People wonder why it can be so hard to get a mortgage and lenders seem to want more and more documentation.  Fraud is increasing and criminals like this make it harder for everyone.

Following 97 months in federal custody for his role in a high-level money laundering scheme, Thomas Kontogiannis still faces heat in the courts, as he awaits sentencing in July for the part he played in a $92 million mortgage-fraud payout between 2003 and 2007.

Thieves are fooling homeowners into sending them their mortgage payments.

You get a letter in the mail, telling you your mortgage has been sold and to start sending your payments to the new lender.

If you’ve had a mortgage in the last ten years, chances are you’ve received one of these letters before and won’t think twice before following the instructions on where to send your next payment.

But you should.

The federal government recently issued a warning that crooks are starting to send out fake letters and scamming unsuspecting homeowners out of two, three, even four payments.

That may not be a large amount of money, but if the crooks get enough homeowners to follow their instructions, it can be pretty lucrative.

For the scammed homeowner, it can be the straw that breaks a tight budget and puts them into foreclosure.

There’s no protection for a homeowner who falls for this scam.  No bank is going to refund the money.  No mortgage lender is going to credit the payments sent to the crooks.

Homeowners need a refresher on the proper way to verify their mortgage has been transferred to a new mortgage servicer.

First, a “Good-bye” letter is normally sent to the homeowner by the current mortgage servicer.  It should have your name, address and account number, with phone numbers for the existing servicer and the new servicer.

Second, a “Welcome” letter is sent by the new servicer with the same information.  Both letters should arrive within about a week of each other.

Cautious homeowners should call their existing mortgage servicer, using the phone number from a recent bill (not the letter), to confirm their mortgage has been transferred.

Under no circumstances should a homeowner be sending their payment to an address outside the U.S.!

A homeowner typically discovers they’ve been scammed when their real servicer contacts them about being behind on payments or foreclosure.  By then it may be too late for the homeowner to recover and they could lose their home.

So, stay alert and pay attention the next time your mortgage payment is transferred.

No, it’s a homeowner and taxpayer.

Read this article from the New York Times.

In Prison for Taking a Liar Loan
By JOE NOCERA
Published: March 25, 2011

A few weeks ago, when the Justice Department decided not to prosecute Angelo Mozilo, the former chief executive of Countrywide, I wrote a column lamenting the fact that none of the big fish were likely to go to prison for their roles in the financial crisis.

Soon after that column ran, I received an e-mail from a man named Richard Engle, who informed me that I was wrong. There was, in fact, someone behind bars for what he’d supposedly done during the subprime bubble. It was his 48-year-old son, Charlie.

On Valentine’s Day, the elder Mr. Engle said, his son had entered a minimum-security prison in Beaver, W.Va., to begin serving a 21-month sentence for mortgage fraud. He then proceeded to tell me the tale of how federal agents nabbed his son — a tale he backed up with reams of documents and records that suggest, if nothing else, that when the federal government is truly motivated, there is no mountain it won’t move to prosecute someone it wants to nail. And it was definitely motivated to nail Charlie Engle.

Mr. Engle’s is a tale worth telling for a number of reasons, not the least of which is its punch line. Was Mr. Engle convicted of running a crooked subprime company? Was he a mortgage broker who trafficked in predatory loans? A Wall Street huckster who sold toxic assets?

No. Charlie Engle wasn’t a seller of bad mortgages. He was a borrower. And the “mortgage fraud” for which he was prosecuted was something that literally millions of Americans did during the subprime bubble. Supposedly, he lied on two liar loans.

“The Department of Justice has made prosecuting financial crimes, including mortgage fraud, a high priority,” said Neil H. MacBride, the United States attorney for the Eastern District of Virginia, in a statement. (Mr. MacBride, whose office prosecuted Mr. Engle, declined to be interviewed.)

Apparently, though, it’s only a high priority if the target is a borrower. Mr. Mozilo’s company made billions in profit, some of it on liar loans that he acknowledged at the time were likely to be fraudulent and which did untold damage to the economy. And he personally was paid hundreds of millions of dollars. Though he agreed last year to a $67.5 million fine to settle fraud charges brought by the Securities and Exchange Commission, it was a small fraction of what he earned. Otherwise, he walked. Thus does the Justice Department display its priorities in the aftermath of the crisis.

•

It’s not just that Mr. Engle is the smallest of small fry that is bothersome about his prosecution. It is also the way the government went about building its case. Although Mr. Engle took out the two stated-income loans, as liar loans are more formally called, in late 2005 and early 2006, it wasn’t until three years later that his troubles began.

As a young man, Mr. Engle had been a serious drug addict, but after he got clean, he became an ultra-marathoner, one of the best in the world. In the fall of 2006, he and two other ultra-marathoners took on an almost unimaginable challenge: they ran across the Sahara Desert, something that had never been done before. The run took 111 days, and was documented in a film financed by Matt Damon, who served as executive producer and narrator. Mr. Engle received $30,000 for his participation.

The film, “Running the Sahara,” was released in the fall of 2008. Eventually, it caught the attention of Robert W. Nordlander, a special agent for the Internal Revenue Service. As Mr. Nordlander later told the grand jury, “Being the special agent that I am, I was wondering, how does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time.” (He also told the grand jurors that sometimes, when he sees somebody driving a Ferrari, he’ll check to see if they make enough money to afford it. When I called Mr. Nordlander and others at the I.R.S. to ask whether this was an appropriate way to choose subjects for criminal tax investigations, my questions were met with a stone wall of silence.)

Mr. Engle’s tax records showed that while his actual income was substantial, his taxable income was quite small, in part because he had a large tax-loss carry forward, due to a business deal he’d been involved in several years earlier. (Mr. Nordlander would later inform the grand jury only of his much lower taxable income, which made it seem more suspicious.) Still convinced that Mr. Engle must be hiding income, Mr. Nordlander did undercover surveillance and took “Dumpster dives” into Mr. Engle’s garbage. He mainly discovered that Mr. Engle lived modestly.

In March 2009, still unsatisfied, Mr. Nordlander persuaded his superiors to send an attractive female undercover agent, Ellen Burrows, to meet Mr. Engle and see if she could get him to say something incriminating. In the course of several flirtatious encounters, she asked him about his investments.

After acknowledging that he had been speculating in real estate during the bubble to help support his running, he said, according to Mr. Nordlander’s grand jury testimony, “I had a couple of good liar loans out there, you know, which my mortgage broker didn’t mind writing down, you know, that I was making four hundred thousand grand a year when he knew I wasn’t.”

Mr. Engle added, “Everybody was doing it because it was simply the way it was done. That doesn’t make me proud of the fact that I am at least a small part of the problem.”

Unbeknownst to Mr. Engle, Ms. Burrows was wearing a wire.

Lying on a stated-income loan is, without question, a crime, and one ought not to excuse it even though, as Mr. Engle says, “everybody was doing it” — usually with the eager encouragement of their brokers. But the Engle case raises questions not just about the government’s priorities, but about something even more basic: did he even commit the crimes he is accused of?

Partly, I concede, Mr. Engle is easy to root for. He is a personable, upbeat man who has conquered some serious demons. Part of his Sahara expedition was aimed at raising money for a charity to help bring clean water to Africa. “Every experience in life has the ability to teach lessons if I am open to them,” he wrote on a blog as he prepared to enter prison. How can you not like someone like that?

But the more I looked into it, the more I came to believe that the case against him was seriously weak. No tax charges were ever brought, even though that was Mr. Nordlander’s original rationale. Money laundering, the suspicion of which was needed to justify the undercover sting, was a nonissue as well. As for that “confession” to Ms. Burrows, take a closer look. It really isn’t a confession at all. Mr. Engle is confessing to his mortgage broker’s sins, not his own.

Perhaps anticipating that problem, when Mr. Nordlander finally arrested Mr. Engle in May 2010, he claims to have elicited a stronger, better confession while Mr. Engle was handcuffed in the back seat of his car. Mr. Engle fervently denies this. This second supposed confession, however, was never captured on tape.

As for the loans themselves, on one of them Mr. Engle claimed an income of $15,000 a month. As it turns out, his total income in 2005, according to his accountant, was $180,000, which amounts to … hmmm …$15,000 a month, though of course Mr. Engle didn’t have the kind of job that generated monthly income. (In addition to real estate speculation, Mr. Engle gave motivational speeches and earned around $50,000 a year as a producer on the hit show “Extreme Makeover: Home Edition.”)

The monthly income listed on the second loan was $32,500, an obviously absurd amount, especially since the loan itself was for only $300,000. It was a refinance of a property Mr. Engle already owned, allowing him to pull out $80,000 of the $215,000 in equity he had in the property.

Mr. Engle claims that he never saw that $32,500 claim and never signed the papers. Indeed, a handwriting analysis conducted by the government raised the distinct possibility that Mr. Engle’s signature and his initials in several places in the mortgage documents had been forged. As it happens, Mr. Engle’s broker for that loan, John J. Hellman, recently pleaded guilty to mortgage fraud for playing fast and loose with a number of mortgage applications. Mr. Hellman testified in court that Mr. Engle had signed the mortgage application. Early this week, Mr. Hellman received a reduced sentence of 10 months, less than half of Mr. Engle’s sentence, in no small part because of his willingness to testify against Mr. Engle.

Even the jurors seemed confused about how to think about Mr. Engle’s supposed crime. When it came time to pronounce a verdict, the jury found him not guilty of providing false information to the bank, which would seem to be the only fraud he could possibly have committed. Yet it still found him guilty of mortgage fraud. “I think the prosecution convinced the jury that I was guilty of something but they weren’t sure what,” Mr. Engle wrote in an e-mail.

Like many people, Mr. Engle’s biggest mistake was believing that housing prices could only go up. When the market collapsed, Mr. Engle defaulted on the two properties, which of course is not a crime. Although his accountant tried to persuade the banks to do a complicated refinancing, they refused and foreclosed on the properties. Like many Americans, Mr. Engle wound up being punished by the market for his mistake, losing all his remaining equity along with the properties themselves. Thanks to the government, though, his punishment was far more severe than most.

At his sentencing, Mr. Engle told the judge: “I can say with confidence that I can turn negatives into positives. I have no doubt I will make the best of it.” With his inspiring prison blog, Running in Place: A Blog About Surviving Adversity, he has already begun to do that.

Even when he emerges from prison, though, his ordeal will not be over. As part of his sentence, Mr. Engle was ordered to pay $262,500 in restitution to the owner of his mortgages. And what institution might that be? You guessed it: Countrywide, now owned by Bank of America.

Angelo Mozilo ought to get a good chuckle out of that one.

This is a great article about how our country is becoming bought and paid for.

How many American would rather be couch potatoes and watch reality trash TV than get involved in our political process?

If you don’t use it, you lose it.

http://seekingalpha.com/article/223397-a-closer-look-at-the-banking-industry-s-lobbying-efforts?source=email

Trader Mark:

Long time readers will know that the best return on investment (ROI for you wonky types) in America is lobbying dollars. For a pittance you can purchase present your case to a Congressman or Congresswoman and generate multitudes of that same dollar spent in return.

It appears that Federal Reserve and Treasury officials are also on sale (aisles 7 and 10, respectively). So hurry on in, but only those with annual revenue of $500M+ are allowed in on the bidding! Our financial oligarchs are top dogs at playing the game but it’s across all major industries. Remember, competition in America is good on paper, as long as it does not effect my fortune 500 corporation. Then it must be stymied!

All the usual suspects in the financial oligarchy – no surprise, since they now control the vast majority of American assets. Oops, sorry, let me go by the company line… there are 8,000 financial institutions in Cramerica competing, blah, blah, blah, snore.

Assets:

1. Bank of America (BAC) $2.3 Trillion
2. JPMorgan (JPM) $2.0 Trillion
3. Citigroup (C) $1.8 Trillion
4. Wells Fargo (WFC) $1.3 Trillion

My favorite statistic in this piece was:

• Lobbyist dollars by top 10 Oligarchy (representing perhaps 300K Americans): $16.3M
• Lobbyist dollar by consumer protection groups (representing 300M+ Americans): $0.8M

That’s like bringing a Colt 45 to a gun fight, while the oligarchy has their AK47s in hand. You’ve been served!

Via AP: (My comments in parenthesis)

• The 10 banks that received the most bailout aid during the financial crisis spent over $16 million on lobbying efforts in the first half of 2010, as the debate over financial regulatory reform reached its height.
• Disclosure reports show that the banks that got the most government help in late 2008 and early 2009 also invested the most to influence members of Congress, the White House, the Federal Reserve, Treasury Department and a long list of federal agencies as new rules were enacted governing Wall Street and the nation’s financial system.
• The $16.32 million spent in the first half of 2010 was 26 percent higher than the combined $12.94 million they spent in the first half of 2009.
• “I’m not shocked that they spent that much money because I saw them every day,” said Ed Mierzwinski, consumer program director at U.S. Public Interest Research Group, who said more than 2,000 lobbyists worked on the financial reform bill. (Translation: for one bill there was roughly a 3.5:1 ratio of lobbyist to representative. Think about that. Then multiply that by every industry group – media, telecom, oil, retail, real estate, agriculture, states and cities, et al) “They did manage to make changes.”
• Leading the pack this year was JPMorgan Chase & Co., which spent $1.52 million on lobbying in the second quarter, on top of $1.51 million in the first quarter of 2010, for a total of $3.03 million. [Jul 21, 2009: NYT - In Washinton, JPMorgan's Dimon Increasing Sway] Citigroup Inc., the largest bank recipient of government funds during the crisis in late 2008 and early 2009, was second. The New York-based bank spend $1.47 million on lobbyists in the second quarter, after spending $1.31 million in the first quarter for a total of $2.78 million. And Wall Street titan Goldman Sachs Group Inc. (GS) was third, with $1.58 million spent in the second quarter, on top of $1.19 million in the first quarter of 2010. Bank of America Corp. and Wells Fargo & Co. both also spent more than $2 million in the first half of the year.
• Lobbying figures do not include any campaign contributions that banks or their employees might also have made.
• Consumer advocacy groups had their own lobbyists working the Capitol’s halls during the finance reform debate as well, but their spending was dwarfed by the banks — a total of $792,000 in the first half of the year for four of the top organizations. (Go get em tiger!)
• “We’re talking billions,” Sloan said. “So the lobbying money is the most effective money you’ll spend.” (Translation: once you reach a certain size as a corporation, your actual business becomes a sideshow and your main focus becomes blocking and tackling in Congress to make sure competition is neutered and favoritism in all aspects is bestowed. You could invest $1 in capital or people and potentially lose money, or instead spend $1 in D.C. and make back $50-100 almost guaranteed. There is no better business on the planet.)

The act is meant to enhance consumer protection and reduce mortgage fraud.

The act requires states to license Loan Originators by:

• Passing a written qualified test
• Complete pre-licensure educational courses
• Take annual continuing education courses
• Having LO’s allow their credit to be checked
• Submitting LO fingerprints to the NMLS for criminal background checks via the FBI

The licensing and registration started in 2009.

So how are loan officers doing with the required testing?

NMLS released the following statistics as of June 30, 2010:

What stands out is that 71% of LO’s so far pass the national component part of the test on their first try and 80% pass the state component.  That’s a pretty good number.

On the other hand, only 44% of those that retake the test pass the national component.  That’s horrible! 

What’s this mean? 

Well if you take into account that the test really doesn’t change that much on the subsequent retakes it could mean any of the following:

• those retaking the test do poorly with tests
• they’re not very good at studying
• they have no idea what they’re doing to begin with

It’s estimated that the NMLS requirements have led to over half the LO’s to leave the mortgage business in the past year.

Of course, the economy has played a large role in that also.

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

The number of companies offering Loan Modifications, with guarantees or success rate claims of 80% or more seems to be growing with the number of foreclosures.

Desperate homeowners are desperately believing that these companies will help them.

My advice is to run, don’t just walk, away from any individual or company that guarantees results for loan modifications and/or short sales.

I tell every and any client that retains me that I will strive to maximize their chances of success, but  I can’t guarantee anything.

Here’s a copy of HUD’s press release below, you can read it at their website by clicking here:

HUD ADVANCES FIGHT AGAINST LOAN MODIFICATION SCAMS
National Coalition Launches Online Scam Reporting Tool

WASHINGTON — The U.S. Department of Housing and Urban Development, in partnership with the Loan Modification Scam Prevention Network, today announced the launch of PreventLoanScams.org.
“ Homeowners at risk of foreclosure can be easy prey for home loan modification scammers. Often, dishonest individuals lure vulnerable homeowners into foreclosure rescue scams by making false promises. Scammers frequently claim they can lower mortgage payments or stop the foreclosure process. ”
“Troubled homeowners lose time and money when they are tricked by con artists who promise to help but never do,” said John Trasviña, HUD Assistant Secretary for Fair Housing and Equal Opportunity. “This initiative combines the collective energies of public and private enterprises to strengthen the ability of law enforcement to prosecute scammers and protect homeowners.”
The Loan Modification Scam Prevention Network, a national coalition of public and private enterprises, is led by the Lawyers’ Committee for Civil Rights Under Law. Fannie Mae, Freddie Mac, the Homeownership Preservation Foundation, and NeighborWorks America assist the Lawyers’ Committee in leading the coalition’s fight against loan modification scams.
The Network developed PreventLoanScams.org to provide homeowners with a single destination to report alleged scammers. Complaints filed online are added to a national complaint database and forwarded to the appropriate law enforcement agencies for review. The Network estimates that the website will assist approximately 50,000 homeowners affected by scams. Additionally, HUD has directed its local fair housing and housing counseling grantees to begin reporting alleged loan modification scams via the website.
The creation of a national complaint database is a major step in the fight against loan modification scams. Prior to the launch of PreventLoanScams.org, federal, state, and local government agencies could not share complaint data with non-profit organizations. The new system allows for better analysis of trends across jurisdictional lines and will likely lead to an increase in private enforcement action filings.

MORTGAGE, EXPERT, MICHIGAN, BIRMINGHAM, BLOOMFIELD, DETROIT, ROCHESTER, ROYAL OAK, TROY

Below is a conversation recorded by a real estate agent with a supervisor in the loss mitigation department of an unidentified lender with a second lien on a short sale property.

To the best of our knowledge, this is totally illegal (but we’re not attorneys) and could lead to serious legal issues for any agent or homeowner that signed an affidavit on a short sale with such a side deal.

This is just another example of different rules for Wall Street and Main Street.  Where are all the politicians on this?  Oh – they’re probably spending the money the banks bribed (oops, I mean lobbied) them with.

NOTE: This is from a blogpost by Jeremy Brandt, which can be accessed at:

www.jeremybrandt.com/short-sale-fraud-recording/

The Short Sales and Bank Fraud story continues to gain traction. After CNBC aired the story we brought them, dozens of other media outlets, bloggers and authorities have contacted me to discuss this topic.

Here is the story of how this fraud initially came to our attention, along with the evidence to back it up.

Last year, I was contacted by an experienced real estate agent in our network who negotiates many short sales. She had recorded a conversation between her and a supervisor in the loss-mitigation department at a major national lender, who she felt was trying to get her to do something illegal.

Here is the audio of that recording, along with the transcript. The names have been removed at the request of the agent to prevent backlash from the bank.

Listen: Recorded Conversation with Bank Supervisor

AGENT: OK, so the only way to settle with *LENDER* then is to get money from somebody else and pay it prior to – that’s what *LENDER-EMPLOYEE* suggested – pay it prior to close of escrow, outside of…. <unintelligible> Pardon me?

LENDER: That is something you can do.

AGENT: Pay it outside of escrow, off the HUD, prior to close.

LENDER: Right, that’s something you could do.

AGENT: And is that something you guys do regularly or you see people doing?

LENDER: Yes, that happens – we have people that send us money outside if they need approval letters <unintelligible> from the first, and once we receive the additional funds, the approval letter can be sent for what the first actually offered – so it happens.

AGENT: OK and what about the fact that the first says that, no more than you know, a certain percent is to go to the second?

LENDER: OK, if the first… Here’s the thing, if you’re asking what this is about – the first is saying “well here’s what I’m going to allow” and the first is saying “this is what we’re willing to pay out.”  If there’s a contribution, if you don’t want to be able to come up with the additional that we’re asking for – the first has already gave their approval on what they’re doing – what someone just comes up with has nothing to do with the first.

AGENT: Even if on this letter it says that “the second is not to receive any more than a certain amount”?

LENDER: The first can not dictate what we receive. The first is saying what they are only going to allow. That’s the amount that they’re allowing to us. If someone out there – the buyer – or a family member puts more money and says here’s what I want to give for you because here’s the additionally requested funds – that has nothing to do with the first.
You’re not asking the first to come out of their pocket any extra than what they are willing to give. So that that’s not any information that might have to be required on the HUD.
Hold on one second please.  <long pause>

LENDER: So I need to have the information – you’ve had the opportunity to go over this with *LENDER-EMPLOYEE* – did he explain all this to you on how this takes place?

AGENT: Well he does but I’m having a tough time, ******, I’m licensed and everybody else…

LENDER: It’s not illegal; it’s not a hard thing, this thing that has happened. The information that you’ve actually received from us – we’re actually trying to help you get this deal closed. If you choose to go back and tell the first what’s going on – you’re going to kill the deal.
So what actually happens prior to closing has nothing to do with the first. What happens at closing – that is information you can provide to them. If you are able to come up with additional funds not to get this deal closed prior to closing, then that’s fine – that’s irrelevant for the first. If you go ahead and you want to let the first know “well, here’s all the information that I have – here’s what’s going on” you will be the one to actually kill this deal. I’m trying to actually give you a way to go about getting this resolved. If you take our suggestion – you take the information that *LENDER-EMPLOYEE* has given you – you can have this done.
If not, then you know, those guys are going to foreclose on it and it’s a done deal. But it’s not like we’re holding up this process.

AGENT: Well, what about the form that the buyer’s lender puts out that there are – that everybody has to sign that says there are no side deals?  <long pause>
I mean that… How do I get around that?

LENDER: What you need to take care of actually is not going to be a problem. What they submit to us – there is $****** they are giving us – the only thing you have to worry about – I mean it sounds like you’re scared that you’re going to be fined for something because you are doing something you are not supposed to. This is what we do all day.

AGENT: Well yes, I don’t want to lose my license, go to jail, I mean, I have to sign…

LENDER: You’re not going to lose your license – we have plenty of realtors who do this, who actually understand how this whole process goes – and they realize that OK, if I want to get this done, this will take place. Nobody’s losing their license and nobody’s going to jail, nobody’s receiving a fine…
So and here’s the thing too, I’ll be really honest with you, if you are uncomfortable about working it, you can probably assign it over to someone else, where they would be able to do this – if it makes you feel that uncomfortable – you should probably just assign it over to someone else. Someone who’s actually been able you know – who’s done this before, who’s more familiar with it.
Not to be disrespectful or rude to you or anything like that, but we deal with this every day all the time, this is not something out of the norm. But if you feel like you are doing something that’s against your morals, please assign it to someone else who’s been able to do deals like this so they can get it done, and you can have a happy buyer and a happy seller.

AGENT: Well, how do I get, I mean what’s the logic or if I could understand – when I’m signing a paper put out by FHA that says there are no side deals – this is a side deal.

LENDER: This is a contribution. <long pause> You guys are able to come up with money in order to get this deal closed.

AGENT: OK

LENDER: OK. So
the offer that we have it still stands – you can call *LENDER-EMPLOYEE* back and let him know if, what you’re going to do, and if you guys foreclose, we understand. If you’re not comfortable with this – go ahead and assign it over to someone else.

AGENT: <sigh> OK, well thank you for your time.

LENDER: No Problem

“Enjoy”, but fasten your seatbelt…

Loan Modifications: Obama’s Part of Problem, Not Solution

Posted: 29 Sep 2009 04:53 AM PDT

I didn’t want to ever have to write that headline. Like so many millions of Americans, I voted for Barack Obama and truth be told there was one big reason. No, not Sarah Palin. And not because he was the anti-Bush. I voted for Barack Obama for a reason that didn’t show up in the polls: the housing foreclosure crisis; he would do something to stop it.

I know now that I’m far from being alone in this. And I know why it didn’t show up in the polls, after all, during all that joy that was present during the month leading up to the Obama victory, and certainly immediately following it, who was going to talk to pollsters about something as depressing as being at risk of foreclosure? Even today, few people want to make public the fact that they may be losing their home, or even that they’ve already lost a home to foreclosure.

It’s in the press, no question about it, but more in a macro sense. It’s “out there,” as opposed to being “right here”. Even here in Southern California, one of the hardest his areas of the country in terms of people being at risk of foreclosure, I run my errands, go about my business, and don’t bump into it at all. In fact, as I wait for my car to come up in valet parking, all I see are BMWs, Mercedes, and Lexii… the foreclosure crisis seems very far away, even though I know, and certainly as well as anyone, that it’s not.

I know because of where my writing has taken me. I never intended to write over 150 articles and exposes about the foreclosure crisis. And I never thought I’d my writing would touch the lives of so many homeowners that they would call or write to me to tell me their stories and ask my advice. Why would they? I knew nothing about mortgages, and the only way I knew to avoid foreclosure was to pay my mortgage payment each month. Why would anyone call me? But they did and they have and they still do… every single day. And I have no idea how many at this point… hundreds certainly, maybe more. And I talk to them all, sometimes for hours at a time because I care a whole lot about what’s happened to them, and what’s happening throughout our country, and I don’t know if I can really matter, but I have to try.

I started writing about the meltdown in earnest about a year ago, although I did write a few articles beginning maybe a year before that. My first was about what was happening on Wall Street and why. I think the headline read: What’s Happening on Wall Street and Why… I’ve never been a very clever headline writer. I wrote it to help people understand what I knew was a very complex problem, but also one that everyone would soon need to understand.

Then, the government followed by the press started laying the blame for the crisis on “sub-prime borrowers,” and I felt compelled to get involved. It was never “the borrowers,” who were at fault for causing this crisis, let alone the sub-prime borrowers. People with relatively low credit scores and incomes who wanted houses did not destroy the U.S. and global financial markets, no matter what anyone might think. And it wasn’t stated income loans either.

Of course, I chose sarcasm to express my point. I made a tee shirt that said: “Sub-Prime Borrowers Unite. Be Nice to Me or I’ll Stop Making My Car Payments Too.” And I wrote an article to go along with that sarcastic sentiment: “Coming to Terms With the New Power Elite: Sub-Prime Borrowers.” The article was my attempt to point out the fallacies that had quickly become conventional wisdom… it was the sub-prime borrowers’ fault. It was nonsense then… and we now, of course, know… now that 54% of the foreclosures are prime loans, that it wasn’t the borrowers at all… it was and is the banks that have caused this pain.

‘Borrowers didn’t break the capital markets. Borrowers didn’t fraudulently package mortgage backed securities and stand by as they were improperly rated AAA. Borrowers didn’t slice those securities up in a million derivative ways, or leverage them to the hilt, before buying and selling them along with their worthless insurance policies known as credit default swaps. Nope, as all of things and more went on, there wasn’t a single borrower to be found anywhere.

Most annoyingly, it certainly wasn’t borrowers who, knowing that increasing future defaults were imminent, agreed to lower their bank’s reserves for future losses in order to pay themselves untold billions in bonuses. There’s another way of putting that… it wasn’t borrowers that robbed the banks, it was the bankers that robbed the banks. (Why they all still have jobs is beyond me. How big a bank do you have to rob in this country to go to jail anyway?)

Of what were the borrowers guilty? Every time I ask this question I get a fringe answer. You know, the story: A 19 year-old college student bought an $11 million home on the water in Newport Beach. Or how about: The family with income of only $3600 a month, but whose mortgage payment was $4800. It’s a lot like when people talk about welfare fraud, and they point to some woman with 19 children who hasn’t even looked for a job since 1983, conveniently ignoring the fact the more than 70% of welfare spending is spent on children.

At worst Borrowers were guilty of bad judgment. Of trusting bankers. Of wanting more in life than they had in the past. Mostly, however, borrowers, if they were guilty of anything at all, were guilty of not seeing The Great Depression, Part 2 coming around the corner, just like… of, say Henry Paulson, or Ben Bernanke. Bankers, on the other hand, many of them were guilty of criminal fraud. Of manipulating securities. Of trading on inside knowledge. Of lying left and right to everyone, if that’s still a crime in this country.

So, I wrote in order to help people who were suffering understand that what was happening in this country, as our economy slid further into the abyss, was not their fault. It was a controversial viewpoint in the beginning, and I’m thankful it is much less so today. One day, and not so far from now, it won’t be controversial in the least. As of September 26, 2009, the Justice Department is working on 570 cases related to the demise of Wall Street’s banks, so it won’t be long before we all see the arrests and criminal charges levied against the mortgage bank robbers who used to think, a’la Enron, that they were the smartest guys in the room. As far as I’m concerned… that day cannot come soon enough. Maybe then we can start the healing process, and maybe we’ll be better for it.

Regardless all of that, here we are in the fall of 2009, and the crisis has only deepened, and deepened significantly. And not only is that the case, but in addition, both our state and federal governments, by virtue of their incredible l
ack of understanding as to what’s really going on, have only made things worse… and significantly worse. What up with these guys? Do they just feel compelled to turn checkers into chess, or are they actually that out of touch that they can’t even see how incredibly stupid they so often appear?

I’m really not sure anymore, but if anyone in government is reading this, and I know that you are, then you might as well hear it from me… you’re embarrassing yourselves… terribly, and although it may not be showing up in today’s poles, it’s there… just under the surface, waiting for the curtain to close in the next election’s voting booth.

Brass Tacks…

Okay, so let’s dispense with the pleasantries and call it like it is. According to our government, here’s all there is to know about getting a loan modification:

1. Call your bank directly. You don’t need anyone to help you with a loan modification. It’s easy, thanks to the President’s Making Home Affordable program.

2. If you feel you need assistance, call a HUD counselor, or other nonprofit. That’s it, and that’s all.

3. Whatever you do, don’t pay anyone in advance, no matter what, because paying in advance always makes someone a scammer.

4. There are zillions of scammers out there ripping off what must be hundreds of thousands of homeowners each day. I’m surprised every time I leave my house these days and return home without getting scammed. Just lucky, I suppose. Oh and by the way, so far the FTC and the Attorney General have shut down… 22 companies. I feel a lot safer.

5. If a private sector company wants to help homeowners, it should be willing to work for months on end with a lender or servicer and then send their bill at the end. What a plan… become an unsecured creditor of someone who is having trouble paying their bills and already has bad credit.

And that’s not even the worst of it…

The irrational thinking has led to some of the most contradictory statements that I’ve ever heard come out of a legitimate government. Try these…

? These people paid this company $3,000 and they didn’t even get a loan modification.

? No company can guarantee you that your loan will be modified.

? If they fail to get your loan modified, they have to refund your money.

? You don’t need help getting a loan modification; it’s easy to do it by yourself.

? For help with a loan modification contact a HUD certified counselor.

? The law firm took the clients money and failed to deliver anything of value.

? According to the Obama administration, servicers aren’t doing what they agreed to do.

? Bank of America only modified 4% of the eligible loans.

? Lawyers are using their law licenses to con desperate homeowners out of $3,000.

? August foreclosures came in at 356,000, the sixth straight month over 300,000.

? Another wave of foreclosures expected.

? The recession is over, probably.

Look… I’m not playing around here. Stop treating the country like we can’t put two and two together.

The evidence of servicer nonperformance is now abundant, and coming directly from the U.S. Treasury, but nothing the government says has changed one iota. Hasn’t anyone linked the two things together… the servicers refusals to do modifications, with the firms failing to obtain loan modifications? Really? Someone do something about this… this one is too stupid for me to mention ever again.

They attack private sector companies that charge a fee for trying to help someone accomplish something that the government can’t get done either, even after giving away a few hundred million. WTF.

I read stuff like this every day. Just a few weeks ago, a friend who knows how much this stuff annoys me, sent me an article that had appeared in a mid-western newspaper. It was a front-page type of article, huge though, and it showed a nice young couple standing with a baby in their arms, in front of a foreclosed home, sign and all. To sum it all up in a phrase… the story said that the couple had written a supposed law firm a check for $1,000 last March, the company was the now infamous FedMod… and that’s why they lost their home.

Holy macaroni! I had no idea that could even happen to someone as a result of writing a check to a law firm, regardless of whether the law firm was legit or not. I wrote a check to a contractor once for $2500 and got ripped off, but I didn’t lose my home or my car or anything as a result. What the heck happened here?

I wonder what the government brain in trust thinks when they see people continuing to write checks to companies up front, even though everyone in America has been told by the President and everyone else on down, not to do that. Why do you suppose they keep doing it, are they stupid? Don’t people watch television?

No, they heard you. They’re doing it because they’ve tried what you suggested and it didn’t work worth a damn. Are you listening, by the way?

There’s another possibility, of course. They could all be in the pocket of the banks, but that’s hard to believe. I’m not talking about Obama, Geithner, and the gang at the Harvard Goldman Club… they are unquestionably in the banker’s pockets. I’m talking about everyone else in state and local government… the bankers can’t have bought them all over to their point of view, can they? All of them?

I can’t be the only one that sees what the banks are doing here, right? I know at least 100 attorneys that know what they’re doing because they’ve seen it first hand on hundreds of occasions.

Banks are telling homeowners that they don’t need a lawyer. Isn’t that giving legal advice? Isn’t that the unauthorized practice of law? Why, yes… I believe it is. But who in the country has the balls to sue or bring charges against a bank? Likely, no one. And besides… why all of a sudden does everyone care so much whether I hire a lawyer? I’ve run my own firm for twenty years… and no one ever cared if I hired a lawyer before. Now it’s seems that even the American Bar Association doesn’t think lawyers should be representing homeowners trying to obtain loan modifications. Why do you supposed that would be.

The Bottom-Line…

President Obama… we haven’t heard from you on the housing and foreclosure since last spring when you gave a speech to adoring and cheering crowds. You set their expectations way above what your program delivers, your administration has spent more time grandstanding over the 22 firms you’ve shut down… you’ve made a mess.

One homeowner who watched your speech in late February recently told NPR that when heard you describe the program he felt as if you were speaking directly to him. And then he went through hell trying to get one. It wasn’t his fault, Mr. President… it’s yours.

This whole thing… the foreclosure crisis is going to be laid at your feet in 2010. Either you owe quite a few people an apology, or you better get on the stick and fix it… fast.

We didn’t vote for you in order to hear excuses about servicers being overwhelmed. And we certainly didn’t vote for you in order not to hear from you… to have Treasury and the Fed stonewalling Freedom of Information requests. We voted for you because it meant change. And so far, when it comes to the foreclosure crisis, what you consider change is not the kind many people are believing in these days

http://mandelman.ml-implode.com/

MORTGAGE EXPERT, DETROIT, BIRMINGHAM, BLOOMFIELD, ROCHESTER, ROYAL OAK, TROY, MICHIGAN
– DETROIT, MI – Over the last several weeks I’ve noticed a substantial increase in the number of loan modification companies being investigated by various government agencies.

All I can say is that it’s about time.

Now don’t misinterpret that statement – I believe that loan modifications may be part of a viable solution in getting our country out of the current housing crisis, although it’s too soon to determine their actual long-term effectiveness.

I also have nothing against loan modification companies in general nor the people that work at them. I’ve met or connected with many individuals that are intent on really helping people and do their best to do so.

Lastly, many homeowners do need some type of assistance as lenders don’t have their best interests in mind when they do loan modifications and many lenders draw the process out seemingly forever.

On the other hand, I’ve personally heard many stories from homeowners victimized by loan modification companies, have heard the same stories from mortgage associates and have read many more on the internet.

From Subprime to Loan Mods
I predicted over a year ago that loan modification companies would become the new subprime “churn & burn” debacle. This was triggered by my observations that many local subprime loan originators were flocking to do loan modifications. I even heard several stories of these originators approaching the same clients they’d put in subprime loans, with offers to now do loan modifications for them.

There really is no barrier of entry to do loan modifications. All you need is a phone and the ability to find clients. Finding clients is easy with so many homeowners struggling with their mortgage payment.

This should all sound familiar as much of it applied to the mortgage industry in general until recently, when state governments started requiring individual licensing of loan originators and the federal government created a national registration system.

When Michigan enacted its Loan Officer Registration Act, April 1, 2009, the state expected 10,000 to register based on past data. To date only 3141 have met the requirements of 24 hours of class time, passed a multiple choice test and background screening. How many of the unregistered do you think are now using their limited mortgage knowledge to do loan modifications?

Desperate People do Desperate Things
One would think that a homeowner, burned by a bad mortgage, would be a bit more cautious when considering a loan modification.

The number of loan mod companies popping up however, prove otherwise. It’s basic supply and demand – the numbers of these companies wouldn’t be expanding if there weren’t desperate homeowners to support them.

So, how do homeowners get burned by these companies? In no particular order:

• Paying upfront fees for a modification never completed.
• Being told they’ll get a principal balance reduction, when in reality it rarely happens.
• Getting approved for a modification that raises their payment or insignificantly lowers it.
• Following advice to not contact their lenders during the loan mod process, only to get foreclosed on.
• Not being made fully aware of the possible credit damage, legal issues and tax consequences.

It’s all boils down to these companies over-promising and under-delivering.

What Took the Government So Long to Act?
If I saw this problem coming over a year ago, you’d think the smart people in our government would’ve saw it coming also.

In a recent informal poll of mortgage originators by “Think Big Work Small”, 81% responded that over 50% of those doing loan modifications are “rats”.

Unfortunately, just like with the mortgage meltdown and the banking crisis, the government only seems to act after the damage has already been done. Here’s a list of the agencies currently chasing loan mod companies:

• Federal Trade Commission
• United States Attorney’s Office for the Central District of California
• Arizona Attorney General’s Office
• California Department of Justice
• California Department of Real Estate
• State Bar of California
• Colorado Attorney General’s Office
• Idaho Attorney General’s Office
• Illinois Attorney General’s Office
• Iowa Department of Justice
• Kansas Attorney General’s Office
• Maine Attorney General’s Office
• Maine Department of Professional and Financial Regulation, Bureau of Consumer Protection
• Maryland Department of Labor, Licensing, and Regulation, Office of the Commissioner of Financial Regulation
• Massachusetts Attorney General’s Office
• Michigan Attorney General’s Office
• Missouri Attorney General’s Office
• New Jersey Attorney General’s Office
• New Jersey Department of Banking and Insurance
• New Mexico Attorney General’s Office, Consumer Protection Division
• North Carolina Department of Justice
• Ohio Attorney General’s Office
• Oregon Department of Justice
• Texas Attorney General’s Office
• Washington Attorney General’s Office

Charges are being filed because of deceptive and/or false advertising (Section 5 of the FTC Act), charging upfront for services before rendered, unlicensed activities, mail fraud, attorney misconduct and several others.

Solutions
The Obama administration really needs to step up and address this issue quickly. The crooks and sharks need to be forced out of the industry to protect homeowners. Honest professionals also need protection – from overzealous government agencies. It’d be a real shame if those that were actually doing good things for homeowners were put out of business, fined or jailed.

An easy to implement option would be to allow loan modifications to only be done by licensed mortgage companies and attorneys. The mechanisms are already in place across the country to control this.

A better solution would be for the administration to create a national solution instead of letting all 50 states come up with their individual plans.
For a list of the loan modification companies currently be investigated, click here and then click on “preview”.

On April 1, 2008, the state of Michigan passed a law called the, “Loan Officer Registration Act” (LORA) that required all mortgage originators to register with the Office of Financial and Insurance Regulation (OFIR).

The law was passed to root out the “bad apples” in the mortgage business that helped contribute to the housing crisis by putting people into loans they couldn’t afford. Loan originators working for federally chartered institutions are exempt from the state law, but all brokers must comply.

The state had to extend the original January 1st, 2009 deadline to April 1, 2009, due to some issues with fingerprinting.

What’s interesting is that even with the extension, the number of complying originators was very small. OFIR sent out a memo to all mortgage brokers on February 24th, 2009 titled, “Alarmingly Low Number or Mortgage Loan Officer Registration Applications Received by OFIR”. OFIR noted that they expected 10,000 applications, but as of that date had received less than 1,000 applications with only 55 being approved.

On March 27th, 2009, OFIR sent out a warning letter titled, “Loan Officer Registration, Loan Officer Notification, and Loan Officer Enforcement”, warning of coming investigations and penalties for noncompliance.

So, where are we at the deadline?

Well, as of the close of business March 31st, 2009 OFIR’s website showed only 1,490 mortgage originators are registered to legally originate mortgages in the state of Michigan.

Several consumers recently found out the mortgage broker they were dealing with, Capita Management Group in Southfield, was operating without a license. OFIR issued them an “Order to Cease and Desist” on March 19th, 2009.

So, if you’re looking to buy a home or refinance your existing mortgage, you might want to make sure that the loan originator you’re working with is operating legally.

By the way, feel free to look me up on OFIR’s list of REGISTERED mortgage originators.