The $26 billion crapshoot

[Scorpio]

The $26 billion crapshoot

The foreclosure settlement looks like a hit-or-miss game that leaves millions of homeowners out in the cold.


Homeowners hoping the $26 billion foreclosure abuse settlement would mean big savings on their mortgages were mostly disappointed. Even though a million borrowers will have their principals slashed by as much as $100,000 or more, most are not eligible for a workout simply because the bank that issued their mortgages, didn't hold their mortgages.

During the housing boom years of the early 2000s through 2007, about 20% of loans went into the bank's own portfolios. The rest were sold off, either to Fannie Mae or Freddie Mac or to investors.

Only loans held by the banks and some of their investors will be modified. The rest of the borrowers will be left out in the cold.

"It's not as long a shot as winning the lottery but there's a lot of chance involved," said Guy Cecala of Inside Mortgage Finance.

The Department of Housing and Urban Development, which helped negotiate the settlement, recognizes that it left out many homeowners.

"From the outset we have been very clear that the settlement is not intended to solve or resolve all the issues related to the housing crisis," HUD spokesman Derrick Plummer said earlier this month. "It's just one step in a host of efforts the Obama Administration is taking to help the housing market recover.

http://money.cnn.com/galleries/2012/...ent/index.html

[Scorpio]

Our loan was sold -- without us knowing

Names: Irene and Freddy Villalpando
Hometown: San Bernardino, Calif.

Irene and Freddy Villalpando were happy when they heard that Bank of America was reducing the principal on mortgages for underwater borrowers by an average of $100,000 or more.

The loan on their San Bernardino house was from BofA and about $75,000 more than the value of the home.

When they called the bank, however, they found out their loan had been sold to Freddie Mac. As a result, it didn't qualify for a principal reduction.

"We signed for a loan with Bank of America, I don't remember anyone mentioning Freddie or Fannie. It was not like we chose, so why should we be left out?," said Irene.

The Villalpando's finances have taken a hit over the past several years. Irene was forced to take five unpaid furlough days at her county job and hasn't received a cost of living increase for the past three years. In addition, their property taxes have been raised each of the past three years, even as the home lost value. Now, gas prices are killing them.

"All that left us just a little money for food and other expenses," she said. "We made a decision in September 2011 to quit making payments, after three years of struggling."

"Thankfully, My husband has his pension and I have a job: We have the ability to make a reasonable house payment," she said. "It is disheartening when we see other people get help and we do not qualify."

http://money.cnn.com/galleries/2012/...tlement/2.html

[Scorpio]

American Dream became a 'nightmare'

Names: Norman and Jennifer Vossschulte
Hometown: Orlando, Fla.

For Norman and Jennifer Vossschulte, the $26 billion foreclosure abuse settlement is a major disappointment.

The couple took out their mortgage in 2006 with Citibank, one of the five major mortgage lenders participating in the deal. But then Citi sold the loan, so the Vossschultes aren't eligible for a principal reduction or a refinancing.

"To hear about the principal reduction program and for us to not qualify for it, is heartbreaking," said Norman.

The couple owe $400,000 and their home is worth only about $220,000.

Even if Citi still held the couple's mortgage, they wouldn't have qualified anyway. The banks are only reducing the balance on loans where borrowers fell behind on payments, which the couple has never done, not even after Norman lost his job a few years ago.

To keep up with their house payments, the couple took out the line of credit and Norman took an hourly job that paid about $200 a week -- a significant pay cut from his previous salary of $75,000 a year.

"To say we're out of air to breathe and are very tired is the tip of the iceberg," he said. "The American Dream they say... It's more like an American nightmare for us!"

http://money.cnn.com/galleries/2012/...tlement/3.html

[Scorpio]

Chances of qualifying: 'Virtually nil'

Names: Jason and Heather Beach
Hometown: Provo, Utah

Like many homeowners, Jason and Heather Beach have had a tough time selling their home. With few options left, the two rented their Kent, Wash., condo out at a loss after moving to Provo, Utah, where Jason could attend school.

They had bought the condo near the height of the housing boom, paying $207,000 for the place. Now it's worth half that, at between $90,000 and $115,000.

Jason was hoping that Bank of America would reduce their mortgage by $100,000 or so, like it said it would do for some 200,000 homeowners as part of the settlement deal. But he soon realized his loan wouldn't make the cut.

"Since it's no longer our primary residence, our chances of qualifying for one of the government programs is virtually nil," said Jason. "I am current with my payments -- my wife and I have worked very hard to be responsible with our money and it feels now that we're kind of getting screwed for it," said Jason.

In addition, when they contacted Bank of America, the Beaches discovered that the bank had packaged their loan with a bunch of other mortgages and sold it to investors. The investment group has not decided yet to authorize BofA to modify its mortgages, he said.

So, instead of realizing big savings, the Beaches have been put on a list.

"BofA [said they] will notify me if sometime in the future the investors do become part of the settlement," he said. "So for the time being, it looks like there are still a group of homeowners like me who are completely on our own."

A bank spokesman, Rick Simon, said they may be eligible for the refinance/interest reduction program, but guidelines and processes for that program have not been finalized or announced.

http://money.cnn.com/galleries/2012/...tlement/4.html

[Scorpio]

'We need some meaningful relief'

Names: Michael Akers and Ralee Bankston
Hometown: Seattle

"Of course it's not fair that Freddie Mac and Fannie Mae loans aren't eligible," said Michael Akers. "This is leaving millions of struggling homeowners out in the cold yet again."

Akers, an app developer for Steelbrain Web Consulting, and his partner, Ralee Bankston, purchased a home together in August 2007 for $390,000 near the top of the market. Since then, they've watched its value shrink.

Zillow currently values the home at around $250,000, putting it $140,000 underwater.

The couple has tried to refinance their mortgage's pricey 6.75% rate to no avail.

"The cost of maintaining our loan -- and we have never missed a payment -- combined with the drastic drop in value, means we aren't able to spend money investing in our home, things like electrical upgrades, insulation, weatherproofing, new windows," said Akers.

Yet, since Bank of America sold their mortgage to Freddie Mac, the couple won't qualify for principal reduction or a refinance under the settlement deal either. Only about 750,000 borrowers will be able to refinance their bank-held mortgages under the deal, allowing them to significantly reduce their monthly payments.

There is another option for Akers and Bankston, however: The Home Affordable Refinance Program. HARP was expanded in December to include borrowers whose mortgage balance is far more than their home are worth, 125% and up. Akers is looking into that program for help.

"We need some meaningful relief," he said. "Watching others receive such tremendous assistance is heartwarming for sure, but we are still in the same dire situation."

http://money.cnn.com/galleries/2012/...tlement/5.html

[Scorpio]

Made BofA's list! Now we wait...

Names: Bruce and Sally Batchelder
Hometown: Weed, Calif.

Bruce and Sally Batchelder are cautiously optimistic that they will see some relief from the mortgage settlement.

When they heard that Bank of America was going to reduce the principal of some borrowers' loans by an average of $100,000 or more, they called the bank.

"The operator brought up our mortgage file while we were on the phone and announced that we qualified for the program, saying we were enrolled and on a list to be called near the first of April by a BofA specialist," he said.

That depends on a court approving the settlement, which could take months.

The couple, who are both real estate agents, live near Mt. Shasta in Northern California in a house with a mortgage of about $215,000. Its current value is about $170,000, according to Bruce.

Carrying an interest rate of 7%, the mortgage payments just became too steep and they started to miss payments last fall. They're now two months late.

"We are like millions of others who are both underwater and delinquent with payments, just waiting for the notice of default," said Bruce.

Despite his good fortune, Batchelder can't help but think of other homeowners who are not as lucky.

"People are upside down and trying to refinance and they get stalled," he said. "I see this every day."

http://money.cnn.com/galleries/2012/...tlement/6.html

[Goldhedge]

What we're witnessing going down is the ConAgra of rental homes.


Just as farms were foreclosed upon in the 30's, homes will be confiscated today.


There already talking about packaging homes in $25M bundles. If you got that kind of grease, you buy.


Maybe we should pass the hat here and take up a collection? We could be moguls!

[Aurumag]

It was no crapshoot for the state's attorneys general, including California's infamous Kamala Harris, whose role in negotiating the deal will deliver a few billion FRNs into the state coffers.

Can you say collusion, bribery, and gross conflict of interest?

[fasTTcar]

Maybe they should not have bought over priced homes they could not afford with no equity to begin with.

Whaa, whaa, now the big bad banks won't give me free money.

Next time I buy a bunch of gold and the price drops, can I qualify for some taxpayers funds to pay for my mistake?