Mortgage-servicer faces allegations of foreclosure fraud

CORDOVA, TN (WMC) -

A Shelby County Circuit Court lawsuit and government records revealed a pattern of fraud allegations against mortgage-servicing company Nationstar Mortgage.

The WMC Action News 5 Investigators launched an investigation of the Dallas-based mortgage-servicer after it foreclosed on the Cordova, Tennessee, home of Linda Howard. Howard and her husband had owned the home since 1998. Her attorney Kevin Snider produced records that proved Howard never missed a payment since Nationstar Mortgage started servicing her mortgage in 2011.

Also according to the records, Nationstar Mortgage suddenly started refusing her monthly payments in February of this year. From February to May, the company sent her payments back with statements posting thousands of dollars in unexplained fees like "property inspections" and "disbursement insurance."

"I wrote them. I called them. And I got no response," Howard said. 

Snider said Nationstar Mortgage kept returning Howard's payments and kept ignoring her requests for explanation of the fees until it foreclosed on her house in May, then sold it at auction. "Nationstar improperly foreclosed on the property," Snider said. 

Snider filed a lawsuit on Howard's behalf in Shelby County Circuit Court. The suit alleges Nationstar Mortgage committed negligence, fraud, breach of contract, breach of the implied consent of good faith and fair dealing, violations of the Tennessee Consumer Protection Act and unjust enrichment based on "...improper, inaccurate and fraudulent representations" of "...improper or excessive late fees" designed to force the Howards into foreclosure "...so that (Nationstar Mortgage) could acquire the property with its large equity at a bargain basement price."

"I don't understand it. I never missed a payment," Howard said. "I don't have a house anymore."

"The Howards made their payment every month. How are these payments being applied? What are the extra charges for?" asked Snider. "They have never been given an explanation. This is a way to garner, if you will, extra fees, extra charges, extra expenses to essentially force them into foreclosure so that Nationstar Mortgage can sell their home."

According to the federal Consumer Financial Protection Bureau, Nationstar Mortgage has registered 14,013 mortgage servicing-related complaints, the fifth most behind Bank of America, Wells Fargo, Ocwen and JPMorgan Chase. Spokesperson Sam Gilford said the bureau neither comments on nor confirms federal investigations of mortgage-servicing companies.

Tennessee Department of Commerce & Insurance spokesperson Kevin Walters said the agency has logged 24 mortgage-servicing complaints against Nationstar Mortgage since 2014. Narratives from the complaints include the following allegations:

"...consumer claims (Nationstar Mortgage) will not give an explanation of refused payment, nor do they show the money they are holding in suspension..."

"...consumer claims (Nationstar Mortgage) used deceptive tactics to steer consumer into foreclosure..."

"...consumer claims (Nationstar Mortgage) never released the lien when consumer purchased the home four years ago and said it would respond within 6 days (and did not respond)"

Kevin Solodar of Dallas, Texas, unsuccessfully filed a petition on Change.org in an attempt to encourage the Federal Trade Commission to "investigate Nationstar Mortgage for abusive servicing practices." He produced financial documents that indicated Nationstar Mortgage may have misapplied his mortgage escrow refund to his mortgage interest during a bankruptcy. "They are a foreclosure mill," Solodar said. "They buy risky mortgages --  people who are unemployed, people who are in bankruptcy -- and do what they can to get the house and sell it."

Kelly Ann Doherty, senior vice president of corporate communications for Nationstar Mortgage, issued this statement:

"We work hard to impress our customers through caring service. We are not perfect, but we have made tremendous progress on our journey to deliver radical service for our nearly 2.5 million customers. For example, customer complaints are down over 50% over the last two years, our current Better Business Bureau rating is an A+ and we have earned Fannie Mae's highest servicing rating for the second year in a row. We also have a legacy of assisting homeowners in the midst of the financial crisis. Since 2010, we have helped more than 600,000 customers stay in their homes through workout solutions. While it is our policy not to comment on pending litigation, I can share that integrity is core to our business and essential to every service we perform. When we collect a payment on behalf of the owner of the loan, our team follows a comprehensive compliance and risk management system, which includes adhering to state and federal regulations."

In 2014, Nationstar Mortgage settled a New York lawsuit, alleging the company illegally sold mortgage loans without notifying investors.The settlement's terms were kept secret.

Howard and her husband must vacate their home by September 30. She said she realizes there's no way to get her home of 18 years back, but she wants Nationstar Mortgage held accountable. "I'm not going to sit back and watch them do this because there's other people out there who are probably going through the same thing," she said.

Complaints concerning Nationstar Mortgage can be forwarded to Andy Wise at awise@wmctv.com. They should also be filed with your state consumer affairs office:

* Tennessee Department of Commerce & Insurance

* Mississippi Attorney General's Consumer Protection Division

* Arkansas Attorney General's Consumer Protection Division

Copyright 2016 WMC Action News 5. All rights reserved.

Mortgage Market Updates

You might remember the subprime mortgage crisis that began around 2007 and might be wondering to yourself if that could ever happen again. I have been reading and researching lately about mortgage default rates and trends which leaves me wondering if the United States could ever have a mortgage crisis like the one that occurred in the early/mid 2000s. 

It's no secret that foreclosures are still occurring throughout the United States. Bankrate.com publishes these rates periodically. According to Bankrate.com, “Foreclosure Filings increased 5.3 percent nationally from April to May 2017.” The national average for May was 1 in every 1,636 housing units is in foreclosure. The Top 10 states are as follows:

Rank State Total housing units Ratio of homes in foreclosure*
(1 in every …)
1 New Jersey 3,577,942 515
2 Delaware 414,416 753
3 Maryland 2,410,256 1,006
4 Illinois 5,303,675 1,057
5 Oklahoma 1,689,427 1,081
6 Nevada 1,192,083 1,108
7 Florida 9,094,999 1,140
8 New Mexico 909,565 1,168
9 Ohio 5,140,902 1,176
10 South Carolina 2,174,319 1,186

In a recent article in USA Today, ‘A Bad Idea’: More New Mortgages are Risky Ones’ indicated that trends are toward home loans guaranteed by the Federal Housing Administration that typically require down payments of just 3-5%. These FHA-backed loans are increasingly being offered by non-bank lenders with more lenient credit standards than most major banks. In addition, the article goes on to say that there are early signs of trouble in the mortgage market which add to concerns generated by recent “increases in delinquent subprime auto loans, personal loans and credit card debt.”

FHA loans comprised 22% of all mortgages for single-family purchases in 2016. The nations biggest banks have largely pulled out of the FHA market leaving non-banks like Quicken Loans and Freedom Mortgage to fill the void. According to the article, the worry is that if home prices peak and then dip, homeowners who put down just 3-5% will owe more on their mortgages than their homes are worth, increasing the incentive to default. The article presents other insights including one the publisher of Inside Mortgage Finance who basically says the fears of another housing crisis are unfounded, ‘noting Federal Reserve officials have complained that FDA loan standards have been too rigorous.’

In another article posted on CNN.com entitled, “Are we Heading Toward Another Subprime Mortgage Crisis,” Mr. William Poole (former president and CEO of the Federal Reserve Bank of St Louis) provided commentary and opinions on the current mortgage market.

“According to Freddie’s 2016 annual report, Expanding access to affordable mortgage credit will continue to be a top priority in 2017. Fannie/Freddie have redefined ‘subprime’ to a credit rating of below 620; previously these firms and banking regulators had used 660 as the dividing line that define a subprime borrower. Now by using the lower number, they may be buying even weaker mortgages than before the financial crises.”

Mr. Poole is concerned that we are headed to another housing crisis.

While the increase in defaults, delinquencies and foreclosures may alarm some, as note investors, this presents us with an opportunity to help. As we invest in non-performing notes, we can help home owners stay in their homes and work with the borrower who wants to make payments, but may not have been able to work with the bank or the bank may not be willing to work with the borrower. By helping the borrowers stay in their home and getting them to re-perform on their note, we are helping our communities stay healthy and free of blighted properties.

US economy doing poorly

Monday’s weak US retail sales showed that the world’s biggest
economy is slowing very quickly, leading one economist to claim
America has gone from “first half hero to second quarter
zero.”  The 0.5% fall for June was far worse than expected and
the third monthly drop, the longest run of falling sales since
2008 when the Lehman crisis led America into recession.  “Given
how rapid the slowdown in job growth has been, it is hard to
blame consumers for their increased caution,” said Capital
Economics chief US economist Paul Ashworth.  Arguing that the
data showed just how quickly the US recovery has gone “from
first-quarter hero to second-quarter zero.” Ashworth believes
the slowdown echoes what we saw in the second quarter of 2010.
That slowdown ultimately led the Federal Reserve to launch a
second round of quantitative easing later that year, but Ashworth
believes Federal Reserve Chairman Ben Bernanke will need more
evidence before pulling the trigger on another round of easing.
“The bar to QE3 is higher than for QE2, if only because there
is considerable skepticism that balance sheet expansion will
accomplish much,” said Ashworth.

Really?? We have NO inventory !!

Home prices are finally turning around

Single-family home prices picked up for a third month in a
row in April, suggesting the recovery in the housing market
is gaining traction, a closely watched survey showed on
Tuesday.  The S&P/Case Shiller composite index of 20
metropolitan areas gained 0.7 percent on a seasonally
adjusted basis, topping economists' expectations of 0.4
percent. On a non-seasonally adjusted basis, prices fared
even better, rising 1.3 percent. Just three out of the 20
cities in the index saw declines in April on a seasonally
adjusted basis. "It has been a long time since we enjoyed
such broadbased gains," David Blitzer, chairman of the index
committee at Standard & Poor's, said in a statement. "While
one month does not make a trend, particularly during
seasonally strong buying months, the combination of rising
positive monthly index levels and improving annual returns
is a good sign." Compared to a year ago, prices were down
1.9 percent, beating expectations for a decline of 2.5
percent, and an improvement from the 2.6 percent annual
decline seen in March.

Inventory shortages stabilize home prices

The average home price for non-distressed properties
increased 1.7% from April to May, suggesting that a decline
in overall inventory is now pushing up prices, according to
the latest Campbell/Inside Mortgage Finance HousingPulse
Tracking Survey. The average price for a short-sale still
slipped 0.7%, while the price on damaged REO properties
increased to 1.8% and 1.5% for move-in ready REOs. In its
latest HousingPulse Tracking Survey, Campbell Surveys cited
declines in home inventory levels as one of the principal
reasons for home price stabilization, especially in areas
that have experienced large price declines in the past six
years. Multiple factors are causing the shortages—namely
homeowners keeping their houses off the market while prices
are still low. In addition, those who are underwater are
staying in place and cannot move until more of the debt is
paid down. The survey also says appraisals are keeping
prices down. The survey cites at least one real estate agent
in Florida as saying appraisals are keeping prices from
going up because appraisals that come in under the contract
price are stopping "natural valid appreciation."

Recession or not?

A summer of modest economic growth is helping dispel lingering fears that another recession might be near. Whether the strength can be sustained is less certain. The economy grew at an annual rate of 2.5% in the July-September quarter, the Commerce Department said Thursday. But the growth was fueled by Americans who spent more while earning less and by businesses that invested in machines and computers, not workers. The expansion, the best quarterly growth in a year, came as a relief after anemic growth in the first half of the year, weeks of wild stock market shifts and the weakest consumer confidence since the height of the Great Recession. The economy would have to grow at nearly double the third-quarter pace to make a dent in the unemployment rate, which has stayed near 9% since the recession officially ended more than two years ago. For the more than 14 million Americans who are out of work and want a job, that's discouraging news. And for President Barack Obama and incumbent members of Congress, it means they'll be facing voters with unemployment near 9%. "It is still a very weak economy out there," said David Wyss, former chief economist at Standard & Poor's. For now, the report on US gross domestic product, or GDP, sketched a more optimistic picture for an economy that only two months ago seemed at risk of another recession.

Some economists doubt the economy can maintain its modest third-quarter pace. US lawmakers are debating deep cuts in federal spending next year that would drag on growth. And state and local governments have been slashing budgets for more than a year. Obama's $447 billion jobs plan was blocked by Republicans, meaning that a Social Security tax cut that put an extra $1,000 to $2,000 this year in most American's pockets could expire in January. So could extended unemployment benefits. They have been a key source of income for many people out of work for more than six months. Nor is the economy likely to get a lift from the depressed housing market. Typically, home construction drives growth during an economic recovery. But builders have been contributing much less to the economy this time. Wyss said that the collapse of housing had probably depressed annual growth by as much as 1.5 percentage points in the past two years. Paul Ashworth, chief US economist for Capital Economics, predicts that growth will cool in the fourth quarter and next year. "While our baseline forecast does not include an outright contraction, we expect GDP growth to average a very lackluster 1.5% next year," Ashworth said in a note to clients.

California pulls out of foreclosure talks

The state of California pulled out of multi-state mortgage negotiations with large US banks, dealing a sharp blow to long-running efforts to secure a broad settlement over allegations of lending abuses. California Attorney General Kamala Harris wrote in a letter on Friday that she will pursue her own investigation. "California was being asked for a broader release of claims than we can accept and ... the relief contemplated would allow too few California homeowners to stay in their homes," Harris said in the letter to government officials leading the talks. New York had exited the talks in August over a disagreement about how much legal immunity the banks should receive in any settlement. Representatives of the banks met with Harris last week in an attempt to keep California on board. The state has faced some of the worst default rates in the country, with an unemployment rate of 12.1% and two million residents who owe more on their mortgage than their home is worth. Eight of the 10 hardest hit US cities in terms of foreclosure rates are in California, Harris said. State and federal officials have discussed penalties totaling roughly $20 billion from institutions that include Bank of America,
JP Morgan Chase, Wells Fargo and Citigroup.