Articles Posted in Foreclosure Defense

Before your mortgage company can file a foreclosure on your Florida home, it must send you a very specific letter known as a “Notice of Intent to Accellerate” or “Default Letter.” If your mortgage servicer fails to serve you with a proper notice, your foreclosure is improper and subject to dismissal.

Nearly every residential mortgage is a Freddie Mac/Fannie Mae Uniform Instrument, regardless of whether either Fannie Mae (FNMA) or Freddie Mac (FHLMC) owns the mortgage. The mortgage servicing industry created the “Uniform Instrument” because Fannie and Freddie own 60% of all mortgages, but before they will purchase a mortgage loan from a bank, the security instrument (ie. the mortgage) must meet Fannie or Freddie guideline. So, for the sake of uniformity and ease of servicing by the banks, the same uniform mortgage is used throughout the country in almost every case.

The standard Fannie/Freddie mortgage has all the basic terms already completed. All that is left to do during a closing is fill in information on the lender, the borrower, the dates, the address, the property description, and so on.

As states have begun allocating funds from the National Mortgage Settlement, news reports are surfacing that indicate some state governments intend to use the funds for unintended purposes. Enterprise Community Partners, a housing nonprofit organization, released a report on the topic in October. The Report indicates that a majority of states are using the funds from the mortgage settlement as intended, but the largest recipients are not.

Of the $25 billion from the Mortgage Settlement, $2.5 billion was designated for direct payments to the states to use in preventing foreclosures, stabilizing communities, and regulating financial fraud. As of October, the funds had been allocated as follows: $966 million was apportioned to housing and foreclosure-related activities (the intended use for the funds), $988 million was diverted to states’ general funds for non-housing uses (not the intended use for the funds), and $588 million was not yet allocated.

Attorneys general were instrumental in negotiating the Mortgage Settlement and how the funds were to be allocated. However, governors and legislators have attempted to influence how the funds will be used. Florida was the second largest recipient of funds–$334 million. Until recently, the sum remained in escrow pending the resolution of a dispute between Florida’s Attorney General, Pam Bondi, and the Florida Legislature over who has the authority to distribute the funds.

Mortgage-Backed Securities are commonplace in today’s housing market woes. The securities are often blamed as one of the causes of the housing market crash, and thus the crash of the economy. However, the Residential Mortgage Backed Securities Fraud Working Group (“RMBS Fraud Working Group”) seeks to hold the major financial institutions accountable for the problems they have caused.

All investments represent an opportunity for the owner of the investment to make a profit on the risk taken in funding the investment–the Risk-Return Tradeoff. For example, a mortgagor/lender takes on the risk that the mortgagee/homeowner might default on his or her loan. In theory, the mortgagor takes on this risk because the mortgagor anticipates the revenue received from interest on all of its loans–on average–will be more than the costs incurred from the occasional homeowners who default. Assuming these mortgage loans were made prudently, the mortgages have value–they can be bought and sold because the income stream will provide revenue over the life of the loan.

Entities purchase these mortgage loans and pool them together to form Mortgage-Backed Securities, as a more marketable way to get investors. As such, it is easier to get someone to invest their money in a security instrument that is made up of many mortgage loans, rather than single mortgage loans–because the risk and reward of investing is made more stable by including many investments into one.

In February 2012, state and federal governments reached an agreement with the country’s five largest loan servicers, offering a glimmer of hope for property owners who are facing foreclosure. The effected banks are Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo. This is often referred to as the “National Mortgage Settlement.” Borrowers whose homes are owned or serviced by the settling banks may be eligible for benefits such as:

• Principal reductions for homeowner seeking loan modifications,
• Refinancing at low interest rates for borrowers whose mortgages exceed home value, and