Is HUD acting in the interests of distressed homeowners?

Someone recently brought to my attention a seasoning investigation, led by Senators from Ohio and Maryland, fueled by homeowners and advocates, in pursuit of accountability. By now, it is no surprise that modification and foreclosure prevention strategies have had little effect from resolving the growing debt balance and collection abuses attached to these properties.

Many homeowners have since given up on a fair deal modification. If one exists, it will be backdated and voided for a myriad of reasons, then processed into foreclosure under a bare minimum of "compliance."

The practices of trickery revolve around creating legal and illegal maneuvers which thwart a homeowners opportunity to fair consideration and negotiation of the distressed loan. Multiple incentives have been given to servicers for participation and performance. This had little effect on reducing predatory servicing practices.

There were temporary delays and moratoriums. Bailouts and Tarp programs were created along with homeowner retention and modification programs. These were designed to make payments affordable and sustainable. HAMP was created. Through investigations and National Settlements, servicors and investors were put on notice and it was anticipated they would work towards revising predatory loans with affordable payments.  It was determined through the NPV test that an investor would make more money on a performing loan than on a foreclosure. It was commonly claimed that loan holders 'don't want your home' and benefited most from an affordable modification.

This is a misnomer. This is not a (formerly) "common" loan transaction with an originating lender that held and serviced the loan. The market was glutted with salesman and the securitized "demand for product" and willingness to 'create and fund' loans (through shady table funding of warehouse lines). The resultant loans creation was soley in order to resell the product. This covert manner of controlling ownership was riddled with predatory terms and hidden conditions, adversary to performance.

On the back end, the assignments to others, effectively transfers liability 'without recourse,' as if knowingly acknowledging the defective products.

Material terms have been altered or misrepresented. Discovery and legal arguments have been slowed deceptively. Relief is rare. Negotiations are one-sided and misleading of intent. Modifications are essentially collection tactics.

The loan will fail with increasing payments at a pre-determined point or event. These things are already calculated. Undefined 'trigger events' initiate the transfer into foreclosure processing. The servicing agents must follow a script and will not, can not, or are unable to disclose pertinent information.

QWRs (Qualified Written Requests) by homeowners are ignored or met with benign statements or 'answers' given to questions not asked in order. Communications are designed to confuse and even conflict. The dual tracking still exists and homeowners receive misleading communications promising relief. The winner in the "delay game" appears to be anyone interested in running out the SOLs for fraud.

Upon obtaining information through an FOI (Freedom of Information) request, legal advocacy groups are accusing fowl play, calling HUD's process  a means of "redistributing wealth."

Instigated by Congress in 2010 urging fiscal improvements to resolve fast failing FHA guarantees and insurance liability, the 'sell-off to third party scheme' was born. Even the sell-offs were securitized. Yet the were too costly for homeowner organizations and non-profits, those concerned with housing displacements and homelessness. Responsibility for reductions, recovery of property to market value, and foreclosure prevention assistance to homeowner were 'transferred' into funds sold at a discount.

What exactly in these securitized sales requires these 'purchasers' to perform any 'negotiation with homeowners?"

Nothing.

HUD avoids the question, stating they encouraged such activity. Their encouragement and discounted sale should be what is necessary for someone else to fix the problem given the fire sale and good deals. Right?

What HUD hasn't considered is how these transfers affect the markets unnaturally. They do not reduce property to real value. The 'securitized properties' are frequently bought back at auction by credit bid. No money passes hands. The formerly clouded title becomes 'perfected' in the court ordered sale and acceleration processing the note.

The acceleration is already anticipated. It is only delayed by the time required to give 'lip service accountability' and remain in compliance with new standards. This disposal method is designed to release x amount of foreclosed property in an orderly manner. Spacing them out a bit and timing the actions to a pre-planned default scheme culminating in seizures of property. Liquify and repackage. Property seized can then be "re-securitized" to take advantage of the "increased demand for rental property" created by these foreclosures.

Yes, it IS a transfer of wealth.

This new debt collector, under new ownership, uses modifications (notably HAMP or promises of HAMP) as a collections means . There is no foreclosure avoidance negotiation. Any portended foreclosure "assistance" programs involve steadily increasing balances, procured from the delays which commit borrowers to accumulating additional debt which destroy their positions to refinance or sell.

With the collapse of the markets (caused by banks investing schemes in these funds), customer service centers were reduced and off-shored. Servicers are over-whelmed with volume and customers trying to resolve 'errors.'  For the Servicer, profit involves reducing information and resolution calls, taking 'payments only' without requirement of accuracy and timely posting , and/or increasing balances of loans held in portfolio for increased income. Reducing staff and destroying effective customer service is the norm of predatory service. There is no ability to perform even if there was the desire to perform.

The servicer does not intend to maintain servicing of the account, there are too many. It is only incentivised with increased balances. Past due, increased by delays in modification processing, is rolled into principal.  Simultaneously, the servicer (or investor) prevents choices by controlling default status and resultant credit reporting.

It's a win, win. The servicor creates higher earnings from the trust as payment contracts are based on the principal balance of the loans in the portfolio. (among other things but this x percent of PLB (Principal Loan Balance) value is the primary pay arrangement) The balance "owed" increases. This typcially is incurred from servicing delays, default terms, ongoing late fee generation, improper escrow, forced insurance charges, and other predatory schemes.

This inflation of the final and 'ending debt balance' enables the "investor" to secure the winning bid at foreclosure via "credit" bid.  Few auction participants will bid above the over-valuation of the 'credit bid' effectively inflating value by excluding the average market of buyers willing to purchase distressed properties.

There is no competition. The investor controls the default AND the foreclosure "purchase" of the property. Small investors, contractors, and potential homeowners are not given the opportunity to bid at auction and re-set value according to local markets . They will not overbid the investor who has "credit' that exceed or trump independent cash purchase bidding. This debt-inflated 'credit bid' exceeds the true auction value and effectively holds a market unto itself for obtaining control of real property.

Securitized investment fund owners and trusts should be banned from using credit bids as these are manipulating markets and preventing free enterprise. If this is not an abuse of free trade laws, I don't know what is.

HUD merely muses that these distressed loans should be reorganized and traunched into smaller "pools" to allow or "encourage" small non-profit housing and neighborhood organizations to invest in the new securities. Then muses again, about the problem of needing even smaller traunches and poolings targeted for low-level homeowner investment purchases, as no non-profit or neighborhood organizations can afford to purchase a billion dollar fund or provide enough funds to meet minimum bids.

Here's a better idea.

Why not allow the properties that DO foreclose go back to the public?

The means of the parties who plan to commit fraud in perpetuity would be stopped in it's tracks if these foreclosed properties were bought by small investors and home buyers willing to put in sweat equity. Parties willing to do ACTUAL work versus paper pushing number methodology designed to profit from hardships. The "paper equity" should be banned from control of their disposal into free markets. This current market is not a free one, it "excludes" those without credit slips.

In the old days, a foreclosed homeowner had the choice to (attempt to) repurchase the property at auction. This auction mechanism effectively 'refinanced' the loan to market value. The homeowner could determine what was affordable, refusing to bid higher than what was affordable. Undesirable properties had less competition, leaving room for some homeowners to salvage their situation. It wasn't common, but motivated homeowners at least had a chance at attempting to buy their own house back at a public auction. That right, the right to bid, was taken away. Not only does the homeowner lose the opportunity to bid but also local 'neighborhood' organizations or small business and contractors.  Organizations and individuals, those investing far less than required or approved by the securitizers (who sell discounts for bulk purchases), can not compete.

HUD is actually dictating bulk purchases as a means to salvage home ownership. The option of obtaining a small portfolio of rehabs or a single property purchase is effectively denied.

The foreclosure auction is a sham process. The forced sale is necessary to correct the resultant securitized effects of clouded titles.

In a round about way, the securitized controller, has seized and profited from origination to final sale, with losses covered by insurance.(insurers who failed were bailed out) Meanwhile, the homeowner has lost ALL of their investment, ALL of their sweat equity, ALL of the retirement security, and becomes homeless.



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