Michael Newton, formerly police officer of West Covina is in his late forties. He is terminally ill confined in a nursing home and unable to communicate except through strained facial movements. His family comprising of his spouse and four children are living under the threat of immediate eviction from their house in North Phillips Avenue, West Covina. The latest position is that they are expected to get out not later than middle October.

Susan Newton, his wife, does not yet have any future plans about how to survive with her four children. A friend of the family, also retired from the police force of West Covina said that for them everything possible has gone wrong even after Susan Newton had done all she could do. Till now she has not told her husband about the eviction threat. They have been living here for eleven years. When they finally leave they will just tell him that. But go where? Susan does not know.

Susan Newton has not yet found a place. Everyone has been refusing her. The hall is piled with boxes. Three of the children are at home while the elder one, Brock Newton is in college.

Susan had asked for the loan to be modified after taking assistance from U.S. Housing Assist by paying an advance of $1,750. They told her not to pay any more mortgage dues as this would qualify her for the loan modification. But the opposite happened – the property slipped into foreclosure. When she tried to get back her advance money she found that the company had downed shutters.

Desperately she turned to another firm – Modify MeDown and paid once more another amount of $750 but help did not materialize.

JPMorgan Chase services her loan and the owner of the mortgage is Fannie Mae. Speaking on behalf of Fannie Mae Amy Bonitatibus said, “Any time someone is asking for a fee to give advice on loan modification, more times than not it’s fraud. Fraud exists and the fraudsters not only offer bad advice but offer it for a fee”.

After handling the loan modification matter Chase passed on the matter to Fannie Mae noting that all attempts at trying to keep the family in the house have been exhausted.

Gary Kishner spokesperson of Chase said that the application of the Newton’s had been received but her eligibility had not been determined because of lack of proper documents. The foreclosure had been postponed for two months but even then the lady had failed to produce the requisite papers.

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Loan servicers, such as the former GMAC Financial, which is where the problem started, have been signing foreclosure documents without reading them for years. The resulting paperwork problems have become a mess. The potential for the proceeding of foreclosure cases to halt could possibly bankrupt some banks and loan servicers because some delinquent borrowers could get settlements from these servicers and they may be able to stay in their homes indefinitely.

Judges have begun to totally distrust what servicers are putting into their foreclosure petitions. More and more judges plan to look at filings more closely. This has made several major banks second guess what they are filing in their foreclosure proceedings. Hence, they have halted these foreclosure proceedings until they are finished reviewing all of their paperwork. Several other major banks, one is Bank of America, are continuing business as usual because they are confident that there is no problem with their methods.

One of the biggest questions to come out of this robo-signing scandal is: Who has the right to foreclose on a home and who really owns the loan? This could potentially plunge banks and loan servicers into an ocean of paperwork.

This foreclosure scandal is dependent upon the note, which is the instrument that lets investors foreclose on delinquent borrowers. A note is the paper that denotes that a loan has been taken out to buy a house, similar to an IOU. The mortgage then uses that house, or property, as collateral to pay off the loan or debt. When these mortgages, or notes, are combined into securities sold to investors, a trust is issued comprising these notes. Then, the investors who buy the notes then become the owners and holders of the mortgage.

The main issue here is that many loan servicers have, technically, lost that piece of paper or it wasn’t transferred to the trust involved, which holds the mortgages, properly. Until recently, quite a few courts didn’t require investors and servicers to produce the actual note, just an affidavit of ownership. This robo-signing scandal has made courts rethink that process and have begun to require the actual note.

Conversely, an industry group, called the American Securitization Forum, has indicated that the standardized industry methods concerning the transfer of ownership of various mortgage loans to securitization trusts are appropriate and sufficient. The Forum has indicated that they are confident that their standardized transfer methods are based on a well-established body of law and that the process is sound.

Since securitizations became popular in the 1990s, loan servicers wanted to centralize and digitize the paperwork concerning the bundling and selling of mortgages. Servicers then created MERS, the Mortgage Electronic Registration System. The point of this system is to be a repository of the correlation between the owner of the note and the home that is the note’s collateral. This information is used to bring about foreclosures but judges are beginning to question MERS’ right to represent the note’s owners, which could make the judge throw out the case.

Even though more paperwork, time and filing fees are involved, the MERS’ situation can be rectified by the trustee bringing suit on behalf of the investors.

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Intense lobbying by lenders prevented the passage of bill SB 1275 in the state assembly of California that would have greatly benefited foreclosure victims. The bill failed despite having passed through the Senate.The bill would have given greater opportunity for modification for many who did not qualify for HAMP.

Paul Leonard of Center for Responsible Lending (Director) said that the bill would have benefited both sides – borrowers on the one hand and lenders together with the servicers on the other.

Sean O’Toole of ForeclosureRadarcom described the bill to be badly drafted, overly complex and excessively burdensome. He said that the major flaw was that the bill would have given the borrowers a year’s time even after sale and this would have been disastrous for the communities. Few buyers would be interested in buying such houses tagged with such a condition. O’Toole commenting on the interesting position of the state said that California lacked effective control over lenders covered by federal regulations. This has led to the legislators of the sated to “continue to monkey with the foreclosure process in an attempt to force lenders to do things they don’t have the power to enforce directly”.

O’Toole informed that on an average the houses entering foreclosure have nearly $150,000 negative equity. He quipped that at day’s end someone has to bear the loss. The legislators of California can run around trying to make things hard for the lending lobby but they cannot compel the lenders, covered by federal umbrella, to swallow any loss. The state does not have the funds to bail to safety the house owners; so finally all their attempts will come to naught.

In the Assembly the Democrats are in the majority (50/27) but 12 of these Democrats did not vote; included were three who had originally voted for SB 1275. Spokesperson Amy Allen for Sandre Swanson of the Assembly (Democrat/Alameda) said that although he had voted for it on 24th August he had not done so on 30th August because there were important issues pointed out by the opponents that had not been addressed in the intervening period. Alley said, “He thought there should have been some kind of compromise, some kind of meeting of the minds”. But this had not happened before the second voting round.

Last August a California law had been passed allowing protection to some extent from lenders chasing borrowers taking advantage of deficiency judgment.

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Kane County’s deputy Jim Seidelman sees a poignant tale behind each foreclosure eviction – one story being distinct from the other. In this fifties Seidelman is a perfect professional and goes about his job meticulously but that does not stop him from understanding and feeling for the tragedy that unfolds before him one after another.

From his experience Seidelman says nearly 80% of the foreclosure victims leave after packing up prior to the arrival of the sheriff’s agents. Many have nowhere to take their belongings so they just leave it there – furniture and even clothes. It seemed as if they had gone out to work and would come back any moment. Forgotten family photographs remain as silent witnesses to the tragedy that overtook their lives.

But there were ugly scenes too – there were for instance sometimes messages written with excrement using foul language against the banks. Many loot the property before departing – yanking off fittings, cabinets, wires and anything moveable or saleable. In one case he came upon a message written on a wall that seemed to have once been lived in by a young girl. It read, “You can take our house, but you can’t take our family”.

Seidelman feels that at times like this the best and the worst in humanity comes out. In one case Seidelman had to spend ten hours to evict a lone woman who had not packed even a single box. Neighbours came over to help and put some of her stuff in their own garages to prevent theft.

In Batavia he came upon a fellow sitting on his shorts and calmly drinking coffee. He had no idea what was going on. Finally the police came and fished out the foreclosure notices that his wife had hidden from him. She had gone off to work as usual without letting anyone know what was about to happen.

He has also come across people who have locked themselves inside the foreclosed property or stand aggressively in front of those who have come to move them out. Seidelman said, “They think if you can’t get in, you can’t do the eviction. We’ll break the window. We’ll use whatever force is necessary to get into the home”.

Till now he has not had had the experience of facing gun shots but he said that the possibility cannot be ruled out.

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The American Residential Law Group has recently created new laws in order to protect homeowners who are facing foreclosure. Changes have been brought about to enable HAMP to be more effective preventing evictions and foreclosures.

The American Residential Law Group has stated recently that each state has a total of 170,000 Americans that benefit from having their home loans modified. Over 6 million people currently are struggling to pay their mortgage dues. These numbers indicate that federal aid to people in danger of foreclosure has not been working. Thus legal help must be given to people struggling with foreclosure to avoid them being ensnared in the nets of these wily leaders. The worst affected are those that are up to their neck in mortgage dues that need to be paid.

More about the legal group can be learnt from their website – http://www.ARLGNow.com. This group endeavours to help the victims with legal help pointing out to them all the assistance they are entitled to.

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Banks think it is not fair to waive principal for foreclosure victims. High ranking banking top brass are evasive about assisting the harried borrowers by forgiving a part of their debts. They told the legislators last Tuesday, 13th April, that only in few restricted cases they were willing to reduce the principal amount on the mortgage loan. They said it was not fair on those who had remained current on their mortgages.
The CEO of JPMorgan Chase, David Lowman, bluntly speaking to the House Financial Services Committee said that huge reduction on principals “could be harmful to consumers, investors and future mortgage market conditions.”
According the estimate of Chase – bringing down the principal on those borrowers who have gone underwater with their loans being more than the worth of their properties, would add up to $900 billion. Of this $150 billion was scheduled to he borne by the government.

The top CEO of Citigroup, Sanjib Das said that these types of programmes “could raise issues of fairness.” Das and Lowman testified to the committee set up by the Senate, together with the highest executives from Bank of America and Wells Fargo. These four mortgage firms are the biggest in America and have come under harsh criticism for not being proactive with the Obama government’s HAMP plan involving $75 billion. No dent has been made on the gigantic problem with only 170,000 borrowers having completed loan modification. 1.1 million borrowers had started to take part in it since the last one year.

The Democrats are accusing the mortgage industry but the Republicans think that the government should give up this line of action and concentration more on generating jobs. Rep. Spence Bachus (Republican from Alabama) said, “The market needs to find its own footing free of government intervention and manipulation so we can revive our economy and get on with a full housing market recovery.”
Last March the Federal Government kicked off a plan to bring down the principal for those homeowners who have gone underwater and are unemployed. The warning was given that not all the troubled owners of residential houses would benefit. The government calculated that if implemented it would help 3 million of the 4 million it had originally targeted.

The four jumbo banks are the prime holders of second liens – the problem that is coming in the way of modification. In second loans or “piggyback” mortgages the borrowers practically did not have to make any down payments.

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On 26th March White House is scheduled to announce new steps to be taken to help foreclosure victims. It will involve the reduction of loan balances on mortgages for some of the borrowers. The step is fraught with controversy and has long been resisted by the lender’s lobby. The new measures will also see to temporary help being given to those of the homeowners who were unemployed. The latest measure will be an indication of the goodwill of the administration in its effort to contain the increasing number of foreclosures.

As per the plan the FHA would be playing a larger role in the efforts of the government by permitting some who have gone underwater to refinance through loans having the backing of the government. It has to be remembered that FHA does not advance loans but insures the loans made so that the lenders are guaranteed against losses. But already FHA is weighed down with losses because of the toxic loans it has so far backed.

The measures will be addressing two of the pressing problems plaguing the housing market – underwater mortgages and unemployment. This is the latest revamping of the programme Obama had introduced one year ago – Home Affordable Modification Program or HAMP.

Unemployed borrowers will get their monthly payments sharply reduced or they will be allowed a grace period free from making any payments – the period stretching from three to six months.

The new move will also expect the banks to think about writing down the loan amount – this being part of the strategy of bringing down the monthly amount. The plan continues to be voluntary. By it interest rates would be cut down to a record low of 2% and terms may be extended to up to 40 years. The federal government will be making incentive payments to both the lenders and borrowers and for this it has set aside $50 billion.

Under the revised plans the banks would get extra payments from the administration proportionate to the principal that it forgives. For the borrowers to benefit they would have to be current on their dues for over three years. Only this would allow the lowering of the principal on their loans.
HAMP had been originally crafted to assist defaulting borrowers or at risk from doing so. But this FHA help would be for borrowers who are current to be eligible for FHA guaranteed loan once their principal has been lowered. Nearly 24% of the borrowers are underwater as per the findings of First American CoreLogic.

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While political pressure is being stepped up by the Obama government on the banking sector to do more to contain the financial crisis, a call has been given out by church-based groups in eastern Contra Costa County to help foreclosure victims. This call, particularly in recent times, has become more urgent.

Two groups at the grass-roots level – the Contra Costal Interfaith Supporting Community Organization (CCISCO) and the PUSH coalition-have joined forces in finding a more effective solution. CCISCO, an Antioch based support organization, comprises mainly of the churches attended by the Spanish speaking faithful. Rev. Jesse Jackson is associated with the Rainbow Push coalition. The group is currently being joined by legislators and officials from the financial sector.

One of those who have turned for help from CCISCO is a man named Miguel Sanchez. Miguel is in his early fifties and has been jobless since the collapse of the construction sector. To add to his woes, his monthly mortgage payment recently jumped to $2,400. He was awarded temporary modification, but hope turned to despair when Sanchez realized he could not manage to pay the modified amount. His ability to pay his dues was undoubtedly going to worsen within a couple of years because he was on the verge of bankruptcy. In fact, bankruptcy was the only alternative available to him.

He is now preparing to walk away from his home, which took him all his life’s savings to purchase. But there is a slim hope that CCISCO will be able reach an agreeable deal with his lenders. Sanchez bitterly commented, “The only people making money right now are the banks, Wall Street. They’ve got all the power over there, but they forgot about the people, the people working hard just for a living. I don’t ask for money; I ask for a little help.”

The housing market of east Contra Costa County has become one of the worst hit areas by the foreclosure crisis. Thousands of units have been swallowed up by foreclosure, which drags down property prices even further. Nearly half of all the foreclosures (8,112) across the county are from this one region alone.

The faith group has started holding rallies that are now drawing hundreds of people. Two of these were attended by Jesse Jackson. Bullhorn protests are also being held in front of banks. Last spring, a chartered bus trip traveled to Washington D.C. to proclaim their demands for a better housing market.

The president of Bank of America’s sector dealing with mortgage, home equity and insurance, Barbara Desoer, has promised to talk with the representatives of CCISCO on 12th January 2010.

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The Treasury is bringing back hope to foreclosure victims with new plans about short sales. But they must nurse patience.

Since last summer the government has been promising that it would launch a plan that would expedite and streamline the process of short sale. As yet the method is complex and frustrating. In the first week of December the Treasury outlined the rules and monetary incentives for those involved in the short sale deals – the borrowers, servicers as well as the investors.
A short sale is when the cash strapped borrower opts to sell the property at a price that is less than the loan amount due. But this would be possible only if the lender gives the nod and aggress to forgive the balance due.

In the beginning it was thought to be the best and better alternative to foreclosures. But in reality it turned out to be a nightmare of waiting for the sellers and buyers as lenders dragged their feet with servicers and investors raising objections. Soon buyers and real estate agents began to shun the offers. Joyce Zelazik aptly summed up the situation and said, “If someone needs something in the next several months, I tell them please don’t consider a short sale. You’re not going to be happy with me.”

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A volunteer group consisting of lawyers set up in Florida to assist foreclosure victims has been booked for trade violations. Events started rolling with a Larry King Live (July 30th show). A woman representing Florida Attorneys Saving Homes came on to the show with a family battling foreclosure. She put forward their case.

This group named FLASH set up a hotline promising legal assistance without charging fees in the first week of June. Since then they have been receiving daily calls numbering 30 to 50. After the show another group using the same name has also started getting calls from borrowers.

This has led to the Federal Alliance for Safe Homes Inc (also known as FLSAH) to accuse the other FLASH comprising of lawyers of infringing trade mark regulations. Recently a demand letter has been sent – this being the first step towards taking legal action.

Kent Spuhler of Florida Legal Services in Tallahassee said, “We’ll continue to try to work things out, but with this demand letter we’re probably headed to court. A single event spurred some misguided calls, but there really isn’t any confusion in the community about this project. It’s catching on like wildfire.”

The Florida Bar, the Florida Bar Foundation joined forces with Legal Forces. Sphulers explained, “We didn’t do a name search beforehand because we were so busy working out the mechanics of it. Then somebody said something about what we were going to call it. Afterwards, we found out about (the alliance’s use of FLASH) but knew it wasn’t a legal problem.”

The group of Tallahassee is a non-profit body seeking to impart education about making homes safe and protecting families in danger from financial pitfalls. In a press release the president of the group, who is also the CEO, Leslie Chapman-Henderson, said that the failure of the group consisting of lawyers to respect the fundamental points about use of trademark is causing the consumers to be confused. Spuhler commented, “We don’t believe we’ve committed any trademark violation. There are about 2,000 organizations that use FLASH in their names.”

Although the names are same the objectives of the two FLASH groups are dissimilar. The alliance body educates the sufferers while the lawher’s body gives legal help. The latter has come forward with many offers of adjustment so as to peacefully co-exist but so far the deadlock has not been resolved.

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