Archive for September, 2009

What I learned at 5Star… and Are foreclosure sales simply HAMPered?




Over and over last week at 5Star I heard about the administrations goal of 500,000 HAMP loan modifications by Nov. 1 2009.  The Administration has requested loan servicers to ramp up loan modifications such to reach 500,000 trial loan modifications by November 1, 2009. This would more than double the number of trial modifications started in the first five months of the program.

Sean O’toole of wrote a great post about this subject:

Here it is:

In my last post Waiting to catch a wave? Surge of REO’s unlikely, I speculated that foreclosures had dropped primarily because of U.S. Treasury Secretary Henry Paulson’s announcment to seek troubled asset relief for banks. The result being that banks are incentivized not to foreclose thanks to mark-to-model accounting changes, and an implied promise that the Fed or taxpayers will take bad loans off their hands at a premium if necessary.

This topic, and shadow inventory, which I also recently posted about, have been hot topics in the blogosphere and in the news. Many have predicted a wave of foreclosures is coming, while others are predicting that foreclosures are being held off the market to manipulate home prices. If you read my recent posts you know I have a different take. A few days ago, Diana Olick of CNBC did what I hoped someone would do and put the question directly to Bank of America. They essentially said that foreclosures had been delayed by the Making Home Affordable program, and would likely increase soon.

Despite it being hard to take banks at their word right now, I do think it is likely that the Making Home Affordable program, and specifically the Home Affordable Modification Program (HAMP) component of that program are playing a significant role in the delay of foreclosure sales. We actually pointed to some evidence of it in our July California Foreclosure Report, where we noted that many scheduled foreclosure sales were being postponed due to lender requests — likely because of this program.

So is it possible that foreclosure sales have simply been “HAMPered”? While I certainly think HAMP has played a role in delaying foreclosures, I don’t believe it is the full story. HAMP was not announced until February 2009 and details were not out until March yet we saw foreclosure sales drop dramatically just days after the Paul announcement last September. A commenter on my blog suggested the foreclosure drop in September was due to Fannie and Freddie being put into conservatorship and implementing moratoriums, rather than the Paulson announcment. That too is a great point. But we saw across the board drops in foreclosures, including for loans that clearly weren’t owned or guaranteed by Fannie or Freddie, so it too is an insufficient answer in and of itself.

The reality is that there are a lot of moving parts, and while its hard to do more than speculate about the specifics, the bigger picture remains clear. As a society we don’t have the political will to foreclose on everyone who isn’t paying their mortgage, and whether by implementing foreclosure moratoriums at Fannie and Freddie, announcing troubled asset relief, or pushing new loan modification programs we will continue to see the government intervene to keep foreclosures down.

Near term I believe this will help put a floor under housing prices and provide some sense of stability. Longer term I believe the government interventions to date fail to adequately deal with the negative equity problem and that they have simply kicked the can down the road leaving us with foreclosure problems for years to come.

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Tax credit lures nearly half of all first-time buyers-

First Time Homebuyers Tax Credit

From Chris Mclaughlin:

According to a survey conducted by Harris Interactive on behalf of, 18% of prospective first-time homebuyers said extending the credit from Dec. 1, 2009 to Nov. 30, 2010 would be the “primary influence” in their decision to purchase a home.  An additional 25% said it would be a “significant influence,” 27% said it would have “some influence,” and 31% said it would have “no influence.”  Zillow projects 1.86m homebuyers stand to take advantage of the program if it is extended, and if all potential buyers took the full tax credit, extending the program could cost $14.86bn. chief economist Stan Humphries said of all homebuyers expected under the 12-month extension through 2010, only one in five homebuyers will enter the market specifically because of the extended tax credit.  In other words, 334,000 mortgages will open because of the tax credit extension.  “While 334,000 may seem like a small number relative to the total number of homebuye
rs who would claim the credit, their addition to the market next year could make the difference between a robust annual increase in home sales next year and a flat or negative change in home sales relative to this year,” Humphries said.

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National Home prices up for the month, down for the year…

From Chris Mcglaughlin:

S&P/Case-Shiller composite index of house prices in 20 metropolitan areas rose 1.6 percent in July from June — more than triple the estimate of a 0.5 percent rise found in a recent Reuters poll.  The monthly price increases helped the annual rates, with the yearly pace of declines in home prices slowing to a 12.8% drop in the 10-city index and 13.3% downturn in the 20-city index.  “These figures continue to support an indication of stabilization in national real estate values, but we do need to be cautious in coming months to assess whether the housing market will weather the expiration of the Federal First-Time Buyer’s Tax Credit in November, anticipated higher unemployment rates and a possible increase in foreclosures,” said David Blitzer, chairman of the index committee at S&P.  Despite the overall improvement, annual rates for all metro areas and the two composites remain in negative territory, with 14 of the 20 metro areas and both composites in double digits, S&P said.

About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.
    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting nearly
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     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building

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Sacramento Housing and Redevelopment Agency and the Sacramento Property Recycling Program…

Oak Park Foreclosures

Sacramento city officials gathered Monday around an abandoned, shopworn home in Oak Park to describe how they plan to use millions of dollars in federal stimulus money to transform foreclosed eyesores into gems.

The property on 34th Street is the first single-family home purchased by the Sacramento Housing and Redevelopment Agency on behalf of the city under the Sacramento Property Recycling Program.

The effort is funded by part of the $13.2 million the city of Sacramento received from federal legislation aimed at shoring up foreclosure-battered neighborhoods.

“If we can rehabilitate these homes and get buyers into them, it helps the whole neighborhood,” said Chris Pahule, assistant director of SHRA.

He noted that the 34th Street house had been broken into previously, and that vacant houses “are a magnet for vandalism and crime.”

The 34th Street property was once appraised for $60,000, but it was foreclosed upon by Wells Fargo Bank. SHRA subsequently purchased it for $38,000.

Renovation on the house will begin later this year. SHRA plans to put it on the market in early 2010.

SHRA has allocated $3 million of the city’s $13.2 million in federal funding to the Property Recycling Program, which will be run in partnership with nonprofit and for-profit partners that will actually make the needed repairs.

The rest of the money is going to programs that make loans to developers who rehabilitate distressed single-family homes for sale and multi-family properties for rent to low-income tenants.

SHRA officials hope to rehabilitate 50 to 60 homes with the $3 million allocation. Proceeds from the sales will be plowed back into the program to buy additional houses.

Sacramento County received $18.6 million from the federal housing bailout bill, and through SHRA also will spend part of that money to buy and fix up foreclosed homes.

In addition to Oak Park, SHRA plans to target portions of Meadowview, North Highlands, Del Paso Heights, North Sacramento, south Sacramento and Galt.

SHRA is seeking an additional $20 million under the second version of the federal Neighborhood Stabilization Act. If it gets that money, the agency envisions rehabilitating more than 300 foreclosed properties throughout Sacramento County.

City Councilwoman Lauren Hammond, in attendance Monday, said she wants to see the bleeding stop in the Oak Park neighborhood, her entire district and countywide, and hopes the federal money will help.

She said there were 252 notices of default and 134 foreclosures in her district in the first quarter of this year alone. Last year, the county recorded 17,221 foreclosures, more than 7 percent of California’s total.

“Just before the recession, we had gone from 85 percent rentals to 60 percent, with 40 percent homeowners (in Oak Park),” she said. “I was really hoping to reach a goal of 50-50, because homeowners tend to be more dedicated to taking care of their homes and property. …

“And then (the recession) hit. Now, I’m hoping that this program will get us heading in the right direction again.”

Right now, the house on 34th Street doesn’t look like much. It needs painting, and the lawn is dead with bare patches. Inside, the floors and walls need work.

To illustrate its potential, SHRA officials on Monday showed off a nearby home renovated by a developer using a loan from the agency. That 950-square-foot home, with new carpet, gleaming features, a separate garage and a basement, is on the market for $86,000 and has a pending sale offer.

While one spruced-up home may not seem like much amid a sea of foreclosures, Sergio Barajas, West Coast community development manager with the National Community Stabilization Trust, a new national nonprofit working to fight foreclosure blight, said surgical rehabilitation of a relatively small number of houses can make a difference.

“When you look at a home like this, we look at the potential to stabilize the neighborhood as a whole, not just one home,” he said.

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Residential Credit Solutions Wins Bid in FDIC’s Legacy Loans Pilot Sale

So they finally had their first auction for the ‘legacy Assets’ otherwise known as problem mortgages that have been taken from failed banks and now are under recivership of the FDIC…

Read more…From DSNews:

By: Carrie Bay

By: Carrie Bay

And the winner is … Residential Credit Solutions, Inc.

The FDIC announced Wednesday that the Fort Worth, Texas-based mortgage servicing company placed the winning bid in a pilot sale of assets that the agency is conducting to test the funding mechanism for

the government’s Legacy Loans Program (LLP). LLP is the component of the Treasury’s Public-Private Investment Program (PPIP) aimed at purging toxic mortgages and other troubled loans from banks’ balance sheets – a program which has been a slow-go to get underway since it was initially announced back in March.

The asset portfolio used in the pilot sale consisted of $1.3 billion in residential mortgages that the FDIC took over from Houston’s Franklin Bank when it was shut down by regulators in November of last year.

As part of the transaction, Residential Credit Solutions (RCS) will take a 50 percent ownership stake in a newly created limited liability company (LLC). RCS will pay the FDIC $64.2 million in cash to transfer the $1.3 billion portfolio to the LLC, who will in turn issue a government-backed amortizing note to the FDIC for $727.8 million.

FDIC officials said that the transaction will likely mean the government receives 70 cents on the dollar for the portfolio, much higher than the 50 cents on the dollar that regulators originally expected to receive for the troubled mortgage loans. That should in turn reduce the $1.6 billion estimated loss the FDIC originally forecast when it took over Franklin Bank.

A total of 12 consortiums threw their bids in the hat for Franklin Bank’s residential home loans. The FDIC said RCS’ bid “would result in the greatest return for the receivership of all competing bids.” The agency said the present value of the bid means the government will receive 70.63 cents on the dollar for the portfolio of mortgage assets.

After the closing, which is expected to occur later this month, The Wall Street Journal reported that RCS will manage the portfolio and service the loans under the administration’s Home Affordable Modification Program guidelines.

The FDIC said it will analyze the results of this test sale to determine whether the LLP can be used to remove troubled assets from the balance sheets of open banks, and in turn spur lending to further support the nation’s credit needs.

LLP was originally intended for assets held by open institutions, but agency officials told the Journal that if the pilot program is successful, it could also become another option for the growing collection of distressed assets the FDIC holds as a receiver for failed banks. According to the paper, the FDIC has around $30 billion in assets in receivership, and that figure is only expected to grow with increasing numbers of bank failures on the horizon.

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Mortgages Down, Interest Rates Up


By Chris McLaughlin


The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending September 11, 2009, including an adjustment for the Labor Day holiday.  The Market Composite Index, a measure of mortgage loan application volume, decreased 8.6% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 18.3% compared with the previous week and decreased 18.7% compared with the same week one year earlier.  The Refinance Index, also adjusted for the holiday, decreased 7.4% from the previous week and the seasonally adjusted Purchase Index decreased 10.3% to from one week earlier. 

The survey also measured interest rates:  The average contract interest rate for 30-year fixed-rate mortgages increased to 5.08% from 5.02%, with points decreasing to 0.98 from 1.23 (including the origination fee) for 80% loan-to-value (LTV) ratio loans.  The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.41% from 4.45%, with points decreasing to 1.12 from 1.13 (including the origination fee) for 80% LTV loans.  The average contract interest rate for one-year ARMs decreased to 6.61% from 6.69%, with points increasing to 0.20 from 0.19 (including the origination fee) for 80% LTV loans.

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California Foreclosures Scheduled for Trustee Sale Increase 89.1 Percent Year-Over-Year

July CA Foreclosure Activity

Foreclosures “HAMPered” by Making Home Affordable Program

Discovery Bay, CA, September 15, 2009 – ForeclosureRadar (, the only website that tracks every California foreclosure and provides daily auction updates, issued its monthly California Foreclosure Report for August 2009. Foreclosure filings dropped both month-over-month and year-over-year, while the inventory of properties scheduled for foreclosure sale continued to grow, and foreclosure sales were flat.

Key findings for August 2009 include:

o Notices of Default filings, the first step in the foreclosure process, dropped substantially from July to 36,396 filings, a 19.1 percent decrease. Year-over-year filings dropped by 14.2 percent from August 2008.

o Notice of Trustee Sale filings continued to swing wildly, dropping 15.1 percent from July to 33,362, after having jumped 31.6 percent from June to July. Year-over-year filings dropped by 8.1 percent from August 2008.

o Foreclosures scheduled for trustee sale increased to 131,300, a 5.1 percent increase from July, and an 89.1 percent year-over-year increase from August 2008.

o Foreclosures sold at auction increased 3.4 percent to 17,829 sales, with a combined loan value of $8.31 Billion. Year-over-year trustee sales remain 32.2 percent lower than August 2008. Just 13.4 percent of scheduled foreclosure sales were sold at auction this month, while 37.9 percent of scheduled foreclosure sales were sold in August 2008. The majority of sales are being postponed to a future date at either the lenders request or with their agreement.

o Sales to third party bidders rose 22.3 percent from July, with 3,280 foreclosures sold primarily to investors. As a percentage of total sales, sales to third parties continued to increase; though lenders still took back 81.4 percent of foreclosures at auction, representing 14,327 loans, a decline of 1.6 percent from July.

o Opening bids placed by lenders at trustee sale were an average of 39.5 percent lower than the loan balance, and 10.2 percent higher than estimated market value. Opening bids that did not result in a sale to a 3rd party were on average 19.9 percent higher than estimated market value, whereas those purchased by third parties were on average 29.7 percent below market value.

o Cancellation of foreclosure sales dropped by 7.5 percent from July to 9,976, with no signs yet that foreclosures being postponed for the new “Home Affordable Modification Program” are being cancelled after successful trial periods.

“It is clear at this point, that foreclosures are being HAMPered” says Sean O’Toole, founder and CEO of ForeclosureRadar. “Where foreclosures head from here will depend a lot on the administration’s Home Affordable Modification Program, commonly referred to as HAMP. We can clearly see that this program is postponing an awful lot of foreclosures, but don’t expect a wave of foreclosures if it fails, instead expect further government intervention.”

The Home Affordable Modification Program (HAMP) is a critical piece of President Obama’s Financial Stability Plan first unveiled February 9th, 2009, with details released on March 4, 2009. One of three parts of the Making Home Affordable program, HAMP was designed to reduce mortgage payments for up to 3 to 4 million homeowners. Payments are reduced by first lowering interest payments to as low as 2%; then if necessary, extending amortization periods to 40 years, and finally forbearing principal, interest free, until the payment reaches a 31% debt to income ratio for a borrower.

The program also provides incentives to mortgage loan servicers for participating, and requires participation by servicers of loans owned or guaranteed by Fannie Mae and Freddie Mac. Through

August 2009, 360,165 trial modifications had been started. For more information, see 

A key feature of the HAMP program is a 3-month trial period, during which foreclosures are postponed to see whether or not the homeowner makes the new, reduced payment as agreed. As a result, the number of scheduled foreclosures that are being postponed at the lenders request or with their agreement has doubled since details of the program were announced. At the end of August 2009 there were 131,300 foreclosures scheduled for sale, compared to 64,177 at the end of February 2009. If the HAMP trials succeed, foreclosures should begin to cancel at record rates, which has yet to happen. If HAMP trials fail, foreclosure sales should increase, which also has yet to happen.


Rankings are based on population per foreclosure sale. NOD indicates the number of Notices of Default that were filed at the county, and NTS indicates filed Notices of Trustee Sale. Sales indicates the number of properties sold at foreclosure auction. Percentage changes are based on monthly Sales. The data presented by ForeclosureRadar is based on county records and individual sales results from daily foreclosure auctions throughout the state – not estimates or projections.


ForeclosureRadar is the only web site that tracks every foreclosure in California with daily updates on all foreclosure auctions. ForeclosureRadar features unprecedented tools to search, manage, track and analyze preforeclosure, foreclosure auction, short sale and bank owned real estate. The web site was launched in May 2007 by Sean O’Toole, who spent 15 years building and launching software companies before entering the foreclosure business in 2002 where he successfully bought and sold more than 150 foreclosure properties. ForeclosureRadar is an indispensable resource for real estate agents, brokers, investors, lenders, mortgage brokers, attorneys and other real estate professionals specializing in the California real estate market.


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FDIC Proposes Mortgage Forbearance for Jobless

By: Adam Weinstein of DSNews

As rampant unemployment sours the mortgage industry, the Federal Deposit Insurance Corp. is “encouraging” its partner banks to do more to help borrowers troubled by job losses or underemployment.

In a press release last week, the agency called on banks that acquire the FDIC’s failed institutions to drop mortgage rates for half a year or more for borrowers whose livelihoods have been ravaged by the economic recession.

“This is simply good business, since foreclosure rarely benefits lenders and would cost the FDIC more money, not less,” FDIC Chairwoman Sheila C. Bair said. “With more Americans suffering through unemployment or cuts in their paychecks, we believe it is crucial to offer a helping hand to avoid unnecessary and costly foreclosures.”

Banks that acquire failed institutions with the help of the FDIC already have to carry out the standards of the agency’s Mortgage Loan Modification program for the failed institution’s assets. That program provides for the modification of qualifying loans with a variety of measures, including cutting a borrower’s monthly housing debt-to-income ratio.

But the FDIC’s new proposal would go further, mandating that banks offer at least six months of forbearance to qualifying borrowers. The FDIC would not cover lost mortgage revenue under its loss-sharing agreements, which means banks might grow reluctant to extend such a potentially unprofitable form of aid to homeowners. It could also deter some banks from becoming loss-sharing partners with the FDIC.

Nonetheless, Bair and the FDIC remained optimistic that many institutions would heed the agency’s advice.

“This is a win-win for the borrower, who can remain in his or her home while looking for a new job, and the acquiring institution, which continues to receive payments on the loan. Ultimately, by reducing losses under our loss-share agreements, this approach helps reduce losses to the FDIC as well.”

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Wells Fargo Exec Squatted, Partied in Foreclosed Luxurious Beach House Mansion

This is a sad…

According to DSNews: Wells Fargo Executive Cheronda Guyton; a senior vice president responsible for foreclosed properties, apparently moved herself and her family into a $12 million mansion in Malibu, California, and turned it into an exclusive party pad.

Talk about s stupid move!

Read The Story:

The burst of the U.S. housing bubble created plenty of unforeseen problems for lenders – like figuring out how to keep mounting foreclosures from flooding the market with unsold bank-owned homes. And preventing those bank-owned homes from falling into disrepair and decay.

Cheronda Guyton found a creative solution to both problems. And it may cost her job and her freedom.

That’s because Guyton, a Wells Fargo & Co. senior vice president responsible for foreclosed properties, moved into a $12 million mansion in Malibu, California, and turned it into an exclusive party pad just after the owners – a couple whose savings were wiped out in Bernie Madoff’s ponzi scheme – surrendered the house to Wells Fargo to settle their debts.

According to the Los Angeles Times, Guyton – and her husband and two children – apparently started squatting full-time in the luxurious beach house last May. That’s when residents of the manse’s gated community, the celebrity- and financier-encrusted Malibu Colony, say Guyton obtained a homeowner’s parking pass from the community’s guards.

Since then, her 2007 Volvo sport utility vehicle has been a fixture in the driveway, and the family Guyton has played host at the house on numerous occasions – most recently at a lavish mega-party in late August.

At one such soiree, revelers arrived by yacht to the 3,800-square-foot house, with its commanding patio view of the Pacific Ocean, the Wall Street Journal said.

In the meantime, Wells Fargo reportedly refused to show the home to would-be buyers, leaving local real-estate agents bewildered.

“It’s outrageous to take over a property like that, not make it available and then put someone from the bank in it,” Phillip Roman, a resident on Guyton’s street, told the Times.

Guyton’s free ride could spell disaster for Wells Fargo and its peers in the mortgage-lending industry. As the housing and credit markets begin to steady, politicians are focusing greater attention on the behavior of the industry’s lenders, servicers and investors to see if they were on the up-and-up.

Nowhere has that scrutiny been heavier than at Wells, a top-five national mortgage lender. The bank lags behind the national average in modifying loans for troubled homeowners, and Congressional leaders have been stinging in their criticism of those numbers, saying banks like Wells don’t care about their borrowers. Last week, the Journal reported that Wall Street also is frustrated with Wells over its lack of transparency on investor issues.

Those developments could explain why reporters are now questioning whether Guyton made her move with Wells’ knowledge. If so, it could indicate the bank wanted to quietly keep the mansion in its “shadow inventory” of available housing that’s not brought to market, out of fears doing so would drive down its sales value. The institution also may have decided it was better for the house to be maintained and look lived-in while it was off the market.

But those questions remain unanswered. Guyton was unavailable to the media for comment, and Wells said in a written statement that it would “conduct a thorough investigation of the allegations,” although it declined to “discuss specific team member situations/issues for privacy reasons.”

The bank also said the property would soon be listed publicly for sale.

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Sacramento Region Homeowners Fed Up with Loan Modification Blunders…

Beautiful Natomas Home

SACRAMENTO, Calif. – James Seeley, a machine shop supervisor at the University of California, Davis, just wants a modified mortgage that he and his wife, Sandi, can better afford.

It’s a common quest in this economy. Seeley’s wages are being cut. His house in Natomas, Calif., has lost almost half its value. And he owes more than it’s worth, even with a $125,000 down payment in 2006.

“We want to get payments down to 31 percent of our income,” Seeley said.

In Curtis Park, Calif., Hilary Egan is trying to do the same. Her contractor husband has seen a considerable drop in business. She wants a modification before their interest-only loan resets next year to higher payments.

The Seeleys and Egans, both current with their mortgages, have something else in common: Both their modification requests were denied.

Their rejections have aligned them with a broad and growing swath of public opinion: sore that a U.S. banking industry that has received billions of dollars in taxpayer support in the past year hasn’t reciprocated on their behalf.

“I don’t know a single person who has benefited from the money that was given to lenders,” Egan said.

Added Seeley, “The taxpayers are the largest investor in these companies, so I would think they would be taking care of us first.”

Banks and financial institutions aren’t usually adored even in best of times. But after absorbing much blame for exuberant lending that created the housing bubble, they are increasingly absorbing a backlash for their response to the subsequent foreclosure crisis.

It’s not hard to see why. While banks and loan servicers have promised for almost three years to better address rising stresses on their home loan borrowers, foreclosures and defaults still haven’t seriously slowed.

The eight-county Sacramento region has counted more than 42,000 foreclosures since the start of 2007. Many area neighborhoods are scarred by vacant repos and dead lawns that pull down property values of other homeowners. Statewide, the foreclosure tally has passed 410,000, and it’s believed thousands more are inevitable.

As a result, it’s not just borrowers griping about the inability of banks to contain the crisis. Elected officials, besieged by complaints from constituents, are increasingly applying pressure as well.

This month, the League of California Cities, convening in San Jose, will consider a resolution urging 480 cities to yank deposits from banks that “fail to cooperate with foreclosure prevention efforts.”

“If you count up the money cities have in banks, that’s an amazing amount of power,” said Los Angeles City Council member Richard Alarcon, a former state lawmaker. “We have never tried to seize it. I’m trying to seize it. If you’re not a good player on the foreclosure front, we’re not going to put our money in your bank.”

Last week, the Elk Grove City Council voted 4-0 to back the notion and lobby for it at this month’s convention. The city of 141,000, one of the fastest growing in California during the housing boom, in the bust became an epicenter of defaults and foreclosures.

“It’s time. It’s past due. We should have done this some time ago,” said Vice Mayor Sophia Scherman, who lives next to a foreclosed home. “It’s going to send a very strong message to these institutions.”

Others aren’t so sure. Tony Cherin, professor of finance at San Diego State University, said, “I can understand the frustration.”

But he said cities would have fewer choices for investing because of bank failures and mergers during the meltdown. He said cities’ options “may be limited even though they would like to divest themselves.”

Two weeks ago, U.S. Rep. Doris Matsui and more than a dozen other California House members applied their own pressure. They wrote Shaun Donovan, secretary of the U.S. Housing and Urban Development Department, urging him to turn up the heat on mortgage lenders to modify more loans. Matsui and others wrote that homeowners who use HUD-approved counselors to contact loan servicers are often “rebuffed or told they couldn’t be helped until they were behind on their payments.”

Said Matsui, “The economy will not come back the way it can until we take care of these foreclosures, and this is the way to do it. There are no excuses at this time, and that’s why the letter went out.”

Last month, the U.S. Treasury Department likewise issued a so-called “name and shame” list of lender performances. The report revealed that banking giants like Bank of America had modified only 4 percent of its loans that qualified for President Barack Obama’s Making Home Affordable Program. (That program provides financial incentives to lenders to lower interest rates or stretch out loan payment times to make payments more affordable to borrowers.) The government said Wells Fargo had modified just 6 percent of its eligible loans.

Banking officials are quick to acknowledge they can do better. But they also contend that they are dealing with a crisis that keeps growing beyond efforts to staff for it.

“Unfortunately, our member banks, as committed as they are to working with their customers, still haven’t found a big enough magic wand to wave over this thing,” said Rod Brown, president and chief executive officer of the California Bankers Association. Brown noted that Wells Fargo hired 4,000 staffers in the first half of 2009 to deal with mortgages. He also cited U.S. Senate testimony by Bank of America that it handles 1.8 million calls a month about residential foreclosure issues.

In a statement last month, Wells Fargo Home Mortgage Co-President Mike Heid acknowledged frustration. He said, “While the majority of our customers who request help are getting through to us and receiving the help they need, we know we’ve fallen short of our customer service goals in some cases.”

Banks, meanwhile, are also dogged by a widespread and often-mistaken perception that the purpose of so-called bailout funds – hundreds of billions of dollars in the past year – was specifically to help banks modify mortgages.

While the Obama administration budgeted $75 billion this year to help prod loan modifications, the much larger sums were designed to “better equip banks to make loans to help them get this economy out of the downturn,” said Brown. “It was also to help banks, strong banks, to give them more capital, and to work with the regulatory entities to acquire weaker or failing banks.” In other words, to prop up a banking sector reeling from losses as more Americans defaulted on residential mortgages, credit cards and commercial real estate.

“Those dollars had nothing to do with residential mortgages. They weren’t directed to banks for that purpose,” Brown said. He and others note that banks are paying back billions of dollars, with interest, to the government.

In the short run, that doesn’t spell relief for James and Sandi Seeley. Their Aug. 19 letter from Wells Fargo said the investor who owns their loan balked at modifying it. The big bank suggested the Seeleys consider a short sale – in which the bank would accept less than it’s owed to avoid foreclosing. The Egans received the same option from a Wells Fargo subsidiary.

Neither couple wants to leave their houses. Both said they’re reapplying for modifications. Said Egan, in a plea to banks, “I don’t want you to bail me out. I don’t want you to make my payment for me. Can you just play ball?”

(c) 2009, Sacramento Bee

Distributed by McClatchy-Tribune Information Services.

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