Attorneys General Must Get Tough on Foreclosure Fraud

NAAG is the National Association of Attorneys General.  AGs from the fifty states and the various other jurisdictions such as territories, districts, etc., gather periodically to cooperate in how to manage common issues and work together on multi-state problems.  Some of the cooperative work they have done includes the Tobacco Settlement and the current Foreclosure Fraud Investigation.

Through North Carolina United Power, I have been participating with a working group of national organizations who are in conversation with the AGs about the Foreclosure Fraud Investigation.  Recently, we took a group to Chicago to meet with some of them about their work to protect homeowners and keep families in their homes.  I was interviewed by the local CBS radio affiliate in the hours before our meeting.

Among the key items of our agenda are:

• broad availability of principal reductions to reset the housing market and remove the risk of more foreclosures;
• remedies for all who have been harmed by fraud other criminal acts, whether they have already suffered foreclosure, are in process, or are facing impending foreclosure;
• the end of dual tracking, with simultaneous loan modification discussions and foreclosure procedures;
• all possible efforts for loan modifications and other non-foreclosure procedures should precede the initiation of foreclosure procedures;
• criminal prosecutions for criminal acts; and
• regulatory regimes to keep this kind of mortgage fraud from being repeated.

We were able to meet with four of the state Attorneys General:  Lisa Madigan of Illinois, Tom Miller of Iowa (the leader of the task force working on the foreclosure fraud investigation), Roy Cooper of North Carolina (President of NAAG who pushed the foreclosure fraud investigation forward), and George Jepsen of Connecticut (newly elected).  Our conversation was formal, perhaps overly so.  We discussed our agenda, they discussed their records, and then we exchanged questions and vague answers.  The time was short:  only 30 minutes.  There was very little new that came out of the meeting, but do not assume that I am saying it was not worthwhile.  Let me clarify why this was such an important meeting.

In organizing, we plan an action to get a reaction.  When we get our reaction, then we evaluate what we have learned and begin to plan future research and actions in light of it.  Our action in Chicago revealed a number of important things about our work on to change the conditions faced by so many families being hit by foreclosures.

This action showed something to our organizing groups, to the four AGs present in our meeting, to the many other AGs at the hotel but not at our meeting, and to the press and their readers.  To us, it showed that we have the power to bring the key law enforcement figures in the foreclosure negotiations to the table, even if we and they know they cannot negotiate publicly with us about potential criminal proceedings against banks.  Not only do they meet with bankers.  They also meet with us.

To the AGs present, we were able to deliver a multiracial, multiethnic, knowledgable, prepared, faith-based and non-faith-based, nationwide constituency to speak intelligently and passionately about this critical work they are doing.  They found us to be what we said, representatives of hundreds of thousands of citizens, thousands of churches and synagogues and mosques, and from states all across the nation.

To the AGs not present, we made it publicly clear that their colleagues who are leading in this foreclosure investigation are willing to meet with us.  Miller, Cooper, Madigan, and Jepsen will meet with us not only in their private chambers back home but in a public forum where they can express, even with the press in the room, their strong agreement with our agenda.  They were very adamant that they would not settle for an agreement that did not fundamentally change the practices of mortgage lending and foreclosure.  They believe the result must benefit homeowners and borrowers, not primarily get lenders off the hook.

To the press and their readers (including bankers) we were able to show that the case for principle reduction remains strong, with a powerful constituency.  Among the key items reported was the commitment to take banks to court if the negotiations do not bring fundamental change.  These AG negotiators  have not given up on a strong settlement and will not accept a weak settlement.  Our action got broad coverage in newspapers and in banking industry news sources.

The investigation and negotiation of a settlement could come very soon.  Or it could drag on through the summer.  Sooner is better, and we are expecting to see a court decree with tools to provide real help to homeowners.

Theology and Economy Update

For those of you who check in here now and then, you probably know that in 2009 a group of theological professors in North Carolina and South Carolina distributed a working paper, "Theological Reflection on the Economy."  It was an early step in a series of actions and campaigns through which faith communities have organized around economic justice in the current economic crisis.  Since that time, I have occasionally communicated with the group of professors about active campaigns, particularly the "10% Is Enough" work on usury pertaining to credit cards and other consumer interest.  This week, I sent a note to update them on the range of actions and campaigns in which North Carolina United Power has continued to organize in the past year and a half.  Here is an excerpt of the note I sent them.

Hey, folks,

A year and a half ago I was sending you lots of emails as we started work on a major organizing campaign dealing with economic justice issues.  As theological scholars and servants of the church, we recognize our responsibilities to follow Jesus in the task of serving the poor, offering ministry of relief, building ecclesial structures to reshape economic life in our neighborhoods, and seeking justice in the face of economic powers.  Thus, the theological reflection leading to the "Theological Reflection on the Economy" of 2009 was an exercise of our vocation which helped to provide grounding for faith-based people's movements which have gone many directions.  The document has been studied in churches, in minister's conferences, in seminary classes, and far beyond North and South Carolina. 

The paths of discipleship continue to open before us even now.  Let me highlight some of the work linked to our efforts of 2009.

1.  The "10% Is Enough" campaign in the Eastern US, London, and Berlin, has continued to bear fruit.  We did not convince banks to voluntarily cap credit card interest rates, nor did with convince Congress to cap consumer interest rates.  But we have built relationships with bank executives which are paying off in continued access and influence.  Moreover, leaders of the "10% Is Enough" campaign have met with Dr. Elizabeth Warren to help shape the Consumer Financial Protection Agency.  Caps on interest rates continue to be a lively topic, in part because of the strong work of MetroIAF, of which we have been a part.

2.  The "6% Is Enough" campaign to protect military families from predatory credit practices and foreclosure has been an overwhelming success.  This is a NC United Power campaign, and we have worked with Wachovia/Wells Fargo and Bank of America.  B of A held ongoing conversations with us for over a year.  Last summer they agreed to everything we were asking for, extending benefits beyond the legal requirements for nine months of protection from rising interest rates.  For several months, they were reluctant to admit publicly that they had changed their policies in response to negotiations with NCUP.  This month, in a surprise turn, CEO Brian Moynihan publicly thanked NCUP and Gerald Taylor for our work in this crucial area.  Our fellow signatory, Dan Rhodes, was present to meet personally with Moynihan, the first time he has met personally with members of our organization.

3.   The effort to bring justice to the foreclosure crisis has taken off in recent months, in part because of the attention that NC Attorney General Roy Cooper has given to foreclosure fraud as President of the National Association of Attorneys General.  For this work, NCUP (also going by the name IAF-SouthEast) has made partnership with People Improving Communities through Organizing (PICO), National People's Action (NPA-US), Alliance for a Just Society, and the Alliance of Californians for Community Empowerment (ACCE), all faith-based community organizing groups, stretching our organizing from the west coast to the east coast, from the Rocky Mountains to the midwest to the south.  We have met with key leaders, including Iowa AG Tom Miller and NC AG Roy Cooper, all the while keeping our efforts alive with Bank of America.  One summary of our proposals, "The Homeowner's Bottom Line," has gained significant interest, and most of its proposals remain on the table in the nationwide AG's investigation and potential settlement with the major banks to improve the foreclosure process.

4.  In conversation with a major funding organization (no funding yet) for theological education research, I have piloted a course at Shaw University Divinity School, "Pastoral Readiness for Economic Crises."  We covered financial literacy and financial freedom for pastors as well as a form of Christian formation for churches and their communities.  We looked at a wide range of theological sources on money, possessions, economics, and consumption from the earliest churches down to our times.  We looked at tools for churches to evaluate their relationships with banks that may or may not be serving poor communities.  We looked at models of community development, such as the Christian Community Development Association model of ecclesial politics of neighbor love.  Finally, we looked at faith-based community organizing.  With this trial run under our belt, I am hoping to work with some of you as partners in developing a proposal for adapting this sort of clergy training to other seminaries and to continuing education programs for current pastors.

5.  The predatory practices of payday lenders and car-title lenders will not die without a fight.  From Texas to North Carolina, from Mississippi to New Hampshire, strong lobbying efforts to open the door to astronomical interest rates on small dollar loans are alive and well in the state legislatures.  I've testified before legislative committees in Texas, mentioning you all and our work.  Just this past week, a bill was introduced in the NC legislature to reopen the door to usurious rates.  When there is the chance of ripping people off legally, there will always be people trying to do it.  Contact your legislator right away to stop the progress of HB 810.  South Carolina, having passed important reforms in 2009, seems not to have any pending legislation at this time.

On two matters I am seeking your response to moving forward with this work. 

First, . . . we are considering a clergy witness [at an upcoming event], with particular attention to dealing justly in the foreclosure crisis. 

The text of Micah 2:1-11 is directly relevant to this matter (not to ignore Isaiah 5:8-17).  The injustice of Samaria and Judah included coveting and seizing houses, ruining people financially (v2).  The powerful put people out of their homes (v9).  All the while they continue to practice the trappings of faith.  Predictably, they demand that anyone who might preach judgment against their greed should stop saying that stuff (v6).  The prophet says they only want a preacher who says, "Go on and get drunk.  Live it up!" (v11), while they "rise up against my people as an enemy" (v8). 

We hope we might gather 100 clergy and seminarians to speak a word of witness about the injustices of foreclosing on people whose financial security was destroyed by the greed, risks, and fraud of bankers, brokers, and insurers. . . . Details of when and where to meet will be forthcoming, depending on whether we believe we can gather an appropriate-sized group for witness.

Second, I will be trying to convene a meeting of some of you professors in late May.  If you would be interested in meeting for three or four hours to evaluate the course I put together and to brainstorm about expanding clergy training for economic life, let me know. . . .

For more information, see

News coverage of recent NCUP action:  here and here

Foreclosure Justice:  Homeowner's Bottom Line 

Broad Campaign for Financial Reforms:  Showdown in America

Against Usury:  10% Is Enough 

Military Families:  6% Is Enough 

Periodic updates on "earth as it is in heaven"

Foreclosure Fraud 6: Appeals, Resetting the Market, and Criminal Charges

The "Homeowner's Bottom Line" concludes by addressing a few additional concerns.  The issue of appeals echos earlier concerns with transparency.  This process cannot be left to autocratic decisions by banks and mortgage servicers.  The formulas they are using, the comparisons they are making, the documents they are relying on--all of these need to be available for examination by homeowners and their advocates.  Moreover, if a decision seems unfair to the homeowner, there must be an appeals process for reexamining the decision to foreclose.

Second, the insistence on loan modifications and principle reduction should not become a point of contention between homeowners facing foreclosure and other homeowners who have been able to continue paying their mortgages.  This crisis, and the lending feeding frenzy that led up to it, has harmed the entire economy.  Speculative, inflated prices of real estate harm entire neighborhoods, not only the homeowners facing foreclosure.  If houses in a neighborhood face sharp devaluation, underwater mortgages, and foreclosure, it hurts everyone there.  Neighborhood devaluations spread to entire municipalities as housing values drop.  People who bought homes during the housing bubble may have payed inflated prices and interest rates.  To get the housing and mortgage market back to a rational level of valuation, we recommend loan modifications be made available to all homeowners.  Mortgage principle and mortgage interest rates should be reset at the current market levels for all borrowers who want loan modifications, whether or not they are facing foreclosure.

Finally, the reckless, devious, and unscrupulous actions of some mortgage brokers, bankers, and other financial executives betrayed their primary fiduciary responsibilities to homeowners, workers, investors, and the common good.  Some have committed criminal acts.  As in the investigation of the savings and loan scandal, appropriate authorities at state and federal levels should bring criminal charges against any and all persons responsible for contributing to this crisis of credit, unemployment, foreclosure, and economic collapse.

Problem: Under the current system, borrowers who are denied for loan modifications do not have access to any kind of appeals or escalation process to have the decision reviewed for accuracy.

Solution:

Every borrower must have the right to appeal to an independent third party-a court, mediator or public agency-that can review the servicer's loss mitigation effort.  Foreclosure must be stayed during the appeal.

Problem: Mortgage fraud has caused a ripple effect of negative consequences for families, communities and government, including reduced property values, negative equity for millions of American homeowners, widespread job loss, and massive state revenue shortfalls.

Solution:

Allow homeowners to refinance at current interest rates and market values.

Problem: Throughout the entire mortgage process, from origination to servicing and modification, banks and bank executives have consistently broken the law.  Bank executives knowingly made and purchased deceptive and predatory mortgage loans; fraudulently packaged those risky loans as AAA high quality investments; ignored the securitization rules they themselves wrote; and systematically falsified loan documents in a rush to foreclose on families.  But so far, not a single bank or bank executive has had to face justice or pay for their crimes.

Solution:

As the top law enforcement officials in our states, Attorneys General must seek criminal penalties as they discover bankers and servicers who broke the law.  Banks and bank executives are not above the law and should not escape the consequences for their illegal actions.

 

Foreclosure Fraud 5: Help for All Who Have Been Harmed

The relentlessness of the current foreclosure crisis can push one to despair.  There is endless talk about solutions, but too many people get their hopes up only to see nothing change.  Many striving for some way to keep their homes wait and wait until the time and opportunities run out and their homes are taken. 

There have been many stories of improper foreclosure proceedings through which people who had not missed any house payments found their homes sold at auction.  They were told that since it was a legal sale, they could do nothing about it.  Even more people, guided through a loan modification process and assured by a bank that the modification is forthcoming, have awoken one day to discover that their homes will be sold at auction anyway.  This does not even take into account the foreclosures completed by banks and servicers who have not produced any proof of their right to foreclose on the home.

In the meantime, millions more homeowners are facing foreclosure in the coming year.  A loan modification solution needs to be available soon so that these foreclosures will not continue to drive people from their homes and further undermine and harm the housing market.  Yet fairness requires that those whose homes have been fraudulently foreclosed have recourse to recover their home and investment.  A just solution must take all of this into account.

Problem: Because of entrenched problems and long-standing fraudulent practices, many families who should have received a loan modification have already been harmed, including the loss of their homes.

There are two basic categories of homeowners who have been harmed by servicers' malfeasance: (1) those who have lost their homes; and (2) those who are still in their homes, but have been denied a loan modification, pushed into default, or merely had improper fees tacked onto their account.

Solution:

• Remedies for Those Still in Process

For homeowners who have not yet lost their home in a foreclosure sale, servicers should institute a supervised, full review of every file marked in default. This review must include a review of the payment history, including the timing and application of payments and the validity of fees charged.

1. Homeowners found not to be in default should be removed from foreclosure, corrections of credit reporting status must be provided to the credit bureaus, and accounts should be fully corrected.
2. All pending foreclosures should be halted while this review takes place, and dual track processing must be stopped on all loans so that the modification review can be completed.
3. Fees should be rolled back and limited to reasonable and necessary ones.
4. Recalculation of principal balances should be done to account for improperly assessed fees or overcharged interest.

• Remedies for Those Whose Foreclosures Have Been Completed

The servicers should also be required to undertake a review of all completed foreclosures to identify any cases where the foreclosure was executed on the wrong home, where the homeowner was not in default, and where the foreclosure was completed without completing the loan modification review process, providing a written denial to the homeowner, or failing to offer a qualifying homeowner an appropriate modification.

1. If the home has not yet been sold to bona fide third party, the servicer should offer to restore the mortgage, with a reduction of the principal balance to account for all assessed foreclosure fees, as well as any improper fees.  If the homeowner cannot afford the current mortgage payments, they should be assessed properly for a loan modification under the procedures established above.  Servicers must further provide corrected credit reporting to the credit bureaus to mitigate the negative credit reporting.  A restitution fund should be established, funded by the servicers, to provide damages to this class of injured party.  

2. If the home has already been sold to a third party or if the homeowner no longer wishes to retain the home, the servicer should be required to refund to the homeowner all foreclosure fees assessed against the homeowner's account, plus the amount by which the valuation the servicer relied on exceeds the foreclosure sale price.  Servicers must also take steps to repair the homeowner's credit in these situations.  A restitution fund should be established, funded by the servicers, to provide damages to this class of injured
   party.  

3. If the homeowner who was subject to a wrongful foreclosure cannot be located, the servicer should be required to deposit the money that would otherwise be paid to the homeowner into the fund for legal services and housing counselors.

The last post in this series will cover a few final concerns, including the criminality of foreclosure fraud.

Foreclosure Fraud 4: Reigning in the Imbalance of Power

Anyone who has negotiated a price for a car knows what happens next.  Having agreed upon a price, the salesperson or clerk starts filling out an invoice and adding more fees, charges, and items over and above the agreement.  A whole new round of negotiations starts, and unless the buyer is willing to walk away from the car, she or he may be stuck with paying these "mandatory" fees.

Banks and other lenders have taken a page from the car dealer's book, and they must have entire departments devoted to thinking up charges and fees with fancy and official-sounding names.  With the passage of reforms for the credit card business and other consumer credit, these fee inventors have redoubled their efforts to replace outlaws charges with new ones.

If there is any fairness in the consumer credit industry, then this ability to arbitrarily and independently add fees and charges has to be reigned in.  Borrowers need to be able to enter discussions on modifications with at least the presumption that the process has their interest as a concern along with the lender's interest.  We want the attorneys general to enforce procedures which help maintain a balance of power in the loan modification and foreclosure process.

Problem: Servicers take unfair advantage of borrowers in default by charging multiple fees, sometimes for services that are unnecessary, and sometimes for costs that are disproportionate to the service being performed (in some cases by affiliated companies).

Solution:

All Fees Must Be Reasonable and Transparent

All servicer fees must be bona fide and reasonable and fully disclosed to the borrower.  Lender attorneys fees charged to borrowers may not exceed bona fide and reasonable fees for work.  Fees may only be collected for services actually rendered or for work actually performed.

Forced-place Insurance Severely Limited

The use afforce-placed insurance must be limited to reasonable application, affordable payments and only after other options, including borrower's option to purchase on open market, have been exhausted.

Problem: For any requirements (including those already in place), adequate enforcement provisions and staff must be put in place so servicers are not able to ignore the requirements with impunity.

Solution:

• Each settlement should contain the creation of an ombuds-office under the AG that will investigate violations of the agreement. Fines should be imposed for violations of the agreement if servicer refuses to cure. Also, the AGs should have the right to issue a "cease and desist" letter to halt foreclosure activity during the investigation.
• A portion of any monetary funds from the settlement should be directed to legal aid and housing counseling groups to assist with modifications and enforcement of agreement including foreclosure prevention litigation.
• In addition to assigning each borrower a single case manager, a single team should be created in house at each servicer as part of the settlement to oversee loan modification activity under the settlement.

The next post will deal with which people should have relief and recourse in dealing with foreclosure fairness and foreclosure fraud.

Foreclosure Fraud 3: Clear and Unequivocal Communication

When a bank working on a possible mortgage modification tells a borrower to stop making payments in order to allow the modification to proceed, usually in another office of the bank a red flag flies up to say that the foreclosure clock must start ticking.  One mouth says stop making payments and become delinquent in order to get paperwork moving.  Another says don't stop payments unless you want another set of paperwork to start moving.  Case after case in the past year has found homeowners receiving notification of a modification offer almost simultaneously with notification of a foreclosure sale.  By now you are all thinking about an old saying having to do with a left hand and a right hand.

This kind of carelessness and lack of concern for customers has characterized the current foreclosure crisis.  Admittedly, banks do not traditionally have enough staff to handle the current volume of potential loan modifications or the current volume of potential foreclosures.  In trying to ramp up while also keeping staffing numbers down, the result has been libraries of lost paperwork, constant restarting of the process, and a different answer from the servicer every time a homeowner makes contact.  Getting the banks to clean this up would seem to be in their interest, but when banks are as large as Wells Fargo and Bank of America, there is also a kind of internal struggle over which departments get to do what they should and which ones just do what they can.  We think that it is more than reasonable for homeowners to expect better.  What follows is a second part of what we are asking the Attorneys General to do.

Problem: Servicers proceed with the foreclosure process at the same time as they are conducting a loss mitigation process. This leads to borrower confusion and further complicates the process and the communication between borrower and servicer. It also leads to unjust foreclosures before due diligence is completed in the loan modification process.

Solution:

Mandatory and Standard Loan Modification Review

Foreclosures should not be initiated until the servicer does a complete review of a borrower's file. If the borrower is already in foreclosure when he or she requests a review, the foreclosure process (and not just the final sale) must be suspended until the review is completed.

a. This review must include the complete payment history; the contact log; and any other relevant information to determine whether the borrower is actually in arrears.

b. This review must include a determination that all loss mitigation requirements (as set out by HAMP, investors, FHA, GSE's, etc.) have been met, and the servicer must disclose to the customer all inputs and calculations done to establish qualification for a loan modification (see NPV transparency above).

c. Servicers must develop a protocol for evaluating Pooling and Servicing Agreements for investor restrictions and must seek a waiver if necessary.

Written Confirmation of Review to Borrower

If a borrower is not offered a loan modification, the servicer must provide a sworn affidavit to the borrower, disclosing the reasons for denial, including

a. any calculations done to determine loan modification eligibility; and

b. if the denial is due to investor-imposed restrictions, the specific language in the PSA prohibiting the modification, instructions on how the borrower can view the full PSA, and a written log of the servicer's efforts to obtain a waiver of this restriction.

Borrower Appeals Process

The denial letter must provide the borrower with an opportunity to appeal this determination to a neutral party. Foreclosure can only be resumed after written denial has been provided and time for an appeal has passed. If an appeal is pending, no foreclosure can be resumed.

No Legal Foreclosure Without Proof of Due Diligence

Servicers should be required to file a certification of loan modification procedures as a precondition to a foreclosure sale. In the case of a non-judicial foreclosure, the government official responsible for recording deeds and other transfers of property in the jurisdiction in which the property is located shall not permit the recordation of a deed transferring title after a foreclosure without certifying that the party conducting the sale has demonstrated that the requirements of this section have been met. A sale of property in violation of this subsection is void.

Consistent Communication with Consistent Staff

Upon contacting the servicer, the borrower must be assigned a case manager that will remain with that borrower throughout their loss mitigation experience. This case manager will have decision-making authority and access to the highest levels of management in the company. It is permissible for additional line staff to assist the case manager, as long as the case manager is always accessible to the borrower.  If a servicer is temporarily incapable of providing this adequate staffing level, the servicer must refer to a licensed special servicer until adequate staffing levels are reached.

The next post will deal with the imbalance of power that leads banks to multiply additional fees and get by with ignoring the law.

Foreclosure Fraud 2: Loan Modifications First

The agenda for stopping foreclosure fraud has to address many aspects of the process.  One of the first problems is convincing banks to see that their best interest, rather than robotically following a set of foreclosure procedures, is often to renegotiate mortgages with homeowners.  The following is an excerpt from our detailed proposals to the Attorneys General.

TO:  Attorney General Tom Miller

FROM:  PICO, NPA, SElU, AJS, ACCE, SE IAF

RE:  Problems in U.S. Mortgage Servicing & Needed Solutions

DATE:  February 9,2011 (REVISED)

CC:  Other 49 State Attorneys General

Problem: Servicers are not making affordable loan modifications that benefit both homeowners and the housing market, even when modification would provide a greater return to investors than a foreclosure.

Mandatory Loan Modification

When a loan becomes delinquent or when a borrower provides their servicer with notice that default is imminent, the servicer must review the mortgage loan to see if an affordable loan modification can be made. If a loan modification is in the best interest of the homeowner and investor, then the servicer is compelled to offer a modification.

Mandatory Principal Reduction
If the balance on a loan exceeds the current market value of the house the first step must be to reduce the principal to 100%. Recapture of forgiven amount may not exceed 50% of the increase in market value as determined by a third party appraisal.

Junior Liens Extinguished or Reduced
For any junior lien that is entirely underwater, even if it is not in default, the servicer must extinguish that lien according to the payoff schedule. For other junior liens, all liens must be reduced proportionately to meet the CLTV cap.

Transparent, Fair, Appealable Net Present Value (NPV) Calculation
Each servicer must provide public access to the NPV Test that it uses in making a loan modification determination. Inputs of general applicability (default rate for a community, locally specific appraisal, foreclosure costs, etc.) must also be made public. NPV calculation must be appealable by the homeowner for errors and misinformation.
     The servicer must disclose the property value of the home that it has used for purposes of determining the terms of the modification and the methodology used to determine the property value. If the homeowner disputes the property value and can give basis for the dispute and show that disputed difference is material, the servicer must conduct an independent appraisal of the property at servicer's expense.

Fair Application of Fees

All foreclosure and default related fees and costs must be waived in determining the new principal balance for the loan modification.

Reasonable Debt-to Income and Residual Income Calculations

Affordability should be based on a debt-to-income ratio range and a residual income test. The front-end debt-to-income ratio for modifications should be between 25-31%. The back end ratio, which should include all other secured and unsecured debts and medical expenses, should not exceed 46-60% based on circumstances. A residual income schedule that accounts for geographical differences in cost of living shall be set to ensure that borrowers have sufficient residual to pay other necessary living expenses regardless of front or back-end ratio calculations.

All Modifications Permanent

All modifications must be at a fixed interest rate for the life of the loan.

No Release of Liability

No modification can include a waiver of any legal claims of the homeowner.

Affirmative Outreach

Affirmative outreach provisions should be put in place requiring servicers to alert borrowers of the terms of the settlement, search for and reach out to eligible borrowers with proposed loan modifications, including door to door contact in heavily impacted census tracts.

The next post will deal with the conflicting internal operations of mortgage servicers and banks who simultaneously start foreclosure procedings and negotiate potential modifications with homeowners.

Foreclosure Fraud 1

A letter went out this week to Attorneys General of all fifty states:  it is time to get tough on the fraudulent, unjust practices of banks and other financial institutions foreclosing on the homes of hardworking people.  Already banks have had to admit they have not followed legal requirements in processing foreclosures.  What needs to be uncovered is the full extent of the carelessness, fraud, and predation by the financially powerful institutions who believe they can get by with it because they can afford the lawyers that most of us cannot.

But each state has an Attorney General who works for us.  They already have initiated action on foreclosure fraud.  The lead investigator, AG Tom Miller of Iowa, has agreed to work with us in pushing this agenda forward.  The letter below is the first page of our expanded agenda to deal with key aspects of the foreclosure crisis, "The Homeowner's Bottom Line."  The letter was cc'ed to AGs from all 50 states.

For more information and to find out how to get involved, check out Showdown in America.