The Short Sale Act of 2011 is back on the agenda for review by the House Committee on Financial Services. Previously, submitted as H.R. 6133: Prompt Decision for Qualification of Short Sale Act of 2010 this bill was bypassed by Congress last year, but expected to pass legislation later this year.

If passed, the Short Sale Act of 2011 will require mortgage lenders to respond to borrowers request for short sale approval within 45 days of written request. If the banks fail to respond within the time period the application will be considered approved.

Expediting the process would benefit homeowners facing foreclosure and allow them to sell their home to qualified buyers within a matter of weeks instead of months. Quick response times would greatly benefit realtors and real estate investors.

As a real estate investor who has purchased short sale real estate, I can attest the process is cumbersome. I have walked away from numerous deals simply because the bank couldn’t decide if they would allow homeowners to sell short.

With investment property it is essential to take quick possession in order to start generating cash flow. When the short sale process extends for months on end, the property costs investors’ money before they finalize the purchase. It’s never good to start out in the hole because there are few options to recoup losses.

If I have to wait several months to acquire a short sale home it can take up to a year to break even. For this reason, many investors are walking away from distressed properties because it takes too long to turn a profit.

While I and others are hopeful the Short Sale Act of 2011 will expedite the purchase process, I can’t help but have reservations. The rule is written in vague language and proposes the 45 day deadline begins when lenders receive all required information.

The last short sale transaction I engaged in was a fiasco. The bank lost documents I mailed via courier service with a tracking number, but claimed they never received them. The loss mitigator I was working with took a week vacation then quit. Weeks passed before being assigned to a new mitigator who was clueless about short selling.

If banks were required to adhere to a standardized protocol it would benefit everyone. Homeowners could avoid foreclosure. Investors and buyers could take quick possession of short sale homes. Banks could liquidate negative assets and eliminate maintenance costs for the property.

If the Short Sale Act passes it could make a positive impact on the real estate market. Of the real estate being sold about 13-percent of sales are short sale properties. Most realtors believe if the short sale process were streamlined this figure could easily double. Considering home sales are at an all-time low, any boost would be welcomed.

Only time will tell if the Short Sale Act of 2011 makes a difference. We’ll continue following proposed legislation and invite you to subscribe to our mailing list to receive updates and breaking news. While you’re here feel free to browse our real estate article library focused on investing, home buying, foreclosure prevention, and personal finance.

A mortgage standards reform proposal was recently released by the Federal Reserve as the government attempts to curb abuses that have contributed to the mortgage crisis. The rule would further tighten lending criteria to ensure borrowers are capable of repaying their housing debt. It would also require buyers to provide a minimum 20-percent down payment when buying real estate.

The mortgage standards reform redefines a qualified mortgage and includes an 8-point checklist which holds mortgage providers accountable for investment decisions. The new rule takes effect later this year and will be governed by the Consumer Financial Protection Bureau.

As a California real estate investor, I keep watch over industry news and government reforms. In the past 3 years, American taxpayers have carried the burdens of failed banks, government bail-out programs, mortgage fraud, and countless home foreclosures.

Although plenty of programs have been instituted to help homeowners avoid foreclosure, few have made much difference. New home sales are still lagging. Property values are still dropping and thousands of homeowners are losing their property via improper foreclosure.

While I hope that mortgage standard reforms will curtail abuses, I have doubt. In recent weeks the news outlets have reported a barrage of stories regarding the unscrupulous behavior of Wall Street investors and banks. Their greed has taken an entire nation to its knees, yet no one has been held accountable.

There is hope this will change in the upcoming months. In the past 30 days, investigations have been initiated regarding bank conduct within the mortgage industry. Thus far, several major banks are under investigation by the Justice Department, Securities and Exchange Commission, state Attorney Generals, and the Federal Housing Authority.

The importance of mortgage standards reform is that it applies to the entire mortgage industry. Every bank that underwrites a loan must verify borrowers’ income and provide guarantee that borrowers have ability to repay their mortgage note. If banks had followed this type of protocol during the real estate boon the market would not be where it is today.

Many politicians are furious about the rule, claiming it would give too much power to consumer protection bureau that would oversee compliance. Consumer groups are ecstatic because banks would be held accountable for loans during the first five years if borrowers default on the note.

There’s also talk that mortgage reform proposal addresses underwriting standards for qualified residential mortgages. QRMs qualify for exemption from requirements that banks retain a share of loans they originate and package for securitization. Exempt loans include mortgages guaranteed or originated by VA, FHA, and USDA.

QRMs are covered under the Dodd-Frank Wall Street Reform and Consumer Protection Act which significantly changed the American financial regulatory system in 2009. A primary role of Dodd-Frank is to ensure consumers are adequately informed when taking out home loans or purchasing financial products.

In compliance with Dodd-Frank, proposed mortgage reform would require mortgagors to contribute a minimum 20-percent down payment. A lot of buyers and investors are not in favor of this portion of the rule. Neither are realtors, as they feel this would further reduce home sales.

Regardless of which side of the fence you’re on there is no doubt some type of positive reform needs to occur. Banks need to be held accountable for investment choices and buyers need to make responsible purchases. Gone are the days of buying houses with no money down and no income verification.

For now, we can only wait and see if mortgage standards reform will reduce potential for banks to engage in unscrupulous lending practices. We’ll continue to follow this rule and invite you to stay abreast of market changes by subscribing to our mailing list. We also invite you to browse our real estate article library covering topics of foreclosure prevention, real estate investing, and personal finance.

Anyone requiring HUD housing counseling should jump in now before budget cuts obliterate the program later this year. Remember the looming government shutdown in early April? Well, the Republicans and Democrats decided one way to balance the budget was to slash HUD funding for counseling services that have helped thousands of homeowners avoid foreclosure.

I’ve referred many people to HUD housing counseling. Especially, those participating in Obama’s Making Home Affordable program. MHA originated in 2009 as a way to help “millions” of homeowners stay in their home via loan modification. The program hasn’t been very successful and is likely to be scraped as well.

I’m all for government budget cuts, but can’t help but wonder why housing counseling would be nixed in the midst of a foreclosure nightmare. Anyone who had undergone the foreclosure process will tell you it’s an unpleasant experience. The endless sea of paperwork can be difficult for a lawyer to understand, let alone a layperson.

HUD housing counselors have been instrumental in helping homeowners submit required documents for Making Home Affordable loan modification and foreclosure alternatives programs. They have also helped many seniors obtain required counseling when entering into reverse mortgages.

Other services offered through HUD include: first time home buyer counseling, rental assistance, and affordable housing locator services. As Americans continue to suffer from long-term unemployment and staggering levels of foreclosure, many depend on help to locate suitable housing.

A report published by the Department of Housing and Urban Development in 2009 states, “In 2006, 93-percent of all Federal Housing Administration (FHA) borrowers in default who completed housing counseling services successfully avoid foreclosure.”

If only 7-percent of homeowners lose their property, wouldn’t it be more budget-conscious to fund programs that stimulate the economy instead of placing a heavier burden on taxpayers? We’re not talking about having the counseling budget reduced. The entire $88 million budget was erased.

A big concern is that losing counseling services will lead to more consumer fraud in the guise of foreclosure prevention scams. It will only be a matter of time before the Feds need a task force to investigate this crime. Chances are it will cost millions, just as it’s costing right now to investigate mortgage fraud.

As far as I know, the Neighbor Works America program will remain intact. This government program only offers housing counseling focused on foreclosure prevention to first time home buyers.

Their website directs visitors to contact HUD housing counselors if facing foreclosure. In fact, numerous government websites direct homeowners to HUD. When counseling no longer exists, these websites will require updated content at taxpayers’ expense.

Budget cuts are expected to occur in the last quarter of 2011. Those who need help should reach out now. We can only anticipate that without help from counselors many more foreclosures will occur and cause property values to decline further.

Losing HUD housing counseling could have serious consequences. Only time will tell how it all shakes out. One thing is certain, the market is very uncertain. If you’d like to keep a close eye on current events take a moment and subscribe to our mailing list and peruse our article library packed with hundreds of informative real estate and personal finance articles.

Improper foreclosure is something you’ll be hearing about a lot. The media is abuzz over bank regulators launching a plan to provide monetary compensation to homeowners whose homes were illegally seized.

Improper foreclosure occurs when banks do not have proper mortgage assignment documents. In recent weeks, much has been publicized about mortgage lenders hiring robo-signers to forge signatures on loan documents; allowing banks to foreclose via fraudulent means.

The term, robo-signers stems from allegations that banks hired employees to sign upwards of 4000 mortgage documents per day which breaks down to roughly 500 documents per hour. Only a robot could perform work that fast!

Recently, CBS aired a report via “60 Minutes” which included interviews with bank employees who stated they were paid $10 per hour to forge signatures so banks could commence with wrongful foreclosure.

Banks have been under investigation by the Federal Reserve since last October. Federal Reserve Chairman, Ben Bernanke announced last week that a plan is in the works to compensate victims of illegal foreclosure, but details have yet to be unveiled.

There are so many elements of the real estate foreclosure mayhem that it would require a book to cover everything. Sadly, chances we’re only seeing the tip of the iceberg. Chances are even higher that American homeowners will never know the truth about how the banks are destroying the real estate market.

The bottom line is banks are wrongfully foreclosing on houses at an accelerated pace. Many of the banks under fire include those that are participating in the Making Home Affordable program established by the Obama administration.

I’ll be the first to admit I was excited about MHA when it was first announced. The program proclaimed it would help millions of homeowners avoid foreclosure through loan modification. The problem is the program details were far from worked out before the program launch. This led to improper paperwork, lack of recordkeeping, and lack of follow-up.

Distressed homeowners spent hours on the phone with their mortgage lender, filled out forms, and practically begged for mortgage relief through Making Home Affordable. To date, less than 250,000 homeowners have entered into permanent loan modification primarily because banks dropped the ball and didn’t adhere to guidelines set forth under the Troubled Asset Relief Program (TARP).

Banks receiving TARP funds are required by law to offer foreclosure alternatives that allow homeowners the opportunity to keep their home by reducing loan installments. In October 2010, a group of California homeowners filed a class action lawsuit against Bank of America. Their complaint was BOA was “acting contrary to intent and spirit of the TARP program.”

The complaint also charged Bank of America with intentionally postponing borrowers’ requests for loan modifications or mortgage refinance which allowed them to commence with improper foreclosure.

California homeowners aren’t the only ones filing suit against banking giants. New Jersey, Massachusetts, Maine, and Florida homeowners have also filed class action lawsuits.

The end result of allegations made against mortgage lenders is yet to be seen. One thing Americans can bank on is that the process of uncovering wrongful foreclosure won’t be transparent. The banks appear to have become experts in covering their tracks and leaving behind a paper trail that even the best detectives can’t piece together.

While it appears likely that action will be taken against banks for improper foreclosure, the process is certain to be slow-moving. We will continue to keep readers informed of all that transpires from this foreclosure fiasco. If you’re not already on our mailing list, take a moment to subscribe so you don’t miss out on breaking news.

ForeclosureGate is the latest term being used to describe the mortgage fiasco. In recent weeks, numerous reports have surfaced claiming banks are responsible for the chaos and that things will only get worse for American homeowners.

ForeclosureGate seems an appropriate term considering the level of cover-up, lies and deceit which are being brought to light. An investigation into the mortgage debacle began in October 2010 after Attorney Generals from all 50 states demanded answers.

Last week, the Office of the Comptroller of the Currency, along with the Federal Reserve completed their investigation. The report claims over $535 billion in real estate mortgages may require foreclosure review due to fraudulent loan documents.
The daily news is flooded with reports of people being illegally evicted from their homes. Just last week, a video of a grandmother being dragged away from her home by a SWAT team in Rochester, NY due to improper foreclosure circulated the Internet a lightning speed.

The week prior, “60 Minutes” aired a segment on robo-signers; employees hired by banks to forge signatures on up to 4000 loan documents per day. Why the need for forged documents? Because banks did not have adequate documentation to commence with legal foreclosure.

Perhaps the worst offender involved in Foreclosure Gate is the state of Florida. In the November issue of Rolling Stone magazine, journalist Matt Taibbi wrote about his experience with Florida foreclosure courts. He revealed that a panel of retired judges had been appointed to oversee foreclosures, although none of the judges have a background in mortgage law.

Taibbi alludes to the fact that these judges are known for having favorable relations with banks. He talks about Florida’s ‘rocket docket’ which expedites foreclosures through kangaroo courts that strip homeowners of their right to due process.

Many Americans have been led to believe the foreclosure crisis was caused by ‘deadbeat borrowers’ who defaulted on loans. The truth of the matter is the real estate mayhem stems from corporate greed. There’s also a high level of mortgage fraud that began with banking executives and trickled down to unscrupulous investors trying to ride the wave of big profits.

According to Matt Taibbi, “The American mortgage bubble of the 2000s is perhaps the most complex Ponzi scheme in human history.” Chances are American homeowners will never know the full extent of fraud, but many are beginning to take action against the banking giants.

Numerous foreclosure class action lawsuits are in the works in effort to expose the ForeclosureGate cover-up. In October 2010, New Jersey homeowners filed suit against Bank of America, while Maine homeowners filed suit against GMAC for foreclosure abuses.

Class action lawsuits have also been filed in Maryland, Massachusetts, and Florida targeting JPMorgan Chase, Wells Fargo, HSBC, Bank of America, and Ally Financial, formerly known as GMAC Mortgage.

Another issue surrounding ForeclosureGate is that of ‘foreclosure mills’. One of the most notable is the Law Offices of David J. Stern of Plantation, Florida. Stern has been accused of falsifying mortgage notes in effort to repossess properties as quickly as possible.

MotherJones.com broke the story on Stern, stating that he “rubber stamped mortgage assignments using notary public stamps that had been outdated for months.” Stern resigned after Florida Attorney General, Bill McCollum launched an investigation against his law firm.

Sadly, these illegal activities take place daily. Millions of homeowners have lost their home because banks failed to engage in strategies that could prevent foreclosure. As more damaging information comes to light about ForeclosureGate, perhaps the banks will finally be busted. One thing is certain; banks can no longer be trusted.

We will provide updates as ForeclosureGate unfolds, so take a moment to subscribe to our mailing list to receive instant notification of breaking news.

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