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Eight banks agree to reform and penalties for falsely foreclosing on homeowners

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A long, hard battle

Homeowners have been wronged. Banks have foreclosed on the wrong homes, accelerated foreclosures, and left people homeless without so much as physically reviewing the homeowner documents. They’ve given borrowers the runaround and spurred dozens of lawsuits.

We’ve been covering the government infighting over the investigation of banks mishandling foreclosures and after the Office of the Comptroller of Currency (OCC) split from a tense joint investigation between dozens of federal agencies in conjunction with all 50 state Attorneys General, a final settlement has finally been made public by the OCC.

The OCC split from the AGs claiming action had to be taken immediately and critics claim the infighting has resulted in a much smaller settlement between the banks and damaged homeowners. The OCC announcement notes that the AGs may still take separate actions, but that the OCC is moving forward with their current settlement.

The OCC was joined by the Office of Thrift Supervision (OTS) and the Federal Reserve Board (FRB) to announce their enforcement actions against eight banks and two third party servicer providers for “unsafe and unsound practices related to residential mortgage loan servicing and foreclosure processing.”

The settlement for unsound practices

The eight banks that are settling are Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank, and Wells Fargo. The two service providers are Lender Processing Services Inc. (LPS) and its subsidiaries DocX LLC, and LPD Default Solutions Inc.; and MERSCORP and its wholly owned subsidiary, Mortgage Electronic Registration Systems Inc. (MERS).

The reform requires correction of “deficiencies” found in the investigation.

The settlement based on the OCC’s investigation that found “deficiencies” with the banks calls for a stricter set of rules for handling loan documents, internal investigations, improved procedures for communicating with homeowners and most importantly restitution to some homeowners if evidence supports an erroneous foreclosure.

Critics of the OCC split claim this settlement restricts the ability for homeowners to join together for a class action lawsuit against these eight banks and two servicers.

Enforcement actions

The OCC Executive Director, John Walsh said, “Our enforcement actions are intended to fix what is broken, identify and compensate borrowers who suffered financial harm, and ensure a fair and orderly mortgage servicing process going forward.”

According to the Federal Reserve Board:

Each servicer must, among other things, submit plans acceptable to the Federal Reserve that:

  1. strengthen coordination of communications with borrowers by providing borrowers the name of the person at the servicer who is their primary point of contact;
  2. ensure that foreclosures are not pursued once a mortgage has been approved for modification, unless repayments under the modified loan are not made;
  3. establish robust controls and oversight over the activities of third-party vendors that provide to the servicers various residential mortgage loan servicing, loss mitigation, or foreclosure-related support, including local counsel in foreclosure or bankruptcy proceedings;
  4. provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in a review of the foreclosure process; and
  5. strengthen programs to ensure compliance with state and federal laws regarding servicing, generally, and foreclosures, in particular.

Case closed?

A statement from the FDIC said, “The interagency review was limited to the management of foreclosure practices and procedures, and was not, by its nature, a full scope review of the loan modification or other loss mitigation efforts of these servicers. A thorough regulatory review of loss mitigation efforts is needed to ensure processes are sufficiently robust to prevent wrongful foreclosure actions and to ensure servicers have identified the extent to which individual homeowners have been harmed.”

The Attorneys General have not disbanded and several other federal authorities are continuing their investigation for separate reform and punishments. This battle is far from over and it remains unseen as to whether or not homeowners will win after being beaten down so badly.

Lani is the Chief Operating Officer at The American Genius and sister news outlet, The Real Daily, and has been named in the Inman 100 Most Influential Real Estate Leaders several times, co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

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14 Comments

14 Comments

  1. MH for Movoto

    April 21, 2011 at 3:00 pm

    Anytime I read about illegal foreclosures my blood just boils. It's a great gesture that these 8 are settling, but IMHO they're not possibly penalized enough.

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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