Archive for March, 2012
It appears that Bank of America is expanding their special brand of incompetence from lending to landlord duties. CNBC is reporting that Bank of America has launched a pilot program that will allow a limited number of borrowers who are behind on their mortgages to become renters. This “Mortgage to Lease” program is targeting owners who are facing foreclosure in an effort to help keep them in their home. The program, at this point, is by “invitation only” and is being tested in Nevada, Arizona, and New York.
The report states that homeowners would transfer title back to the back and, in return, their outstanding mortgage debt would be forgiven. Property management would be outsourced to firms specializing in that area.
My reaction? This is a bigger joke than the “$25 billion” mass settlement.
Here’s my biggest problem with this program. Say a homeowner transfers title back to Bank of America and starts renting. We’ll give BoA a huge benefit of the doubt, for now, that they can execute such a program in its initial stages. What assurances does a homeowner have that they will be able to stay in their home for an extended period of time? Maybe they sign a 1-year lease. But what is to stop BoA from kicking them out after that lease expires?
The media is preaching how the housing market is supposedly improving. If that’s the case, what confidence could a homeowner possibly have that BoA wouldn’t want to sell that house as soon as market conditions improve enough to make financial sense? Does Bank of America really expect us to believe that it’s willing to play landlord for the next 10, 20, or 30 years on a house? Or even less likely, are we really to believe that BoA is going to keep thousands and thousands of REOs on its books for decades?
To me, this looks like an effort on Bank of America’s part to get around the problems they are having foreclosing on homes. Just think about it. Under Bank of America’s Mortgage-to-Lease plan, BoA voluntarily gets title to a piece of property in exchange for, let’s say, a 1-year lease. At the end of that year, BoA simply refuses to renew the lease and–PRESTO!–they essentially get to foreclose without having to even go through the foreclosure process. In the interim, they get rent payments from a family who thinks they’ve saved their home.
If Bank of America really wanted to help homeowners keep their homes, they would get serious about the modification process and genuinely work with homeowners on manageable financial arrangements. In my experience, most homeowners working with Bank of America on modifications simply get passed around from call center to call center,while constantly being told they need to submit additional paperwork. BoA should enhance their modification program to where homeowners actually are able to work through the system.
I understand the volume of loans that BoA deals with is huge, and they have to manage it somehow. However, it takes a lot less time to spend 30 minutes on the phone with a homeowner once to get things right than to take twelve 8-minute callbacks because BoA says something wasn’t documented correctly. Modifications or loan workouts create true win-win situations: homeowners get to stay in their homes, and the bank receives monthly mortgage payments. This is the goal that needs to be achieved. In my opinion, Bank of America’s Mortgage-to-Lease program doesn’t do that–it simply gives this bank a backdoor way to foreclose.
Attorney Walker M. Duke recently obtained a temporary injunction, stopping a foreclosure on a McKinney, Texas family’s home. The injunction will keep the family in their home throughout the life of a lawsuit against their lender, which challenges the bank’s right to foreclose and seeks to keep the family in their house long-term.
“This is a complicated case that deals with a number of Wall Street transactions. The judge took the time to hear the arguments from both sides, thoroughly reviewed the briefing, and after thoughtful deliberation, made what I believe was the right decision. I applaud this judge’s efforts to truly grasp the issues before him,” said Walker Duke. The case involves a home loan that was allegedly “securitized,” a complex process by which a residential home loan is converted into a tradeable security that can be bought and sold on Wall Street–all without the homeowner’s knowledge or consent.
Walker Duke, a Dallas-based foreclosure defense lawyer, noted that the bank made representations to the U.S. Securities & Exchange Commission that were inconsistent with the records they filed with the Collin County Clerk. “In my opinion, the bank is either lying to the SEC or they’re lying to the Collin County Clerk. I’m going to hold them accountable either way,” Duke stated.
The injunction followed the granting of a temporary restraining order, or TRO, that initially halted the foreclosure.
Foreclosure can happen to anyone. It doesn’t matter whether you’re a family struggling to make ends meet after a lost job or you’re a former Pro Bowl wide receiver who made tens of millions of dollars in the NFL.
Terrell Owens’ condo at the Azure luxury highrise in Dallas was sold at foreclosure on Tuesday. A spokesman for T.O. said that a short sale were being pursued “due to a drop in market value.” I’m not sure I buy that explanation.
I don’t feel particularly sorry for T.O., and most people shouldn’t. However, homeowners across this country should take note of the T.O. foreclosure for the reason that a foreclosure truly can happen to anyone. I’m sure when he was making millions of dollars in the NFL, T.O. never would have dreamed his luxury condo would be foreclosed upon. But then his health faded, he got older, and suddenly, he didn’t have the same job making the same money he used to make.
Take a few zeros off the paycheck and the story of Terrell Owens is the story of millions of Americans over the last 4 years. And you can rest assured that if the bank–in this case, JP Morgan Chase–had no problem foreclosing on a Pro Bowl wide receiver, they’ll have no problem foreclosing on you too: unless you take action to stop them.