All posts in Current Events

By ALAN ZIBEL And LESLIE SCISM

Wall Street Journal

WASHINGTON—A U.S. housing regulator is cracking down on a little-known practice that has hit millions of struggling borrowers with high-price homeowners’ insurance policies arranged by banks that benefit from the costly coverage.

The Federal Housing Finance Agency, which regulates mortgage giants Fannie Mae FNMA -6.63% and Freddie Mac, FMCC -7.63% plans to file a notice Tuesday to ban lucrative fees and commissions paid by insurers to banks on so-called force-placed insurance.

Such “forced” policies are imposed on homeowners whose standard property coverage lapses, typically because the borrower stops making payments. Critics say the fee system has given banks a financial incentive to arrange more expensive homeowners’ policies than necessary.

Banning the fees and commissions could help lower the price of the insurance policies. The housing agency’s move would apply nationwide to all mortgages guaranteed or owned by Fannie and Freddie—about half of the housing market.

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This is great.  You can access the ABI Journal article and video here.  By West Virginia University 2L Andy Loud.

Here are some of the rap-style lyrics:

I’m at a law school / Trying to keep cool / All of my prospects looking blue / Just doing my readings / Motions and pleadings / And case briefing International Shoe …

If the Eighth Amendment does exist / How are they allowing all of this?

http://www.americanbanker.com/issues/178_38/california-man-foreclosure-scam-targeted-tarp-banks-1057011-1.html

A California man has been accused of running a scheme to prevent banks from foreclosing on properties.

Walter Bruce Harrell of Montara, Calif., has been indicted by a federal grand jury on charges of bankruptcy fraud and making false statements in bankruptcy proceedings, the Office of the Special Inspector General of the Troubled Asset Relief Program and the U.S. Attorney for the Northern District of California said Friday. Many of the creditors that were prevented from foreclosing were banks that had received Tarp funds, the special IG said.

Harrell’s alleged scheme was a version of the so-called foreclosure-rescue scam, in which a troubled property owner hires someone who says he can forestall foreclosure proceedings.

Harrell’s scheme involved transferring part of the interest in a foreclosed-on property to a third party, whom Harrell would then pay to file for bankruptcy, according to the indictment. The “automatic stay” clause in bankruptcy law would then halt foreclosure sales.

The indictment charges Harrell with running this scheme on six properties in 2011 and making false statements in two bankruptcy trials. The maximum penalty is five years in prison and a fine of $250,000.

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FOR IMMEDIATE RELEASE:
February 11, 2013

CONSUMER FINANCIAL PROTECTION BUREAU REMINDS MORTGAGE SERVICERS OF LEGAL PROTECTIONS FOR CONSUMERS WHEN TRANSFERRING LOANS

CFPB to Closely Monitor Transfer Activity at Bank and Nonbank Servicers

WASHINGTON, D.C. —The Consumer Financial Protection Bureau (CFPB) today issued a bulletin reminding mortgage companies of their legal obligations that protect consumers during loan transfers between mortgage servicers. When handing over the processing of loans, mortgage servicers should not lose paperwork, lose track of a homeowner’s loss mitigation plans, or hinder a consumer’s chances of saving their home from unnecessary foreclosure. The CFPB has a heightened concern about these practices given the large number and size of recent servicing transfers.

“Consumers should not be collateral damage in the mortgage servicing transfer process,” said CFPB Director Richard Cordray. “This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of such transfers, and makes clear that we will be monitoring them for compliance.”

The bulletin is available at: http://files.consumerfinance.gov/f/201302_cfpb_bulletin-on-servicing-transfers.pdf
Mortgage servicers, among other things, collect and process loan payments on behalf of the owner of the mortgage loan. Mortgage servicing transfers are common and occur when a mortgage owner sells the right to service its loans or when the owner outsources the servicing duties. These transfers can be logistically challenging. A transaction could involve the moving of hundreds of thousands of loan documents.

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Check him out at the Los Angeles Bankruptcy Monitor

—
Christine A. Wilton, Esq.
Law Office of Christine A. Wilton