Thursday, June 27, 2013

Former Employees Denounce Bank of America Foreclosure Practices

A recent article in Bloomberg highlights the “foreclosure frenzy” that’s engulfing Bank of America.  Five former Bank of America employees filed declarations in a federal court that “they were instructed to mislead customers on the verge of losing their homes and stall their applications for loan modifications.”  In short, the former employees accused the big bank of telling them to lie to customers and to increase residential foreclosures.
Yet, Bank of America says it did everything it could to keep homeowners in their houses.  According to Jumana Bauwens, a Bank of America spokesperson, “these allegations are absurd, patently false and contrary to Bank of America’s long-standing policy only to foreclose as a last resort.”
So, who’s telling the truth?  Will Bank of America face mortgage fraud convictions or other legal repercussions?  And will the outcome have an impact on the housing market recovery in Illinois?
Has Bank of America Lied Before?
The Bloomberg article suggests that there’s a history of deception at Bank of America when it comes to foreclosure practices.  The U.S. Treasury Department’s Home Affordable Modification Program (HAMP) may have failed to provide relief to struggling homeowners due at least in part to corporate greed.  After all, “major banks that service mortgage loans often can make more money from foreclosures than from loan modifications.”  A story in the Wall Street Journal’s “Market Watch” recalls consumer complaints that have been filing in since 2009 with allegations that “the bank inexplicably lost their paperwork—and then their homes were foreclosed.”
And what about robo-signing allegations?  Didn’t bank employees risk “committing perjury when they signed false affidavits”?  Indeed, Bank of America has already been held accountable for some of these issues.  The Wall Street Journal reminds us that Bank of America was part of last year’s $25 billion settlement that was supposed to make amends for “abusive foreclosure practices.”
Details of the Current Lawsuit
The recent allegations against Bank of America arose in a federal court in Boston.  Homeowners have filed a lawsuit against the bank, arguing that “they were improperly denied permanent loan modifications.”  While Bank of America claims that these homeowners “failed to return requested documents” or “failed to make payments,” former employees’ testimonies tell a different story.  
The Wall Street Journal points out that the former employees’ statements have been submitted under penalty of perjury, which emphasizes the seriousness and assumed veracity of their accounts.  And they don’t paint a pretty picture for Bank of America.
Recorda Simon, who worked at the Bank of America call center in Fort Worth, Texas in 2010 stated, “Although I was called a ‘Home Retention Specialist,’ my job was to collect as much money as possible from homeowners.”
Even worse, another employee who worked at the bank from July 2007 to February 2012 testified that she and her co-workers had been instructed to lie to customers.  “We were told to lie to customers and claim that Bank of America had no received documents it had requested, and that it had not received trial payments when in fact it had,” reported Simone Gordon.
In fact, Gordon went on to explain that collectors who accrued 10 foreclosures or more in a given month were “rewarded” with a $500 bonus.  Other employees noted that Bank of America gave out retail store gift cards when they placed accounts into foreclosure.  Theresa Terrelonge, who worked for the bank from 2009-2010 as a loan-servicing representative echoed these statements, recalling how she and other employees “were awarded incentives such as $25 in cash, or a restaurant gift card” when they declined applications for loan modifications.
Homeowners are still in trouble across the country, and it looks like Bank of America may have had a hand in it.  If you’re currently facing foreclosure or have questions about the recent claims against Bank of America, an experienced foreclosure defense lawyer can discuss your case with you today.
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Thursday, June 20, 2013

Chicago City Council Votes to Protect Renters in Foreclosures

When houses go into foreclosure, renters are often in the dark.  What’s worse is that many renters can be left without a place to live when lenders take possession of the foreclosed property.  Earlier this month, the Chicago City Council voted to adopt a “Keep Chicago Renting” ordinance, according to a report in the Chicago Tribune.  The new rules will be important to renters in the city, as well as to anyone who is thinking about buying a foreclosure.
The new ordinance has been a long-time goal for tenants’ rights advocates, according to local WBEZ.  Keep Chicago Renting will require “most entities that take ownership of foreclosed rental buildings to offer legitimate tenants rent-controlled leases for as long as they own the building.”  In the alternative, the new property owners will be required to provide $10,000 “per unit in relocation assistance.”
Who Will Have to Abide by the Ordinance?
The new law will apply to lenders, as well as to most buyers who purchased foreclosed rental buildings at court-supervised foreclosure auctions.  The buildings that will fall under the ordinance are quite varied, ranging from smaller single-family rental homes, all the way up to larger high-rise apartment buildings.
If the lender makes the decision to keep the renters in the property, it will have to offer leases that include a promise of no more than a two percent increase in rent per year.  In addition, people who buy foreclosed buildings through auctions will be required to provide the current tenants with notice that ownership of the property has changed hands, as well as information about their rights as renters.
The Keep Chicago Renting ordinance will be much more effective in helping renters than Chicago’s current vacant building ordinance.  While the vacant building ordinance was intended to help maintain properties in the city and prevent neighborhood decay, it didn’t provide the same financial incentives or information requirements when it comes to renters.
According to Diane Limas, the board president of the Albany Park Neighborhood Council, the primary problem with foreclosed properties and neighborhood maintenance is that the properties tend to be vacant upon foreclosures.  Limas favors the Keep Chicago Renting ordinance, which she believes will “keep families in these foreclosed properties.”  In turn, since the properties will have people living in them, “they will be maintained.”  In other words, “they won’t become burglarized or vandalized,” and the property values around these foreclosures aren’t as likely to suffer since the foreclosed property will remain stable.
At the same time, however, Limas noted that the $10,000 relocation assistance payout isn’t preferable—in order to keep properties filled, Limas and her neighborhood council “hope that that $10,000 is never paid out.”
What Properties Aren’t Covered by the Ordinance?
While Keep Chicago Renting will apply to many purchasers of rental property across the city, there are certain types of property that will be exempt from the ordinance.  First, it won’t apply to anyone who purchases a foreclosed rental property in private transactions after the court-supervised auction has already taken place.  In addition, the ordinance won’t apply to anyone who buys a foreclosure with the intention of making it into their primary home, or to any nonprofit that buys a foreclosure—at auction or otherwise—with the intention of turning it into affordable housing.
If you have questions about the new city ordinance or are at risk of foreclosure, an experienced foreclosure defense lawyer can speak to you today.  Contact us for more information.
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Wednesday, June 19, 2013

New HUD Grants for Housing Counseling

The housing crisis isn’t over, and the U.S. Department of Housing and Urban Development (HUD) hopes that the grants it provides will help American homeowners to avoid foreclosure.
Just today, HUD released the news that it would be providing more than $40 million in housing counseling grants across the country.  In all, the funds will be split between 334 national, regional, and local organizations, according to the HUD press release.  The agency reports that, as a direct result of the grants “and the additional funding they [will] help leverage, more than 1.6 million households will have a greater opportunity to find housing, make more informed housing choices, or keep their current homes.”
What Will the Grant Funds Support?
According to the department’s press release, the funds will directly support housing counseling programs that are currently run by 27 national and regional organizations, 8 multi-state organizations, 277 local housing counseling agencies, and 22 State Housing Finance Agencies (SHFAs).  In addition to funding agencies that directly provide housing counseling, HUD has also allocated $2 million for two different national organizations that train housing counselors.  These organizations provide the “instruction and certification necessary” for housing counselors to “assist families with their housing needs.”
The HUD Secretary Shaun Donovan made clear that the grant funds will have a positive impact on families throughout the country.  He explained that the “HUD-approved counseling agencies this funding supports are crucial in helping families manager their money, navigate the homebuying process, and secure their financial futures.”
He went on to clarify that current statistics prove that “housing counseling works.”  After families have undergone housing counseling, many have been able to find homes or keep their current homes, both facts that help to “promote neighborhood stability in the long term.”  In fact, a 2012 HUD report showed that in both families who purchase their first homes and families who struggle to avoid foreclosure, housing counseling significantly improved their chances of remaining in their homes.
In addition to housing counseling agencies, the recent grants also shed light on HUD’s new Office of Housing Counseling.  This new office “streamlined the application process for these grants” and made certain procedural improvements, both of which allowed more agencies to apply for and to be awarded grant money.  Specifically, the new office substantially reduced the administrative burdens that grant applicants typically encounter.
What Do Housing Counseling Agencies Do?
According to HUD, housing counseling agencies provide a number of services, including:
·      Helping homebuyers and homeowners to “realistically evaluate their readiness for a home purchase,” thus helping these families to avoid situations in which they can’t pay their mortgages and could face foreclosure.
·      Helping homebuyers and homeowners to better understand financing issues and down-payment options.  For many families, understanding the finances of homeownership can be difficult, and housing counseling agencies can help.
·      Helping families to find affordable rental housing.
·      Providing “financial literacy training” to families and individuals who have credit problems that are preventing them from buying a home.
·      Assisting homeless persons to find transitional housing so that they can eventually find a permanent home.
While housing counseling agencies can provide important information to homeowners about avoiding foreclosure, you should also have a dedicated foreclosure defense lawyer on you’re side if you’re at risk of losing your home.  Contact us today to discuss your options.
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Thursday, June 13, 2013

Current Housing Recovery Only Temporary?

Despite recently rising home prices that suggest an improvement in the market, data from Radar Logic insists that the factors underlying the perceived financial recovery “will not lead to sustainable price gains.”  If Radar Logic is right, then its data will be important to understand the limitations of financial recovery and other issues facing the housing market in Illinois.
What is Radar Logic?
Radar Logic is a self-described technology-driven data and analytics business that provides “a daily ‘spot’ price for residential real estate in major U.S. metropolitan areas.”  It’s primarily known for producing “Radar Logic Daily Prices,” which provide information for the company’s monthly housing market reports.
Notably, Radar Logic also “provides the tools and support needed to power the Residential Property Index market.”  You may have heard of this index, which is trademarked as “RPX.”
Recent Data and Price Gains
According to an article in DSNews, the forces that are driving the housing market increase is only temporary.  In March, Radar Logic’s home price index “showed a 13.1 percent year-over-year again.”  The data points to a number of reasons that the ricing price trend won’t last, but the primary reason is that the market will soon become saturated with supply—again.    
In other words, we currently have rising prices and limited supply, which makes it look like financial recovery is in the works, but that limited supply is likely to lead back to the oversaturated market that defined the years of the real estate crash.
In April of 2013, there were approximately 1.9 millions single-family homes available for sale (a number that excludes condominiums and townhouses).  This may seem high, but it’s actually strikingly low compared to the number of houses on the market in July 2007, a point that represents the peak of the housing boom.  In fact, in July 2007, 3.4 million single-family homes were available for sale.
However, there are a number of factors at work that, according to Radar Logic, will lead to market saturation in coming months.  While we’ve been reading that there’s currently a limited supply of homes on the market, this is only a temporary issue.  And when it’s resolved, so to speak, financial recovery will stymie across the country.  The recent report points to some of the current supply constraints that will ease as prices continue to rise.  These include low and negative equity, seller psychology, and building activity.  
To begin with, homeowners with negative equity are now able to list their properties since prices are rising, and this will add to the overall supply in the market.  Seller psychology will play a big role as sellers begin listing their homes as a result of the rising price trends, thus oversaturating the market.  And finally, data from the Census Bureau shows that building activity “is picking up again,” with huge increases in building permit requests.
These factors, combined with the fact that “demand is not expected to last,” can mean a quick halt to financial recovery in Illinois and across the country.  In fact, “recent evidence actually suggests profitability in the single-family market is already disappearing.”  As a homeowner, it’s important to stay current with your mortgage payments and to know the trends in the real estate market if you’re considering selling your house.  If you have questions about real estate, homeownership, or avoiding foreclosure, an experienced foreclosure defense lawyer can discuss your options with you today.
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Thursday, June 6, 2013

Fraud Convictions for Former Bank Executives

Late last month, three former executives of the Bank of the Commonwealth were convicted of fraud by a federal court in Norfolk, Virginia.  They now each face a penalty that can include up to 30 years in prison.
While this trial concerned a bank and its executives in the state of Virginia, the conviction in this case reignites concerns about mortgage fraud in our country.  It also makes clear that the government will prosecute financial executives, in Illinois and elsewhere, for crimes that affect the public and put our financial institutions at risk.
Background to the Fraud Scheme
According to, the convictions stem from a fraud scheme that began in 2008 and ultimately led to the bank’s failure in 2011.
The former executives convicted include Edward J. Woodard, the former bank CEO and chairman; Stephen G. Fields, the former Executive Vice President; and Troy Brandon Woodard, the CEO’s son and a former employee at the bank.  In addition to the former execs, the federal court also convicted a “favored borrower” in the fraud scheme, Dwight A. Etheridge.
A news release from the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) showed that the bank approved and funded loans that didn’t adhere to industry standards, or even to “the bank’s own internal controls.”  As a result, the bank had a “buildup of troubled loans and foreclosures by 2008.”
Between 2008 and 2011, Edward Woodard and Fields reportedly tried to hide the financial problems at the bank.  According to the SIGTARP report, they did this by “overdrawing demand deposit accounts to make loan payments, using funds from related entities to make loan payments, using change-in-terms agreements to make loans appear current, and extending new loans or additional principal on existing loans to over payment shortfalls.”
In addition to cutting corners, so to speak, the execs also provided fraudulent assistance to troubled borrowers like Etheridge in order to mask non-performing assets.
In short, the execs hid significant financial problems at the bank for their “own personal benefit and to the detriment of the bank,” according to a news release from the Federal Bureau of Investigation (FBI).  And all in all, the men ended up costing the Federal Deposit Insurance Corporation (FDIC) about $268 million due to the bank’s failure, and the bank itself lost about $115 million.
Bringing Bank Executives to Justice
The recent conviction came after a multi-week trial in which the government hoped that guilty verdicts would show that the Federal Reserve System and the Consumer Financial Protection Bureau are “committed to bringing to justice bank executives who engage in illegal activities that undermine public trust.”
Echoing this concern, Neil H. MacBride, the U.S. Attorney who prosecuted the case, referred to “the brazen greed and dishonesty” of the defendants, emphasizing how their fraudulent behavior actually “intensified the impact of the 2008 financial crisis on the public.”  MacBride indicated that the guilty verdict in this case puts all top bank executives on notice that the public has entrusted them with “the health of our financial institutions,” and if they violate the public’s trust, they’ll be put on trial and held accountable for their crimes.
All of the execs, as well as the “favored” borrower Etheridge, are scheduled for sentencing this September.
If you have questions about home financing or other questions concerning your relationship with your bank and lenders, an experienced attorney can answer your questions today.
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Tuesday, June 4, 2013

American Financial Recovery—Is it Only for the Wealthy?

A recent article in MoneyWatch had startling news regarding the average American’s wealth and financial recovery in years since the recession.  Although housing prices have increased, and the stock market claims to be posting “all-time highs,” most Americans haven’t seen this kind of recovery.  In fact, according to a report released by the Federal Reserve Bank of St. Louis, “the average U.S. household has recovered only 45 percent of the wealth they lost during the recession.”
What does this mean for families in Illinois?  And is the housing crisis over in our state, or will we continue to see the effects of the recession in our neighborhoods and communities?
Rising Stock Prices and Wealthy Household Recovery
For most Illinois residents who were negatively affected by the housing crisis and the recession, financial recovery isn’t on the immediate horizon.  This new report is especially disconcerting, as it comes on the heels of an earlier report that suggested that “Americans as a whole had regained 91 percent of their losses.”  It turns out that this earlier, more promising figure is the result of an aggregation of household-net-worth data.  A lot of this recovery in net worth is due largely to the stock market, which isn’t the source of wealth for most Americans.  In fact, according to CBS News, it means that “most of the improvement has been a boon only to wealthy families.”
According to the St. Louis report, nearly two-thirds of the increase in aggregate household wealth is the result of rising stock prices.  And what does this mean in terms of disproportionate household recovery?  Approximately 80 percent of stocks are owned by “the wealthiest 10 percent of the population.”  So, while financial figures show that American households, as a group, have regained $14.7 trillion between the time of the housing bust and the end of 2012, those numbers might be misleading.  The majority of those households that have recovered these high dollars likely are homes with stockholders who are benefiting from rising stock prices, according to CBS News.
The Average American and the Limitations of Financial Recovery
Unlike the report indicating a 91 percent recovery of wealth losses, the grim figure reported in MoneyWatch takes into account inflation, and its adjusts accordingly.  If MoneyWatch is right, average American households don’t own stocks, and they’re not benefitting from rising stock prices.  While a small percentage of households may hold their wealth through stocks (those in the upper financial echelons), most of the total wealth for middle-class and low-income households stems from home values.  And for most of these Americans, those home values are still “30 percent below their peak.”
In our state, and even in the Chicago area specifically, many homeowners are part of this middle- and lower-income household bracket.  As such, many families in our state haven’t seen a whole lot of wealth recovery.  And for some of them, there are still very real risks of home foreclosure and bankruptcy.  For most of these families, paying down debt isn’t a realistic option in the current economy—jobs are still limited, and homeowners still owe substantial amounts in loans.
The MoneyWatch report emphasizes that paying down debt will be the only way for the average American household to begin to recover from the recession, and this includes mortgage debt.
If you have questions about home loans in Illinois or need help avoiding foreclosure, an experienced foreclosure defense lawyer can discuss your concerns with you today.
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