Ethics of strategic default are really hitting home

Some question the morality of homeowners intentionally walking away from mortgages that they can afford to pay

Gail MarksJarvis

Americans have taken a sharp slap in the face from the housing crisis, financial crisis and jobs crisis. Now, some wonder if the residue of those harsh realities is an ethical crisis.

For the first time in the nation's history, bankers say, people are walking away from mortgages they can otherwise afford to pay. The phenomenon known as strategic default was once unthinkable. It represents a calculated decision to hand over the keys to a home without making good on a loan, reasoning that it makes no sense to keep paying the monthly mortgage when the home is worth thousands of dollars less than the obligation.

Jeff Horton, a 33-year-old Orlando, Fla., technology manager, is among those who recently decided to take the step. He told his lender that he's done making payments on the condo he bought in 2005 and the home he bought in 2007, because he wants to move from Florida and can't sell or rent the properties at a price nearly high enough to cover his payments.

"Life is too short," said Horton, who has mortgages totaling about $400,000 with Bank of America — about twice as much as he thinks he would get if he could sell the property. He says he has little choice because the bank has refused to refinance the mortgages or adjust original terms.

Strategic default is a symptom of a housing market that suddenly turned from "American Dream" to financial trap. With the Norman Rockwell-like images of homeownership decimated by a 30 percent plunge in prices, some fear America is also losing its grip on another idyllic notion, that people will live by the slogan: "My word is my bond."

Morgan Stanley recently estimated that about 18 percent of defaults will be strategic. In a recent Pew Research Center survey, 36 percent of Americans said that walking away without paying a mortgage is acceptable, at least under certain circumstances. Fifty-nine percent said the practice is unacceptable.

The saying "My word is my bond" was first posted in the London Stock Exchange in the late 1920s to convey living up to promises. Now, after the worst financial disaster since that period, people such as Horton say they have no such image of Wall Street or large banks as trustworthy institutions, and that has allayed guilt about walking away from mortgages.

"I felt guilty at first," said Horton. "It all stopped when I saw them take $90 million in executive bonuses. They take bailout money and do nothing for the little guy. They wouldn't do anything for me."

Most people walking away from homes see little choice, says John Maddux, chief executive of UWalkAway, a Web site that provides advice on the strategic-default process. "They bought the house thinking of it as an investment in their future," he said. "For some, it was to be their retirement; for others, it was seen as forced savings, and now it's bleeding them dry."

Overburdened with mortgages, people conclude they won't be able to send their children to college, save anything for retirement or move to a place where they can find a job. But as they go through the soul-searching and guilt connected with walking away, Maddux noted they often point to a sense of betrayal.

He said he frequently hears: "I don't feel bad for the banks. They let this happen. Banks made the mistake of giving a loan to anyone if they had a pulse. Their loose lending standard led to a bubble, and the regulators should have controlled this."

Banking expert E. Philip Davis sympathizes with that point of view, but he also points out the implication of homeowners walking away from a commitment.

"It makes them as bad as the bankers," said Davis, a Baptist minister in the United Kingdom who teaches courses on fostering stability in the financial system.

The erosion of the ethic of keeping promises "will be a cancer for society," said Davis, who was with the Bank of England and is now a fellow at the U.K.'s National Institute of Economic and Social Research.

On the surface, one consequence is evident: If bankers don't trust that people will pay off their loans, banks will demand higher interest and other assurances before lending in the future.

In fact, there's research behind the concern, says Tom Donaldson, a University of Pennsylvania Wharton business ethics professor. And it shows that both bankers and borrowers are at risk if trust erodes.

"We've known for decades that trust is critical to successful business," said Donaldson. "Studies have shown that if one party cheats on one end, the other party feels more entitled to cheat. It's not the most noble way, but it is human nature and it becomes a race to the bottom."

Research into strategic default by University of Chicago Booth School of Business professor Luigi Zingales shows what he calls "the contagion effect." "The stigma goes down once you see someone else do it," he said.

Donaldson adds, "I hope bankers are thinking about restoring trust. It's enormously in their interest."

Jim Wallis, the author of "Rediscovering Values: On Wall Street, Main Street and Your Street," is discouraged. He had hoped that the financial crisis would lead individuals and business leaders to seek what he calls "a moral recovery," and deal with issues such as "enough is enough" and "we're in it together."

But while he saw interest from businesses at the Davos World Economic Forum after the financial meltdown in 2008, he said the focus has shifted. Now he sees a lot of "anger and yelling" by individuals, and occasionally business people approach him to "voice frustration and yearning. There is no champion for a values discussion."

While Wallis tries to get individuals to question whether individual debt levels were a moral breach leading up to the financial crisis, others say people now have an ethical duty to their families to walk away from debts if paying mortgages would hurt their financial stability.

Brent White, a University of Arizona law professor, argued in a recent paper that people have a moral obligation to their families to move on from mortgages that will overburden them. He said mortgages are legal contracts written with the understanding that they might be breached.

Those agreements stipulate what will occur if a borrower does not make payments as required. The borrower must turn the collateral, or home, back to the bank, and when that is done the contract is fulfilled.

Historically, taking back homes was a satisfactory remedy for banks. But that is no longer true, because both individuals and banks find themselves in the abyss of the housing crisis. Some homeowners can't afford their mortgages, while banks are struggling to manage the record number of foreclosures.

JPMorgan halts 50K foreclosures for possible flaws

NEW YORK (AP) – Sept. 30, 2010 – JPMorgan Chase has temporarily stopped foreclosing on more than 50,000 homes so it can review documents that might contain errors.

JPMorgan’s move Wednesday makes it the second major company to take such action this month, underscoring a growing legal problem. The issue could stall an already overloaded foreclosure process.

Still, analysts don’t expect the delays to reduce the number of foreclosures over the long run.

“It will probably slow things down for a couple months while these documents are reviewed,” said Rick Sharga, a senior vice president at foreclosure listing service RealtyTrac Inc. “It won’t stop things.”

But if the problems turn up at more of the largest mortgage companies, a foreclosure crisis that’s already likely to drag on for several more years could persist even longer.
GMAC Mortgage LLC last week halted certain evictions and sales of foreclosed homes in 23 states to review those cases. The company said it found procedural errors in some foreclosure affidavits.

After GMAC’s announcement, attorneys general in California and Connecticut told the company to stop foreclosures in their states until it proves it’s complying with state law. The Ohio attorney general this week asked judges to review GMAC foreclosure cases.

And in Florida, the state attorney general is investigating four law firms, two with ties to GMAC, for allegedly providing fraudulent documents in foreclosure cases.

The issue is also gaining attention on Capitol Hill. Last week, Rep. Barney Frank, D-Mass. and two other lawmakers wrote to Fannie Mae, urging the government-controlled mortgage giant to stop working with so-called “foreclosure mill” law firms under investigation for document fraud.

“Why is Fannie Mae using lawyers that are accused of regularly engaging in fraud to kick people out of their homes?” the lawmakers wrote.

A Fannie Mae spokesman said the company is reviewing the issue.

JPMorgan acknowledged Wednesday that its employees signed some affidavits about loan documents without personally verifying the files. These affidavits verify the accuracy of the loan information, including who owns the mortgage.

JPMorgan spokesman Kelly said the bank believes the information in the affidavits is accurate, and that the affidavits were prepared by “appropriate personnel.”

The bank asked judges not to enter judgments against homeowners facing foreclosure until it completes its review of the problem. JPMorgan expects the process to take a few weeks.

The way mortgages are packaged and sold to many investors as securities can make it hard to determine who has the right to foreclose on a homeowner.

In some states, lenders can foreclose quickly on delinquent mortgage borrowers. But 20 states use a lengthy court process for foreclosures. They require documents to verify information on the mortgage, including who owns it. Florida, New York, New Jersey and Illinois are the biggest states with this process.

Christopher Immel, a Florida lawyer who represents homeowners, said people who already have lost homes could sue their lender, alleging errors in documents.

In August, a judge in Duval County, Fla., ruled that JPMorgan could not foreclose on two homeowners. The reasoning was that Fannie Mae carried the mortgage on its books and JPMorgan Chase only collected payments on the loan. JPMorgan Chase had identified itself as the owner of the loan.

More lawsuits could come soon.

In May, JPMorgan employee Beth Ann Cottrell said in a deposition that she and her staff of eight signed about 18,000 legal documents a month without reviewing every file. In a similar testimony, GMAC employee Jeffrey Stephan said he signed 10,000 documents a month without personally verifying the mortgage information.

“It’s very realistic to believe that this is a standard practice in how they go about foreclosures in certain states,” said Immel, whose law firm took Cottrell’s and Stephan’s depositions.

Copyright 2010 The Associated Press; Alan Zibel, AP Real Estate Writers; Janna Herron, AP Real Estate Writers. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Zibel contributed to this report from Washington.

Foreclosure Fraud--A New Home Game


“Fraudulent Foreclosure Mill”
It’s the game where laws don’t matter and all the houses go back to the bank no matter what!  I’m not sure, but it sounds like something that might have been developed by Saddam Hussein, no?  Or, maybe Vikram Pandit and Jamie Dimon, I suppose.

Mandelman—September 24, 2010

I’m sorry, but is GMAC… no, wait… Ally Financial… I keep forgetting they’re my “ally” now… run by a 40 Mule Team of morons?  Don’t answer that, it was clearly rhetorical.

Okay, so here’s the story… some attorneys representing homeowners in foreclosure noticed that GAMC was saying things that weren’t true, which is sometimes referred to as “lying,” and then in a deposition it came out that a middle manager at GMAC was actually signing 10,000 foreclosures a month without reading the paperwork like he was supposed to… or, one might consider… like any normal human being would do given they had a job signing 10,000 of anything each month.  I mean… what the… can you even imagine?

Well, here’s your job.  We’ll need you to sit here and sign your name roughly 10,000 times a month.  So, if there are 21.67 work days per month, which there are, according to Amswers.com, then that would mean signing your name about 462 times per day, or 58 per hour, assuming one were to work eight hours a day without breaks of any kind.  That’s one per minute, and it assumes there’s some sort of catheter involved.

No problem you say.  Except how will I be able to read what I’m signing? “Oh, no need for that, silly rabbit,” your boss says… “kicks are for trids.”  What in the world was going on here, pray tell?  Why, it’s time to play “Fraudulent Foreclosure Mill,” of course.  It’s the game where laws don’t matter and all the houses go back to the bank no matter what!  I’m not sure, but it sounds like something that might have been developed by Saddam Hussein, no?  Or, maybe Vikram Pandit and Jamie Dimon, I suppose.

NPR reported: “The company recently halted evictions in dozens of states, after news of the robo-signer came to light.”

Oh come on… I HATE it when people treat me like I’m six.  Is this “news” to GMAC, or any of the other banksters?  That’s what I’m to believe?  Really?  Well I don’t usually say what I’m about to say but this is my blog and I don’t work for anyone but me, so… GMAC… F#@k you.

I worked in corporate America for some 20 years, and quite a few of those years I even worked for banksters, including JPMorgan, and there’s absolutely NO CHANCE whatsoever that this is “news” to anyone there.  I absolutely guarantee you that there are secretaries at GMAC that know about this practice… they’ve been having meetings about it for years.  There are enough CYA memos floating about at GMAC that if you stacked them on top of each other they’d be taller than Shaquille O’Neal standing on Lord Blankcheck’s throat in a pair of 4” stilettos while on the roof of a Yukon, an image that I’d go pay-per-view to see, I don’t know about you.

No, it’s not “news,” although I guess I have to be happy that the lamebrain media has finally caught on that something might be amiss in Foreclosure Land.  And it’s about damn time.  As I recently said to a producer at American Public Television: “Thanks for coming, media people, you’re a little late, but come on in, there’s still plenty of food.”

No, even though NPR, the Washington Post, the New York Times, and just about every news site, publication and blog on the planet reported on the story, it’s not “news,” except that perhaps because it’s us the taxpayers that actually own most of GMAC, it is.  Yep, it’s “us” that are paying that robo-signer to sign his name a gazillion times a month, thus creating fraudulent documents that are then used by lawyers with fewer ethics than pond scum to throw “US” our of our homes illegally.

We, the taxpayers, have given GMAC $17.2 billion in TARP funds, none of which have been repaid, by the way.  And I love the way the media reports that the “Treasury invested” in GMAC.  The U.S. Treasury doesn’t have any money, folks.  That’s U.S. citizen paid or borrowed tax payer money they’re “investing”.  And if we the tax payers are going to invest in companies, why do we have to invest in all the shitty ones?  (I apologize for my language in this article, but it’s just not a good day for me to play nice.)

NPR also reported that:

“The case — which could allow thousands of homeowners to challenge their evictions — has triggered other reports this week of sloppy foreclosure practices.”

Now I happen to like NPR, I’ve been listening to them on the radio for years.  But, “sloppy foreclosure practices?”  “SLOPPY?”  “SLOPPY?”  What the hell, have we all forgotten how to use the English?

Fraudulent, forged, bogus, fake, illegal, spurious, sham, false, phony, suppositious, illicit, unlawful, criminal, immoral, sinful, vicious, evil, iniquitous, peccant, wicked, wrong, vile, in violation of the law… damn it, don’t make me go find my thesaurus.

It reminds me of when that Senator was molesting that 16 year-old boy… the White House page, by at the very least, sending him repulsive, repugnant emails, and Newt Gingrich referred to them as “naughty emails”.  I mean… OH MY GOD!  “Naughty,” Newt?

Even the venerable Financial Times chimed in a couple of days ago saying:

“An official at JPMorganChase said in a deposition earlier this year that she signed off on thousands of foreclosures without verifying the details.”

Wow, really?  Who could have possibly known about that?  Oh wait… ME, among God-only-knows-how-many-others.  Here’s my story on the JPMorganChase robo-signer from LAST JUNE 4th, 2010.  Yepsiree… they call me “Scoop Mandelman,” yes they do… Oh, please.

And the Washington Post had their two cents to add:

“And an employee of a Georgia document processing company falsely claimed to work for dozens of different lenders while signing off on tens of thousands of foreclosure documents over the course of several years.”

Here’s what GMAC… oh, that’s right they’re my “ally,” had to say:

“Ally says that its review of the GMAC Finance issue has ‘revealed no evidence of any factual misstatements or inaccuracies’ in the documents that weren’t properly reviewed. And the company says it has fixed its process for reviewing foreclosure documents.”

Pardon me?  Did you just… I mean, what the… I can’t believe I just heard you say… what the… somebody oughta give you such a…  And what about the other 27 states?  Are they all fine and dandy?  People have lost homes here… God damn it…

Alright… STOP.

Look, there’s more to this story and you can bet your boots that I’m going to write about it all weekend… in great detail.  I’m going to tell you WHY they’re having to forge documents in order to foreclose on homes all over the country.  And you’re going to hate this even more than the forgeries themselves.

(Attorney Max Gardner and attorney April Charney, of Jacksonville Legal Aid, are the country’s leading experts on this and related injustices, and they’ve been gracious enough to give me enough information to write a book covering this topic on a scale of Gone With the Wind, the Next Ten Years.  I’m going to run my next piece by them before I post, but it’ll be up this weekend if it kills me.  Don’t miss it.)

But not right now, because right now I’m going to head down to my local watering hole to toss back a couple of pints.  Then I’m going to ask a friend of mine to back over me with his car to make the pain go away.

Oh, and what follows is GMAC’s “CONFIDENTIAL” memorandum… they labeled it “privileged & confidential,” but anyone want to guess how much I care about that?  Read it and weep… I know I did.

Mandelman out.

The church is near, but the road is icy.  The tavern is far, but we will walk carefully.

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Urgent: GMAC Preferred Agents

Privileged & Confidential 9/17/10

Attorney/Client Privilege

Dear GMAC Preferred Agents:

GMAC Mortgage has determined that it may need to take corrective action in connection with some foreclosures in the following states:

Connecticut

Florida

Hawaii

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Nebraska

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Pennsylvania

South Carolina

South Dakota

Vermont

Wisconsin

As a result of the above, effective immediately and until further notice, please take the following actions only in the states identified above:

Evictions:

Do not proceed with evictions, cash for keys transactions, or lockouts. All files should be placed on hold, regardless of occupant type.

REO Closings:

Do not proceed with REO sale closings. GMAC Mortgage will communicate instructions to the assigned agent regarding the management of the properties in Pending status. If the contract has already been executed by both parties, the Asset Manager will request an

amendment to extend the closing date by 30 days or as otherwise designated by the Asset Manager. Please provide appropriate notice to the REO purchaser that, pursuant to Section

(Page 2)

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1 of the GMAC Mortgage Addendum to Standard Purchase Contract, GMAC Mortgage is exercising its sole discretion to extend the Expiration Date of the Agreement by 30 days at this time. If the REO purchaser wishes to cancel the contract, GMAC Mortgage will terminate the Agreement and return the earnest money deposit.

You will receive further instructions regarding the status and handling of these assets from your asset manager. There could be asset level exceptions and you will receive direct communication from GMAC on the handling of those exceptions. Please send any questions or concerns regarding these matters to your asset manager.

Please ensure your staff is aware of these requirements immediately.

GMAC Mortgage

GMAC Mortgage LLC 2711 N. Haskell Ave, Suite 900, Dallas, TX 75204

Ally Financial legal issue with foreclosures may affect other mortgage companies

Washington Post Staff Writer
Wednesday, September 22, 2010; 5:37 AM


Some of the nation's largest mortgage companies used a single document processor who said he signed off on foreclosures without having read the paperwork - an admission that may open the door for homeowners across the country to challenge foreclosure proceedings.

This Story

The legal predicament compelled Ally Financial, the nation's fourth-largest home lender, to halt evictions of homeowners in 23 states this week. Now it appears hundreds of other companies, including mortgage giants Fannie Mae and Freddie Mac, may also be affected because they use Ally to service their loans.

As head of Ally's foreclosure document processing team, 41-year-old Jeffrey Stephan was required to review cases to make sure the proceedings were legally justified and the information was accurate. He was also required to sign the documents in the presence of a notary.

In a sworn deposition, he testified that he did neither.

The reason may be the sheer volume of the documents he had to hand-sign: 10,000 a month. Stephan had been at that job for five years.

How the nation's foreclosure system became reliant on the tedious work of a few corporate bureaucrats is still a matter that mortgage lenders are trying to answer. While the lenders may have had legitimate cause to foreclose, the mishandling of the paperwork has given homeowners ammunition in their fight against foreclosure and has drawn the attention of state law enforcement officials.

Ally spokesman James Olecki called the problem with the documents "an important but technical defect." He said the papers were "factually accurate" but conceded that "corrective action" may have to be taken in some cases and that others may "require court intervention."

Olecki said the company services loans "from hundreds of different lenders," but he declined to provide names.

Spokesmen for Fannie and Freddie confirmed Tuesday after inquiries from The Washington Post that they use Ally, formerly called GMAC, to oversee some mortgages. The companies have launched internal reviews to assess the scope of any potential issues.

Ally, Fannie and Freddie - all troubled mortgage companies that received extraordinary bailouts by the federal government during the financial crisis - declined to say how many loans might be affected. The Treasury Department, which owns a majority stake in Ally and seized Fannie and Freddie in 2008, also declined to comment.

Fannie and Freddie, created by Congress to finance mortgages and encourage homeownership, have in recent years been repossessing houses at record numbers. Fannie alone reported recently that 450,000 of its single-family loans were seriously delinquent or in the foreclosure process as of June 30. That's nearly 5 percent of the loans it guarantees.

Lawyers defending homeowners have accused some of the nation's largest lenders of foreclosing on families without verifying all of the information in a case, but it has been hard for them to stop foreclosure proceedings.

Ally's moratorium comprises only the 23 states - none in the Washington area - that mandate a court judgment before a lender can take possession of a property. But if Stephan signed documents related to foreclosures in states without this requirement (it's unclear whether he did), it could help a much broader range of borrowers.

Ally's moratorium comprises only the 23 states - none in the Washington area - that mandate a court judgment before a lender can take possession of a property. But if Stephan signed documents related to foreclosures in states without this requirement (it's unclear whether he did), it could help a much broader range of borrowers.

Stephan was the only employee signing papers for foreclosures that were to be submitted to courts that did not involve bankruptcies. The latter cases, which were more complex, were handled by a separate department.

Olecki said Stephan still works for Ally but added, "We cannot comment further about his position."

While several large lenders contacted by The Post declined to talk about the document review process for foreclosures, attorneys working on behalf of homeowners said the setup at Ally was not unusual.

Christopher Immel, an attorney in Florida who deposed Stephan for a case in Palm Beach County, said he thinks Stephan was not a rogue employee but one that was performing his job responsibilities as the company told him to do.

"GMAC has a business model to do this, and Stephan was just one small part of it," Immel said. "He was under the impression it was okay to do this."

Lawmakers Challenge Fannie Mae's New Policy on Strategic Defaulters

A faction of House Democrats have called on Treasury Secretary Timothy Geithner and the regulator of Fannie Mae, the Federal Housing Finance Agency (FHFA) to suspend the GSE’s recently announced policy to sue homeowners who strategically default on their mortgage.

In late June, the mortgage giant issued a notice stating that defaulting borrowers who walk away when they had the capacity to pay, or who do not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage for a period of seven years from the day of foreclosure.

In addition, Fannie Mae said it will take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments.

The group of lawmakers, led by Rep. John Conyers, Jr. (D-Michigan), called the policy “opaque, overbroad, and punitive,” and decried Fannie for using taxpayer dollars to penalize underwater homeowners.

Conyers and his colleagues sent a letter to Secretary Geithner this week, urging him and FHFA Acting Director Edward DeMarco to suspend the policy indefinitely until the administration and Congress have reviewed the implications and determined if it is in the best interest of the American people to have Fannie Mae pursue such a strategy.

“This policy is one of many which seems to run counter to the national need to stem the tide of foreclosures which are devastating communities across our nation,” the correspondence stated. “At a time of record deficits and a nation crying for the government to get its finances in order, it is also unclear why Fannie Mae is proposing to use taxpayer dollars to pursue legal judgments against individuals who will lose or have lost their homes, have wrecked their credit rating, and likely have little or no remaining monetary assets.”

The lawmakers went on to say, “Treasury has already invested $86 billion into Fannie Mae and considering Fannie Mae’s dependence on federal dollars to exist and operate, we think pursuing expensive litigation against a vulnerable population when there appears to be little to no economic incentive is questionable at best.”

The legislators also questioned what objective criteria Fannie would use to determine whether a default was truly strategic. The GSE has said it will rely on the reports of its servicers to determine borrower intent.

“We have great concern with putting such faith in the servicers,” the lawmakers wrote, citing feedback from their constituents and a number of congressional watchdog groups that call into question servicers’ performance in dealing with huge volumes of defaults and communicating effectively with borrowers.

In addition to Conyers, the letter was signed by Reps. Marcy Kaptur (D-Ohio), Raúl Grijalva (D-Arizona), Steve Cohen (D-Tennessee), Barbara Lee (D-California), Zoe Lofgren (D-California), and Michael Honda (D-California).

Fannie Mae says its policy is designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure by imposing stiffer penalties for strategic defaulters.

According to the analysts at Moody’s Investors Service, the new rules will be difficult to implement and even harder to enforce. In fact, they warn that Fannie’s policy could potentially reignite private subprime lending.

New Obama Plan will Reduce Mortgage Balances for homeowners who owe more than their homes are worth.

By NICK TIMIRAOS

The Obama administration on Tuesday will launch its most ambitious effort at reducing mortgage balances for homeowners who owe more than their homes are worth.

Officials say between 500,000 and 1.5 million so-called underwater loans could be modified through the program, the first initiative to target homeowners who are current on their mortgage payments but are at risk of default because they have no equity in their homes. Some experts are warning, however, that the same knots that tied up prior initiatives could do so again.

Under the new "short refinance" program, banks and other creditors that write down mortgages to less than the value of the property can essentially hand off the reduced loan to the government. The process involves refinancing borrowers into loans backed by the Federal Housing Administration.

While the program puts taxpayers at risk-officials estimate one in five loans in the program could default-the government has set aside $14 billion previously earmarked for housing aid from the Troubled Asset Relief Program to cover losses.

The new program, which was announced in March, is starting as the housing market shows signs of renewed trouble and as the Obama administration's signature Home Affordable Modification Program, or HAMP, falls short of its goals of helping three million homeowners. Half of the 1.3 million borrowers that enrolled in temporary loan modifications have fallen out of HAMP because they didn't qualify. Only one-third has received permanent modifications.

The initiative also comes as mortgage rates fall to their lowest levels in more than 50 years. Average rates on 30-year fixed-rate loans dropped to 4.43% last week, down from 4.55% during the previous week, according to a survey published Wednesday by the Mortgage Bankers Association.

FTC Issues Final Rule to Protect Consumers in Credit Card Debt

Amendments to Telemarketing Sales Rule Prohibiting Debt Relief Companies From Collecting Advance Fees Will Take Effect in October 2010

Starting on October 27, 2010, for-profit companies that sell debt relief services over the telephone may no longer charge a fee before they settle or reduce a customer’s credit card or other unsecured debt.


“At the FTC we strive every day to make sure America’s middle class families get straight deals for their dollars,” Chairman Jon Leibowitz said. “This rule will stop companies who offer consumers false promises of reducing credit card debts by half or more in exchange for large, up-front fees. Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.”

Three other Telemarketing Sales Rule provisions to take effect on September 27, 2010, will:


  • require debt relief companies to make specific disclosures to consumers;
  • prohibit them from making misrepresentations; an
  • extend the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising.

The Final Rule covers telemarketers of for-profit debt relief services, including credit counseling, debt settlement, and debt negotiation services. The Final Rule does not cover nonprofit firms, but does cover companies that falsely claim nonprofit status. Over the past decade, the FTC and state enforcers have brought a combined 259 cases to stop deceptive and abusive practices by debt relief providers that have targeted consumers in financial distress.

Advance Fee Ban

The Final Rule contains specific requirements for debt relief providers related to charging an advance fee before providing any services. It specifies that fees for debt relief services may not be collected until:


  • the debt relief service successfully renegotiates, settles, reduces, or otherwise changes the terms of at least one of the consumer’s debts;
  • there is a written settlement agreement, debt management plan, or other agreement between the consumer and the creditor, and the consumer has agreed to it; and
  • the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

To ensure that debt relief providers do not front-load their fees if a consumer has enrolled multiple debts in one debt relief program, the Final Rule specifies how debt relief providers can collect their fee for each settled debt. First, the provider’s fee for a single debt must be in proportion to the total fee that would be charged if all of the debts had been settled. Alternatively, if the provider bases its fee on the percentage of what the consumer saves as result of using its services, the percentage charged must be the same for each of the consumer’s debts.


Dedicated Account for Fees and Savings


Another new provision of the Final Rule will allow debt relief companies to require that consumers set aside their fees and savings for payment to creditors in a “dedicated account.” However, providers may only require a dedicated account as long as five conditions are met:


  • the dedicated account is maintained at an insured financial institution;
  • the consumer owns the funds (including any interest accrued);
  • the consumer can withdraw the funds at any time without penalty;
  • the provider does not own or control or have any affiliation with the company administering the account; and
  • the provider does not exchange any referral fees with the company administering the account.

Disclosures and Prohibited Misrepresentations


Under the Final Rule, providers will have to make several disclosures when telemarketing their services to consumers. Before the consumer signs up for any debt relief service, providers must disclose fundamental aspects of their services, including how long it will take for consumers to see results, how much it will cost, the negative consequences that could result from using debt relief services, and key information about dedicated accounts if they choose to require them.


The Final Rule also prohibits misrepresentations about any debt relief service, including success rates and whether the provider is a nonprofit entity. The FTC’s Statement of Basis and Purpose, which accompanies the Final Rule, provides extensive guidance about the evidence providers must have to make advertising claims commonly used in selling debt relief services.


The Rulemaking Process


In August 2009, the FTC published in the Federal Register a notice of proposed rulemaking proposing amendments to the Telemarketing Sales Rule and requesting public comments. Over 300 commenters, representing a wide variety of stakeholders, submitted comments in response. The Commission also held a public forum on the proposed amendments on November 4, 2009. The FTC developed the Final Rule based on the public comments, the record of the public forum and the FTC’s September 2008 Workshop on the debt settlement industry, recent testimony before Congress, and law enforcement actions brought by the Commission and the states.


Information for Businesses


Today, the FTC staff issued a compliance guide to help businesses comply with the new debt relief rules. The compliance guide describes the key changes to the Telemarketing Sales Rule affecting debt relief services, helps businesses determine if they are covered by the new rules, details information that covered entities must disclose to customers, and discusses how fees may now be collected. It can be found at http://www.ftc.gov/bcp/edu/pubs/business/marketing/bus72.pdf on the agency’s website and is linked to this press release.


The FTC vote approving publication of the Federal Register notice was 4-1, with Commissioner J. Thomas Rosch voting no. The notice will be published in the Federal Register shortly, and is available now on the FTC’s website at http://www.ftc.gov/os/2010/07/R411001finalrule.pdf. The provisions of the Final Rule will take effect on September 27, with the exception of the advance fee ban provision, which will take effect on October 27.


The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

China Overtakes Japan to Become Second Biggest World Economy

Forum topic China Overtakes Japan to Become Second Biggest World Economy has been created.

Friday, 30 Jul 2010 06:30 AM

China has overtaken Japan to become the world's second-largest economy, the fruit of three decades of rapid growth that has lifted hundreds of millions of people out of poverty.

Depending on how fast its exchange rate rises, China is on course to overtake the United States and vault into the No.1 spot sometime around 2025, according to projections by the World Bank, Goldman Sachs and others.

China came close to surpassing Japan in 2009 and the disclosure by a senior official that it had now done so comes as no surprise. Indeed, Yi Gang, China's chief currency regulator, mentioned the milestone in passing in remarks published on Friday.

"China, in fact, is now already the world's second-largest economy," he said in an interview with China Reform magazine posted on the website of his agency, the State Administration of Foreign Exchange.

Cruising past Japan might give China bragging rights, but its per-capita income of about $3,800 a year is a fraction of Japan's or America's.

"China is still a developing country, and we should be wise enough to know ourselves," Yi said, when asked whether the time was ripe for the yuan to become an international currency.

China's economy expanded 11.1 percent in the first half of 2010, from a year earlier, and is likely to log growth of more than 9 percent for the whole year, according to Yi.

China has averaged more than 9.5 percent growth annually since it embarked on market reforms in 1978. But that pace was bound to slow over time as a matter of arithmetic, Yi said.

If China could chalk up growth this decade of 7-8 percent annually, that would still be a strong performance. The issue was whether the pace could be sustained, Yi said, not least because of the environmental constraints China faces.

In an assessment disputed by Beijing, the International Energy Agency said last week that China had surpassed the United States as the world's largest energy user. If China can keep up a clip of 5-6 percent a year in the 2020s, it will have maintained rapid growth for 50 years, which Yi said would be unprecedented in human history.

The uninterrupted economic ascent, which saw China overtake Britain and France in 2005 and then Germany in 2007, is gradually translating into clout on the world stage.

More

http://www.moneynews.com/Headline/China-Second-Biggest-World...

Ready, Aim, Bankruptcy!!!

"If you file for bankruptcy, you run the risk of losing your money and your car to creditors.

But under a measure that just overwhelmingly passed the House of Representatives, one thing they would not be able to take is your gun.

The House this afternoon passed a bill that would change the law to allow someone going through bankruptcy proceedings to retain their rifles, shotguns, and pistols so long as they are worth less than $3,000 combined. (CBS Radio Capitol Hill correspondent Bob Fuss reports that, under the law, if you keep just one firearm, there is no such limit on its value.)

Sen. Patrick Leahy, D-VT, introduced a similar measure in the Senate yesterday. The bill passed the House 307 to 113.

The House measure was introduced by freshman Democratic Rep. John Boccieri of Ohio, who argues that "We must protect the rights guaranteed to us by our founding fathers, no matter what financial circumstances a citizen might face," according to The Plain Dealer.

The National Rifle Association, possibly the most powerful lobbying group in Washington, endorsed the measure, saying in part, "We think it is reasonable for folks who are in financial distress to have an effective means of defending themselves."

Many states already have carve-outs for firearms in bankruptcy proceedings."

Unemployment Benefits Might Stop Temporarily!

WASHINGTON – As Congress raced to leave Washington for its Easter recess, a Republican senator blocked a stopgap bill to extend jobless benefits, saying its $9 billion cost should not be added to the national debt.

As a result, some people who have been out of work for more than six months will at least temporarily lose benefits. Newly jobless people won't be eligible to sign up for generous health insurance subsidies.

Help on second Mortgages!

The four big holders of second mortgages — Citigroup Inc., Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. — have now joined the government's program to modify second mortgages, after pressure from the Treasury Department. That program was delayed for months but now the major players in the industry are on board.

15 Billions to fund new program to help homeowners

After months of criticism that it hasn't done enough to prevent foreclosures, the Obama administration announced on Friday March 19 a plan to reduce the amount some troubled borrowers owe on their home loans.

The administration cautioned that the plan isn't intended to stop all foreclosures or assist all troubled homeowners.

"There's no intention here of tackling what may be 10 to 12 million foreclosures over the course of the next three years," said Diana Farrell, a White House economic adviser

The plan announced Friday will also require the mortgage companies participating in the administration's existing foreclosure prevention program to consider slashing the amount borrowers owe. They will get incentive payments if they do so.

It also includes three to six months of temporary aid for borrowers who have lost their jobs. And there will be additional payments designed to give banks an incentive to reduce payments or eliminate second mortgages such as home equity loans — a problem that has blocked many loan modifications

 

 

Allowable debt limit for Chapter 13 as of april 1st

Section 109(e) allowable debt limits for individual filing bankruptcy under chapter 13 as of April 1, 2010:

$360,475 = Unsecured Debt

$1,081,400 = Secured Debt

Bank of America to lower mortgage principal

Bank of America came up with a new program.  This program would apply only to borrowers who owe more than 120 percent of their home's current market value and would be limited to those customers with certain adjustable-rate and high-interest mortgages. Would you like to know if you qualify?