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Archive for the ‘Loan Modifications’ Category

Fewer Home Owners Report Equity in Homes

Friday, July 22nd, 2011

DAILY REAL ESTATE NEWS | FRIDAY, JULY 22, 2011

With falling property values, more home owners are reporting being underwater, owing more on their home than it’s currently worth.

One in three home owners — or 33 percent — say that their home is worth less than the amount they still owe on their mortgage, while another 18 percent aren’t even sure if they’re underwater, according to the latest Rasmussen Report of 676 home owners.

Upper-income home owners tend to be more confident about their home’s value than those who earn less, according to the study. Also, investors were found to be more confident than noninvestors about their home’s equity.

Overall, for the second straight month, less than half of home owners — 49 percent — say the value of their home is worth more than the amount they still owe on their mortgage. While that’s up from June’s all-time low of 45 percent, analysts are still concerned.

For comparison, in December 2008, 61 percent of home owners surveyed said they believed their home was worth more than their mortgage. While that number has fallen since, this is the first time the number of home owners believing they had equity in their home stayed below 50 percent for two months in a row.

Source: “Just 49% Say Home Is Worth More Than Mortgage,” Rasmussen Reports (July 21, 2011)

Some MARS Stipulations No Longer Enforced

Tuesday, July 19th, 2011

By: Kristie Franks

The Federal Trade Commission will no longer enforce most provisions set forth in the Mortgage Assistance Relief Services (MARS) Rule, according to a statement released Friday.

The MARS Rule required real estate agents to make several disclosures when assisting distressed homeowners in obtaining short sales from their lenders or servicers.

The rule also banned advance fee collection and prohibited false or misleading statements.

After the Rule was enacted by Congress in 2009, several real estate agents complained that the disclosures often confused homeowners or misled them.

“As more and more American homeowners seek short sales, it is especially important that the Rule not inadvertently discourage real estate professionals from helping consumers with these types of transactions,” the FTC stated.

The MARS Rule required real estate agents to state that they are not associated with the government, nor have their services been approved by the government or the homeowner’s lender; the lender may choose not to alter the homeowner’s loan; and if a company tells a homeowner to stop making mortgage payments, they must warn them that they could lose their home or damage their credit rating.

Real estate agents who are in good standing under state licensing requirements, in compliance with state real estate laws, and assisting homeowners in obtaining short sales are no longer required to provide the MARS disclosures.

These agents may also collect advance fees.

Deceptive practices and false statements will still be prohibited by the FTC.

The FTC’s stay only applies to short sales and does not affect agents providing assistance with other types of relief such as loan modifications.

BofA Reaches Settlement With Investors Over Legacy Countrywide Deals

Thursday, June 30th, 2011

by Carrie Bay

Bank of America has agreed to pay investors $8.5 billion to compensate them for Countrywide’s dealings years before the subprime lender was acquired by BofA.

The company said in a statement Wednesday that the settlement resolves “nearly all” of its repurchase exposure stemming from legacy first-lien residential mortgage-backed securities (RMBS) issued by Countrywide.

The agreement involves 530 trusts, five of which are second-lien trusts, and covers RMBS that carry a total original principal balance of $424 billion.

As part of the settlement, Bank of America has also agreed to implement certain servicing changes, including transferring high-risk loans owned by the trusts to subservicers and paying additional fees to the investors if benchmarked default-servicing timelines are not met.

The company estimates the costs associated with the supplementary servicing obligations to be approximately $400 million, and notes that the agreed upon actions are consistent with the consent orders issued in April by federal regulators.

In addition to the arrangement, which settles claims from 22 private institutional investors and is subject to final court approval, BofA says it will also be making a $5.5 billion provision to address expected loan buyback liability for both GSE and non-GSE exposures in the second quarter.

Bank of America acquired Countrywide, once the largest subprime lender in the country, in July of 2008. The company has paid out billions of dollars to settle lawsuits related to Countrywide’s business prior to the acquisition, including a multi-state settlement involving mandatory modifications and restitution for homeowners with Countrywide loans.

“This is another important step we are taking in the interest of our shareholders to minimize the impact of future economic uncertainty and put legacy issues behind us,” said Brian Moynihan, Bank of America’s CEO. “We will continue to act aggressively, and in the best interest of our shareholders, to clean up the mortgage issues largely stemming from our purchase of Countrywide.”

Bank of America says Wednesday’s settlement will eat into its second-quarter earnings, scheduled for release on July 19. Company officials are advising investors that the bank will report a loss for Q2 in the range of $8.6 billion to $9.1 billion, or 88 cents to 93 cents per share, as opposed to net income of 28 cents to 33 cents per share without the settlement outlay.

Still, financial markets and the investment community see the settlement agreement as a positive. Analysts say it eliminates a serious cloud of uncertainty that’s been hanging over one of the nation’s most prominent financial fixtures.

BofA’s stock price reportedly rose more than 5 percent in pre-market trading and has seen a steady rally throughout the day, with other shares of financials following suit on its coattails.

Fitch Ratings said it views the settlement as a “favorable development,” adding that the recognition of the cost associated with the agreement in the second quarter “decreases future financial uncertainty and considerably reduces the drag on future earnings from this issue.”

FTC to Collect $2.2M from Banned Loan Mod Companies

Wednesday, April 13th, 2011

By: Heather Hill Cernoch

The Federal Trade Commission (FTC) reached a settlement this week with two companies and three individuals, who are now banned from the mortgage relief services business and must pay $2.2 million in assets for consumer refunds.

The FTC filed the proposed consent order in the U.S. District Court for the Southern District of Florida.

As part of its efforts to thwart scams targeting homeowners seeking mortgage relief, the FTC alleged in

November 2009 that Kirkland Young LLC and its manager, David Botton, misrepresented themselves as consumer mortgage lenders, servicers, or their affiliates.

According to the FTC, they falsely promised to modify consumers’ loans and make their mortgage payments more affordable. The FTC added Botton’s sister, April Botton Krawiecki, their father, Samy Botton, and Attorney Aid LLC as defendants in December 2009.

The settlement also permanently prohibits these companies and individuals from misleading consumers about financial-related goods and services and bars the defendants from selling or disclosing customers’ personal information.

The FTC did not allege any violations of the Mortgage Assistance Relief Services Rule in this case because the defendants’ claims predated the rule.

The rule bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable.

Congressional Panel Report Says Foreclosure Mitigation “Largely Failed”

Wednesday, March 16th, 2011

By: Joy Leopold

The final report released on Wednesday by the Congressional Oversight Panel (COP) regarding the programs and uses of money under the Troubled Asset Relief Program (TARP) paid special attention to foreclosure mediation programs, particularly the Home Affordable Modification Program (HAMP).

The panel pointed out that TARP is expected to cost much less than originally expected, and while that is in part due to careful planning and diligent management, it pointed out that “a separate reason for the TARP‘s falling cost is that Treasury‘s foreclosure prevention programs, which could have cost $50 billion, have largely failed to get off the ground. Viewed from this perspective, the TARP will cost less than expected in part because it will accomplish far less than envisioned for American homeowners.”

Because of this, the report says “The TARP is now widely perceived as having restored stability to the financial sector by bailing out Wall Street banks and domestic automotive manufacturers while doing little for the 13.9 million workers who are unemployed, the 2.4 million homeowners who are at immediate risk of foreclosure, or the countless families otherwise struggling to make ends meet.”

The COP report analyzed several foreclosure mitigation efforts that have been implemented since as far back as 2007.

And though all of the efforts were begun with good intentions, the COP’s report made it very clear that none of the programs have been as successful as hoped, mainly because of poor planning, poor regulation, and poor data collection.

After pointing out that the federal government is not an official sponsor of the HOPE NOW alliance, the COP says that while the alliance reports it has modified more than 3 million loans, little information is available about the actual savings the modifications are providing to homeowners.

Of the HOPE for Homeowners program that was established in July 2008, the COP says it “managed to refinance only a handful of loans,” most likely because the program had “poor initial design, lack of flexibility, and … [relied] on voluntary principal write-downs, which lenders were very reluctant to make.”

The report also reiterated the negative sentiment that has surrounded HAMP for months, pointing out the programs failure to meet its initially projected number of modifications.

In addition, the report said HAMP modifications are unstable, due to the large debt burdens and negative equity that many participating homeowners continue to carry.

And while the panel notes that Treasury did implement some basic measures to attempt to address problems with HAMP, the report says, “the panel remained concerned that the choices made by Treasury in terms of program structure, transparency, and data collection did not leave borrowers well served.”

The panel also points out that its suggestions for changes or requests for information from Treasury were largely ignored.

The report says, “In April 2010, the panel recommended that Treasury commit to providing regular and publicly available data reports on all HAMP modifications through the end of their five-year modification period.”

Treasury failed to produce those reports until late January 2011, which the panel complains leaves limited time for any real conclusions from the data to be drawn before HAMP expires.

The COP also repeatedly asked Treasury for characteristics of borrowers who default again despite receiving a HAMP modification. The panel reports that “Treasury has begun to release a limited amount of aggregate data on HAMP redefaults, but despite the panel‘s urging, it has not made public any analysis that identifies borrower characteristics that positively correlate to a higher risk of redefault.”

The COP requested that the Treasury announce firmer goals for HAMP, specifically how many foreclosures the agency expects HAMP to prevent, but “To date, Treasury has not released any goals or estimates for how many foreclosures will be ultimately prevented by HAMP since its original goal of 3 to 4 million.”

Also, “The Panel repeatedly urged Treasury to improve and streamline communications with borrowers, and to make it easier for them to apply for HAMP assistance,” but, “Treasury did not implement this recommendation.”

The report goes on to list numerous other instances in which suggestions by the COP were ignored. It concludes the analysis of foreclosure mitigation with a section that suggests learning from mistakes made and implementing future policy that takes into account the many factors that go into successfully preventing enough foreclosures to have an impact on the struggling economy.

“Future policymakers should be mindful that the incentives of mortgage servicers are different from those of the government, and design any foreclosure mitigation program with that reality in mind,” it said

MARS Summary and Road Map to Disclosures – By AAR General Counsel K. Michelle Lind

Thursday, March 3rd, 2011

The Federal Trade Commission (“FTC”) Mortgage Assistance Relief Services (“MARS”) Rule applies to any person that provides, offers to provide, or arranges for others to provide, any “mortgage assistance relief service.” A “mortgage assistance relief service” includes any service, plan, or program, offered or provided in exchange for consideration to assist or attempt to assist the consumer with negotiating, obtaining or arranging a short sale. Thus, despite initial uncertainty about this issue, it is now clear that a broker negotiating a short sale with a lender on behalf of the seller must comply with the MARS Rule.

 Not surprisingly, AAR continues to receive inquiries regarding this new Rule. AAR has been diligently working to provide answers. AAR’s Risk Management Committee is meeting to determine if any of the MARS disclosures should be incorporated into AAR’s existing Short Sale forms and to develop any necessary separate MARS disclosure forms. Since this is a federal rule, NAR has been working with the FTC and has published a summary of the Rule. Read the summary online.

 The FTC has published The Mortgage Assistance Relief Services Rule: A Compliance Guide for Business (February 2010) (“FTC Guide–), which is available at: http://business.ftc.gov/documents/bus76-mortgage-assistance-relief-services-rule. Every broker involved with short sales should carefully read this FTC Guide.

 The FTC Guide states:

  • Real Estate Agents. The Rule covers real estate agents who promote their services as a way to help consumers to avoid foreclosure, for example, by getting a lender’s approval for a short sale. However, the Rule doesn’t cover real estate agents who don’t promote their services this way, and who only provide services to help people in buying or selling homes — like listing homes for sale, showing homes, or finding homes that meet buyers’ needs.

 THE FOLLOWING IS A SUMMARY OF THE MARS REQUIREMENTS

 (1) NO ADVANCE FEES

The Rule contains a prohibition against requesting or receiving any advance payment of any fee or other consideration until the seller has executed a written agreement between the seller and the lender or servicer incorporating the terms of the short sale offer.

 The FTC Guide states:

You can’t collect any fees for intermediate steps you take as part of the process. For example, it would be illegal to charge separately for:

  • conducting an initial consultation with a customer;
  • reviewing or auditing a customer’s mortgage or foreclosure documents to detect errors, including “robo signing” or title problems;
  • gathering financial or other information from a customer;
  • sending an application for mortgage relief or any other request to a customer’s lender or servicer;
  • communicating with a lender or servicer on a customer’s behalf; or
  • responding to requests for information from a customer’s lender or servicer.

Notably, in Arizona a real estate licensee may not receive additional compensation for negotiating a short sale, unless also licensed as a loan originator by the Arizona Department of Financial Institutions and the requirements of A.R.S. § 32-2155(C) are met. See, ADRE Informational Alert (February 15, 2011) at: www.azre.gov/PublicInfo/Documents/Short_Sale_Negotiator_Regulations.pdf.

 The ADRE Informational Alert also states: “[a]ny fee, refundable or non-refundable, that a broker/salesperson requests or receives from a consumer to negotiate, obtain or arrange a short sale, in advance of an executed agreement between the consumer and his or her lender or servicer that incorporates the final terms that the lender or servicer will agree to, violates the advance fee ban described in section 322.5 of the Federal Trade Commission’s MARS Rule.”

 (2) DISCLOSURES IN ADVERTISING

The FTC guide states:

The Rule requires certain disclosures in what it calls “general commercial communications” — that is, advertising meant for a general audience, like ads on TV, radio, or the Internet.

The clear and prominent advertising disclosure must state:

IMPORTANT NOTICE (in two-point type larger than the font size of the disclosure): (Name of company) is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. [If the broker represents that the seller should stop making payments add: "If you stop paying your mortgage, you could lose your home and damage your credit rating"]

Communications disseminated orally or through audible means must be preceded by the statement “Before using this service, consider the following information.”

(3) DISCLOSURES IN COMMUNICATIONS WITH PROSPECTIVE CUSTOMERS

The FTC Guide states:

The Rule requires additional disclosures in any “consumer-specific commercial communication” — that is, a letter, phone call, email, text, or the like, directed at a specific person you’re soliciting for your service.

The clear and prominent disclosure required in every communication with a prospective customer must state:

IMPORTANT NOTICE (in two-point type larger than the font size of the disclosure): You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us (insert amount or method for calculating the amount) for our services. (Name of company) is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. [If the broker represents that the seller should stop making payments add: &8220;If you stop paying your mortgage, you could lose your home and damage your credit rating”]

Communications disseminated orally or through audible means must be preceded by the statement “Before using this service, consider the following information” and, in telephone communications, must be made at the beginning of the call.

 (4) TWO SEPARATE DISCLOSURES WHEN PRESENTING A SHORT SALE OFFER FROM THE LENDER OR SERVICER

The FTC Guide states:

Under the Rule, when you give a customer an offer of mortgage relief from their lender or servicer, you have additional disclosure requirements…

The first clear and prominent disclosure must be on a separate written page and state:

IMPORTANT NOTICE: Before buying this service, consider the following information (in two-point type larger than the font size of the disclosure): This is an offer of mortgage assistance we obtained from your lender [or servicer].You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount as disclosed previously] for our services. [If the broker represents that the seller should stop making payments add: “If you stop paying your mortgage, you could lose your home and damage your credit rating”]

The second disclosure the broker must provide is a separate notice from the lender or servicer. The FTC Guide states:

You have to give your customer a separate one-page written notice from the customer’s lender or servicer that explains all material differences between the offer of mortgage relief you got from the lender or servicer and the customer’s current loan.

(5) TRUTH IN ADVERTING SERVICES

The Rule contains prohibitions against making certain representations and misrepresentations.

 The FTC Guide states:

Under the Rule, it’s illegal to misrepresent, either expressly or by implication, any “material aspect” of your services. That includes any information that’s likely to affect a consumer’s decision to use your service or choose one service over another. [Examples Omitted]…

 In addition, if you make claims about the benefits, performance, or efficacy of your services, your statements must be truthful and you must have competent and reliable evidence to back them up. [Examples Omitted]…

 Beyond requiring that your claims are truthful, the Rule makes it illegal to tell a customer or potential customer to stop communicating with their lender or servicer.

 (6) RECORD-KEEPING AND MONITORING REQUIREMENTS

The Rule requires certain records be retained for at least two years and reasonable steps to ensure employees and independent contractors comply with the Rule. The records that must be retained include: (i) advertising and promotional materials; (ii) sales records; (iii) communications with customers; and (iv) agreements with customers.

 In addition to the foregoing, it is a violation of the Rule for a person to provide substantial assistance or support to any mortgage assistance relief service provider when that person knows or consciously avoids knowing that the provider is engaged in any act or practice that violates this Rule.

 The Attorney General is authorized to bring an action to enforce the Rule. To review the MARS Rule in its entirety, go to www.ftc.gov/os/fedreg/2010/december/R911003mars.pdf

 In conclusion, the FTC Guide states:

Questions about the MARS Rule? Contact:

Division of Financial Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, DC 20580
(202) 326-3224

 Disclosure #1: ADVERTISING

The Rule requires disclosures in “general commercial communications,” such as advertising short sale services. The clear and prominent advertising disclosure must state:

IMPORTANT NOTICE (in two-point type larger than the font size of the disclosure): (Name of company) is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. [If the broker represents that the seller should stop making payments add: “If you stop paying your mortgage, you could lose your home and damage your credit rating”]

Communications disseminated orally or through audible means must be preceded by the statement “Before using this service, consider the following information.”

Disclosure #2: COMMUNICATIONS WITH PROSPECTIVE CUSTOMERS

The Rule requires additional disclosures in any “consumer-specific commercial communication,” such as communication with a specific prospective client regarding a short sale transaction. The clear and prominent disclosure required in every communication with a prospective client must state:

IMPORTANT NOTICE (in two-point type larger than the font size of the disclosure): You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us (insert amount or method for calculating the amount) for our services. (Name of company) is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. [If the broker represents that the seller should stop making payments add: “If you stop paying your mortgage, you could lose your home and damage your credit rating”]

Communications disseminated orally or through audible means must be preceded by the statement “Before using this service, consider the following information” and, in telephone communications, must be made at the beginning of the call.

 Disclosure #3: WHEN PRESENTING A SHORT SALE OFFER FROM THE LENDER OR SERVICER

When presenting the seller with the lender’s short sale approval letter, the Rule requires two disclosures.

The first is a clear and prominent disclosure on a separate written page that states:

IMPORTANT NOTICE: Before buying this service, consider the following information (in two-point type larger than the font size of the disclosure): This is an offer of mortgage assistance we obtained from your lender [or servicer].You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount as disclosed previously] for our services. [If the broker represents that the seller should stop making payments add: “If you stop paying your mortgage, you could lose your home and damage your credit rating”]

The second disclosure the broker must provide is a separate notice from the lender or servicer that explains all material differences between the offer of mortgage relief you got from the lender or servicer and the customer’s current loan.

Sample Disclosure Forms

AAR has developed sample MARS disclosure forms (Microsoft Word), which can be downloaded from the links below:

Please consult your designated broker or independent legal counsel about the use of the sample forms.

Additional Information

 For Answers to Questions about the MARS Rule

Division of Financial Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, DC 20580
(202) 326-3224

The MARS Rule: A Compliance Guide

Thursday, February 10th, 2011

Homeowners facing foreclosure are often desperate for a way to hold on to their homes. Some companies claim they can help fight off foreclosure by negotiating new mortgage terms with lenders or servicers. The Federal Trade Commission (FTC), the nation’s consumer protection agency, has issued a Rule to curb unfair and deceptive practices associated with mortgage assistance relief services. If you offer mortgage assistance relief services – or work with companies that do – it’s wise to know about the provisions of the Mortgage Assistance Relief Services (MARS) Rule.

This guide, which represents the views of FTC staff and is not binding on the Commission, offers tips on complying with the Rule. Here are some compliance highlights:

•It’s illegal to charge upfront fees. You can’t collect money from a customer unless you deliver – and the customer agrees to – a written offer of mortgage relief from the customer’s lender or servicer.
•You must clearly and prominently disclose certain information before you sign people up for your services. You must tell them upfront key information about your services, including:
•the total cost,
•that they can stop using your services at any time,
•that you’re not associated with the government or their lender, and
•that their lender may not agree to change the terms of their mortgage.
•If you advise someone not to pay his or her mortgage, you must clearly and prominently disclose the negative consequences that could result. You must warn customers that failure to pay could result in the loss of their home or damage to their credit rating.
•Don’t advise customers to stop communicating with their lender or servicer. Under the Rule, it’s illegal to tell people they shouldn’t communicate with their lender or servicer.
•You must disclose key information to your customer if you forward an offer of mortgage relief from a lender or servicer. You must give your customer a written notice from the lender or servicer describing all material differences between the terms of the offer and the customer’s current loan. You also have to tell your customer that if the lender or servicer’s offer isn’t acceptable to them, they don’t have to pay your fee.
•Don’t misrepresent your services. Under the Rule, it’s illegal to make claims that are false, misleading, or unsubstantiated.
Is My Business Covered by the Rule?
If your business is a for-profit provider of mortgage assistance relief services, the Rule applies to you. Bona fide non-profit organizations aren’t covered, but the Rule applies to companies that falsely claim non-profit status.

The Rule defines “mortgage assistance relief service” as a service, plan, or program that is represented, expressly or by implication, to help homeowners prevent or postpone foreclosure or help them get other kinds of relief, like loan modifications, forbearance agreements, short sales, deeds-in-lieu of foreclosure, or extensions of time to cure defaults or reinstate loans. The Rule applies whether you work directly with consumers’ lenders or servicers to get mortgage relief or you offer services to help consumers do it on their own (for example, by conducting a “forensic audit” or other review of consumers’ loan documents).

How does the Rule apply to businesses in the mortgage industry?
•Mortgage Brokers. The Rule covers mortgage brokers who promote loan origination or refinancing transactions as a way for homeowners to avoid foreclosure. Mortgage brokers who don’t promote their services this way generally aren’t covered by the Rule.
•Real Estate Agents. The Rule covers real estate agents who promote their services as a way to help consumers to avoid foreclosure, for example, by getting a lender’s approval for a short sale. However, the Rule doesn’t cover real estate agents who don’t promote their services this way, and who only provide services to help people in buying or selling homes – like listing homes for sale, showing homes, or finding homes that meet buyers’ needs.
•Lenders and servicers. The Rule doesn’t cover lenders and servicers that offer mortgage assistance relief services in connection with loans they own or service. For example, the Rule wouldn’t apply if a business that services a homeowner’s loan helps the homeowner in modifying the loan to avoid foreclosure.
•Accountants and Financial Planners. The Rule doesn’t cover professionals like accountants or financial planners as long as they don’t claim expressly or by implication that using their services will help a homeowner get a loan modification or other mortgage relief.
•Attorneys. The Rule has special provisions for attorneys who provide mortgage assistance relief services. Read Mortgage Assistance Relief Services Rule: A Compliance Guide for Lawyers to find out more. Having an attorney on your staff or using outside attorneys to perform some of your services doesn’t exempt you from the Rule. Nor does having an attorney place fees in a client trust account, by itself, allow you to collect fees in advance.
Even if you don’t provide mortgage assistance relief services, you still may have obligations under the Rule. It’s illegal to provide “substantial assistance” to someone if you know – or consciously avoid knowing – that they’re violating the Rule. What amounts to substantial assistance depends on the facts. Activities like procuring leads (the contact information of potential customers) for MARS providers, helping a MARS provider with its back-room operations, reviewing customer files, processing customers’ payments, or contacting customers’ servicers are just a few examples. If you work with MARS providers, review their policies, procedures, and operations to make sure they’re complying with the Rule because willful ignorance on your part simply isn’t a defense.

How Do Truth-In-Advertising Principles Apply To Claims We Make About Our Services?
Under the Rule, it’s illegal to misrepresent, either expressly or by implication, any “material aspect” of your services. That includes any information that’s likely to affect a consumer’s decision to use your service or choose one service over another. Here are some examples of claims that would be material:

•the likelihood of negotiating, getting, or arranging a specific form of mortgage relief;
•how long it will take to get the advertised mortgage relief;
•an affiliation with the government, public programs, or lenders or servicers;
•the terms and conditions of homeowners’ mortgages, including how much they currently have to pay;
•your refund and cancellation policies;
•whether homeowners will be getting legal services;
•the benefits and costs of using alternatives to for-profit MARS providers;
•the amount homeowners may save if they use your service;
•the total cost of your service; and
•the terms, conditions, or limitations of a lender or servicer’s offer of mortgage relief, including how much time the homeowner has to accept the offer.
In addition, if you make claims about the benefits, performance, or efficacy of your services, your statements must be truthful and you must have competent and reliable evidence to back them up. So, for example, if you make claims about how much your customers will save – like “We can reduce your mortgage payments by 20% to 50%” – your claims must accurately reflect the results you’ve achieved for previous customers. Similarly, if you claim that your customers have reduced their mortgage debt by “up to 50%,” it’s likely you’re conveying to new customers that they, too, will get savings of around 50%. If you don’t have solid proof to back up that claim, your claim is considered deceptive.

Beyond requiring that your claims are truthful, the Rule makes it illegal to tell a customer or potential customer to stop communicating with their lender or servicer.

What Information Must I Disclose To Customers Or Prospective Customers?
The Rule spells out several key pieces of information you must disclose clearly and prominently to consumers. (See page 9) for more on how to make disclosures clear and prominent.) Some disclosures must be made in all advertising for general audiences. Other disclosures must be made in one-on-one communications you have with prospective customers, like telephone calls, letters, or email. A third type of disclosure must be made when you give a customer an offer of mortgage relief from his or her lender or servicer. The Rule also requires that if you ever tell a customer that he or she should stop making timely mortgage payments, you must tell them, using these words, “If you stop paying your mortgage, you could lose your home and damage your credit rating.”

Disclosures you must make in ads meant for a general audience
The Rule requires certain disclosures in what it calls “general commercial communications” – that is, advertising meant for a general audience, like ads on TV, radio, or the Internet. In those ads, you must clearly and prominently disclose two key facts, in these words:

1.”[Name of your company] is not associated with the government, and our service is not approved by the government or your lender;” and
2.”Even if you accept this offer and use our service, your lender may not agree to change your loan.”
The two disclosures must be presented together. The Rule has specific requirements for presenting them.

Disclosures you must make in communications with prospective customers
The Rule requires additional disclosures in any “consumer-specific commercial communication” – that is, a letter, phone call, email, text, or the like, directed at a specific person you’re soliciting for your service. In every communication you have with prospective customers, the Rule requires that you clearly and prominently disclose three key facts, in these words:

1.”You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [insert amount or method for calculating the amount] for our services.”
2.”[Name of your company] is not associated with the government, and our service is not approved by the government or your lender;” and
3.”Even if you accept this offer and use our service, your lender may not agree to change your loan.”
The three disclosures must be presented together. The Rule has specific requirements for presenting these disclosures to prospective customers.

Disclosures you must make when you give customers an offer of mortgage relief from their lender or servicer
Under the Rule, when you give a customer an offer of mortgage relief from their lender or servicer, you have additional disclosure requirements:

1.You have to give your customer a separate written page that clearly and prominently says “This is an offer of mortgage assistance we obtained from your lender [or servicer]. You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount you disclosed upfront] for our services.”
2.You have to give your customer a separate one-page written notice from the customer’s lender or servicer that explains all material differences between the offer of mortgage relief you got from the lender or servicer and the customer’s current loan. Some examples of differences in loan terms that would be material to customers – and would have to be disclosed – include:
•the principal balance;
•the interest rate on the loan, including the maximum rate and any adjustable rates;
•the number of payments on the loan;
•how much the customer must pay each month for principal, interest, taxes, and any mortgage insurance;
•any delinquent payments the customer owes;
•any fees or penalties; and
•the duration of the loan.
3.If the offer of mortgage relief you get for a customer is a trial loan modification – that is, a loan modification that’s temporary – the written notice you give your customer from his or her lender or servicer also must disclose the material terms, conditions, and limitations of this type of relief, including:
•That it’s a trial loan modification and the duration of the trial period;
•That the customer may not qualify for a permanent mortgage loan modification; and
•If the customer doesn’t qualify, the likely amount in suspended payments, arrears, or fees the customer would owe once the trial loan modification period ends.
The Rule has specific requirements for presenting these disclosures to customers.

How Do I Make Disclosures Clear And Prominent?
One goal of the Rule is to make sure that key disclosures about the nature of mortgage assistance relief services are read – and understood – by consumers. That’s why the Rule requires you to present disclosures clearly and prominently. These requirements apply to “general commercial communications” – advertising meant for a general audience, like ads on TV, radio, or the Internet – and to “consumer-specific commercial communications” – letters, phone calls, email, and the like directed at a specific person who has not yet signed up for your service. What makes a disclosure clear and prominent depends on the method you use to communicate with prospective customers. The Rule has more details on how to make sure your disclosures are clear and prominent.

When Can I Collect My Fee?
The Rule says you can’t collect any fee from a customer until you’ve met three requirements:

1.You get an offer of mortgage relief from your customer’s lender or servicer. You must have persuaded your customer’s lender or servicer to reduce, modify, or otherwise change the terms of the customer’s mortgage loan;
2.You give your customer the written offer. You must provide your customer with a written agreement from the lender or servicer to reduce, modify, or otherwise change the terms of the customer’s mortgage loan; and
3.Your customer accepts the written offer. The customer’s acceptance must be in the form of an executed written agreement with the lender or servicer that incorporates the changes to the terms of his or her mortgage loan.
You can’t collect any fees for intermediate steps you take as part of the process. For example, it would be illegal to charge separately for:

•conducting an initial consultation with a customer;
•reviewing or auditing a customer’s mortgage or foreclosure documents to detect errors, including robosigning or title problems;
•gathering financial or other information from a customer;
•sending an application for mortgage relief or any other request to a customer’s lender or servicer;
•communicating with a lender or servicer on a customer’s behalf; or
•responding to requests for information from a customer’s lender or servicer.
Does The Rule Have Record-Keeping Or Monitoring Requirements?
The Rule requires you to keep certain records for at least two years from the date the document is created, generated, or received:

Advertising and promotional materials. You must keep a copy of each substantially different advertisement, brochure, telemarketing script, website, training document, or other material related to the advertising or marketing of your service. You don’t have to keep separate copies of documents that have minor, immaterial differences.

Sales records. You have to keep records showing the name, last known address, and telephone number of each of your customers; the services they bought from you; and how much they paid you. You need to maintain records relating only to customers who agree to use your services. You don’t have to keep records relating to people who asked about your services, but didn’t sign up.

Communications with customers. You must keep copies of all written communications between you and customers that occurred before they agreed to use your service.

Agreements with customers. You must keep copies of all contracts or other agreements between you and your customer.
You also must take reasonable steps to ensure that your employees and independent contractors comply with the Rule. At a minimum, that would include:

•performing random, blind monitoring and recording of sales and customer service calls involving your employees or people who do telemarketing on your behalf;
•establishing a procedure for receiving and responding to consumer complaints and investigating each one promptly and thoroughly;
•determining the number and nature of consumer complaints related to transactions involving individual employees or contractors and
•taking corrective action – which may include training, discipline, or termination – if they’re not complying with the Rule;
•keeping records sufficient to establish that you’re meeting your monitoring responsibilities under the Rule.
For More Information
MARS Rule
www.ftc.gov/os/fedreg/2010/december/R911003mars.pdf

Mortgage Assistance Relief Services Rule: A Compliance Guide for Lawyers

http://business.ftc.gov/documents/bus77-mortgage-assistance-relief-services-rule-lawyers

The BCP Business Center: Your Link to the Law
www.business.ftc.gov

Questions about the MARS Rule? Contact:
Division of Financial Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, DC 20580
(202) 326-3224

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair practices in the marketplace and to provide information to businesses to help them comply with the law. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to File a Complaint, at www.ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad. For free compliance resources, visit the Business Center, www.business.ftc.gov.

Opportunity to Comment.
The National Small Business Ombudsman and 10 Regional Fairness Boards collect comments from small businesses about federal compliance and enforcement activities. Each year, the Ombudsman evaluates the conduct of these activities and rates each agency’s responsiveness to small businesses. Small businesses can comment to the Ombudsman without fear of reprisal. To comment, call toll-free 1-888-REGFAIR (1-888-734-3247) or go to www.sba.gov/ombudsman.

Fitch: Subpar Loan Mod Results Making U.S. Foreclosures a Reality

Wednesday, February 9th, 2011

by Carrie Bay:

With loan modifications on a steady decline, the analysts at Fitch Ratings say the common thread running through the industry has become when will the servicer foreclose as opposed to how can a distressed borrower stay in their home.

Fitch’s latest analysis of loan modification trends in non-agency residential mortgage-backed securities (RMBS) shows little improvement in success rates. While moves toward foreclosure alternatives like short sales are modestly improving loss severities, the agency says servicers report borrowers are electing to remain in their property longer by staying through the extended foreclosure process.

In addition, servicers’ reviews of workout options and required mediation, as well as recent documentation defects, continue to push out foreclosure timelines, Fitch notes. The agency says it expects this trend to continue in the near term.

Since the high water mark of 86,500 modifications in April 2009, Fitch’s study reveals that loan modifications have steadily decreased. During December 2010, the agency tallied 36,500 completed modifications – nearly 58 percent fewer that the peak hit 20 months earlier.
“The combined efforts of HAMP [Home Affordable Modification Program] and other mortgage loan modification programs have made little more than a dent in the large volume of outstanding distressed loans,” said Diane Pendley, Fitch’s managing director.

HAMP, in particular, has faced mounting criticism for failing to come close to the numbers originally promised by the administration. Pendley notes that while the government program has failed to meet volume projections, HAMP did assist in standardizing the reduction of payments and focused more attention on the use of modifications.

While mod numbers have fallen off lately, other loss mitigation efforts, including short sales and deed-in-lieu offers, have increased slightly. As of December 2010, Fitch says 53 percent of prime, 34 percent of Alt-A, and 32 percent of subprime liquidations were not by REO sale.

Alternative liquidation methods have resulted in slightly improved loss severities when compared to REO sales, according to Fitch’s analysts. The agency expects the level of these alternative strategies to increase in 2011, although limited by borrower acceptance.

In addition, Fitch continues to expect a majority of modified mortgage loans to default again within a year, though the agency’s projections are now slightly lower than previously reported. Fitch anticipates a re-default rate between 60 percent and 70 percent for subprime and Alt-A loans; and 50 percent to 60 percent for prime loans.

Fitch also points out that procedural defects in servicer’s foreclosure procedures have stalled the process throughout many states and these defects are lengthening already-substantial timeframes for default processing and clearing out of the inventory backlog.

“Based on current and expected inventory, it will take four years to remove the backlog of properties and return the market to balance,” said Pendley.

Back by Popular Demand: Underwater Home Webinar

Wednesday, February 2nd, 2011

Underwater Home: What Should You Do If You Owe More Than Your Home is Worth?

Monday, February 14, 2011
3:00 PM – 4:30 PM Arizona  
Webinar Password: Underwater

Click here to register and receive log in instructions

Underwater Home is both an emotional and practical guide for the underwater homeowner. Professor White explains when it makes financial sense to stay in your underwater home and when it makes sense to get out. He explains your options and gives you the facts that will empower you to make the best decision for your family, free from guilt or fear, and with clarity, confidence and peace of mind.

Brent White is a law professor at the University of Arizona James E. Rogers College of Law and one of the nation’s leading experts on the mortgage crisis. His academic work has been widely-covered in the national media including 60 Minutes, the Wall Street Journal, the Washington Post, National Public Radio and the New York Times.

FDIC’s Bair Warns of Double-Dip if Servicing Problems Aren’t Remedied

Thursday, January 20th, 2011

By: Carrie Bay 

FDIC Chairman Sheila Bair warned mortgage bankers Wednesday that failure to take immediate and decisive action to deal with the foreclosure crisis and breakdowns in servicing procedures will trigger a double-dip in U.S. housing markets and keep the industry deeply mired in a cycle of credit distress.

Speaking at a Mortgage Bankers Association servicing summit in Washington, D.C., Bair outlined specific steps to address what she described as “chaos in mortgage servicing and foreclosure.”

Her fix includes assigning distressed borrowers a single point-of-contact throughout the entire loss mitigation process, instituting new fee structures so that servicers aren’t forced to cut corners, and establishing a claims commission funded by servicers to compensate borrowers who’ve been impacted by substandard practices.

“FDIC-insured institutions have recognized more than half a trillion dollars in losses thus far, and they’re not finished yet,” Bair said.

“The fact is, every time servicers have delayed needed changes to minimize their short-term costs, they have seen a deepening of the crisis that has cost them – and the rest of us – even more. It is time for government and industry to reach an agreement that will finally bring closure to the crisis and pave the way for a lasting recovery in our housing and mortgage markets,” she told mortgage professionals at the forum.

Bair urged lenders and servicers to recognize that loss mitigation is “not just a socially desirable practice” to preserve homeownership, but is “wholly consistent with safe and sound banking and has macroeconomic consequences.”

For the industry to successfully respond to today’s foreclosure crisis, Bair said first, regulators must remedy failures endemic to the largest mortgage servicers with enforceable requirements that will improve opportunities for homeowners to avoid foreclosure.

She said one such requirement is that servicers must provide a single representative to assist a troubled borrower throughout the loss mitigation and foreclosure process.

“In order to prevent costly miscommunication, this person – and it does need to be a real person – must be well trained and adequately compensated,” Bair said, and she stressed that this person must be authorized to put a hold on any foreclosure proceeding while loss mitigation efforts remain ongoing.

In addition, Bair said industry benchmarks – based on a maximum number of delinquent loans per representative – must be established and servicers must commit to adequate staffing and training for effective loss mitigation.

She noted though, “There is no question that the fee structure currently in place for most servicers provides insufficient resources for effective loss mitigation and has led servicers to cut corners in their legal and administrative processes.”

Bair said paying servicers a low fixed-fee structure based on volume may be sufficient to ensure that payments are processed and accounts are settled during good times, but it does not provide sufficient incentives to effectively manage large volumes of problem loans during a period of market distress.

She said this compensation structure drove automation, cost cutting, and consolidation in the servicing industry in the years leading up to the crisis. Case in point, Bair said the market share of the top five mortgage servicers has nearly doubled since 2000, from 32 percent to almost 60 percent. However, when mortgage defaults began to mount in 2007 and 2008, she said servicing shops were left without the contractual flexibility, financial incentives, or resources they needed to responsibly manage distressed loans.

In addition, Bair said to expedite the loan modification process and help clear the market, the industry should look for opportunities to simplify loan modification offers in exchange for waivers of claims, and must also deal head-on with the second-lien problem and the potential conflicts of interest they pose.

Bair called for independent reviews of loss mitigation denials and an appeals process for borrowers; eliminating incentive payments to law firms for speedy foreclosures; and regulations that prohibit foreclosure sales when a loan is in loss mitigation, unless delay would disadvantage the investor or violate existing contracts.

Lastly, Bair said the industry must provide remedies for borrowers harmed by past practices. She suggested establishing a foreclosure claims commission, modeled on the BP oil spill or 9/11 claims commissions, which would be funded by servicers and address complaints from homeowners who have been foreclosed on as a result of servicer errors.

Bair said these resolutions should become part of a settlement agreement between servicers and the regulators and state attorneys general who are investigating foreclosure and servicing practices.