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Banks giving loan modifications but only if homeowners waive legal rights

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Banks and lenders with new requirements

It has been a dramatic year in the lending industry with changing requirements[1], news that half of the housing market is now distressed[2], and endless infighting over how to resolve the robosigning debacle wherein banks illegally (or “wrongfully” if we’re being politically correct) foreclosed on homes[3].

Some homeowners have stood up against banks by going on hunger strike[4], suing back for millions[5] and even foreclosing on bank branches through loopholes[6] to the point that we’ve asked how the legal system is going to handle the onslaught of lawsuits[7] of all the victims (and even those that are not victims but putting their palms out anyhow). All that could change, however.

Rights wavers buried in fine print

According to a new study by Slate and ProPublica[8], banks are now choosing to be proactive and have “buried in the fine print” a rights waver so that a homeowner has to agree to never sue the bank for anything relating to the loan in order to get a loan modification.

On one hand, it sounds fair and is part of a standard settlement- the bank will change your loan, but you can’t sue them over it. On the other hand, it is a form of blackmail, especially in light of ProPublica reporting this practice has already been banned.

Homeowners in a vulnerable situation?

The report implies that most homeowners won’t understand or realize they’re signing a waiver as it is not a separate form or given much attention, rather “buried” in fine print deep in the loan modification offer. Even if vulnerable homeowners do understand that they’re having to waive their rights, their choices may be limited- lose their home or lose their right to defend themselves?

ProPublica “identified eight banks and other mortgage servicers who offer help that limits homeowners’ ability to sue or fight foreclosure. When contacted, they offered a variety of responses. Some said the inclusion of the waivers had been a mistake and would stop. Some argued that language that seemed to waive the homeowner’s rights didn’t actually do so. One argued that a loophole in a rule barring the practice meant their inclusion in certain agreements was proper.”

No legal challenges. Yet.

The waivers have not been challenged in court yet, so it remains to be seen if they will hold up, but it seems highly questionable that the same banks (Bank of America, Wells Fargo, Chase and the like) that are losing lawsuits have responded by a back door waiver of rights that allows them to abuse homeowners in any way they deem “proper” given the homeowner has waived rights forever just to modify their loan.

Tell us in comments what you think of this rights waiver- is it a fair and acceptable part of a settlement with a homeowner (we’ll make this change but you can’t sue us for it later), or is it a gateway for further abuses in an industry whose ethics are consistently questionable?

Resources:
[1] “Government to mandate 20% down on all home loans – is housing doomed?”
[2] “Distressed homes now half of the housing market, is there a silver lining?”
[3] Robosigning debacle, stories of illegal foreclosures
[4] “Hunger strike in Austin over foreclosure comes to an end”
[5] “Military homeowners’ class action suit against Chase settled for $48 million”
[6] “Homeowner forecloses on Wells Fargo office, becomes folk hero”
[7] “How will the legal system handle the coming onslaught of lawsuits?”

[8] Slate & ProPublica story “Mortgage modifications: Some lenders ask homeowners to waive their rights in order to get mortgage relief”

The American Genius is news, insights, tools, and inspiration for business owners and professionals. AG condenses information on technology, business, social media, startups, economics and more, so you don’t have to.

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26 Comments

26 Comments

  1. Jacksonville short sale

    May 10, 2011 at 6:31 am

    I'm not surprised about this. After dealing with the banks over the past several years with Short Sales, I'd believe just about anything sketchy originates at banks first.

  2. Don Reedy

    May 10, 2011 at 9:10 am

    Fine piece of reporting on another virus infecting our industry. You have got to know that in rooms all around the country the banks are meeting to continue their quest to (as Burger King would say) "have it their way. Having it "their way" in fine print is why good real estate agents, good lawyers (stop laughing and wipe that coffee off the paper), and good common sense reporting are all that stand between contract law and the human condition. And for me, that's enough to say to consumers, if the print is small, get yourself a good pair of reading glasses. Can't say you weren't warned.

  3. MH for Movoto

    May 10, 2011 at 1:50 pm

    While I agree with "Jacksonville short sale" insofar as this doesn't surprise me a bit, I have a hard time seeing this as anything BUT blackmail. And that's the only way I can imagine it being successfully challenged.

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Economic News

Is the real estate industry endorsing Carson’s nomination to HUD?

(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?

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NAR strongly backs Dr. Carson’s nomination

When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?

The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.

In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…

>>>>>Click to continue reading…<<<<<

#CarsonHUD

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Economic News

Job openings hit 14-year high, signaling economic improvement

The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.

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job openings

Job openings hit a high point

To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.

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The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.

Good news, bad news, depending on your profession

That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.

Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.

What’s next

If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.

If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.

Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.

#JobOpenings

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Economic News

Gas prices are down, so are gas taxes about to go up?

Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.

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gas-tax

Gas taxes and your bottom line

Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.

Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.

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Supporters and opponents are polar opposites

Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.

Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.

While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.

The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.

Is a gas tax politically plausible?

Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”

Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”

Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.

Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.

“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”

Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.

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