Foreclosure Negotiations Settlement Scheduled Target is July 13, 2011

Some of the biggest banks in the United States are about to settle state and federal claims over faulty, and fraudulent foreclosures.  The target date for the settlement with Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial is Wednesday, July 13, 2011.

The settlement is expected to exceed $20 billion, forming state and federal funds to provide relief to mortgage borrowers.  The case has been focused on how banks treated customers during the rise in mortgage defaults.  This case is just one in many cases regarding issues of negligent, faulty, and possibly criminal activity related to mortgage and foreclosures.

Some of the issues that are related include compensating people whose homes were improperly seized.   Other issues include the institution of funds for states including Ohio to resolve civil mortgage complaints as well as a separate federal account that would require them to provide a specific amount of mortgage relief to borrowers.

I will be thrilled when this is settled as it is just one more piece of the puzzle that we need to put the Ohio economy back on track, but I am sure that whether they meet the deadline of Wednesday or not, we will be hearing about this topic for quite some time to come.

Ohio Real Estate Market Down | Columbus Down 25%

Real estate sales in Ohio are still quite low, which is confirmed by the May sales figures from RealtyTrac.  One of the problems is that even when a buyer is interested in buying real estate, banks are reluctant to allow them to borrow, even when their credit scores are good.  May home sales in Columbus were down 25% from May 2010, which is an echo of what is happening all over the state.

There is nowhere in Ohio that has been spared from the foreclosure, short sale and price reductions in homes.  Homes that once demanded a price only affordable to successful professionals are now going to auction for far less than $200,000.

3,405 home owners were were forced to move in Cincinnati after their homes were placed on the auction block this summer. Columbus also faces a large foreclosure problem with 4,099 homes recently listed as foreclosures. Smaller communities face the same issues as metropolitan areas, but do not have as many foreclosures and short sales. The southern Ohio cities of Jackson, Athens and Logan each have less 20 repossessed homes listed for sale.

When a home is in foreclosure, there are often also unpaid real estate taxes attached to the property. Local governments and schools around the state are suffering due to the growing amount of delinquent property taxes.

Homeowners in general are impacted by the growing list of foreclosures. The steeply discounted prices on short sale and foreclosed homes drives down the price of similar homes in the same area. Banks require a real estate appraiser to use comparable homes to determine current market value during the loan process. When your neighbor cannot pay his mortgage and his house is sold at a foreclosure auction, your home is now worth less in the eyes of lenders and appraisers.

There is some hope.  In June 2011, there has been a slowdown in the rate of foreclosure filings and of repossessions.  The courts nationally have also become more aggressive about challenging foreclosures. In January 2011, Massachusetts’s top court voided the seizure of two homes by Wells Fargo & Company and US Bancorp after the banks failed to show that they held the mortgages at the time of the foreclosures, and courts in several states are considering similar cases.

Sometimes the Mortgage Money Goes to the Right People

In an unexpected twist, lawyers from Dworken & Bernstein law firm insisted that any unclaimed funds in a settlement with Wells Fargo and CitiFinancial from a class action case regarding unreleased mortgage liens be turned over to charities instead of being returned to the defendants.

Due to this “cypres” legal doctrine, 20 Ohio charities will be able to continue their work with new funding.  The charities that benefited from this donation included Neighborhood Housing Services of Greater Cleveland, Project Love, The E Prep School, The Arc, Society for Rehabilitation, Malachi House, Trinity Episcopal Cathedral, University Hospitals, The Gathering Place, Cornerstone of Hope, Antioch Community Development, Ohio College of Podiatric Medicine, and Gordon Square Arts District.

Many class action suits end up with unclaimed funds, and this doctrine can be applied to all of them, but often the unclaimed funds just go back to the defendants.  Since they are being asked to give up the funds to rectify a wrong, it makes more sense for the unclaimed funds to go out into the community to help those in need of a hand up.  Class action suits are brought to “fight city hall” so to speak, and it is not often enough that the little guy manages to win against the big corporation.  Certainly we see evidence all of the time of when the big guy wins.

Corruption is rampant when no one is watching, and unfortunately class action suits are the only way to get our own back.  Certainly the people that are affected by the injustice committed by the defendants would prefer that the unclaimed money go to the community instead of back to the defendant.

We can think of it as just a little more justice.

Cuyahoga Country Grand Jury Indicts 9 in Fraudulent Home Loans Case

For the first time in Ohio, and one of the few times across the U.S., a grand jury has indicted 9 employees of a California based loan company, Argent Mortgage Inc., for their suspected roles in approving fraudulent home loans.  So far it has been rare that any home loan companies have actually had criminal charges brought against them, whether they approved subprime home loans or not.

Argent Mortgage, Inc. was one of the biggest originators of home loans in Cuyahoga County from 2003 to 2005, and was sold to Citibank in 2008.  This particular case has been investigated by the Cuyahoga County Mortgage Fraud Task Force, and shows how the lending practices of Argent and other subprime lending companies were responsible for the foreclosure crisis that has decimated Cleveland, Ohio and many of its area suburbs.

The indictment of the Argent employees alleges that they helped coach mortgage brokers about how to falsify loan documents so that they misstated the source or existence of down payments and also borrowers’ income and/or assets.

According to the case, employees at an Argent loan processing center in Illinois approved the loans even though they KNEW that their own company’s lending rules had not been satisfied.  Argent employees bent the rules in order to get the loans approved so that they would get higher wages and bonuses.

Subprime loans have been viewed as a major cause of the downfall of the banking industry, as these popular loans during the housing boom between 2000 and 2007 were given with little or no proper documentation in order to get approved.  Because of these loose lending practices, many speculative property purchases were made, and fraudulent practices abundant.

The indicted included 3 Argent account executives assigned to work with mortgage brokers in Northeast Ohio, and two supervisors and four underwriters who were responsible for ensuring that the company’s lending standards were being met.  This investigation into Argent employees grew out of a Cuyahoga County case being prosecuted against Ur Gofman, owner of Cleveland based REal Asset Fund.  Gofman was indicted in August 2008 in Cuyahoga County Common Pleas Court for his role in what prosecutors are calling one of the biggest mortgage fraud schemes in U.S. history.  Gofman was convicted this year in U.S. District Court of mortgage fraud related charges.  Sentencing in this case is scheduled for this week.

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Cleveland is Adding Jobs, But They Don't Pay as Much

Greater Cleveland, Ohio (which includes Cleveland and the outlying suburbs) has actually been doing an admirable job of adding employment opportunities for people out of work, even in a weak economic recovery.  Unfortunately, the jobs that people are getting pay less than they did before the economic downfall.

According to the Brookings Institution’s MetroMonitor, which is a project measuring economic performance in the 100 largest metro areas of the United States, while the Cleveland-Elyra-Mentor area gained jobs in the first quarter of 2011, economic output in the area fell.  This a common trend in the economic recovery patterns over and over again, in many areas.

The report showed that Cleveland ranked second in terms of places that have brought down their unemployment rate, but is still struggling in economic output (the value of goods and serviced produced in the region).  Part of the problem is how productivity is measured.  Manufacturing jobs get higher points on the productivity scale because they pay more than lower paying service jobs.  Manufacturing is a key post-recession job growth factor in Ohio and neighboring states.

Local experts say that there is still reason for hope.  Early figures show that the Cleveland area continued to add obs during the second quarter of 2011, including jobs in the business and professional sector, which are also higher paying jobs.  Cleveland has a very large medical professional community due to the many high level hospitals like the Cleveland Clinic and University Hospitals systems.  In many ways, the medical industry is what is driving much of Cleveland’s economic growth and stability, and creating jobs for people that will eventually turn into home buyers as they settle in the Cleveland area.

Ohio Home Sales Slipping Even Including the Short Sale of Foreclosed Homes

The Ohio housing market is still quite sluggish, even during the time of year when housing sales usually go up due to better weather and ease of moving.  This trend is quite disappointing for real estate sellers, who are blaming part of the home sales slump on bad weather, high gas prices, and the difficulty in getting mortgage loans these days.

Last spring, home sales were up due to a very popular home buyer tax credit, but that is not available for home buyers now, so there is less incentive to take a risk this year.

Sales of homes in Northeast Ohio rose in May, however they were still behind May of 2010.  This pattern was followed across the state of Ohio.  Home sales were 20.8% lower than last year at this time (Ohio Association of Realtors).  In Northeast Ohio, sales of new and existing homes rose 6.8% last month, but were down 17.3% from May 2010.  Condo sales, however, jumped 35.7%, but were 4.6% lower than May 2010. Data is provided form the Northeast Ohio Real Estate Exchange.

Most analysts say that buyer demand is just sluggish, and buyers are sitting on the sidelines waiting to see what is happening.  The average price for a house in Northeast Ohio in May was $121,447, while the average price for a condo was $117,742.

RealtyTrac Report Shows Ohio is the 13th Highest Foreclosure State

Yippee!  Ohio is in the running to be the highest home foreclosure state in the U.S.  Out of 50 states in the union, we are the 13th highest.  This is not a race that we want to win, folks.  We want to lose this race.

RealtyTrac is a company that tracks statistics related to real estate issues, and in the last few years foreclosure stats have been highly tracked.  Ohio’s statistics for May show that one out of every 608 households in the state received a foreclosure notice.  RealtyTrac’s report went on to say that Ohio saw nearly 8,400 foreclosure filings last month. Filings include default notices, auction-sale notices and bank repossessions.

So is there anything we can do to get our real estate crisis back on track, building instead of foreclosing?  It all comes back to jobs.  We need more good jobs in Ohio to help people get back to paying their bills on time.  This will kick start the economy in all directions as people with jobs spend more money in stores which in turn infuses the state with more corporate buying.

RealtyTrac says the number of homeowners nationwide who were put on notice for being behind on their mortgage payments fell in May to the lowest level since 2006. The decline was the result of a slowing housing market and lingering delays in banks’ foreclosure process not really any new construction or an upswing in home buying.

Mortgage lenders also took back fewer properties in May, the second down month in a row. Repossessions have been held up as many lenders continue to work through foreclosure documentation problems that surfaced last fall in compliance with federal regulators’ demands.

Three Years Later, Banks are Recovering From Foreclosure Crisis in Ohio

Not sure what this means for homeowners in foreclosure, but BauerFinancial Inc., an independent rating company, announced that 3 of the 14 largest banks operating in Greater Cleveland–Huntington, U.S. Bank, and Park View Federal Savings–saw their financial strength increase last quarter.  This is significant news because the ratings do not change often.  Out of the 34 banks that operate in Northeast Ohio, only 1 bank, Home Savings Bank of Kent, had their rating go down from 4 stars to 3.5 stars.

In more good news, banks are getting healthier in the entire state of Ohio, 71% of them earning a 4 star or higher rating based on the first quarter of 2011.  Banks with ratings of 4 stars or above are considered excellent, and are recommended to businesses.  Ohio’s banks are actually stronger than the overall rating across the United States.  The nation’s overall bank rating was 61% excellent.  However, the bad news is that there are still plenty of troubled banks in the U.S., 5.9% of Ohio’s banks are troubled.

While it is good to hear that Ohio’s banks are getting stronger, they still have a long way to go until the local economy has recovered from the mistakes that many of the banks made on mortgages, and foreclosures.  Still if you need to rely on a bank, which most of us do, it is good to know that the bank is not about to go under.  If you want to look up the stability of your own bank, and what the star ratings mean, you can go to the BauerFinancial website and look it up.

Cuyahoga County's FitzGerald Raising Standards for Appraisers of Foreclosed Properties

In an attempt to clean house at the Cuyahoga County’s Sheriff’s office, Cuyahoga County Executive Ed FitzGerald is changing the standards for contracted appraisers in the real estate unit.  In Ohio, the county sheriff’s office is responsible for overseeing the auction of foreclosed properties.

The Cuyahoga County sheriff’s office hires contractors to appraise the foreclosed homes to set the values for auction.  Former Sheriff Gerald McFaul was found to previously give many of these contractor jobs to his political buddies, some of whom did not even have appraiser licenses.

In order to meet requirements under the new rules, applicants must have the following qualifications:

  • 5 years experience as an appraiser
  • Ohio appraiser license preferred

FitzGerald believes that requiring Cuyahoga County appraisers to have experience will make the county’s foreclosed property appraisal unit the most qualified in the state of Ohio.  Ohio state law dating back to 1831 requires only that the appraisers be disinterested freeholders (property owners) in the same county.

So, what exactly does a county appraiser do?

When a property, home or building goes into foreclosure, the bank or lender is required in Ohio to ask a judge to order a sale at the public auction.  The appraiser then is called to survey the exterior of the foreclosed home, check the yard, and look in the windows.  They are not required to enter a foreclosed home unless a judge approves a mortgage lender’s request for an inside appraisal.

As the more and more homes have been foreclosed in Ohio, the county appraisal jobs have become more coveted as appraisers earn money from each appraisal done from fees that the foreclosing banks pay.

Landlord in Foreclosure: What are the Foreclosure Consequences for a Renter?

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It used to be that renting an apartment or an office was much less risky than buying because you were only required to commit to a one year lease.  However, that is no longer the case here in Ohio where landlords may go into bank foreclosure at any time.  Since a tenant does not know the financial circumstances of their landlord, this can come as a complete surprise to the renter.

One of the issues is what happens to the security deposit that most landlords require from tenants.  A security deposit is usually at least one month’s rent on the apartment or office.

In the case of foreclosed property, when property changes hands, owners are legally required to either return the security deposit or transfer it to the new owner, and this rule applies whether the new owner is a foreclosing bank or someone who buys the house in a regular sale.  But often, in foreclosure situations, the defaulting owner seldom returns the deposit or gives it to the bank.

The new owner in this foreclosure is held responsible as a matter of law for returning the security deposit, however, many banks have not aggressively collected this money from the former landlords.  Renters do not always know that the owner is legally required to return the money to them, so they do not pursue it.

Oregon is introducing a bill in the Senate to help the dilemma faced by a tenant whose security deposit will never be returned. Legislators are considering a bill (Senate Bill 293) that would allow tenants, upon learning that their rental is in foreclosure, to serve notice to their landlord that their deposit is to be used as rent.

This will give tenants two or more months in which they at least need not keep paying rent to a defaulting owner. It also means that if the foreclosure goes through, there will be no deposit to cover any damage or otherwise unpaid rent. However, foreclosing banks have been lenient in these situations.

The Oregon bill provides that a landlord who rescues his property from foreclosure is entitled to require the deposit to be replenished. Tenants in this situation would have two months to return the money.

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