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U.S. Looks Deeper Into Foreclosures

It’s about time somebody starts looking into more of these seemingly shady practices.

From the Wall Street Journal
November 26, 2010

WASHINGTON — The Justice Department and other federal agencies have intensified their review of the banking industry’s foreclosure documentation problems, using their powers over bankruptcy proceedings to scrutinize the treatment of troubled mortgages.

A key part of the effort is the Justice Department Trustee Program, the federal watchdog overseeing bankruptcies, which has launched a broad review of Chapter 13 bankruptcy filings by homeowners trying to halt foreclosure proceedings.

A U.S. official said Wednesday that 17 federal Trustee offices around the nation have recently stepped up efforts to scrub Chapter 13 filing documents, looking for documentation errors or improper practices such as inflated fees. Under Chapter 13 bankruptcy, a borrower seeks to halt foreclosure and comes up with a plan to catch up with their mortgage debt within five years.

Leading the federal response is Associate Attorney General Thomas Perrelli, the Justice Department’s No. 3 official, who has been tapped to coordinate the efforts of multiple federal agencies, including the Treasury Department and the Securities and Exchange Commission, and also share information with state attorneys general.

The increased federal scrutiny puts more pressure on the banking industry, which is already dealing with probes by 50 state attorneys general into allegations of the improper use of “robo-signers” to foreclose on homes. The industry is also bracing for the results of a separate probe by the Federal Housing Administration, which is scrutinizing the way banks process mortgage payments.

The reviews could lead to the government requiring banks to overhaul the way they modify mortgages and handle foreclosures, according to government officials involved in the discussions. Under agreements with the states, banks could also have to establish settlement funds to compensate homeowners who have been hurt by foreclosure errors, these people said.

No decisions have been made and the reviews are still in their early stages, the officials familiar with the matter said.

The new effort comes after criticism from homeowner-rights groups and others who have said the federal government wasn’t doing enough to address the document problems.

There have been varying assessments of the foreclosure-documentation problems. Many in the banking industry acknowledge paperwork mistakes, but say they mostly concerned homeowners who were in default on their loans and would have lost their homes anyway. Critics say the errors show how the banking industry hasn’t given homeowners a chance to rework the terms of their loan.

Federal officials hold weekly conference calls to discuss new developments and are beginning to challenge arguments from the banking industry that an intrusive investigation could damage the housing market’s recovery.

Treasury Department Assistant Secretary Michael Barr said Tuesday the federal review of foreclosures found “widespread” and “inexcusable” breakdowns in the process. “These problems must be fixed,” he told the Financial Stability Oversight Council, a consortium of regulators.

Scrutiny by federal Trustees is focusing on two common problems found in Chapter 13 filings, according to the U.S. official. In Chapter 13 filings, mortgage servicers are required to file a “proof of claim” to show how much they are owed by borrowers.

Trustees officials are scrutinizing documents for signs that lenders aren’t inflating their claim or aren’t improperly trying to resume foreclosure proceedings against borrowers. Homeowners are required to continue to make mortgage payments as the bankruptcy court considers the filing.

Similar problems were at the root of a Trustees settlement with the former Countrywide Financial Corp., announced in June. The agreement was part of a $108 million settlement between Countrywide and the Federal Trade Commission. The FTC and the Trustees alleged that Countrywide collected excessive fees from borrowers who were using Chapter 13 to try to keep their homes.

Program uses job-loss coverage to lure home buyers

By Jacob Adelman
Associated Press
November 13, 2010

The California Association of Realtors program allows home sellers to fund insurance plans that pay buyers up to $1,500 a month toward their mortgages for six months if they’re laid off from their jobs.

The so-called Home Payment Protection Program is a nod toward the role job concerns are playing in the housing market, especially in high-unemployment states such as California, where 12.4 percent of the population remains without work.

“Most people out today wanting to buy houses have a fear: What happens if I lose my job?” said CAR president Beth L. Peerce. “This takes some of that stress away.”

Mortgage payment protection programs are nothing new, but what distinguishes the California scheme is that the protection is being pitched as a selling point for reluctant buyers, which sellers advertise as part of their home listings.

Under the program, which covers buyers who lose their jobs within 12 months of escrow closing, a seller can choose to pay $200 for six mortgage payments of up to $1,000 each, or $275 for six mortgage payments of up to $1,500 each.

CAR began offering the service last month but doesn’t plan to begin advertising it widely until January, Peerce said.

National Association of Realtors spokesman Walter Molony said he knows of no other states that are offering similar incentives for job-fearing home-seekers.

The focus on consumers wary of making big purchases in a shaky economy recalls Hyundai Motor Hyundai Motor America’s offer to buy back cars from people who lose their jobs.

Analysts have credited that program with helping boost Hyundai sales since its introduction in January 2009, despite the ongoing economic doldrums.

University of Southern California business professor Lars Perner, who specializes in consumer behavior, thinks the realtors’ program could embolden those who have been putting off buying a home because of job insecurities.

“Taking away some of that fear of getting into big trouble is something that could easily tip the balance,” he said.

But Howard Wial, who directs the Brookings Institution’s Metropolitan Economy Initiative, said the plan would help only a limited number of borrowers with middling mortgage payments and relatively short amounts of time spent without work.

Indeed, nearly half of the state’s unemployed had been out of work for an average of more than six months, according to state statistics based on the year ending in September.

Meanwhile, although the state’s average mortgage payment was $1,055 in September, according to tracking firm MDA DataQuick, the insurance payouts wouldn’t cover mortgages in higher priced counties where sales have been most sluggish.

Average monthly mortgage payments in San Francisco and Orange County were $2,469 and $1,772 in September, DataQuick said.

“It could have some impact on home sales, but I wouldn’t overstate it,” Wial said of the CAR plan. “I think it’s a small step.”

India admits to different, even sub-standard expectations from western countries. Makes you wonder about the standards in work quality delivered to real estate buyers and sellers in this country.

From The New York Times
Published: September 24, 2010

NEW DELHI — Had the statement come from a non-Indian, especially a Westerner, it probably would have been angrily repudiated as an affront to Indian dignity. But the offending words came from a top Indian official trying to deflect criticism for the bureaucratic failings and lax preparations threatening the coming Commonwealth Games.

The issue was reports of unsanitary conditions inside the athletes’ village, a facility promoted by Indian organizers as world class. Officials of the New Zealand team, arriving early, had been horrified at dirt-caked bathrooms and soiled rooms. The explanation offered by Lalit Bhanot, the second-ranking official on the organizing committee? Indians and Westerners have different standards of hygiene.

“These rooms are clean to both you and us,” Mr. Bhanot told Indian reporters this week. Foreigners “want certain standards in hygiene and cleanliness which may differ from our perception,” he said.

India had hoped the Commonwealth Games, a quadrennial athletic competition among nations of the former British Empire, would serve as a public relations vehicle to show off the economic progress that has made the country a rising power. Instead, the world is witnessing an ugly spectacle of bureaucratic dysfunction that only confirms the image of governmental ineffectiveness that Indian leaders hoped to dispel.

Indians acknowledge that sanitation is woefully lacking in many parts of the country. But Mr. Bhanot’s suggestion that their government cannot, even under the glare of a global spotlight, deliver a high standard of hygiene in an expensive new facility fueled broad public indignation that rippled through television talk shows and Internet message boards.

“It is unbelievable that a person holding such a responsible position can make such a statement,” said J. Anand, vice president of a New Delhi travel agency. “Hygiene is hygiene, whether it is in India or anywhere else. I feel embarrassed by that statement.”

The dirty bathroom controversy is just the latest problem to plague the games. New Delhi has experienced record monsoon rains, causing periodic flooding in low-lying areas and amplifying the seasonal outbreak of mosquito-borne dengue fever. Missed deadlines have officials racing to finish work, and a pedestrian bridge under construction collapsed this week, injuring 27 people. Already, as many as nine athletes have dropped out of the Games.

Now the photographic leitmotif of the games is filthy bathrooms. Snapshots taken of an apartment in the athletes’ village with dirt-caked bathrooms and toilets, a mattress stained with dog paw prints and a sink smeared with the spittle of chewing tobacco have ricocheted across the Internet. On Friday, two leading Indian newspapers ran some of the photos on their front pages.

The dirty conditions have prompted several teams to delay their arrival into New Delhi, with only eight days before the Oct. 3 opening ceremony. If the situation has been embarrassing, it mostly reflected the abysmal management that has plagued the Games; some laborers had used the rooms during construction, and housekeepers had failed to clean up on time.

Anyone living in India is inevitably confronted by squalor, whether the slums and shantytowns that exist in most cities or the beggars, often children, who tap on car windows for change. Few Indians would argue that poverty is not a paramount national concern, and many domestic critics of the games argued that the country was still too poor to spend so much money on what is effectively a government prestige event.

Mr. Bhanot’s comments hit a raw nerve because many middle class Indians make a distinction between public and private standards. If public bathrooms in government buildings are usually dirty, private homes are usually immaculate. Most people pay close attention to their appearance and cleanliness, even as public roads are usually potholed and public buildings are often not well maintained.

“It’s not that somehow people don’t recognize the truth that there is a problem about public standards of hygiene in India,” said Pratap Bhanu Mehta, president of the Center for Policy Research in New Delhi. “But usually we have dealt with it by confining it to the public space. We think private standards are very high. And he seemed to be questioning that.”

Foreigners visiting India invariably run into the chaotic, often dirty public sphere throbbing outside their hotels, coloring their impressions of the country. Keshav R. Murugesh, chief executive of WNS Global Services, a Mumbai outsourcing company, said Indian companies needed to work hard to persuade international customers that Indians could do complicated work in a timely and exacting manner.

Mr. Murugesh worried that clients, having seen the controversy over the athletes’ village, would now wonder: “Is that how I’m being served?” He jokingly added: “I just wish they had outsourced it to us.”

The irony of the cleanliness controversy is that the bathrooms in the athletes’ village represent the sort of luxury most Indians never experience. The walls are made with marble, and the sinks and toilets appear equipped with expensive fixtures. For much of India, the lack of access to a toilet and the absence of adequate sanitation are widespread problems blamed for the spread of disease as well as the contamination of the country’s rivers and other water sources.

Bindeshwar Pathak, founder of the Sulabh International Social Service Organization, has spent 40 years promoting the need to expand sanitation in India. His group has placed more than 1.2 million household toilets around the country and operates a toilet museum in New Delhi to promote awareness about sanitation.

Meanwhile, the effort to scrub the athletes’ village moved into extra high gear on Friday. Prime Minister Manmohan Singh ordered organizers to intensify cleaning efforts at the village immediately, while the Indian news media reported that the government had asked several of the country’s elite private hotels to complement the cleaning effort.

Athletes trickling into the city were reportedly being put up temporarily in hotels, though international sports officials, who have blasted the lack of preparations, sounded more optimistic on Friday.

“Conditions at the Commonwealth Games Village are acceptable,” said Perry Crosswhite, head of Australia’s delegation, according to The Associated Press. “Things are getting better every time.”

For his part, Mr. Bhanot has backpedaled, trying to argue that his comments were taken out of context. But he is not the only local official who has offended the public.

When the hurriedly built pedestrian bridge near the main stadium collapsed during construction this week, a senior official, Jaipal Reddy, tried to dismiss the accident as a “minor matter,” even though many people thought it symbolized the risks of delaying preparations until the last minute. Sheila Dikshit, chief minister of New Delhi, also initially described the collapse as “minor.”

The Times of India ran photographs of the dirty bathrooms on Friday and denounced the “criminal unconcern” of games officials. “They must be made to pay,” it blared, “so that India’s name is not dragged so willfully into the mud ever again.”

FEMA: Hundreds of levees no longer reliable

By Peter Eisler, USA TODAY

WASHINGTON — The government has determined that hundreds of levees nationwide no longer meet its standards that ensure protection during major floods, a decision that forces thousands of property owners to buy federal flood insurance.

The Federal Emergency Management Agency (FEMA) has revoked its accreditation of the levees as part of an effort to update the government’s flood hazard maps, which guide state, local and federal decisions on development in flood-prone areas. Properties protected by the levees now are in flood hazard zones, which means owners who have federally backed mortgages are required by banking laws to carry flood insurance.

Flood insurance, based on property value and risk, ranges from less than $200 to more than $1,000 a year. National average: $500.
FEMA has not accredited 300 levees, mostly in California and Arizona, on the maps it has updated so far. Those maps, most of which have taken effect since 2008, cover 65% of the U.S. population. Maps for the rest of the country are due to be finished over the next three years.

“There’s a lot of real money and real consequences to this,” said Rob Vining, adviser to Congress’ National Committee on Levee Safety and former chief of civil works programs for the Army Corps of Engineers. Some of the suspect levees protect prime commercial and residential real estate, said Vining, a vice president of HNTB, a firm that helps cities manage infrastructure projects.

“If you require flood insurance for all that property, you get a very big price tag,” he said.

To keep a levee accredited, local governments or other responsible parties must certify that it can handle a flood so severe that it has a 1% chance of occurring each year. Some communities where levees have deteriorated face tens of millions of dollars in rehabilitation to meet that standard.

There’s been no net gain in the number of properties in flood zones, because other properties have been removed as protections have been built or conditions have changed, FEMA says. “Flood hazards are constantly changing due to natural as well as man-made factors,” spokesman Brad Carroll said.

In Sacramento, levees protecting about 20,000 properties in the city’s fast-growing Notomos area were deemed insufficient when new FEMA maps took effect at the start of last year. “There was a big outcry,” said Dave Brent, the city’s engineering manager. To build in the newly designated flood zone, structures must be elevated as much as 20 feet to remain above the flood plain, he says. “It was a new growth area for us, and development has been pretty much shut down.”

In Woonsocket, R.I., levees that lost their accreditation on maps issued in March 2009 put nearly 1,500 properties into flood zones. “I’ve heard from people complaining about the (insurance) charges,” said local Realtor Kate Duggan of Essex Properties. “But no one’s saying they want to sell their house because of it.”

The map updates are mandated by Congress so banks can be sure that people who need flood insurance are required to buy it.
But lawmakers from areas where property is being added to flood zones are pushing a bill to give communities more time to improve flood protections and grant property owners a five-year grace period to buy insurance.

“Local jurisdictions need time to address the impact … and the costs for individuals,” said Rep. Jerry Costello, D-Ill.

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