Loan modifications burn many homeowners

Lenders cancel trials; borrowers surprised

Many people who sought help under a federal program created to keep them from losing their homes are instead saddled with huge, unexpected bills.

Thousands now face a stark choice: Go deeper into debt, or foreclosure.

Lenders routinely approved short-term “trial” loan modifications that reduced payments for desperate borrowers under the umbrella of the Obama administration’s Home Affordable Modification Program. But lenders continued to count the mortgages as delinquent or in default.

Now instead of granting permanent modifications, lenders often are reinstating the original loan terms and demanding big back payments.
Through November nationwide, lenders canceled 729,109 trial modifications. Carl Christensen, a Minneapolis real estate attorney, said he is getting 15 telephone calls a week from shocked borrowers.

Shocking demand

Patti, 51, and Scott Weddle, 57, of Harris, Minn., were ecstatic when JPMorgan Chase offered in November 2009 to cut their monthly mortgage payments by about 20 percent under a trial modification. Patti was out of work with a neck and back injury, and the Weddles were having difficulty making ends meet.

Nearly a year later, the Weddles were told their application for a permanent modification was denied and they would have to pay $24,228 to bring their mortgage current and avoid foreclosure.

The Weddles insist the demand came as a shock, because they had made all their payments on time under the trial modification. “We did everything that was asked of us, and it only pushed us deeper in the hole,” Patti Weddle said.

JPMorgan Chase and other lenders argue that the risks are clearly disclosed to borrowers when they sign up for temporary loan modifications. Even so, many homeowners are caught by surprise.

A growing number of critics contend the loan modification program, known within the industry as HAMP, may be doing more harm than good. Many homeowners are draining their savings and incurring new loans to make the temporary payments only to end up in foreclosure anyway when they can’t afford the large, lump-sum payments demanded at the end of the process.

“The banks put out their hand and say, ‘We’re going to help you,’ and then stab people right in the back,” Christensen said. Courtesy of the Fort Myers News Press.
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Fort Myers Area homes sell and prices rise

Home prices and sales were buffeted by a chaotic real estate market in 2010, but ended the year with a nice bump up, according to information released Thursday by Florida Realtors
Meanwhile, in a separate survey released Thursday by the National Association of Realtors, the number of people who bought previously owned homes last year fell to the lowest level in 13 years. But home sales in December jumped to the fastest pace in seven months.

In Lee County, the median sales price was $92,500 in December, up 3 percent from November's $89,800. There were 1,322 houses sold, up 29 percent from 1,022 in November. Sales include only those assisted by a Realtor.

For the entire year of 2010, prices were up 4 percent to $93,700 from 2009's $90,400. Sales fell 6 percent from 16,260 to 15,207.

Statewide, the median dropped 5 percent to $133,100 from $139,800 and the number of sales was up 4 percent from 14,923 to 15,550.

Data for Collier County is not made public by the real estate boards there. It is included in Florida Realtors' statewide statistics, but not broken out separately.

Real estate broker Denny Grimes, president of Denny Grimes & Co. at Royal Shell in Fort Myers, said 2010 was a year in which events overtook the market repeatedly.

"The first quarter was very strong," he said. "Only God knows what the rest of the year could have been without the oil spill and the robo signing."

The oil well leak in the Gulf of Mexico started in April and caused buyers to waver as the oil continued to flow, but fortunately didn't happen in time to dampen the positive effects of a tax credit for first-time homebuyers, Grimes said.

A wave of reports that major banks and law firms had made serious mistakes in processing mortgage foreclosures - including "robo signing," in which law firm officials reportedly signed thousands of documents without reading them - was another blow to the market, Grimes said.

The bottom line, Grimes said, was that the gap widened between what sellers wanted and what buyers were willing to pay. Courtesy Fort Myers News Press.

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Banks drop foreclosures in Southwest Florida

Hundreds of Foreclosure lawsuits dismissed

Banks in recent weeks have been dropping hundreds of their Southwest Florida foreclosure lawsuits instead of facing defendants at trial, according to local attorneys and court records.

Opinions varied sharply on whether that means banks are just taking a breather before refiling with stronger evidence - or giving up for good on hopelessly flawed cases.

Some foreclosures at large law firms were never actually read by the attorneys who filed them here and elsewhere, and some of the mortgages that ended up in mortgage-backed securities sold to investors were never legally transferred by the banks, defense attorneys have alleged.

"We think they're going to come back and refile," Lee County Clerk of Court Charlie Green said.

That's an expensive proposition, he said, noting foreclosure suits carry a hefty filing fee: about $1,900 for a $250,000 house, for example.

What happens is lawyers for the banks are asking judges to dismiss their cases, which is "very much out of the ordinary," Green said. "You don't see cases dismissed without prejudice that often."

Foreclosures were rare in Southwest Florida until the housing market crashed at the end of 2005, bringing on waves of mortgage defaults by investors and homeowners.

Green said he hasn't calculated exactly how many foreclosures are being dismissed.

But eight voluntary dismissals were filed Tuesday alone by seven different banks including Bank of America, one of the largest filers of foreclosures in this area. Bank of America did not reply to a request for comment Tuesday.

At one court hearing alone, attorney Kevin Jursinski said, one of his associates watched as "50 in a row" were withdrawn.

"Can they re-litigate?" Fort Myers-based attorney Carmen Dellutri asked. "I don't think so."

Most of the mortgages in dispute were sold to Wall Street and sold in bundles to investors as mortgage-backed securities, he said. But so many mistakes were made in the process it's unlikely the banks can win those cases.
Some mortgages still held by the bank that made the loan might be defensible but those are in the minority, Dellutri said.

He said he's seeing cases withdrawn in large numbers in Lee, Collier and Charlotte counties, and he heard from an attorney in Jacksonville the situation is the same there.

April Charney, a Jacksonville-area legal aid attorney who's an expert on foreclosure issues, said for the most part banks have no way to prosecute their cases because the mortgages in mortgage-backed securities were never actually legally transferred to the trusts.

She said much of the recent wave of voluntary dismissals may be a result of a Massachusetts Supreme Court ruling Jan. 7 upholding a judge's decision two foreclosures were invalid because the banks didn't prove they owned the mortgages, which he said were improperly transferred into two mortgage-backed trusts.

Now, she said, many mortgages simply aren't fixable. "You can't go back and securitize. You run a red light, you can't go back and unrun it." Courtesy of Dick Hogan, Fort Myers News Press

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Home Prices Continue to Fall

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 U.S. home prices fell 5.1 percent in November from a year earlier and are expected to go lower as the housing market struggles to find its recovery, according to a recent report.

Real estate analytics firm CoreLogic said that single-family home prices declined for the fourth consecutive month in a row and at a faster pace. They dropped 3.4 percent in October year-over-year.

November declines occurred in 44 states, up from 18 in June when federal tax credits for home buyers were still pumping up sales. Sales and prices fell after the credits expired.

The credits "created the illusion that the market was stronger than it's been," says Patrick Newport, economist at IHS Global Insight. His firm predicts national home prices will fall 5 percent to 7 percent more this year before potentially rebounding later in the year.

Rather than draw many new buyers into the market, the credits "just pulled sales forward," says Sam Khater, CoreLogic senior economist. The higher rate of decline in prices in November from October underscores the big challenges the market faces with recovery, he says.

The state of the housing market isn't good news for the overall economy, which is showing improvement. But lower home prices are also not surprising given the expiration of the tax credits, says economist Mark Zandi of Moody's Analytics.

The economy avoided a double-dip recession, but, "Housing is double dipping," Zandi says. Zandi expects home prices to continue to decline, about 5 percent, until at least midyear. By the time prices hit bottom, the housing crash will have lasted five years and driven prices 35 percent off their 2006 peak, he says.

CoreLogic reports November prices did rise in six states: Indiana, Vermont, New York, Wyoming, North Dakota and Maine. Maine led the nation with an 8.6 percent jump, followed by North Dakota at 4.4 percent.

In general, states seeing rising prices didn't experience the real estate boom to the extent that other states did, and so they aren't feeling the bust as much, says IHS Global Insight analyst James Diffley.

Market researcher Zillow, which doesn't include foreclosure sales in its data, says November marked the 53rd consecutive month of declining home values. Zillow's data show national home prices down 5.1 percent in November from November 2009, resetting to levels last seen in October 2003.

Zillow expects sustained declines until late 2011. Even then, "The bottom will be very long and rocky," says Zillow chief economist Stan Humphries.

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Lee County Foreclosures Up

Lenders filed 409 foreclosure lawsuits in Lee County in December, according to statistics released today by the Southwest Florida Real Estate Investors Association.

In a separate report also released today, the county Department of Community Development said builders pulled 19 permits for single-family homes in December in the unincorporated part of the county — bringing the year’s total to 384, a 16 percent increase from 2009’s 331.

During the housing boom that ended in late 2005, hundreds of permits a month were pulled. The number dropped sharply starting in 2006.

December’s 409 foreclosures was an increase from November’s 343 but still far below the peak of 2,665 reached in October 2008 after the housing crash caused homeowners and investors to lose properties, according to the association’s report.

The number of filings dropped sharply last year after some large banks discovered problems with how the paperwork had been handled on previously filed foreclosures.

The county’s report said the total number of permits issued in 2010 was 30,481, up 25 percent from 2009’s 24,374. Search Fort Myers Real Estate