NEW MORTGAGE RULES FOR APRIL 1ST

Could new mortgage regulations created to protect homebuyers under the Truth in Lending Act actually hurt more than it helps? The debate rages on, as mortgage brokers brace for what some argue will lead to less competition in the market, and therefore less credit for consumers. Charles Hugh Smith at our sister site, DailyFinance, explores the nuances of the new rules set to go into effect on April 1, to explain why the amendments may be shortsighted -- even harmful -- for prospective homebuyers.
New regulations limiting mortgage brokers' compensation go into effect on April 1, and they might prove to be appropriate for an April Fools' Day. Though aimed at unscrupulous mortgage brokers, it seems the regulations will instead hit the nation's struggling housing market.
The Federal Reserve Board says that its regulatory goal is to "protect mortgage borrowers from unfair, abusive, or deceptive lending practices that can arise from loan originator compensation practices." The basic idea is to prevent loan officers from steering borrowers into riskier types of loans or a higher-than-average interest rate to make a higher commission.

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Officially titled "Loan Originator Compensation amendment to Regulation Z," The new rules apply to mortgage brokers and the companies that employ them, as well as mortgage loan officers employed by banks and other lenders.

Since most of us only deal with mortgage loan origination fees when we buy a home or refinance a mortgage, the average citizen will have a tough time sorting out the often-arcane issues at stake. But the bottom line is straightforward: the already-limited mortgage market is about to become more limited, as small mortgage brokers are essentially being shoved out of business. Call it "unintended consequences" or a cloaked plan to channel more of the mortgage business to the "too big to fail" big banks -- but regardless of the motivations, the rules may end up limiting consumer choice and make it harder for home buyers to get a loan.

While the stated goal of the new rules is laudable, those in the mortgage industry say it's a case of closing the barn door after the horse has bolted: the risky, subprime-type mortgages that were the root cause of the problem have already vanished from the mortgage market.

FLORIDA FORECLOSURE PLAN FALTERS

The Florida Supreme Court continues to devise programs in an effort to help homeowners in foreclosure, or so it would seem. The Residential Mortgage Foreclosure Mediation Program initiative was announced in 2009 and a Florida Supreme Court Task Force was assigned to implement the program. The 52-page report by the Task Force has all the first source information and fact-finding that led up to them establishing the Mediation Program.

The task force included court administrators and defense people who warned that there was going to be a crisis. Attorney Matt Weidner of Tampa, Fla., who has been instrumental in representing clients during the foreclosure crisis, as well as fighting much of the wrongdoing, told AOL Real Estate:
"The findings of fact are what's leading to the collapse of this mediation program, and we all said from the beginning that this is not going to work. This goes back to us not knowing who owns these properties, so we don't even know who needs to come to the table at these mediations."

The courts were pressured to establish the mediation program at a great expense, and so far there is only a single-digit percentage of success stories. That's because there are relatively few plaintiffs coming to the table. Also, the named plaintiff in these cases isn't the real party in these interests, the party driving this, the investors should be the ones at the mediation table but they're just going through the motions.

"There's a fundamental inability to identify who owns anything," says Weidner. "It all gets back to that."


Attorney Tom Ice, of Ice Legal in West Palm Beach, agrees with Weidner, saying, "In our opinion, the banks merely go through the motions so they can check mediation off their list of required things to do, but are not seriously contemplating a modification."

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The mediation process is mandated for every foreclosure case filed. The banks have to fill out the forms indicating it's a homestead property. One of the requirements of the administrative order is that the plaintiff (the bank) is required to begin the process, which includes hefty fees.

"In virtually every case I've been to in mediation, the banks never provide the proper documents, which again permeates the entire process," says Weidner. "These documents are what shows they have the right to be at the table."

In many cases, the investors will not agree to the modification which is the best business decision because they then do not receive the FDIC or investment money. Weidner says the system is in lockdown because of system failure. These modifications don't address the homes that are vastly underwater or the principal reduction.

FORECLOSURE DROP IS DROP IN THE BUCKET

The headlines blared last week about a 27 percent drop in foreclosures, after RealtyTrac released their U.S. Foreclosure Market Report for February. On the surface, it looked like maybe it was positive. And most journalists covered the release as good news for the housing market. But when examined closely, it is perhaps just the opposite: another sign of how depressed the housing market really is.

To their credit, the professionals at RealtyTrac went on to give what seems to be a real analysis of what is going on: "Foreclosure activity dropped to a 36-month low in February as allegations of improper foreclosure processing continued to dog the mortgage servicing industry and disrupt court dockets," said James J. Saccio, chief executive officer of RealtyTrac. "While a small part of February's decrease can be attributed to it being a short month and bad weather, the bottom line is that the industry is in the midst of a major overhaul that has severely restricted its capacity to process foreclosures. We expect to see the numbers bounce back, but that will likely take several months."

So, what exactly does that mean?

First, it means that the drop in the actual number is more a reflection of delays in the legal process

See photos of homes for sale in your area and across the country on AOL Real Estate

than it is a suggestion that the malaise is over. Second, it means that the pipeline of new 'foreclosed' homes for sale, so called REO inventory at banks is not really slowing down. That pipeline is a big part of what we call shadow inventory, the size of which is getting bigger as home values continue to drop. And that shadow inventory is a big problem for home prices. Simply put many more sellers than buyers. Not the environment in which prices will naturally go up. But to us, the real key is that this is another example of how homeowners, homebuyers and everyone else who wants to know what the real story is need to be careful about how they interpret what they read and hear.

In my last column, I pointed out that there are a large number of data released about housing and that, unfortunately, more often than not; the headlines that accompany the data do not capture the whole story. Now as we head into the spring, the normal start of home buying season, it becomes crucial that participants pay close attention to the details, not just the headlines. No one wants to buy a house in a neighborhood where it looks like foreclosures have stopped coming, only to find out they were not going away, only being delayed. Without a close look, everyone is at some risk of being drawn to the wrong conclusion.

We will continue to call the market as we see it. And we hope that will help

SCAM VICTIMS GET MONEY BACK

Who kicks a guy when he's down? During these hard financial times, unfortunately, lots of people. But today, one of the most frequently targeted groups, foreclosure victims, is getting a fair shake in civil court. Thanks to a Federal Trade Commission investigation, nearly 1,500 victims of foreclosure rescue scam fraud will be reimbursed for a portion of their losses. Jorgen Wouters from our sister site, WalletPop, has the full story.
Nearly 1,500 consumers ripped off by a mortgage loan modification and foreclosure rescue scam will be receiving refund checks from the Federal Trade Commission.

The ringleader of the scam, Bryan D'Antonio, has run afoul of the FTC more than once since 1999 for defrauding consumers and violating court-ordered bans against telemarketing.

Some 1,455 victims of D'Antonio's latest scam,Tax Relief ASAP, will receive checks averaging approximately 24% of their total losses. But that won't be much comfort to victims who lost their homes to foreclosure by falling for his bogus foreclosure rescue scheme.
D'Antonio's first run-in with the FTC occurred in 1999, when the agency filed a complaint against him and his company, Data Medical Capital, Inc. for running a work-from home telemarketing scheme. The FTC accused D'Antonio of lying to consumers by promising them incomes of at least $23,400 per year by purchasing his medical billing work-at-home program.

Very few consumers who bought into his work-at-home scheme, the FTC said, were able to generate clients, start a business or earn any money. D'Antonio settled with the FTC in 2001 and was fined more than $600,000 to reimburse his victims. He was also banned for life from marketing business ventures, employment opportunities, work-at-home opportunities and telemarketing