Friday, August 30, 2013

How Will Fannie Mae and Freddie Mac Account for Future Losses?

According to an article in the Chicago Tribune, a recent government report raises concerns about the ability for Fannie Mae and Freddie Mac to account for future losses.  The two large companies, which were seized by the government in 2008, have delayed write-offs of delinquent mortgages in order to save money in the short term.  However, experts worry that the two companies won’t be able to provide sufficient funds to the government down the road.
A lot of these details can seem confusing, but they could have a significant impact on housing market recovery.  In other words, if Fannie and Freddie don’t actually have the profits it looks like they have now, that could spell trouble for housing recovery across the country.  We’ll try to break down the important points about this report and explain how they could affect Illinois residents in the future.
Mortgage Write-Off Rules
According to the inspector general for the Federal Housing Finance Agency (FHFA), which oversees Fannie and Freddie, the companies have been “avoiding billions of dollars in potential long-term losses by delaying a requirement that they write off more of the delinquent mortgages they own or back.”
Over a year ago, Fannie and Freddie were supposed to change their accounting procedures to mirror those used by banks that write off delinquent mortgages.  However, they haven’t implemented that rule yet, and its implementation has actually been delayed until the beginning of 2015.  Experts say that three years is a shockingly long time to wait to implement this rule.
The new FHFA rule would require Fannie and Freddie to “write off losses on single-family home mortgages that are more than 180 days overdue.”  Right now, they don’t write off these mortgages until there’s a foreclosure.  Jon D. Greenlee, an FHFA official, indicated that “implementing the rule could potentially require them to charge off billions of additional dollars.”
Why does it matter?  In short, “an increase in write-offs could eat into the profits posted by the two companies as the housing market recovers.”  In turn, that profit shortage would “affect how much in dividends they could pay to the government on the bailout money.”  Recent news reports have shown Fannie Mae posting profits and paying billions to the U.S. government.  According to the FHFA, those kinds of profits and payments might be a result of limiting write-offs.
Senator Bob Corker, a Republican from Tennessee, indicated, “it’s possible that the situation at Fannie and Freddie isn’t quite as rosy as some have come to believe over recent months.”
Government Backing, and the Future of Fannie and Freddie
Commentators emphasize that, regardless of profits or losses, Fannie and Freddie are only able to generate profits because their work is backed by the government.  In other words, they make housing recovery tenuous no matter how they’re making money.  Indeed, Senator Corker explained that “we should all remember that these two entities wouldn’t generate one penny without the government guaranteeing their transactions, a reality that underscores the need to move to a stronger system of housing finance.”
Fannie Mae indicated that it has set aside $53.1 billion in loss reserves since the end of June, in anticipation of eventually implementing the new rule.  Regardless, President Obama and other lawmakers have questioned whether Fannie and Freddie should remain open for business or whether the housing finance system should undergo a complete overhaul, which would eliminate the companies.
In the meantime, it will be especially important for Fannie and Freddie to set aside enough funds to cover losses from mortgages that eventually will have to be written off.  If the companies can’t continue to use profits to pay the government, housing recovery could be threatened for families in Illinois and across the country.  If you have questions about how the housing market affects you and your family, or if you’re one of the many people who remain at risk of foreclosure, an experienced foreclosure defense lawyer can help.  Contact the attorneys at the Emerson Law Firm today.
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Tuesday, August 27, 2013

New Illinois Bill Protects Renters From Foreclosure

While foreclosures continue to plague many urban areas across America, Illinois Governor Pat Quinn recently signed a bill that will protect renters from being forced out of their homes if those properties go into foreclosure.  According to, the new law, Senate Bill 56 was sponsored by Senator Jacqueline Collins and Representative Kelly Cassidy, both of Chicago.  It will take effect in just under ninety days now.  This bill will increase the protection associated with the Illinois Protecting Tenants in Foreclosure Act (PTFA), a law that’s set to expire in 2014.
Do you have questions about your rights during the foreclosure process?  The experienced attorneys at the Emerson Law Firm can answer your questions today.
Protecting Tenants in Foreclosure Act
The Protecting Tenants in Foreclosure Act originally went into effect in May 2009.  The Act is actually part of the Helping Families Save Their Homes Act of 2009.  It had been set to expire at the end of 2012, but the Dodd-Frank Wall Street Reform and Consumer Protection Act extended the act until the end of 2014.
Under the act, the purchaser of any foreclosed property has to provide tenants with at least 90 days notice before they can force those renters out of the property.  And further, unless certain conditions are met, the purchaser of a foreclosed home has to allow a tenant to run out the course of her lease on the property.
Although the PTFA won’t expire until the end of 2014, that expiration date might arrive before the foreclosure crisis has truly come to an end.  The new Illinois law will continue protecting Illinois families who rent homes that end up in foreclosure.
Renters Need Adequate Time to Make a Safe Move
According to the news release about the new bill from the Illinois Government News Network (IGNN), renters who inhabit foreclosed property need to have adequate time to make a safe move, and the new bill affords them just that.
Governor Quinn spoke about the bill, remarking that “the foreclosure crisis has been devastating to homeowners as well as many families living in rental homes who are at risk of losing their home due to no fault of their own.”  Indeed, families who rent may run nearly as high a risk as homeowners who have difficulty making their monthly mortgage payments.  That’s where the new law comes in.  According to Governor Quinn, “as families in our communities continue to recover from the worst recession since the Great Depression, this law will ensure renters are protected from sudden forced moves that can be costly and disruptive to their lives.”
In fact, statistics related to Senate Bill 56 reveal that about forty percent of families who are negatively affected by foreclosure are actually renters who have no idea that their landlord isn’t making the monthly mortgage payments on their home.
Speaking about the bill, Senator Collins indicated that “a consistent commitment to housing rights protects tenants as well as homeowners.”  Describing the impetus for sponsoring the bill, she said that “no one should be evicted on short notice and lose access to a safe place to live because of the financial circumstances of the landlord.”
In short, the Senate Bill 56 will ensure that renters are protected from foreclosure beyond the end of 2014.  If you have questions about the impact of the new bill or if you’re having difficulty making your monthly mortgage payments, an experienced foreclosure defense attorney can help.  Contact us today to discuss your case.
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Friday, August 23, 2013

Housing Market On the Rise in the Chicago Area?

We all know about the housing market crash and the devastating number of foreclosure filings across the country.  We’ve also reported on news that the real estate market has begun to show strong signs of recovery.  It’s clear that we haven’t reached a point at which foreclosures aren’t a problem.  Indeed, many families in Illinois continue to have difficulty making monthly mortgage payments, putting them at risk of foreclosure.  However, some commentators have begun to look ahead, speculating about the rising real estate market in Chicago and the Midwest.
A recent article in the Chicago Tribune suggests that housing recovery in the Chicago area might look a little bit different than we might imagine.  Rather than return to “the olden days of the housing boom” in which builders were eagerly “throwing up McMansions in the distant suburbs,” researchers suggest that new building and buying trends may fall closer to the city center.  According to Lance Remella, a researcher at John Burns Real Estate Consulting who tracks the housing markets in Chicago and the Midwest, “the race is on for land in nearer-in locations.”  As a result, buyers might have to pay higher prices than they’d expect.
The intricacies of the housing market can be daunting for first-time buyers and for families who are having trouble making their mortgage payments.  If you have concerns related to real estate and avoiding foreclosure in the Chicago area, the experienced attorneys at the Emerson Law Firm can answer your questions today.   
More Jobs, More Real Estate Buying
While many commentators worry that employment numbers remain low and foreclosures continue to occur, Ramella insists that there are “enough jobs to indicate better days ahead.”  Even though the jobs in Chicago aren’t growing at the same pace as some other states, it’s still increasing by 1.5 percent, and according to Ramella, the Chicago area has “added 60,000 jobs—which isn’t setting the world on fire, but it’s a slow, steady growth.”
Indeed, commentators expect the job growth rate to continue to increase in the Chicago area, with 1.6 percent by the end of 2013, 1.9 percent by the end of 2014, and 2.1 percent through 2015.
If Ramella is correct, then the number of jobs added in the next couple of years means that the Chicago real estate market will be “completely undersupplied with new housing.”  By the end of 2015, foreclosure rates are expected to drop, and more families who once experienced difficulty making mortgage payments might be able to invest again in homeownership.
And although household income growths aren’t likely to get anywhere near “back to normal” until 2016 according to market researchers, household incomes continue to increase as the market rebounds.
In fact, by the end of 2013, researchers predict that the “price appreciation for resale homes will increase by about 4 percent.”  According to Ramella, prices will increase by 11 percent in 2014, which means that metropolitan Chicago will “see double-digit appreciation coming for the next two years.”
The housing crisis isn’t over, but the continued news about the recovering market suggests that we may see a return to normalcy within the next several years.  However, many families in the Chicago area continue to struggle with monthly mortgage payments and fears about foreclosure.  An experienced lawyer can answer your questions when it comes to avoiding foreclosure or the intricacies of the housing market in our area.  Contact us today for more information.
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Wednesday, August 14, 2013

Homeownership Benefits and the Housing Crisis

Since the housing crisis began, the Joint Center for Housing Studies at Harvard University has been conducting research on the perceptions of homeownership among the American public.  Is buying a home still worth the stress and hassle?  Is it still a primary tenet of the so-called “American Dream”?  According to a recent report released by the Center, the “housing crisis does not appear to have had any major long-term effects on Americans’ perceptions of homeownership.”
If the Center’s report reflects the opinions of a majority of us across Illinois and the country, that’s good news for the housing market.  If more people seek out homeownership, we can continue to see the real estate market rebound, according to an article in
However, it’s important to know that not everyone is in the clear.  Many people in our country continue to struggle to pay their mortgages, and they face the threat of foreclosure.  If you or a loved one are at risk of foreclosure, an experienced foreclosure defense attorney can help.  The lawyers at Emerson Law Firm also have extensive knowledge and experience with real estate and foreclosure matters and can answer your questions today.

The Joint Center for Housing Studies
Although the Center is based at Harvard University in Cambridge, Massachusetts, its work is important for states throughout the country.  So what does the Center do?  Primarily, Harvard and MIT created it in the late 1950s to address policy issues connected to the shifting American demographics in the postwar years.  Now, it’s supported by the Ford Foundation, and it seeks out research that connects directly to “housing’s critical role in the economy and in communities.”
Earlier in August, for instance, it convened a symposium that focused on “sustaining homeownership for low-income and minority families.”  The symposium featured information from both scholars and practitioners, seeking to bring together research and praxis.  Each discussed the values of homeownership and emphasized how important it is for our economy that Americans continue to think about purchasing homes.
Social Benefits of Homeownership
The Center’s research report, entitled Reexamining the Social Benefits of Homeownership After the Crisis, explains that “no extraordinary efforts will be needed to attract American households back into the housing market.”  The report suggests that homes are still considered a good financial investment, even though a significant number of homeowners lost their homes through foreclosure or have taken hits to their credit standings.  Even with the “dramatic loss of equity and the high foreclosure rates” over the past years, the Center determined that Americans still think buying a home is preferable to renting one, and most are willing to make that investment at some point in the near future.
The report also emphasized the sense of security that comes with homeownership.  Although many Americans haven’t felt secure with high mortgage payments and the effects of the housing crash, the Center believes that “the long term cultural preference for owning seems to have weathered the recent housing crisis.”  The research will continue, and the Center says that it needs to do more to determine the connections between the actual and the perceived benefits of homeownership.
For many Americans, homeownership may again be a possibility.  For others, the effects of the crash continue to linger.  If you have questions about foreclosure or about real estate in Illinois, don’t hesitate to contact the experienced attorneys at the Emerson Law Firm today.
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First-Time Buyers Interested in Buying Foreclosures

Tuesday, August 13, 2013

Bank of America Accused of Securities Fraud

Just last week, the government filed two lawsuits against Bank of America for securities fraud.  According to the Justice Department, the bank perpetrated “a fraud on investors involving nearly a billion dollars of residential mortgage-backed securities.”  Both the Justice Department and the U.S. Securities and Exchange Commission filed suits in the U.S. District court in Charlotte, according to a report in CNBC Business News.
This news highlights that the housing crisis isn’t over yet.  Many Americans are still feeling the effects, and the government continues to look into possible causes for the real estate collapse.  If you’re at risk of foreclosure, don’t hesitate to contact and experienced foreclosure defense attorney today.
Details of the Government Claim Against Bank of America
When did these crimes allegedly occur?  According to the court filings, the securities go back to around January 2008, which is toward the beginning of the financial crisis and the housing market collapse.  Bank of America has issued statements denying the allegations.  According to a statement published by CNBC, a Bank of America spokesperson said, “these were prime mortgages sold to sophisticated investors who had ample access to the underlying data.”  The bank went on to argue, “we are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result.”
However, when the Guardian reported on recent news, it made clear that the fraud claims are no small matter.  Indeed, the U.S. government has accused the bank of fraud related to residential mortgage-backed securities worth $850 million.  The lawsuits are coming close on the heels of Bank of America’s $45 billion settlement related to the foreclosure crisis.
The residential mortgage-backed securities are known as BOAMS 2008-A.  According to the Guardian, they were “of a higher credit quality than subprime mortgage bonds,” and they’re “dated to about January 2008,” was which “months after many Wall Street banks first reported billions of dollars in writedowns on their holdings of subprime mortgage securities.”
The lawsuits were filed in Charlotte, NC, where the headquarters of Bank of America are located.  The claims from both the Department of Justice and the U.S. Securities and Exchange Commission argue that Bank of America made “misleading statements” and failed to “disclose important facts about the pool of mortgages underlying a sale of securities to investors in early 2008.”
According to the Justice Department, “these misstatements and omissions concerned the quality and safety of the mortgages collateralizing the BOAMS 2008-A securitization, how it originated those mortgages, and the likelihood that the ‘prime’ loans would perform as expected.”  In its statement surrounding the case, the Justice Department also made clear that the “material number of mortgages in the pool failed to materially adhere to Bank of America’s underwriting standards.”  In other words, both the Department of Justice and the U.S. Securities and Exchange Commission claim that Bank of America employed fraudulent mortgage practices for which they haven’t yet compensated those who were negatively affected.
We’ll have to wait and see if the cases result in more hefty financial settlements from Bank of America.  In the meantime, if you have been negatively affected by bank practices or are at risk of foreclosure in our state, the experienced foreclosure defense lawyers at Emerson Law Firm can discuss your case with you today.
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Friday, August 9, 2013

Reverse Mortgages and Foreclosure Problems

 According to a recent article in the Chicago Tribune, the Federal Housing Administration (FHA) plans to begin cracking down on its rules for reverse mortgages.  While reverse mortgages initially were intended as to help elderly homeowners “meet their immediate needs, such as home repairs, while preserving the remaining balance as a nest egg in case of emergencies,” it looks like many seniors have actually been using the reverse mortgage as a way to avoid foreclosure.

This news could have significant implications for the elderly communities in Illinois who have applied for or are planning to pursue a reverse mortgage.  If you have questions about the new FHA regulations and their relationship to foreclosure issues, contact an experienced foreclosure defense attorney today.

FHA Reverse Mortgages for Senior Citizens

What is a reverse mortgage for seniors?  The FHA explains that homeowners who are at least 62 years old and have either paid off their mortgage or have “paid down a considerable amount” could be eligible for a reverse mortgage.  In addition to the financial aspects, these homeowners must be living in the property for which they’re seeking a reverse mortgage.

This program for seniors is known as FHA’s Home Equity Conversion Mortgage (HECM) program, which enables elderly homeowners to “withdraw some of the equity” in their property.   In order to be eligible, seniors must first meet with an HECM counselor to determine whether they meet all of the requirements and to decide if the financial implications will be worth it in the long run.

The FHA has specific requirements that fall under three categories:

·      Borrower Requirements:  The borrower must be at least 62 years old.  In addition, the borrower must either own the property or have paid a considerable amount down on the mortgage, she must occupy the property as her principal residence, she can’t be delinquent on any federal debt, and she must participate in a “consumer information session given by a HUD-approved HECM counselor.”
·      Property Requirements: The property must be a single-family home or a 2-4 unit home with at least one unit occupied by the borrower.  Or, it can be a HUD-approved condo project or a manufactured home that satisfies certain FHA requirements.
·      Financial Requirements: In order to be financially eligible, homeowners must be able to verify their income, assets, monthly living expenses, and credit history.  In addition, they mist be able to show that they’ve made timely payment of their real estate taxes, and that they have paid insurance premiums for hazard and flood insurance.

Foreclosures and Financial Difficulties Force Rules to Change

Did you know that more than one-third of the elderly counseling clients at the National Council on Aging (NCA) have mortgage debt that exceeds more than half the value of their home?  When these borrowers use a reverse mortgage to “pay off the existing mortgage and other household debt,” the borrowers are left with “little equity to fall back on,” according to theChicago Tribune.  With this situation, borrowers can’t pay their property taxes or homeowner insurance.

These losses are described as “technical defaults,” and they take away from the FHA’s mortgage insurance fund.  In short, they’re forcing the FHA to “tighten its requirements for seniors who apply for an FHA-insured reverse mortgage.”  While the HECM system already verifies a borrower’s income and monthly living expenses, they’re going to have to do more.  Likely, the FHA will impose a “set-aside of two to three years’ worth of taxes and insurance payments” for certain borrowers.

Most importantly, seniors shouldn’t take out a reverse mortgage as a final attempt to save a home from foreclosure.  Instead, it should be a measure that occurs early on—“before crisis,” said the NCA Director Ramsey Alwin.

There are a variety of options for the reverse mortgage, and if you or an elderly loved one need extra funds to “pay off immediate needs” but still hope to “maintain the nest egg for a rainy day,” it’s a good idea to speak with an experienced lawyer as soon as possible.  Don’t hesitate to contact us today.

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