A new mortgage broker is about to enter the Ann Arbor housing market, despite the slowdown in residential housing construction and sales.
Embattled mortgage brokers are defending themselves against the accusations by politicians and consumer advocates that they are to blame for causing the meltdown in the home loan industry by giving loans to borrowers who couldn’t afford them.
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A Washington mortgage broker and his wife have been officially charged with multiple criminal offenses in what investigators are calling a foreclosure rescue scheme to get title to a local couple’s home.
The subprime mortgage crisis has ignited scrutiny of the people who broker home loans, with some critics arguing that hidden fees and other practices have caused a surge in delinquencies.
The main problem is that, counter to common perception, a mortgage broker does not represent the borrower who pays them for advice.
Instead, a mortgage broker is more like an independent salesperson who is often paid as much by the mortgage lender offering loans as the borrowers.
Denouncing what he called “rogue” mortgage lenders and “liar” loans, New York Sen. Charles Schumer Wednesday called for the national regulation of mortgage brokers and a ban on riskier, controversial loan products.
According to the Buffalo News, the state’s senior senator said the collapse of the home loan market for borrowers with bad credit shows the need to protect consumers from practices he calls unscrupulous.
The Democrat also said the market for so-called “subprime” (bad credit mortgage loans) has operated with too little federal or state oversight, aside from simple registration of mortgage brokers in some states.
And he said federal scrutiny is needed to rein in non-traditional mortgage products, high rates and fees, and reckless mortgage lender practices that threaten the ability of many to own a home.
The National Association of Mortgage Brokers Tuesday criticized a proposal by two groups of regulators, who called for a national registry of brokers.
The mortgage broker group said the proposal, while admirable in theory, does not go far enough, as it wouldn’t include all lenders.
However, one Western New York mortgage lender said regulation is clearly necessary to weed out bad actors. She even supports some of Schumer’s recommendations, although she hopes Congress doesn’t overreact.
“As usual, the government is reacting far too late to abuses,” said Linda Mallia, president of Devere Mortgage Corp. “I just hope now that they don’t do what they usually do. I hope what is done is reasonable and realistic.”
The bad credit New York mortgage industry is being hammered as higher rates and falling home prices are leaving borrowers unable to make payments or refinance. Losses have risen precipitously.
Nationally, more than 1.2 million homes were foreclosed in 2006, while the number of homeowners who were in some stage of foreclosure in December 2006 was up 35 percent from a year earlier.
The Federal Deposit Insurance Corp. projects about 1.8 million Americans could eventually lose their homes because they can’t afford new payments after mortgage rates tick up.
That includes more than 50,000 in Upstate New York and nearly 10,000 in the eight-county area of Western New York. And Schumer noted the state numbers are probably low because New York’s foreclosure rate is higher than the U.S. as a whole.
“This subprime problem is turning into a foreclosure nightmare and thousands of New Yorkers are likely to be left in the wake,” he said. “The first step is to make sure the borrowers are taken care of.”
To that end, Schumer said he would try to convene a state foreclosure prevention task force — consisting of private mortgage lenders, government officials, and non-profit representatives — as well as a rescue fund to help residents who may be facing foreclosure.
He’s in the process of talking to state and federal regulators, the U.S. Department of Housing and Urban Development, and mortgage finance firms Fannie Mae and Freddie Mac.
The goal would be to help homeowners qualify for a fast mortgage refinance on unaffordable loans, allow them to put off payments temporarily, and help them sell distressed homes if necessary.
Follow the link to continue reading in the Buffalo News …
A mortgage broker admitted Wednesday that he helped a real estate developer cheat a bank by falsely pledging to cover a $25 million check the developer had deposited from a closed account.
The New Jersey mortgage broker, Joseph Kohen, pleaded guilty to a single charge of bank fraud, which carries as much as 30 years in prison and a fine of $1 million. He was released on $100,000 bond pending a June 27 sentencing hearing.
Solomon Dwek, the real estate developer, is accused of cheating PNC Bank out of about $22 million by depositing two $25 million checks, drawn on a closed account, then withdrawing nearly half the money. He was arrested in May on federal bank fraud charges.
Since then, hundreds of pieces of property linked to Dwek’s New Jersey housing market holdings have become embroiled in litigation.
A state judge is now attempting to sort conflicting claims from creditors who maintain that Dwek owes them millions as part of the New Jersey mortgage arrangement.
Michael B. Himmel, an attorney representing Dwek, did not immediately return a request for comment Tuesday. He has said that Dwek, who is free on $10 million bond, denies the bank fraud charge.
A telephone message left Tuesday evening at the office of Kohen’s lawyer, Ephraim Savitt, also was not immediately returned.
Kohen, who helped the developer secure the mortgage, may get substantially less time behind bars if he cooperates with investigators.
During his appearance, Kohen said he could provide information about the real estate deal besides what he disclosed during his plea.
SOURCE: Arizona Daily Star
We’ve talked at great length about the surge in bad credit home loan lending over the past five years and the problems coming home to roost now.
But Ed Jurenas, president of the Maine Association of Mortgage Brokers, is taking issue with the recent media coverage in the state insinuating that mortgage brokers are the prime perpetrators of abusive lending practices in Maine. This is not the case, he urges.
The predominance of predatory lending in Maine, he says, has been conducted by out-of-state, non-bank telemarketers - not mortgage brokers.
Lawsuits against Household and Beneficial Finance entered into by various states resulted in the return of $1.6 million to Maine consumers in 2003.
A settlement of $295 million in 2006, again with Maine participating, was garnered from Ameriquest, the nation’s largest direct subprime, or bad credit mortgage lender.
Both of these companies are based outside of our state and have no ties to any Maine mortgage brokers. Yet, a Portland Press Herald editorial cited “predatory mortgage brokers” as the source of predatory lending in Maine.
Is this to say that no Maine mortgage broker has ever participated in abusive practices? Not likely. However, the exceptions hardly prove the rule.
The ranks of U.S. mortgage brokers have grown dramatically in the past 20 years. Today, over half of all residential mortgages annually originated in the nation are from home mortgage brokers, because they generally offer a greater number of mortgage products and services than are available at local banks.
Maine’s mortgage brokers comprise a statewide community of over 150 small businesses comprising an effective, competitive delivery channel for residential and commercial mortgage products.
Their efforts are in no small way a contributing factor to Maine having one of the highest rates of home ownership in the nation.
These organizations have long backed efforts to curb abusive lending practices through both federal legislation and consumer education, and continue to do so with current legislative initiatives before Congress.
The problem of predatory lending must be attacked with precision. Predators need to be driven from the mortgage industry, but what is done to protect some consumers should not prevent other home loan borrowers from full and ready access to credit.
Legislation that disproportionately affects one delivery channel (home mortgage brokers), and not others (retail banks, credit unions and non-bank lenders) in effect creates an slanted playing field with the unintended consequence of limiting consumer access to credit.
It is unfair to both mortgage brokers and to the homeowners they serve that any mischaracterization should arise from the predatory lending debate.
In particular, the unintended consequences of legislation should not make getting a Maine mortgage even more expensive for the consumer.
SOURCE: MaineToday.com
Disposable income and significant assets, including access to lots of cash, characterize high-end and second-home buyers, who are generally unfazed by the ups and downs of mortgage interest rates or real estate prices.
In 2005, second home purchases accounted for 40% of all sales, according to the National Association of Realtors, a number that was expected to dip last year as investors/flippers backed off. However, as Baby Boomers continue their inexorable march towards retirement, there remains enough wealth to keep the high-end, second home industry perking rather than peaking.
Strategies for reaching these asset-rich buyers vary widely, from heavy use of the Internet - with sophisticated websites providing virtual tours of luxury properties - to word-of-mouth referrals arising from home mortgage brokers‘ personal spheres of influence.
Location is also a key factor in how properties are marketed, and to whom. Resort and vacation areas tend to attract second home buyers who don’t need to be near jobs and schools, key concerns for younger homeowners. Those buying second or soon-to-be retirement homes like to be within driving range of children and grandchildren, but not too close to them.
“The bottom line is that the high-end, second-home buyer is looking for a gathering place for the extended family and a central location, because all the kids are grown up and scattered around,” says Debra Savage, who relies largely on referrals to sell homes at Deep Creek Lake in the Maryland housing market, a four-season mountain lake resort area within a three-hour drive of 23 million people.
When these Baby Boomers reach retirement, they sometimes sell their house in the suburbs and move up to a larger condo in town. Typically, these buyers are doctors, lawyers and financial company executives - and they use the Internet to find what they want.
Michael Saunders & Company, based in the Sarasota housing market places a high premium on Internet marketing. In an average week, according to Alexa.com, traffic to the high-end firm’s website was 15 times higher than to Coldwell Banker’s Florida site, 65 times higher than Prudential Palms, 142 times higher than Premier Properties and 900 times higher than RE/MAX Properties Sarasota.
“It’s our biggest focus,” says Tom Heatherman, a company spokesman. “As your income goes up, the likelihood you’ll use the Internet also goes up. When you go to our website and you are a high-end buyer, you can click on videos we’ve purchased and take a virtual tour of some of our priciest listings.”
Many of Saunders’ buyers are looking not just for second but for third homes. “You’ve probably heard about the bubble bursting in Florida, but it’s the high-end, $3 million and above, that’s really held up,” says Heatherman.
While special mortgage financing programs may attract first-time home buyers - and brokers marketing to them may promote their firm’s subsidiary financial services - obtaining a mortgage at a good home loan rate is often not an issue for high-end and second-home buyers.
There are, however, other services that high-end buyers have come to expect. Sellers of such properties “get specific higher-end expanded advertising,” says Lynn Kosner, who manages Baird & Warner’s North Suburban office. “The property gets on two or three extra websites,” such as luxuryportfolio.com and Baird & Warner’s special luxury home site, which also links to properties in other “luxury destinations.”
The method of payment also distinguishes the high-end market. “They are what we mostly consider cash buyers,” Kosner says. “They very rarely add a mortgage contingency to their offers. They usually don’t need to qualify for a mortgage.”
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An Arizona mortgage company and more than 75 of its branch offices in the metropolitan Phoenix area have been shut down by financial regulators in the state, the Arizona Republic reports.
The Arizona Department of Financial Institutions cited illegal lending practices in pulling the license of Eagle First Mortgage and its broker, David Sanchez, last week.
Regulators described more than 100 illegal transactions, loan activities and hiring practices.
The department began examining Eagle First’s operations last summer. In the fall, it reported its findings to the Attorney General’s Office and to the Office of Administrative Hearings. Eagle First agreed to shut its doors instead of go through the process of a hearing on the case.
The Department of Financial Institutions has the power to fine or close the mortgage firm. But only a prosecutor like the attorney general can go after a mortgage broker for criminal activity. Regulators wouldn’t say if criminal action would be taken against Eagle First.
A wave of Phoenix home loan fraud started spreading across the metropolitan area last year that could cost lenders millions of dollars and erode values and confidence in Arizona’s real estate market and economy.
Most of the fraud is coming from cash-back deals that involve obtaining a mortgage for more than a home is worth and pocketing the extra money. But there are other types of fraud, such as faking and forging documents and lying about income and other personal information for loans.
The Department of Financial Institutions joined forces with other state and federal regulators and law enforcement agencies late last year to form a task force to go after offenders in the Arizona housing market.
The home mortgage company had been cited before. Back in early 2004, it was fined for 10 violations. Some of its recent violations include laws it had broken three years ago, according to the Department of Financial Institution’s consent order.
Several employees also were named in the complaint. Those employees aren’t licensed and could get jobs at other mortgage firms. So could Sanchez, as long as he doesn’t apply to be a broker again. All Arizona mortgage brokers must be licensed.
Regulators have estimated that there are as many as 18,000 people taking mortgage applications, negotiating mortgage rates and getting commissions statewide without licenses to do so.
SOURCE: Arizona Republic
Today’s Chicago Sun-Times tells the story of a Spanish-speaking home mortgage broker who offered what seemed like a great deal to Des Plaines, Ill., homeowner Jose Cortez.
Cortez was told he could pay off his credit cards and car loan through simple mortgage refinancing on his home.
What the mortgage broker declined to mention was that Cortez would owe $17,000 in closing costs.
And, contrary to what he was promised, Cortez’s new payments don’t include property taxes and insurance.
Spanish speakers, seniors and other vulnerable homeowners often don’t spot astronomical fees and other ripoffs buried in the fine print by predatory mortgage lenders and brokers, consumer advocates say.
Another scam is to offer an initial monthly payment that doesn’t even cover the interest. Homeowners wind up owing more on their house each month - a phenomenon known as negative amortization.
Retired office worker Delores King said she now owes thousands of dollars more on her South Side home than when she refinanced in 2004. Her monthly payments nearly doubled after the 1.5 percent “teaser rate” expired.
“I’m going to lose my house if something doesn’t give,” King said at a news conference Sunday called by U.S. Rep. Luis Gutierrez.
Gutierrez is introducing a bill that would require brokers to disclose - in writing - all fees and penalties associated with Illinois mortgage loans.
If found in violation of the bill, predatory mortgage brokers would be liable for homeowners’ losses, plus legal fees and other damages.
A similar bill died in committee last session, but Gutierrez is much more confident now that Democrats control the U.S. House of Representatives.
Gutierrez’s bill is one of several pending right now in Congress. But the National Association of Mortgage Brokers says new regulation could restrict loan options for consumers.
The mortgage broker association instead proposes criminal background checks for brokers and better education for consumers.
SOURCE: Chicago Sun-Times