debt of $3,000.
Banks fined for delays
In this June 2010 letter to GMAC, Fannie Mae warns that it may begin fining lenders for unauthorized foreclosure delays.
More on the compensatory fees, in Fannie Mae's talking points for banks.
The toll of foreclosures
Number of borrowers in Michigan and the United States who had their foreclosed homes repossessed by their lender.
Source: RealtyTrac
How many homeowners are underwater
Percentage of borrowers who owe more than their homes are worth.
Source: Zillow
The basic steps of foreclosure
Fannie Mae has publicly assured homeowners going through foreclosure that they will be protected from losing their homes while applying for a federally funded loan modification. They can apply for a modification at any point before or during the foreclosure process. If a modification is approved, homeowners can keep their homes if they make their adjusted payments. Absent that, here are the stages of a typical foreclosure:
1) IN DEFAULT: A loan is in default when a mortgage payment is 30 days late.
2) WARNING: When a loan is 60 days past due, the bank, credit union or mortgage company warns that foreclosure is the next step.
3) PROCEEDINGS BEGIN: After 90 days, the lender refers the loan to its foreclosure department, and hires a local lawyer to begin foreclosure proceedings.
4) SALE ADVERTISED: The lender’s lawyer advertises the property for sale for four consecutive weeks in a local newspaper. The sheriff’s sale date is listed in the advertisement.
5) SALE HELD: The sale is held on the published date. A sheriff’s employee conducts a courthouse auction and the highest bidder wins, usually the bank that owned or serviced the mortgage.
6) SHERIFF’S DEED: The winning bidder gets a sheriff’s deed that lists the last date the homeowner can redeem, or take back, the property, usually six months from the date of the sheriff’s sale. During this redemption period, the homeowner can live in the property or try to sell it.
7) REDEMPTION PERIOD: To redeem a property, the homeowner must pay off the mortgage and all interest and late fees, court and attorney fees, title and appraisal fees, taxes and insurance. Otherwise, they will be evicted from the home.
Graphics by Moses Harris, Kofi Myler, Eric Millikin, and David Pierce. Assembled for the web by Jamie C. Smith |
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Sun Aug 14, 2011 11:22 am |
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untanglingwebs
El Supremo
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Fannie Mae and Freddie Mac's fire sales are crippling metro Detroit communities, leaders say
1:31 AM, Aug. 15, 2011 |
BY JENNIFER DIXON
DETROIT FREE PRESS STAFF WRITER
Tell us your story
Have you been through the nightmare of foreclosure? Have you struggled to get help from the federal government's Making Home Affordable programs or the Hardest Hit Fund? Do you have a tale to tell? E-mail your story, in 300 words or less, along with your e-mail address and phone number, to getpublished @freepress .com or by using the "Submit News" tab on the Free Press smartphone app. We'll select the best and share them on freep .com .
Would using appraisers help solve problem?
Is it possible that foreclosed homes would be sold for a higher price if Fannie Mae and Freddie Mac were required to use appraisers?
The U.S. Office of the Comptroller of the Currency requires the banks it regulates to get appraisals on foreclosed properties. The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, does not.
While FHFA does not require appraisals, Fannie Mae says it seeks an appraisal and what are known as broker-price opinions from local brokers when pricing its properties. Freddie Mac says it gets two broker-price opinions.
Appraisers say their research is more detailed and comprehensive than a price opinion from a real estate broker. They're also a bargain if the seller can get a higher price for a property, appraisers say.
Ray O'Neil, a Clarkston appraiser, said an appraisal costs the seller about $350-$450. Appraisers must also be geographically competent -- that is, they must know the community where a property is being appraised. They also cannot have a financial stake in the deal.
"We are the only independent eyes, the only ones in this transaction that do not have an agenda," said Dearborn appraiser Jumana Judeh.
Appraisers say FHFA should learn from the comptroller.
Second of three parts
Interactive map: Fannie Mae, Freddie Mac metro Detroit foreclosures sales compared to market value | How metro Detroit homeowners can get help | Real estate brokers just want to move homes | Who are Fannie Mae, Freddie Mac?
Fannie Mae and Freddie Mac are selling hundreds -- perhaps thousands -- of foreclosed properties in metro Detroit for far less than they appear to be worth, a practice that local leaders say is driving down property values and weakening neighborhoods.
In some instances, homes listed by the government-financed mortgage giants are being snapped up by private investors, then re-sold within days or weeks for far more money.
Local officials blame the federal government -- which took control of Fannie and Freddie in 2008 at a cost to taxpayers of $141 billion and climbing -- for doing little to stop the fire sales.
"It's an unconscionable practice," said Oakland County Treasurer Andy Meisner. "It's fiscally irresponsible from their perspective because they're getting pennies on the dollar, and it's fiscally reckless from our perspective" because Fannie and Freddie "are almost single-handedly ... killing our property values."
Meg Burns, chief of policy at the Federal Housing Finance Agency, which regulates Fannie and Freddie, acknowledged the two companies are eager to sell foreclosed homes as quickly as possible. However, she said the aim is to prevent vacant homes and neighborhood deterioration, not destroying property values.
A Free Press investigation, including an analysis of more than 700 real estate transactions in the past year, finds that Fannie and Freddie are selling foreclosed homes, on average, for a third less than the homes' already deflated market value in some areas, and at less than half of market value in other neighborhoods.
Critics say the low list prices are part of the companies' rush to get foreclosed homes off their books while U.S. taxpayers are still covering the mortgage giants' losses, three years after the federal government bailout.
In February and March, 34 Fannie and Freddie properties in Southfield were sold by the mortgage giants for 55% of their market value, on average, property records show.
In Farmington and Farmington Hills, 30 homes sold at 66% of their market value.
And 75 Fannie and Freddie homes in Warren sold for an average of 45% of their market value.
The price tags on some home sales were equally jaw-dropping. Take these examples in Oakland County:
• A foreclosed Ferndale home with a market value of more than $70,000 was sold by Fannie for $11,100 in February.
• A Waterford home valued at $73,000 was sold by Fannie for $8,619 in January.
• Freddie sold a Milford Township home on 5 acres for $101,000 in 16 days. Its market value was nearly twice that: $194,300.
Oakland County Deputy Executive Bob Daddow called the sales a "travesty" that have helped home values fall by a third since 2007, costing local governments tax revenues.
"It crushes our budgets. ... We're completely revamping government as we once knew it," Daddow said.
Taxpayers pay price -- more than once
Critics say Fannie and Freddie can sell homes far below their value because, under the terms of the companies' 2008 taxpayer bailout, taxpayers cover the cost of their losses.
Moreover, because the mortgage giants dominate the local market of distressed property sales, ordinary homeowners and other sellers of foreclosed homes are forced to compete with their prices, further driving down property values and local tax revenues.
The situation is particularly acute in the region's poorest cities. In Detroit, 49 Fannie properties sold this summer at 22% of market value, on average.
And across Wayne County, Fannie Mae properties went at fire-sale prices, records show:
• $2,500 for an Ecorse home that is valued at $60,000;
• $45,000 for a Livonia home valued at nearly $100,000;
• $11,000 for a home in Westland valued at $56,400.
Wayne County Executive Robert Ficano said the U.S. Treasury Department, which is bailing out Fannie and Freddie, should investigate the sales and "hold people accountable for things that just don't make common sense."
Similar complaints echoed from Macomb County.
"It's fundamentally clear to me that the federal government is ... dumping them on the market," Warren Mayor Jim Fouts said of the home sales and the blight that follows. "It's creating some unacceptable problems for cities like Warren."
Across Macomb County, Fannie Mae appears to be selling on the cheap: $29,000 for a Fannie property in Harrison Township valued at $152,240; $18,000 for a Fannie property in Eastpointe valued at $64,120.
Trying to stabilize
the neighborhoods
Burns, the official at the Federal Housing Finance Agency, disputes that the mortgage giants are dumping homes, arguing they are merely trying to stabilize neighborhoods by keeping homes from sitting empty.
"Our overarching concern is vacant properties sitting on the market for too long."
An FHFA spokeswoman, Corinne Russell, added that Fannie and Freddie have procedures to ensure that sales of foreclosed homes are "sound and that every effort is made to preserve the assets, helping to protect the community from destabilization and decline."
Fannie Mae spokesman Andrew Wilson said the company typically bases its listing price on an appraisal and the recommendation of a broker.
"Once a value has been established ... our marketing efforts are primarily focused on finding buyers for our properties at a price that promotes neighborhood stabilization," he said. "Our No. 1 goal is to sell to owner-occupants who will move into the neighborhood and help to stabilize the community."
Wilson declined to answer other questions about Fannie's practices or address the metro Detroit home sale data compiled by the Free Press.
Freddie spokesman Brad German said he rejected "assertions that we're selling at uncompetitive prices."
Nationally, during the first quarter of 2011, German said Freddie Mac properties sold at 92% of market value, as determined by market sales.
"We stand by our pricing and marketing strategy, which is helping us minimize losses while being good stewards of taxpayer resources and supporting the housing market," German said.
Experts disagree with Fannie, Freddie plan
German also took issue with the Free Press analysis, arguing that the assessed value of a home doesn't always capture factors that can lower the price the home is eventually sold for, such as the current condition of the property and the market.
But Dearborn appraiser Jumana Judeh said assessed value -- used in part to figure property taxes -- remains "an excellent reflection of the market."
Wayne State University law professor John Mogk, an expert in real estate and urban development, also called assessed values a valid benchmark and "a reasonable standard to use."
In Michigan, the assessed value is supposed to be half the market value of a home. Independence Township appraiser Louise Braun used twice a home's assessed value as her benchmark to compare Fannie and Freddie sales of foreclosed homes against the sale of other single-family homes in several Oakland County communities.
• In June, for example, Fannie and Freddie foreclosures sold at 67% of the market value in Berkley, on average. Non-foreclosed homes in Berkley sold at 96% of market value, on average.
• Fannie and Freddie homes in Orion Township and Lake Orion sold, on average, for 70% of their value. Non-foreclosures sold at 114% of market value.
• And in Independence Township and Clarkston, the Fannie and Freddie homes sold, on average, for 76% of market value, compared with the non-foreclosures that sold for 108% of market value, on average.
One low sale can spoil the bunch
Georgia Institute of Technology accounting professor Charles Mulford, who studies how companies report their finances, said Fannie and Freddie feel no compulsion to maximize profits now that they are controlled -- and subsidized -- by the government. The companies, he said, are more interested in getting troubled mortgages, including foreclosed homes, "off the books so they can start anew, making new loans, loans that are more profitable."
Dwayne McLachlan, president of the Michigan Assessors Association and the Pittsfield Township assessor, said the impact of depressed home sales on communities can be devastating.
"All it takes is one low sale in a neighborhood to corrupt that market for that (subdivision) or site condo complex," said Braun, the Independence Township appraiser.
Time and again, area property records show, investors are snapping up low-ball listings by Fannie and Freddie and turning a quick and sizable profit, an indication that the mortgage giants are listing the homes for far too little, real estate experts said.
Ted Phillips, executive director of the United Community Housing Coalition, a Detroit advocacy group for low-income housing, said he has seen Fannie Mae refuse to allow homeowners to stay in a home for less than what they owe on a mortgage -- only to sell the property to an investor for far less than what the struggling homeowner had offered to pay.
"Then you've got another slum rental property in the community. If they're using tax dollars, why aren't they using tax dollars efficiently?" he said.
"Even the worst slum landlord understands that basic concept. Why wouldn't you take the $10,000 from the homeowner? But they will take $2,000 or $3,000 from an investor?"
Freddie Mac sold a Warren property on March 15 for $31,000. The home resold 10 days later for $45,500. The city says no building permits were pulled, indicating that it was unlikely the buyer made any big improvements before reselling the home at a 47% profit.
Fannie Mae sold an Auburn Hills home in June 2010 for $45,000. It was resold for $129,900 in January. No permits were pulled on that home, either.
That home was among 38 Fannie and Freddie properties that were resold, or "flipped," in Oakland County during the first four months of 2011. The homes fetched, on average, twice what Fannie and Freddie received for the homes.
While resales by investors may help stabilize housing prices, critics say the U.S. taxpayers who bailed out Fannie and Freddie are the ones being shortchanged when these homes are listed for less than what they might fetch.
"It's another indicator the selling price is not representative of the market," said Philip Mastin, director of assessments and equalization for Wayne County, who said Fannie and Freddie homes are being resold at nearly double the original price in his county.
Selling too cheap and too quickly
Listings of Fannie and Freddie homes show that the mortgage giants were prepared to sell some houses for less than what comparable properties in the same neighborhood fetched, records show.
For example, Fannie listed a four-bedroom home in Troy at $141,000 in March, even though four similar or smaller homes nearby sold for roughly $160,000. The Fannie home, on Harold, was on the market for three days before it had a buyer for $170,000 -- nearly $30,000 above its list price.
Freddie Mac was willing to take $153,900 for a property in South Lyon last spring, even though there was a nearly identically sized home in that subdivision listed at the same time for $193,000 and a smaller house for $164,900. Freddie got $155,000 for its property; the other sellers got $179,000 and $165,500.
German, the Freddie spokesman, said the mortgage giant's properties sell in an average of 110 days nationally. But in metro Detroit, Freddie's own numbers show that its properties are selling far more quickly -- in roughly 50 days. Property experts say that indicates the homes are listed too low.
Of the 72 homes that Freddie contracted for sale in Oakland County in April, 58 were on the market for less than a month before buyers signed contracts, according to data compiled by Braun.
One of the Freddie foreclosures, in Springfield Township, was offered in the Multiple Listing Service at 9:19 a.m. on April 11 for $38,900 -- even though its market value was $123,000. Within 24 hours, someone had a contract to buy it for $42,500.
Judeh, the Dearborn appraiser, said homes typically need three to six months of marketing. "And if you don't market them properly, it becomes dumping, not selling, and there's a huge difference," Judeh said.
Through May, home prices in metro Detroit have fallen 38% since 2000, according to the S&P/Case-Shiller home price index. As Fannie and Freddie contribute to the downward spiral in property values, tax revenues fall, too.
In Eastpointe, property values have dropped 54% since 2008, and Linda Weishaupt, assessor and deputy city clerk, blames foreclosures for much of that decline.
Since 2009, property values have dropped 21% in Rochester Hills, and the city expects another 10% reduction over the next two years, said Keith Sawdon, city finance director.
Erik Ambrozaitis, a Rochester Hills Realtor and mayoral candidate, said the decline in revenues is "the crisis. The roads in front of my house are starting to crumble. As a Realtor, I'm deeply concerned. As a homeowner, I'm really concerned. As a former council member, it is a disaster."
Mastin, the Wayne County official, said even if home prices recover, communities won't recoup lost revenues quickly.
"We will never be able to recover what's been lost," Mastin said. "What's been taken away has been taken away."
View Comments | Share your thoughts » |
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Mon Aug 15, 2011 12:09 pm |
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westflint
F L I N T O I D
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| great information. you seam to keep up with what is going on. keep writing |
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Mon Aug 15, 2011 10:53 pm |
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untanglingwebs
El Supremo
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Homeowners share their frustrations: We got roadblocks, not help
By JENNIFER DIXON
| FILED UNDER -
Local News
/ Michigan |
1:51 AM, Aug. 16, 2011 |
Patricia McClain, formerly of Clawson, lost her home after her bank offered her several loan modifications that hiked her monthly payments. The bank said she defaulted on her loan and declined modification offers. Photo by REGINA H. BOONE/Detroit Free Press
Part three of three-part series
Kim Orsi's bank told her she needed to earn more money to qualify for a federal loan modification program. So she started a pet-sitting business, only to be told she made too much to qualify.
• Part one: Fannie Mae promises to keep families in homes, but instead pressures banks to foreclose
• Interactive map: Fannie Mae, Freddie Mac metro Detroit foreclosures sales compared to market value
• Part two: Fannie Mae and Freddie Mac's fire sales are crippling metro Detroit communities, leaders say
Patricia McClain lost her Clawson house after her bank offered her loan terms that were actually higher than what she had paid on the home she had lived in for decades.
Sgt. Eric Spalding returned from Iraq with brain injuries only to spend months wrestling with his lender to keep his home -- what he calls his safe haven.
They are among tens of thousands of homeowners who have sought -- some successfully, many not -- to navigate the troubled foreclosure relief programs created by the government to keep people in their homes.
When he introduced the Home Affordable Modification Program, or HAMP, in February 2009, President Barack Obama promised it would help 3-4 million borrowers modify their mortgages. To date, fewer than a million have been given relief. More borrowers were rejected or dropped out of the program.
For many struggling homeowners, like some of the people profiled today, the programs have left them worse off financially than before they applied.
Fighting to save their homes
The people in these stories have battled banks and the taxpayer-funded mortgage giant Fannie Mae in a bid to pay their mortgages and save their homes. Some were customers of Bank of America, the nation's largest mortgage servicer.
Persistence pays off after 18 months of faxes and late fees
Ann Damon of Lodi Township, near Ann Arbor, couldn't afford her monthly mortgage payments when the interest rate ballooned and her son with cerebral palsy needed major surgery. Read more
Disabled vet trades war in Iraq for battle over home
After Sgt. Eric Spalding returned from Iraq with a traumatic brain injury and a Purple Heart, his brick ranch in Ypsilanti was his cave, his only haven. Read more
Income was too much -- and too little
When Kim Orsi's marriage collapsed and her husband moved out last year, she could no longer afford the mortgage. Read more
Not getting it in writing costs Clawson grandma
Critics of the Home Affordable Modification Program say it has cost some people the very homes it was meant to protect. Patricia McClain says she is one of them. Read more
Trying to do the right thing leaves homeowner in shambles
Scott Lawrence had just finished graduate school to become a surgical physician's assistant when he bought the colonial on Big Timber Drive in Grand Rapids in 2006. Read more |
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Tue Aug 16, 2011 4:10 pm |
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untanglingwebs
El Supremo
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Disabled vet trades war in Iraq for battle over home
12:07 AM, Aug. 16, 2011 |
An emotional Sgt. Eric Spalding of Ypsilanti says the fight for his home resulted in the "total dismantling of my life and credit." But it was worth it: He received a permanent modification that will allow him to stay. / REGINA H. BOONE/Detroit Free Press
BY JENNIFER DIXON
DETROIT FREE PRESS STAFF WRITER
When Eric Spalding returned from Iraq with a traumatic brain injury and a Purple Heart, his brick ranch in Ypsilanti was his cave, his only haven.
So when his lender, GMAC Mortgage, started foreclosure proceedings, Spalding wasn't going to let the company take the house.
"I didn't have anything else," said Spalding, a gunner who guarded convoys in Iraq for the Michigan National Guard and has a son, Eric. "Where am I going to live? Under a bridge?" he asked.
Like many borrowers seeking a loan modification, Spalding almost lost his home at sheriff's sale while seeking help with his mortgage payments.
He was wounded in 2007. His troubles began when he returned home and failed to pay his 2008 property taxes. His military pay had been cut in half, a job at General Dynamics was outsourced, and he said he didn't know he was eligible for disability until later.
GMAC paid the taxes for him to preserve its interest in the property, then rolled them into his mortgage, raising his payments from $1,100 to more than $2,300 a month.
That put him behind on his payments, said Moonson River Eninsche, a foreclosure prevention counselor with the Washtenaw County Treasurer's Office who intervened to help Spalding.
GMAC and Spalding don't agree on what happened next.
Eninsche said GMAC offered Spalding a three-month trial modification in April, with monthly payments of about $1,430.
According to Spalding, GMAC then offered him a permanent modification. He signed the papers and said he believed his monthly payments would remain $1,430. Yet the next month, he said, GMAC billed $2,300.
Eninsche said it appeared to him that GMAC was processing two conflicting applications at the same time.
According to GMAC spokesman Jim Olecki, Spalding did not qualify for the federal Home Affordable Modification Program, or HAMP, because he earned too much.
GMAC described several efforts to lower Spalding's loan payments under other programs. In each case, Spalding stopped payment or failed to write a check, forcing GMAC to cancel the deals, Olecki said.
In October, Eninsche said, GMAC hired a lawyer and began plans to sell the home at auction.
After repeated calls to GMAC, Eninsche said, GMAC called off the sheriff's sale and in November agreed to a permanent modification that lowered Spalding's monthly payment to around $1,450, including taxes and insurance.
Deb Odom Stern, an Ann Arbor Realtor who also helped Spalding, said she made sure GMAC knew it was dealing with disabled veteran.
Spalding said the experience has resulted in the "total dismantling of my life and credit."
He said he traded one of the most dangerous jobs in Iraq for a yearlong fight with GMAC.
It was a fight worth fighting, he said.
He is home for good. |
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Tue Aug 16, 2011 4:15 pm |
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untanglingwebs
El Supremo
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Not getting it in writing costs Clawson grandma
1:25 AM, Aug. 16, 2011 |
Comments
BY JENNIFER DIXON
DETROIT FREE PRESS STAFF WRITER
Critics of the Home Affordable Modification Program say it has cost some people the very homes it was meant to protect.
Patricia McClain says she is one of them.
The disabled grandmother had fallen behind on her loan in 2009, but said she had repaid the money when she got a letter that November from Bank of America offering to modify the loan on the Clawson home she had owned for 34 years.
McClain, 59, who lives on $1,000 a month from Social Security, said a bank employee told her that, under the federal program, known as HAMP, the bank could reduce her payments from $535 a month to less than $500.
McClain told the bank she would consider its offer on the Fannie Mae loan -- but that she wanted to handle taxes and insurance herself because she was negotiating with the city to lower her tax payments.
Despite her request, the bank paid her taxes, hiked her insurance and modified her loan payment to $1,908 -- nearly four times what she had been paying on her mortgage.
The bank said it made the payments to protect its interest in the property.
After she complained, Bank of America modified her payments to $971 -- again, far more than the $535 she was already struggling to pay each month.
Again, McClain complained. This time, she said, a bank employee told her to disregard the offer and send monthly good-faith payments of $431.
While she was making those payments -- some of which the bank returned -- her loan was referred to the bank's foreclosure department. She said bank employees assured her that this was a formality and not to worry -- as long as she was making payments.
On June 22, 2010, her home was sold at a sheriff's auction.
"I did everything they wanted me to do," she said, "and all I know is that, within six months, my house was being sold. To me it was a three-ring circus and I was in with the lions."
She sued Bank of America and Fannie Mae. In response, lawyers for the bank said McClain defaulted on her loan when she was late on her 2009 payments and that she declined a loan modification last year. Upon further review, the bank said, she was ineligible for any further modification.
Fannie Mae began eviction proceedings in January. McClain's Southfield lawyer, Kenneth Hardin II, got the eviction delayed until July, but his lawsuit against Fannie and Bank of America was dismissed in May.
Hardin said the case was doomed because his client's negotiations with the bank to make the good-faith payments were conducted by phone, and were never put in writing.
"If a mortgage company calls you and says we will promise you X, Y and Z or another benefit to you, if they don't put that in writing, it's not enforceable. The mortgage company doesn't tell you that," he said.
McClain said she feels misled and bereft.
"I'm out of money. I'm out of hope. I'm out of everything. I don't have any money to fight these giants, and I don't have any way to get any money," she said. "They even have the government to bail them out. I don't even have a car."
McClain said she made a final plea to Fannie Mae to allow her to stay and make payments on her home, but was told her case had "gone too far."
McClain once worked in purchasing at Comerica Bank before being infected by West Nile virus in 2002. She said she suffers memory loss, diabetes and arthritis. Sometimes, she can't walk or use her hands.
She grew up two doors from the lot where she built the home in 1977. She paid off that loan, but borrowed against the home to pay for one daughter's college and for the weddings of two other daughters.
Her credit shot, McClain now lives with a daughter in California -- "like a ship without a port," she said.
She said she thinks about the Clawson home all the time, going from room to room, if only in her mind. Her grandchildren still live on the street. They were close enough to pop over daily. Now they're more than 2,000 miles apart.
"All I asked was for someone to hear me out," she said. "But nobody listened to me."
"They ruined my life." |
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Tue Aug 16, 2011 4:20 pm |
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untanglingwebs
El Supremo
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Persistence pays off after 18 months of faxes and late fees
1:20 AM, Aug. 16, 2011 |
Ann Damon of Lodi Township looks at stacks of paperwork from her loan modification. Her loan servicer said applicants must "submit certain documents in a complete and accurate manner." / REGINA H. BOONE/Detroit Free Press
BY JENNIFER DIXON
DETROIT FREE PRESS STAFF WRITER
For 18 months, saving the little house on the slab foundation and her organic garden became Ann Damon's full-time job.
Damon of Lodi Township, near Ann Arbor, couldn't afford her monthly mortgage payments when the interest rate ballooned and her son with cerebral palsy needed major surgery.
She asked Litton Loan Servicing, a Houston company that services her mortgage, for a loan modification under the Obama administration's Home Affordable Modification Program, or HAMP.
She faxed Litton documents. And more documents. She learned to make duplicates. She kept lists of people she talked to in Texas. Finally, she got a fax and copier.
"Litton deliberately makes it complicated," she said. "They would add fees, and the next month, they would say you didn't pay such-and-such, and that went on your credit report. Instead of one late fee a month, they would charge two."
She said she once called Litton after being charged for an appraisal and was told, "We have a right to drive by the house and appraise the house and charge you for it."
She said the fees "sounded like a bunch of mumbo jumbo."
Litton spokeswoman Donna Marie Jendritza would not discuss Damon, citing privacy rules, but said HAMP "requires customers to submit certain documents in a complete and accurate manner within a specific time frame in order to be evaluated for a trial modification."
Kurt Eggert, a law professor at Chapman University in California who has testified before Congress about mortgage issues, said such fees are troubling, but not unusual.
He said it is very profitable for mortgage servicers to pile up fees from borrowers. "The sweet spot for servicers is for borrowers to pay late fees all the time," Eggert said.
After four months of faxing documents and paying late fees, Damon got a three-month trial modification for her home in Lodi, which she describes as a "little bit of heaven."
But she said when she asked for a permanent modification, Litton said it hadn't received her documents.
Worried she would lose her home, Damon turned to a loan counselor at the Washtenaw County Treasurer's Office. She sent all her documents again and got another three-month trial modification.
Finally, Litton agreed to a permanent modification that lowered her monthly payments from $1,100 to $395.
Damon, a part-time teacher, said it took her 18 months in all.
"Had I not been persistent and personable ... I don't think it would have happened," she said. "I love this house. It's a cross between a cabin and being in the city." |
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Tue Aug 16, 2011 4:25 pm |
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untanglingwebs
El Supremo
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U.S. Sues 17 Big Banks From the Daily Beast
The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac has filed suit against 17 major banks, including Bank of America, JPMorgan Chase, Goldman Sachs, and others. The Federal Housing Finance Agency has accused the banks of mislabeling mortgages as securities to investors and failing to follow through as they were legally required to do—which caused them to miss evidence that the borrowers’ incomes were inflated or falsified. Fannie and Freddie lost more than $30 billion when borrowers were unable to pay mortgages, and the mortgages lost their value. In July, the FHFA filed a suit against UBS to recover at least $900 million. At the time, UBS vowed to "vigorously" defend all charges in court.
Read it at The Wall Street Journal
September 2, 2011 5:35 PM |
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Sat Sep 03, 2011 10:13 am |
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