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Default Servicing News

Recent foreclosure prevention and default services activity

October 8, 2008


Several states are calling on subprime servicers to adopt streamline modifications that may cost one company more than $8 billion, while servicers of Federal Housing Administration loans are being warned about loss mitigation steps that are required to avoid damage assessments. And as some companies have emerged to help servicers deal with delinquent and foreclosed loans, one is looking to exploit lender compliance errors.

Wingspan Portfolio Advisors LLC announced last week that is has launched. The company, based in the Dallas area, helps servicers convert non-performing loans into re-performing mortgages utilizing an aggressive incentive compensation plan for its specialists. Founder Steven Horne is a lawyer who previously worked for Fannie Mae and Ocwen.

"We have created a methodology that uses data and metrics to help us establish scenarios that offer hope to investors and borrowers alike," Horne said in the statement. "We don't arrive at the decision that a loan is lost before we completely understand the situation. That means using advanced analytics that consider each factor affecting the loan and exploring every servicing strategy open to us."

Jessica Davis, P.A., recently issued a statement that her law firm represents numerous lenders, banks and mortgage brokers throughout Florida for legal services that include counseling and negotiation and dispute resolution. Litigation services include foreclosures, bankruptcy, evictions, REO closings and loss mitigation related services. The firm is available by phone at 305.461.0022.

Attorneys general from eight states sent letters yesterday to 16 subprime mortgage servicers calling on them to adopt the streamline modification program outlined in an $8.4 billion settlement announced by Bank of America Corp. Monday. BoA agreed with several states to writedown principal or lower interest rates on 400,000 Countrywide Financial Corp. borrowers who closed on an owner-occupied subprime or pay-option adjustable-rate mortgage prior to Dec. 31, 2007.

"Given the significant losses associated with foreclosures, and your fiduciary duty to maximize the return for your investors, we believe that every major servicer of subprime loans should adopt these types of programs as soon as possible," the letter said. "We believe that doing so is in the interests of homeowners, servicers, investors, and the economy at large."

Mortgagees must take three actions to avoid treble damage assessments for failing to engage in loss mitigation, the U.S. Department of Housing and Urban Development said in Mortgagee Letter 2008-27. The assessments apply to defaults that occurred after May 25, 2005.

First, loss mitigation evaluations must be completed for all delinquent mortgages before four full monthly installments are due and unpaid. Next, the appropriate action needs to be taken based on these evaluations. Finally, documentation must be maintained for all initial and subsequent loss mitigation evaluations and actions taken.

HUD announced Friday $50 million in housing counseling and counseling training grants. More than $47 million will support 21 national and regional organizations and 376 state and local housing counseling agencies, while another $3 million will go to two national organizations to train approximately 2,600 counselors. The agencies will utilize $4 million for reverse-mortgage counseling.

To help nonprofit agencies best utilize the $3.9 billion Neighborhood Stabilization Program, NeighborWorks America launched the Community Stabilization Initiative on Tuesday. The information hub for nonprofit organizations and their public and private partners provides strategies for neighborhood stabilization research and data on neighborhoods impacted by foreclosures and opportunities to interact with experts and peers.

REOMAC will participate in the New York Foreclosure Showcase on Oct. 12. The not-for-profit mortgage default service provider plans to bring prospective borrowers together with real estate industry participants. Prospects will be educated about purchasing REO properties.

The American Nightmare, written by Sylvia Alvarez and Walter Walker Jr., provides past-due borrowers with tips to help avoid, survive and overcome foreclosure. Advice offered in the book -- which was published in partnership with the National Association of Hispanic Real Estate Professionals -- includes contacting the servicer as soon as problems arise, consulting a HUD-certified counselor and dealing with no response from lenders.

HomeForeclosureFighter.com has launched a free step-by-step guide to loan modifications. In addition to an explanation of the loan modification process, the guide lists documents needed for lenders to approve modifications and provides advice on how to work with loss mitigation departments.

HomeSaverProgram.org announced Monday that it helps delinquent borrowers compose hardship letters and negotiate with servicers to obtain loan modifications. The firm cited one couple with a 10 percent adjustable-rate mortgage for $325,000 that it worked with. After 45 days of negotiating with Litton Loan Servicing, the loan was modified to a 5.75 percent fixed rate.

You Walk Away is trying to lure delinquent borrowers with a new forensic loan documentation review program that utilizes attorneys to find compliance errors. The company exploits lender violations of the Truth in Lending Act and the Real Estate Settlement Procedures Act. The service also looks to exploit predatory lending practices and mortgage fraud violations.

"The average homebuyer was abused during the mortgage craze," You Walk Away said in its statement. "Many homeowners got pressured into signing loan documents with much higher rates and fees at the closing than what was disclosed on their Good Faith Estimates."

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: [email protected]

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