Consumer Advocacy Group Weighs in on AG Settlement

Rumors have been circulating for some
time that the Obama Administration is pressuring the 50 state attorneys general,
the Justice Department and the Department of Housing and Urban Development to
settle with major banks over issues relating to errors in servicing and
foreclosure abuses including the robo-signing uproar.  The settlement has been controversial and several
attorneys general including those in California, Delaware, and New York have opted
out of the settlement and/or launched independent lawsuits of their own,
claiming the settlement is not sufficient to the offense.  The rumors have intensified over the last few
days based on a theory that the President hopes to announce the settlement
during his State of the Union Address tonight.

Today the Center for Responsible Lending
which has been an early and outspoken critic of mortgage lending came out in
favor of the settlement saying, while it isn’t perfect, it would represent an important
step forward in addressing foreclosure abuses

“The settlement would include key reforms to clean up unfair mortgage
servicing practices,” the statement from the Center said.  “It would also provide an important template
for ways banks can use principal reduction to reduce unnecessary foreclosures
and put the country back on a path to economic recovery.”

While the Center admits that not all
details of the settlement are available as yet, but based on current
information, the key reforms include:

  • The
    elimination of robo-signing as banks would agree to individually review
    foreclosure documents according to the law.
  • Adoption
    of practices that would improve communication with services and end servicer
    abuses including fairer treatment for homeowners who are late on mortgage
    payments.
  • More
    sustainable loan modifications including a requirement that banks “get serious”
    about reducing principal balances.
  • While
    the state AGs would be prohibited by the settlement from pursuing further
    actions against the banks, the Center said that nothing in the settlement would
    prevent homeowners from suing on an individual basis nor would the settlement
    shield the banks from prosecution for criminal activities or from claims based
    on mortgage securities violations, fair lending suits or claims against the
    Mortgage Electronic Registration System.
  • The
    settlement would be enforceable in court by an independent monitor.

The Center said that its research
indicates that the country is only about half-way through the mortgage crisis,
but the proposed settlement would wrap up a year-long investigation into
robo-signing and other abuses and is “crucial to containing the damaging
effects of foreclosures on our economy.” 
It stresses, however, that additional policy actions on multiple fronts
is a necessary addition to the settlement.

…(read more)

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Mr. President, it’s Time for a National Housing Policy

Please Mr. President, enough with the one-off responses, it’s time for a National Housing Policy.

The only thing more predictable than the fact that the President will deliver to Congress a State of the Union Address each year is the speculation that precedes it regarding what “Big” announcements the President’s speech will contain.

This year is no different, and a great deal of current speculation surrounds the topic of housing and whether the President’s speech will include some grand proposal intended to relieve those American homeowners who continue to suffer under the weight of a housing economy that remains stuck in neutral.

One plan getting a great deal of attention would involve the government granting debt forgiveness to borrowers whose mortgages are underwater, meaning that the amount currently owed by them on their mortgage exceeds the current value of their home.

To date, the Federal Finance Housing Finance Agency (FHFA) – the primary regulator of Fannie Mae and Freddie Mac – has resisted calls from Congress to approve principal forgiveness. In a report circulating today, we now understand why. According to that report, the cost of such a plan to Fannie and Freddie could well exceed $100 Billion! That $100 Billion would be in addition to the $151 Billion already owed by the two enterprises to the US Treasury. And to be clear, that means owed to US taxpayers.

Hopefully, current speculation is wrong and the President’s address includes no such proposal. Its not that we don’t sympathize with underwater homeowners, we most certainly do. We too look forward to the day when the American housing economy is once again growing and functioning well – and by extension, when the challenges facing homeowners are far less. When that day arrives, that will be a sure sign that the American economy generally has returned to a healthy condition.

Our objection is broader and goes to the fact that since 2009 the policy response to the housing crisis by the Administration has involved one tactical reaction after another – or as we have said before … “a series of one-off reactions …” and, unfortunately, little more.

And while certain tactical reactions were appropriate and even required in 2009 and even into 2010, the time is long passed for the development and introduction of a comprehensive National Housing Policy. Such a policy would lay out in clear terms the goals to be achieved through the Nation’s support of housing; the economic costs and benefits of such a policy; as well as the anticipated intangible benefits of such a policy. Finally, such a plan would identify the likely costs and risks of the failure to implement such a plan.

With such a plan in place (or at least proposed), the uncertainty that today plagues this industry would begin to lift and Congressional policy makers, regulators and business leaders alike would be better equipped to address the important considerations that must still be resolved if we hope to develop an enduring solution to the Nation’s housing crisis.

And for those who would ask, “Why should a housing policy be a priority?”, consider the following written in 2003 – perhaps the last time we had a legitimate National Housing Policy in this great Nation – by the Millennial Housing Commission:

“… housing matters. It represents the single largest expenditure for most American families and the single largest source of wealth for most homeowners. The development of housing has a major impact on the national economy and the economic growth and health of regions and communities. Housing is inextricably linked to access to jobs and healthy communities and the social behavior of the families who occupy it. The failure to achieve adequate housing leads to significant societal costs.”

Until these sort of deliberations and debate occur and a National Housing Policy is in place, it is impossible to know what we as taxpayers get (and give up) for another $100 Billion spent in this manner in support of the housing crisis.

It seems to us, that the time to answer the important question: “What do we get?” … before we give more … is long overdue.

…(read more)

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Obama Faces Heat from Left on ‘Robosigning’ Talks

Associated Press
The Obama administration is facing criticism about a possible settlement over alleged foreclosure abuses.

For quite a while now, liberals have been unhappy with the Obama administration’s approach to the housing crisis. Now they’re getting organized.

The Obama administration came under fire Monday from Democratic lawmakers and liberal groups. They say a forthcoming settlement over alleged foreclosure abuses won’t do enough to punish the banking industry.

Administration officials and state attorneys general have been putting the finishing touches on a settlement with major banks following foreclosure-processing problems that erupted into public view in fall 2010.

Housing and Urban Development Secretary Shaun Donovan and Associate U.S. Attorney General Thomas Perrelli were meeting in Chicago on Monday with Democratic attorneys general to review potential settlement terms, according to a spokesman for Iowa Attorney General Tom Miller, who has been leading the talks. The officials were scheduled to hold a separate conference call with Republican attorneys general later in the day.

State and federal officials are “discussing the details of the progress we have made so far in settlement negotiations, including the terms we must still resolve,” Mr. Miller said in a statement. “We have not yet reached an agreement with the nation’s five largest servicers, and we won’t reach a settlement any time this week.”

When a settlement is finally reached, it will inevitably draw criticism from Republicans on Capitol Hill and other conservatives. They have long been critical of the settlement process. Last spring, several Republican attorneys general argued that mandating principal reductions is unrelated to the foreclosure abuses that took place.

Speaking to U.S. mayors in Washington last week, Mr. Donovan said the settlement would benefit about 1 million U.S. households with reductions in the amount they owe on their home loans. Mr. Donovan hailed those principal write-downs as “perhaps the most important step we can take in the short term to help the housing market.”

Criticism of the potential settlement is growing, even before its final terms are made public. The settlement’s rough outlines have been known for a while, but an area of uncertainty has been what additional legal claims prosecutors could bring once a deal is signed.

Activist groups, including MoveOn.org and local organizations, said they were protesting outside the Chicago hotel where the attorneys general were meeting on Monday. They also held protests last week at offices of President Barack Obama’s re-election campaign. They argue that the administration (which, of course, is led by a onetime community organizer from Chicago) should not agree to the settlement without a full-fledged investigation of banks’ conduct.

Some lawmakers agree.

“When it comes time to pay the penalty for fraudulent foreclosures, Wall Street banks again are trying to pass the buck,” said Sen. Sherrod Brown (D., Ohio) in a conference call with reporters Monday. “Instead of thorough investigations…instead of criminal prosecutions, we’re talking about not much more than a slap on the wrist.”

Representatives for HUD and the White House did not immediately comment.

A settlement would end months of negotiations among federal officials, state attorneys general and at least five of the nation’s largest mortgage servicers: Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. The talks center on “robo-signing,” in which bank employees approved legal documents without proper review, and other questionable foreclosure practices.

The five banks and the state attorneys general and Obama administration officials are pushing a deal of $19 billion or more, depending on how many states join. The Obama administration has been pushing for a deal involving all 50 attorneys general, but Democratic attorneys general have called the proposed settlement inadequate.

10 Gardening Lessons, Learned the Hard Way

In a new column, Bart Ziegler offers some advice to novice gardeners with limited time. First off, those zucchini jokes are true.

REITS Keep Raising the Ante on Dividends

Real-estate investment trusts continue to reward their shareholders, with one-third of the group raising their quarterly dividends in 2011.

Of the 140 REIT stocks tracked by SNL Financial LC, 35% raised their dividends last year, a 17% increase from 2010. Moreover, 49 companies made “sharp” dividend increases, according to data by SNL, meaning the dividend rose 5% or more.

The higher payouts come at a time when commercial landlords are charging higher rents, increasing occupancy levels and delivering robust stock returns, which are boosting the income pool for dividends. REITs, along with other public companies, were forced to cut or suspend dividends during the downturn in an effort to preserve cash to help ride out the recession. For instance, in 2009 roughly 43% of the equity REITs either suspended or slashed payouts, according to SNL.

“Dividend increases are driven by an improvement in operating income,” said Brad Case, senior vice president of research and industry information for the National Association of Real Estate Investment Trusts. He expects that REITs will continue to see earnings growth via higher rents and occupancy that “will lead REITs to continue increasing their dividends.”

REITs were established in 1960 to give individuals an easy way to invest in income-producing real estate. The firms, which typically focus on distinct areas of real estate, such as offices, retail properties or apartments, must pay at least 90% of taxable income out as dividends.

New York City’s largest commercial landlord, SL Green Realty Corp. provided the most generous payout in 2011 as the company raised its common dividend in December 150% to 25 cents a share per quarter. The company is spreading its wealth as it reaps the benefits of surging property and loan values in Manhattan. Chief Executive Marc Holliday said during an investor presentation last month he expects another boost to the dividend in 2012 if the company’s earnings continue to be robust.

Although the market is improving, the dividend payouts still aren’t as handsome as they were at the height of the market in 2005 and 2006, when dividend increases reached 104 and 100, respectively.

Some analysts also predict that REITs will cool on dividend increases this year in order to preserve capital for acquisitions and to pour more investments into their existing properties.

“Investors would prefer that REITs retain cash flow and reinvest in businesses and acquisitions rather than pay the maximum distribution possible,” said Paul Adornato, an analyst at BMO Capital Markets.