Prototype of Standardized Monthly Mortgage Statement is Released, by Jim Puzzanghera, Los Angeles Times

The Consumer Financial Protection Bureau‘s proposed statement is designed to provide clear information about the loan on a single page and wouldn’t change each time your loan is sold to a new servicer.

 

 

Reporting from Washington—

Your monthly mortgage bill soon could get easier to understand, and it wouldn’t change each time your loan is sold to a new servicer.

The Consumer Financial Protection Bureau has developed a proposed standardized mortgage servicer statement designed to provide clear information about the loan on a single page.

The prototype released Monday included a breakdown of how much of the monthly payment went to principal, interest and escrow. The form also detailed the outstanding principal, maturity date, prepayment penalty and, for adjustable-rate mortgages, the time when the interest rate could change.

“This information will help consumers stay on top of their mortgage costs and hold their mortgage servicers accountable for fixing errors that crop up,” said Richard Cordray, the agency’s director. “Given the widespread mortgage servicing problems we’ve seen over the past few years, consumers need clear disclosures they can count on.”

Although many servicers already provide such information on their monthly statements, there are no industrywide standards, the agency said.

Such standards are a good idea, and initial reaction from servicers to the agency’s proposal was positive, said Rod J. Alba, senior counsel in the mortgage markets division at the American Bankers Assn.

The agency posted a working draft of the standardized statement on its website,http://www.consumerfinance.gov to solicit input from the public and industry before a version of the form formally is proposed this summer.

Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, said simplified mortgage statements would help resolve the broad mortgage servicing problems that were at the heart of last week’s federal and state settlement with five of the nation’s largest banks over botched foreclosure paperwork.

The consumer agency is required under the 2010 financial reform law to put new mortgage servicing rules in place to help consumers, Cordray said. The law has specific requirements for mortgage statements, including a phone number and email address for the customer to get information about the loan, as well as information about housing counselors.

The new mortgage statement is the latest consumer financial paperwork the agency is trying to simplify.

In May, it released two prototypes for shorter, easier-to-understand disclosure forms that lenders would have to give home buyers before they close on a mortgage. The agency has been receiving comments on the forms and tested them last month in Philadelphia.

And in December, the agency proposed a simplified credit card agreement form to make it easier to understand interest rate terms and comparison shop.

The agency also is developing a new disclosure rule for hybrid adjustable-rate mortgages that would require consumers to be notified months before their first interest rate increase, as well as to be provided with a good-faith estimate of the new monthly payment.

jim.puzzanghera@latimes.com

Boiler Rooms, Foreclosure Mills: The Story of America’s Mortgage Industry, by Blacklistednews.com

The news about the nation’s foreclosure scandal has been coming fast and furious, driven by tales of backdated documentsfalse affidavits and “rocket dockets” that push families into the street. A former employee with one of the nation’s largest lenderstestifies that he signed off on 400 foreclosure documents a day without reading them or verifying the information in them was correct.

Ex-employees of a law firm that serves as a “foreclosure mill” for major lenders describe a workplace where speed — not accuracy or justice — trumps all. “Somebody would get a 76-day foreclosure,” one recalled, “and then someone else would say, ‘Oh, I can beat that!’”

Shocking stuff. But surprising? Not for anyone who’s been tracking the recent history of the mortgage machine. Just about every corner of the America’s mortgage industry has been blemished by significant levels of fraud over the past decade.

On the front end of the process, for example, many mortgage pros used “boiler room” salesmanship to peddle loans to borrowers who didn’t understand what they were getting and couldn’t afford their loans in the long run. To make these deals go through, some workers forged borrowers’ signatures on key documents, pressured real estate appraisers to inflate home values, and created fake W-2 tax forms that exaggerated loan applicants’ earnings.

At Ameriquest Mortgage, one of the companies I focus on in my new book about the subprime mortgage debacle, The Monster, this sort of cut-and-paste document production was so common employees joked that the work was being done in “The Lab” or the “Art Department.”

Here’s a snippet from the book, from a passage about Stephen Kuhn, a young Ameriquest salesman who eventually became distraught about the things he had to do to earn his living:

The pressure to produce began to get to Kuhn. After he became a branch manager, he saw a bigger picture of how Ameriquest was treating its customers. Many nights, he had to drink a twelve-pack of beer to get to sleep. He asked for a demotion. He wanted to go back to being a salesman.

Even that didn’t work for him. He felt trapped. To hang on to his job, he had to put borrowers in deals that sank them deeper into ruin. One of his customers was a veterinarian who was having tax problems. The IRS was threatening to close down his business. Kuhn arranged a loan for the veterinarian that “had no benefit whatsoever. It was a terrible loan.” Another customer was a small businessman, the owner of a Chinese restaurant. Kuhn put the man into a stated-income loan that raised his payments by $200 a month, even though he was struggling to keep up on his existing mortgage. “He was desperate,” Kuhn said. “So I was told to take advantage of him.” Kuhn said a supervisor ordered him to cut and paste documents to make the loan go through, telling him, “It’s a three-hundred-thousand-dollar loan. Get it done.” The borrower was facing foreclosure on his existing mortgage, so Kuhn forged his mortgage history so it looked like he’d never been late on his mortgage.

By the summer of 2003 Kuhn couldn’t take it anymore. He told his manager he was having trouble dealing with things, because he thought Ameriquest’s rates, fees, and business ethics were terrible. Soon after, on a day when Kuhn was out sick, his manager left him a cell phone message telling him it would be in everyone’s best interest if Kuhn and Ameriquest parted ways. Kuhn called back and asked why he was being fired. The only answer the manager would give him, Kuhn said, was, “I think you know.”

Stephen Kuhn was far from alone, at Ameriquest and other lenders around the country.

As the Center for Public Integrity documented in its 2009 report, Economic Meltdown: The Subprime 25, many of the largest financial institutions in America were key players in the subprime market — and many of them had to make payments to settle claims of widespread lending abuses.

Little was done to stop the bad practices when they were happening. Former Federal Reserve Chairman Alan Greenspan would later explain to CBS’ 60 Minutes: “While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late. I didn’t really get it until very late in 2005 and 2006.” The Fed took no action even when it became aware of the problems, he said, because “it’s very difficult for banking regulators to deal with that.”

With federal officials pushing a soft approach to policing the mortgage market, it was left to the states to do what they could to try and rein in the worst practices. A coalition of state authorities dug into Ameriquest’s tactics, eventually forcing the company to agree to a $325 million loan-fraud settlement.

Now that a fresh scandal has emerged in the mortgage industry, the states are once again taking the lead in confronting the problem. At least seven states are investigating questionable foreclosures.

On Wednesday, Ohio Attorney General Richard Cordray sued Ally Financial Inc. and its GMAC Mortgage division, claiming that workers at the company had signed and filed false court documents in an effort to “increase its profits at the expense Ohio consumers and Ohio’s system of justice.” Cordray called the alleged misconduct the “tip of an iceberg of industrywide abuse of the foreclosure process.”

Now the question becomes: Will federal officials intervene — and, if so, how forcefully? Key members of Congress are pushing U.S. Attorney General Eric Holder and current Fed Chair Ben Bernanke to investigate.

A spokesman for House Republican Leader John Boehner of Ohio says “it is imperative that we get all of the facts about this situation, and quickly.”

Congress and other powers in Washington failed to get the facts and act the first time around — when lenders were engaged in a frenzy of predatory lending. The foreclosure scandal is a second chance for lawmakers and bureaucrats to prove that they can ferret out the truth and take action.