Archive for 'Foreclosed Properties'

Lawyers for Wells Fargo and Co., a mortgage lending company, have urged U.S. District Judge Benson Legg to dismiss a case filed by the city of Baltimore, Maryland blaming it as the cause of the flood of bank foreclosure properties in the area.

In its lawsuit, the city claimed that Wells Fargo had preyed on black communities in the area with subprime loans, driving many homeowners to go into default and eventually, foreclosures.

According to Legg, he would decide whether to conduct a trial on the initial lawsuit to be filed in court by a city. The allegation contends that a mortgage lending company violated the Fair Housing Act federal law with predatory loans that push higher the number of bank REO properties.

In New York, the U.S. Supreme Court has ruled that the city’s office of the attorney general has the authority to conduct an investigation on whether major banks practiced discriminatory lending against minorities who were seeking mortgages.

Meanwhile, in Baltimore, the lawsuit it filed against Wells Fargo alleged that the bank discriminated against African American borrowers by enticing them with high-cost subprime loans even when some of them would have been eligible for prime-rate mortgages.

The city claimed that the policies of Wells Fargo had led to an increase in the number of bank REO properties in targeted neighborhoods, leading to the devastation of the city’s economy due to low tax revenue and exacerbating housing, police and fire costs.

Tony Paschal, former loan officer in Wells Fargo, stated in his affidavit that loan officers from the banks were made to categorize African Americans as those who do not pay their bills and were often referred to as mud people or niggers.

Wells Fargo attorney Andrew Sandler argued that there is lack of evidence showing that the bank intentionally targeted African American borrowers or that they were encourage to go the route of subprime loans with high interest rate.

According to Sandler, out of the 143 foreclosure cases, 100 were due to excessive obligations, 43 were due to illness and job loss accounted for 41.

From 2005 to 2008, over 60 percent of Well Fargo’s bank REO properties were located in city sections where inhabitants are 60 percent blacks.

Sixteen partially-built foreclosure properties in the California city of Victorville were demolished by Austin-based Guaranty Bank because it figured that it would lose more money if it completes the foreclosed properties.

City officials were informed by the bank that the total costs of finishing and then marketing the foreclosure properties would surpass their sales proceeds, especially as home prices are still falling.

The bank also said that it faces fines from the city as the foreclosure properties, located in an abandoned housing area in Victorville, have been invaded by squatters, vandals and drug users. Victorville is one of the desert cities in Southern California’s San Bernardino County, about 85 miles east of Los Angeles.

Across San Bernardino County, home prices have dropped by 60 percent from their peak in 2006, based on data from real estate research firm DataQuick.

The median price for new homes in the city is $265,000, according to another research firm Hanley Market Intelligence.

The demolition of the 16 foreclosure properties indicated how the foreclosure crisis had affected mortgage banks which invested in Los Angeles suburbs that showed great potential during the boom. According to city officials, the foreclosed properties were constructed by California-based developer Matthews Homes in 2007. Guaranty Bank foreclosed on the builder in December 2008.

Guaranty Bank has been losing from loans extended to home developers. Like many other lenders in the home building industry, Guaranty has been foreclosing on residential developers whose housing projects have collapsed. Regulators have pressured Guaranty to move its foreclosure properties, but the bank could not find buyers as home values continue their downward direction.

The bank’s parent firm Guaranty Financial Group is also facing its own foreclosure-related problem: a cease and desist order from the U.S. Office of Thrift Supervision for its alleged unsound banking practices.

Guaranty spokesperson John Wessman asserted only 4 of the 16 foreclosure properties were almost complete and that the other units were just skeletons. He also added that the Guaranty executive who supposedly told Victorville reporters it would cost over $1 million to finish the project was not authorized to give information to the press.

Ron Willemsen, head of the Montclair-based Intravaia Rock & Sand which demolished the foreclosure properties, expressed surprise that the bank could not think of a better alternative to demolition.

Search Foreclosure Properties in California Cities:

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More than 20 people demonstrated outside a convention center in Manhattan New York City to protest the auction of hundreds of foreclosed homes by Real Estate Disposition Corp. It is possible that among these foreclosed homes are tax foreclosure properties.

Several of the demonstrators are carrying signs that say banks get rescued while homeowners get evicted. They explained that they are not against the people who went to the auction to look for homes. They said they are protesting against banks that received billions of bailout funds from the federal government after launching lending schemes that increased their profits but put millions of homebuyers into foreclosures. While the banks get rescued, individuals whose assets became tax foreclosure properties due to the economic downturn do not receive any bailout from the government.

Larry Holmes, spokesperson of the Bail Out the People Movement, insisted that they understand the situation of people looking for cheaper homes and are not angry at them. They are not protesting against them. He said his group staged the protest rally at a REDC auction because REDC is the country’s biggest private auction company for foreclosed homes, which in all likelihood include tax foreclosure properties. He claims REDC is making money out of other people’s hardships.

Additionally, Holmes called on the federal government to declare a national moratorium on foreclosures to give time to distressed families to improve their finances. Previous owners of tax foreclosure properties or individuals troubled by tax foreclosures would have wished that Holmes included tax foreclosure properties in his intentions. Because of continued corporate downsizing and layoffs, a lot of real estate assets are also being turned into tax foreclosure properties.

Holmes specifically questioned the auctioning of homes that are still occupied by families. He questioned the idea of forcing families out of foreclosed homes into cars while giving billions to financial multinationals like AIG and Citicorp.

American International Group and Citigroup received billions of bailout money from the Troubled Assets Relief Program in 2008 under the Bush Administration. These financial companies, in addition to others in the financial industry, are again being evaluated for possible further bailout by the federal government under the Obama administration.

Finally, Holmes’ group said foreclosure proceedings are violating the U.S. Housing and Economic Recovery Act. They announced they are going to hold a major protest rally on April 3 on Wall Street.

Fannie Mae and Freddie Mac went into conservatorship last September 2008 as a government move to stall their collapse. Between these two companies rest the fate of 31 million mortgages worth more than $5.3 trillion, many of which are endangered tax foreclosure properties due to the more than $1.6 trillion Alt-A and subprime loans.

They were each given a $100-billion lifeline from the government and they accounted for more than 75 percent of mortgage originations towards the end of last year. Their activities injected the much needed cash-flow required by the financing and lending sectors, which made their importance clear for both homebuyers and lenders.

As indicated by the Federal Housing Finance Agency, the federal entity regulating these two companies, the Obama administration has made it clear that Fannie Mae and Freddie Mac will continue on their key role of stabilizing the housing market. Each will play a vital part in the tax foreclosure properties prevention program planned by the new administration. These plans include:

• Fannie Mae and Freddie Mac to create provisions for low-cost refinancing access to borrowers having little or no remaining equities on their homes. This move is expected to help at least 5 million borrowers from losing their homes to foreclosures.
• As part of the $75 billion loan modification program, Fannie Mae and Freddie Mac will contribute over $20 billion to help subsidize interest rate reductions for struggling borrowers with tax foreclosure properties.

For these two struggling companies to accomplish their tasks, the administration will pour in at least $200 billion each in support, which is double than previous levels. On top of that, the administration has agreed that the two companies can guarantee or own mortgages up to $900 billion, which is higher than the previous $850 billion.

This added support and funding from the government comes at a very crucial time for the two companies, which are reeling from the impact of soaring defaults and tax foreclosure properties as the economy continues to plummet. Both firms are expected to report huge fourth quarter losses. With these trends, both entities may need more than $200 billion each from the government, but the administration has made it clear that the federal government will be there to back them up.

Even with the staggering $700-billion bailout of troubled financial corporations, the wave of foreclosures is still continuing and the expected stimulation of profitable lending has not occurred.

To help end the housing crisis, two of the largest banks in the country, Bank of America and JP Morgan Chase, have announced programs that would help homeowners at risk of foreclosure and borrowers who have already become delinquent.

JP Morgan Chase has officially announced that it will defer foreclosure procedures by 90 days in order to give time to homeowners to work out remedies to save their homes. The bank will examine their mortgage loans to determine if they are eligible for interest rate reduction or loan balance reduction.

According to JP Morgan, it has already assisted more than 250,000 families and more than $40 billion in total loan value. It has committed to rescue another 400,000 borrowers with more than $70 billion in mortgage loans.

Mortgage loans provided by EMC Mortgage Corp. and Washington Mutual, the financial companies recently bought by JP Morgan, will also be examined for possible modification.

Some analysts have reservations about the banks’ loan modification initiatives and their impact on the foreclosure crisis. They doubt if the banks can really give the level of interest rate that would significantly reduce monthly payments

Analysts say that reducing loan principal balances is more realistic for borrowers on the verge of foreclosure. It also reflects the current market values of homes and it would help stabilize the housing market.

To illustrate the favorable effect of principal balance reduction, the loan contract of a house purchased for $250,000 is considered. If the home is revalued at $180,000, the monthly payments are drastically reduced. The homeowner then is able to pay the amortization and will avoid foreclosure. The price levels for comparable homes will then also drop to $180,000, but not to the level of $130,000 to $120,000, which happens if the home is foreclosed and sold at an auction

Federal Deposit Insurance Corp. Chairwoman Sheila Bair has urged the U.S. Treasury Department to consider a $50 billion bailout program. The program, which will use the $700 billion funds in the financial rescue plan, aims to encourage banks to modify and lower mortgage payments and allow homeowners to continue living in their homes.

One proposal under the bailout plan is for banks to lower loan interest rates in the period of five years. The U.S. government would then guarantee the modified mortgage even if homeowners will once again default on their payments.

Senator Mel Martinez, a Department of Housing and Urban Development former secretary who gave his support to the $700 billion bailout plan, believes that abating foreclosures is the key to solving the economic and financial crisis. He praises the way Bair addresses the housing market problem.

Meanwhile, Senator Bill Nelson, who did not support the $700 billion bailout plan, points out that financial institutions involved in the bailout program should be compelled to modify or refinance any mortgages they hold for homeowners who are under threat of foreclosure.

The mechanics of the rescue plan for homeowners who are under threat of foreclosures are expected to be complicated. They may involve a lower mortgage principal and interest rates.

It is also expected that the biggest problem facing those responsible for the bailout plan’s implementation is choosing eligible recipients for the program.

Many Americans owe mortgages more than the value of their properties. It is not clear what the bailout plan can do to those homeowners who are diligent payers and to those who avail of reasonable mortgages on properties they could pay but may lose their homes because of not having any jobs.

However, it is expected that the relief package will successfully reduce foreclosures, which in turn will alleviate the economic crisis.

Learn about tax foreclosure properties.