Earlier this week I was talking with a client who let me know that their home was headed into foreclosure. I was a bit surprised to hear this because I had been led to believe that there was no problem making the home mortgage payments, only the other debt (which included other real estate). I was also surprised to learn that this problem had been going on for a few months. And I was even more surprised to learn that the clients had been working with a mortgage broker. But what really surprised me was why I was only learning about this now.

Apparently, the clients had been solicited by a mortgage broker who assured them they need not file bankruptcy. He assured them that they would refinance the house and avoid bankruptcy. He also told them not to discuss this at all with me: their bankruptcy attorney.

For reasons that only they can explain, the clients chose to follow that advice. And unfortunately, they may pay a price for doing so: they risk losing their home, and they have complicated their bankruptcy filing and made it more expensive. I write about his with the hope that this error will serve as a cautionary tale to others in a similar situation.

Mortgage brokers get paid a commission based on the mortgage they obtain. If they do not obtain a mortgage, they do not get paid (although some may charge non-refundable applicable fees). If a mortgage broker is able to get financing, no bankruptcy attorney is going to dissuade a consumer for taking it…unless the mortgage product (or the act of refinancing itself) is going to place the client into an even more precarious financial position. With that said, the only reason why a mortgage broker would be concerned about a client talking with an attorney is if the attorney attempted to talk the consumer out of the mortgage….and the only way I see that happening is if the attorney is doing his or her job by protecting the client.

If you’re trying to refinance and are speaking with mortgage professionals, please do yourself a favor and speak with an attorney. If any of these professionals urge you not to speak with an attorney of your choosing, do not do business with them. There is no harm in speaking to your attorney, but there can be great harm to you and your family if you follow the recommendations of someone whose interest is not the same as yours.

Posted by Bill McLeod at 3:31 PM | Permalink | Comments (0) | TrackBacks (0)

Many times we hear that it is exotic mortgages with resetting ARMS that are fueling the sub-prime foreclosure melt-down. A new report from the State Foreclosure Prevention Working Group suggests something far more nefarious.

"A significant percentage of subprime adjustable-rate loans are delinquent before they experience payment shock from their first adjustment, reflecting weak underwriting or fraud in the origination of the loan," the report concluded.

More here and here (see link, upper right).

My question is this: they have found the fraud....now when are the indictments coming?

Posted by Bill McLeod at 8:49 PM | Permalink | Comments (0) | TrackBacks (0)

Today’s New York Times is reporting that Countrywide Financial “fabricated documents related to the bankruptcy case of a Pennsylvania homeowner.” Apparently, the documents were letters addressed to the homeowner claiming that $4,700 was owed. Countrywide’s local counsel told the bankruptcy court that the letters were “recreated.”

“These letters are a smoking gun that something is not right in Denmark,” Judge [Thomas P.] Agresti said in a Dec. 20 hearing in Pittsburgh.

Read more here.

For an interesting take on this, please check out Tanta's entry early this morning over at Calculated Risk: "Turns Out Judges Don't Like 'Efficient' Servicers.'"

Posted by Bill McLeod at 11:16 AM | Permalink | Comments (0) | TrackBacks (0)

If the Federal Reserve cuts rates, mortgage payments should decline, right? Perhaps not.

Today's Boston Globe also reports on foreclosure rescue scams.

And finally, may Bostonians have noticed the number of new condominium construction projects that have sprung up over the last few years...and the building boom continues. But if you build it, the buyers will not necessarily come. Today's Boston Herald reports that some new condominium projects are finding that it is easier to rent the units rather than sell them.

Posted by Bill McLeod at 12:39 PM | Permalink | Comments (0) | TrackBacks (0)

According to a New York Times report, the NY Attorney General filed a lawsuit in Manhattan accusing an appraisal firm of inflating the values of homes. According to the report, the firm - a subsidiary of the First American Corporation - inflated the values of homes because of pressure from Washington Mutual, a claim the bank denies.

Mr. Cuomo’s case is built on e-mail messages obtained through a subpoena to First American. According to the complaint, the messages show that executives at eAppraiseIT initially resisted the pressure from Washington Mutual to raise the values of the appraisals it was conducting for the lender in early 2006. The loans in question were largely used to refinance mortgages and take equity out of homes. Higher appraisals would allow a lender to make bigger loans and earn greater returns when selling them to investors.

In a written statement, Washington Mutual denies any impropriety.

Read more here.

Posted by Bill McLeod at 3:47 PM | Permalink | Comments (0) | TrackBacks (0)