FTC says no more upfront loan modification fees

 
The Federal Trade Commission has proposed a new rule that would prohibit third parties, including loan modification specialists and loss mitigation attorneys, from collecting payment for foreclosure prevention services until after they obtain a documented offer from a lender or servicer for a modification or other form of mortgage relief.  “Homeowners facing foreclosure or struggling to make mortgage payments shouldn’t have to contend with fraudulent ‘companies’ that don’t provide what they promise,” FTC Chairman Jon Leibowitz said. “The proposed rule would outlaw up-front fees so companies can’t take the money and run.”  The FTC has brought 28 cases against companies suspected of foreclosure rescue and mortgage modification scams, and state and federal law enforcement partners have brought hundreds more. According to the agency, generally these cases charged that companies do not provide the services they promise and that they misrepresent their affiliation with the government and government housing assistance programs, including the Making Home Affordable program. 

“Far too many homeowners have paid up-front fees to bad actors who promised loan modifications but never delivered,” Treasury Secretary Timothy Geithner said. “I commend the FTC for proposing a strong set of safeguards to protect consumers from these predatory practices.”  The proposed rule also would bar providers from telling consumers to stop communicating with their lenders or mortgage servicers. It would also require them to disclose to consumers that they are for-profit businesses, the total amount consumers will have to pay, that neither the government nor the lender has approved their services, and that there is no guarantee that the lender will agree to change their loan.

Home prices bottomed?

According to the PMI Mortgage Insurance Risk Index, the risk of home prices dropping even lower in the next two years is stabilizing in most Metropolitan Statistical Areas (MSAs).  The index charts the chance that home prices will rise or fall along a yearly timeline. To do this, PMI analysts translate a percentage, which predicts the probability that house prices will be lower in two years, into a Risk Index score. A score of 100 means there is a 100% chance that the prices will be lower in two years for that MSA.  According to the latest Index, risk may have peaked for many MSAs, though the average risk score remains “very high.”  In Q309, risk dropped in 22 of the top-50 MSAs. Of all the 384 MSAs measured in the Index, 212, slightly more than half, had decreases in risk scores.

But even though risk declined in the majority of MSAs, the average risk score stayed above 50, dropping for the first time in over a year from 58.3 to 57.5.  MSAs in Florida, California, Nevada and Arizona continued to have the highest risk scores in the nation during Q309. All MSAs in Florida, Nevada and Arizona have risk scores in the 90s. But California showed some improvement. Of the 28 MSAs measured in California, 25 saw decreases in risk scores from Q209 to Q309.  North Dakota, South Dakota, Nebraska and Vermont continue to show minimal risk. North Dakota leads the nation with the lowest risk score of 1.6.  The leading MSAs in terms of risk correspond closely with the MSAs holding the highest foreclosure rates in the RealtyTrac Year-End 2009 Foreclosure Report.

New HUD Policy Created to Allow Quicker Foreclosure Re-sales!

Effective February 1, 2010 the Department of Housing and Urban Development (HUD) will relax FHA rules that prohibit insuring mortgages on homes that are owned by the seller for less than 90 days – a move that could help expedite the rehabilitation and resale of foreclosure properties.

In a housing market where tighter lending requirements have made FHA financing the only option for some buyers, this 90-day policy has (1) kept some homebuyers from being able to purchase affordable homes and (2) prevented the quick resale of foreclosed properties, which affects the ability of communities to stabilize and rebuild.

Research has shown that the buying, fixing, and reselling of foreclosed properties is often achieved in less than three months time.

The temporary waiver, which will expand access to FHA mortgage insurance to many, will be in effect for a period of one year, unless extended or withdrawn by the FHA. With this in mind, now may be an excellent time to contact clients who have recently purchased a foreclosed property and those who may be on the fence about purchasing a foreclosure as a short-term investment.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

To ensure FHA borrowers are protected from inflated prices, the policy has certain restrictions, including:

• All transactions must be arms-length and there can be no identity of interest between the buyer and seller.

• If the sales price of the property is 20 percent or more above the seller’s acquisition cost, the lender must meet specific conditions for the waiver to apply.
• The waiver is limited to forward mortgages, and cannot be used under the Home Equity Conversion Mortgage (HECM) purchase program.

IRS Releases New Forms, Instructions:

The IRS has released IR-2010-6, which provides a revised Form 5405 to reflect the changes to the tax credit made in the extension and expansion legislation enacted in November 2009.  The release reminds taxpayers that those claiming the credit cannot use the IRS E-File automatic system, but must file their returns manually.  The revised form includes a section for repeat buyers who are eligible to claim the $6,500 tax credit.  The HUD-1 or evidence of the transaction must be filed with all returns claiming the credit (both the $8,000 and $6,400 crredits).  Individuals who claim the repeat-buyer credit must also provide evidence that they have owned and used the prior residence for five (5) consecutive years.  Property tax or homeowner insurance records are sufficient for this purpose, the form indicates.  For more details, check out the above IRS form number.