Green Credit & Me
Okay, I’m back from a much needed vacation (more on that later) and there seems to be some amount of chatter going on out there in on-line-loan-modification-land about yours truly, apparently started by some guy named Mo Beddard, or whatever his name is, I really don’t know. Apparently, he’s some sort of mortgage-broker-turned-loan-modification-blogger-type who has, for whatever reason, gotten it into his modicum of grey matter that I’m somehow a bad guy because I liked the guys that operated a company called Green Credit Solutions, or Green Credit Law Center.
You see, the California State Bar Task Force recently shut down Green Credit as they were working hard to finish negotiating on behalf of the 1,500 or so homeowners that remained in the incredibly inefficient, and down right stupefying loan modification negotiation process, brought to all of us by our banks and federal government.
According to the company’s records, since its inception in the latter part of 2007, the company represented approximately 5,000 homeowners seeking loan modifications; 1,000 of which were either declined and never charged, or received refunds for whatever reason. Therefore, at the end of their day, Green Credit successfully completed loan modifications for roughly 2,500 homeowners, which I might point out is more than most of the lenders or servicers participating in President Obama’s Home Affordable Modification Program, known by the wonky acronym, HAMP.
And that makes Green Credit… NOT A LOAN MOD SCAM. Are there any questions about this point? A “loan mod scam” is a company that takes your money and delivers nothing in return. A “loan mod scam” does not save 2,500 homeowners from being thrown out of their homes by obtaining loan modification agreements from banks and servicers.
Moe has also written a stream of utter and entirely unfounded nonsense about me being paid by law firms as a result of referring homeowners to their practices, something that has simply NEVER HAPPENED. I’ve tried to explain this fact to Mo by commenting on his blog several times, but although I don’t know the guy from Adam, he’s certainly shown himself to be someone who prefers not to be bothered by facts. He even implies that I’m some sort of criminal in several of his almost incoherent diatribes. I’m not going to bother responding to stuff like that because it just seems silly to do so, but recently I spoke with an attorney that’s had some dealings with Mo a few years back, along with a few others that have known Mo, and it’s interesting that he and Green Credit do have something in common: They’ve both shut down firms offering to help homeowners obtain loan modifications. Oh well, no matter…
Mo is obviously some sort of sociopath with a following and I guess I’m supposed to care one way or the other when he says something. I don’t, however, so let’s get to Green Credit and end this interminable boredom. I’m only going to do this once, so if anyone cares about this topic… now’s the time to pay attention.
I met the guys at Green Credit last year in the late fall… maybe November of 2008. One of their senior executives contacted my firm, asking that I meet with them in my role as a communications strategist.
The senior managers at Green Credit were very forthcoming in showing me their internal operation and allowed me to interview several of their clients so I could learn more about the whole loan modification conundrum. They ended up retaining my firm for a couple of months to create a few things like an electronic brochure, a newsletter, and other miscellaneous minor stuff like that. My main consultative contribution was to tell Green Credit’s senior managers that they should be extremely understanding of the plight of homeowners, and further that they should go out of their way to let homeowners know that today’s situation is not their fault. It’s the banks that broke the world through fraud and unconscionable leverage, not homeowners. My firm has represented literally hundreds of companies in the U.S. and abroad and by comparison, Green Credit would be considered a tiny client engagement, to the point of being insignificant.
Months later, in the Spring of 2009, Green Credit was audited by the Department of Real Estate and they invited me sit through that audit, which I did. I asked the DRE examiner whether they were doing anything seriously wrong, or whether it was a matter of administrative compliance, and the examiner stated that it was only compliance issues as far as the DRE was concerned.
The State Bar closed them recently, charging that they were “practicing law without a license,” which sounds pretty bad, but I don’t think anyone was actually concerned that they were going to go to court and try any cases, or anything like that.
You see, last October, the Department of Real Estate (DRE) here in California came out with a new “advance fee agreement,” which was to be used by all DRE licensed companies offering to assist homeowners with loan modifications. That new agreement stopped firms regulated by the DRE from charging homeowners up front to work on obtaining a loan modification. Instead these companies would be required to place funds paid by homeowners in some sort of trust account, withdrawing them at certain points along the way. The end result of this new advance fee agreement was that it would seriously impair a company’s operating cash flow.
In my mind, the advance fee agreement was always a manifestly stupid response by a state regulatory agency who clearly hadn’t the foggiest idea what was going on as related to loan modifications, nor any idea what to do about regulating the emerging industry in order to protect consumers from unscrupulous operators. I mean, either you’re a scam or you aren’t. If you are, then you shouldn’t be allowed to steal only some money… you should be closed down. And if you’re not a scam, then the government has no business regulating how a company is allowed to charge for its services.
The DRE could have carefully investigated the situation related to the legitimate operations offering to obtain loan modification agreements from lenders and servicers. They could have, but they didn’t. Instead, they decided that limiting the cash flow of the legitimate companies would somehow help protect consumers. It didn’t, of course. The scammers went right on scamming, and the legitimate operations like Green Credit, consulted with their attorneys and went through all kinds of gyrations in an attempt to find a way to operate in compliance with state law in order to complete the client files they had taken in to-date.
Now, this next point may shock some of you… certainly those that haven’t read any of the 260 articles I’ve written on this and related topics over the last year… but I don’t give a rat’s ass about trivial and contrived compliance issues. I only care about the millions of homeowners who continue to be unconscionably screwed and consistently abused by our nation’s banks and mortgage servicers. If someone did something wrong in the compliance department, but also modified several thousand loans, I’m not all that concerned. I’d rather have my house saved than a firm that’s worried about following all the rules, especially because I’ve watched the mess that our state and federal government has made over the last two years related to loan modification companies.
If the guys in Sacramento or Washington D.C. think that I view ANYTHING they’ve done to-date as being even remotely competent, let me be oh so clear… I DON’T. As far as I’m concerned, our government is functioning just slightly above where I’d expect a troop of trained chimps to be functioning.
As a matter of fact, since we’re on the subject, I’m not really much of a “law-and-order” guy. I don’t mean that I don’t like the television show, I mean that I don’t always believe in following the letter of the law in this country, and I certainly don’t when I find the law to be unfair at best. That’s right… in my view, if you can save my home, I don’t care if you work for the mob… got it?
And, lest you not recall, this country was started by a bunch of guys who were committing treason, and it was made great by a group of people who refused to follow the Supreme Court’s unspeakable madness we refer to as segregation. That’s right… Rosa Parks was out of compliance, was she not?
In fact, truth be told, I’m the kind of guy that would harbor a fugitive if I knew that his or her crime had involved doing whatever was necessary to feed an orphanage… and there was no other way to do it. And as far as lying to banks… well… I encourage it. They deserve nothing from any of us.
I would have thought that anyone and everyone who has read more than one or two of my columns would already know these things about me, but apparently some things need to be said in no uncertain terms, so here goes…
1. I’ve never been paid plugged a nickel having anything to do with a loan modification or referring a homeowner to a lawyer. Never, not even once, not even a nickel. Mo’s a liar. And Mo, in case you can read, I’m easy to find, so grab your bus pass and head on over whenever you muster up the courage to do so. Otherwise, as someone familiar with Mo’s colorful past said to me recently: “Mo should have smoked more of the pot he was dealing when he was busted and maybe then he wouldn’t have been arrested later for beating his wife.”
Was that too subtle?
2. I feel badly that Green Credit was shut down before finishing the work on behalf of the 1,500 homeowners they had left in their pipeline, as it’s referred to in the industry. But if anyone wants to be upset about that, perhaps they should be mad at the State Bar or DRE. Had Curt Melone or Chris Fox, Green Credit’s founders, wanted to take the money and run, they would have done so ages ago. They may not have been in compliance with whatever, but because of them more than 2,500 people didn’t get thrown out of their homes last year. Perhaps the state could have helped them be in compliance instead of making it essentially impossible.
Was that too subtle?
Don’t bother writing in on this subject; it’s highly unlikely that I’ll read the comments. It’s time to move on to more important things… like toasting my bagel.
Mandelman out.
Epilogue…
Okay, look… I don’t really have anything against Mr. Bedard, nor do I actually care whether he wants to attack me by spouting untruths. My readers are certainly more than capable of discerning what’s true and what’s not. I have tens of thousands of readers each month and communicate with hundreds of lawyers across the country almost constantly. If those lawyers were compensating me because I referred a homeowner to them, there’d be a lot more people accusing me of it than Moe Bedard, wouldn’t you think? Besides, if I was being paid for referring homeowners to lawyers, I wouldn’t be broke all the time.
Mandelman Matters isn’t a business plan. Apparently, Moe offers a class on how to make money blogging and I’m thinking about signing up. Mandelman Matters sells no advertising, and makes no money. It’s easily the most expensive hobby I’ve ever had. Read it if you like it, don’t if you don’t. I write it for me, no one else. But, by all means, feel free to check or challenge any of my facts. They are always right. And if they’re not, I sure do want to know and will correct the matter instantly.
(I missed one fact last year… I called Massachusetts a “judicial foreclosure state,” when in fact it’s a non-judicial one. Several readers wrote in within minutes of the article’s posting and I corrected with a notice at the top of the page right away.)
Yeah, Moe’s a jackass, but he’s obviously also a jackass that in his own way wants to help homeowners, and fight unfair treatment by lenders and servicers. He started one of the first loan modification firms in Southern California and he’s made some mistakes… so what. Hell, I’d probably like the guy… again, if he wasn’t such a pant-load.
His partner in the persecution of Green Credit as the second coming of the evil empire is a woman named Krista Railey, who was a blogger at ML-Implode, the site that hosts Mandelman Matters at no cost, by the way. Krista, although perhaps a bit fanatical at times, always seemed to be a good person and there’s no question that she fancies herself the loan modification compliance queen. I haven’t read anywhere near all of what she’s written about me and Green Credit, and she does go a bit around the corner at times, but she’s right that she complained to me that she thought Green Credit was out of compliance on several occasions.
Just like now, I told her I wasn’t the compliance police and I didn’t care as long as they were saving homes for homeowners, which they undoubtedly were throughout their existence. If I’ve assured Krista once, I’ve done so a thousand times: I have or had no business relationship with Green Credit or ML-implode, beyond what I’ve described herein. No money has changed hands having to do with me, and I don’t know anything about anyone else’s dealings.
I can’t tell who is going to be deemed to be “compliant” and who isn’t. The California State Bar obviously has no idea what they’re doing when it comes to lawyers offering loan modifications, nor does the FTC. I’ve written numerous articles that draw out precisely why I say these things, so check them out if interested. If you can’t find them, ‘cause my blog does suck that way, email me and I’ll send you a link. (My email is: mandelman@mac.com)
It should be obvious that our state and federal governments have failed at every single turn in our growing foreclosure crisis. Nothing they’ve done or said has been remotely helpful or honest, and as far as transparent… don’t even get me started. These guys are transparent like Mt. Rushmore is transparent.
There have been several others that have been shut down or are being investigated by one group or another related to loan modifications. I’m going to write about each one that I know something about, and I’m going to challenge the FTC and State Bar’s idiocy whenever needed and appropriate.
I will tell you who’s not going to be investigated as related to loan modification scams: Any of the banks.
IndyMac/One West Bank… the poster child for unreasonable foreclosures, in my view, should be fined a zillion dollars and the bank’s CEO should be wearing an orange vest and picking up trash on the 405 Freeway for what his bank has done to homeowners. And unquestionably, HAMP’s now infamous “trial modifications” are the biggest scam to hit loan modifications since Hope-4-Homeowners managed to modify one mortgage… instead of the many thousands promised.
So, that’s the long and short of it. I’ll keep following the scams, and the not-so-scams. And I’ll keep helping in any way I can, which will soon be a lot more than ever.
Stay tuned… I’m about to make something available to homeowners that can’t be had anywhere else. Something that will help level the playing field between the banks and homeowners. Something that will save homeowners thousands of dollars and months of frustration.
That’s all for now though… Look for it… it’s coming very soon… only days away.
And remember… The church is near, but the road is icy. The tavern is far, but we will walk carefully. Ahhh… it’s good to be back… I missed you guys.
Ergo bibamus.
A “loan mod scam” is a company that takes your money and delivers nothing in return.
Sorry but by your own words...you ADMIT they were a scam..see my MOTHER and MY BROTHER both SIGNED UP for Green Credit..and guess what in the end after paying 3K each in FEES they got....drum roll please...NO..not a loan modification..No not a denial...here is the ANSWER...NOTHING!!...
YEP..no money returned..just a lovely letter from the company they transferred the files to called Guardian saying, "Sorry but according to blah blah..we can't do anymore loan mods!!!"...so Mandelman..THEY ARE A SCAM..and shame on you for not ADMITING IT!
From Krista Railey aka Do_the_Math:
Martin, you've once again shown how unqualified you are to comment on the modification issue. First off, the California Department of Real Estate did not just suddenly start requiring advance fee agreements in October 2008, approval of advance fee agreements for real estate licensees has been required under the California Business and Professions code for quite some time.
The DRE came out with the model advance fee agreement in 2008 as a guideline to assist licenses in understanding the requirements for advance fee agreements under California law and the regulations of the CA DRE Commissioner. There is a reason why advance fee agreements and trust accounts are necessary, and I've tried to explain it to you before to no avail.
In Mandelmanland, it may be perfectly acceptable to collect fees in advance and pay referral fees from the borrower's funds (that are supposed to be held in trust and not disbursed until the fees are earned), but in Fiduciaryland, it is a really big no-no. An advance fee agreement allows for the collection and retention of the fees in trust accounts until the services have been performed- not to pay referral fees, operation costs, or co-mingle with other funds.
Green Credit refused to provide an accounting of trust funds to borrowers or provide refunds long before the CA Bar stepped in. There is a big reason why the CA DRE and CA Bar took action, and frankly, you don't have enough knowledge to even begin to question DRE regulations or enforcement actions. The reality is that Curt et al knew they were violating CA laws, and decided not to comply because it conflicted with their business model.
I, too, toured the facilities, spoke to employees, saw the modification files, asked Curt about the business model, and reviewed correspondence with the DRE regarding their advance fee agreement. But, unlike you, I am actually a licensed Real Estate Broker going on 23 years experience, and understand fiduciary duty and compliance. At the end of the day, I couldn't justify a flagrantly non-compliant business model.
GCS started the business long before HAMP, and the fact that the modification business is difficult isn't an excuse for non-performance or failure to provide refunds or trust fund accounting. As to the number of successful mods, I call BS. I simply don't believe you because I have dealt with too many complaints and discovered first hand that GCS (or Getmycreditgrade.com) would not issue refunds or provide accounting of trust funds.
The company held themselves out as a law firm when they were not a law firm. They used brokers and paid referral fees (or paid leads as Randall called it) as a business model. This is highly illegal under CA laws and DRE Commissioner regulations.
Now, rather than man up to the mistake you made, you attack Moe. Let's get this straight- Moe may be many things, but one thing he does exceptionally is call out people for BS. No doubt you didn't like what he had to say, and no doubt you were subjected to a certain degree of well-deserved criticism. Moe was not shut down by a regulatory agency like GCS, and he did not close and reopen under a new name. He did not practice law without a license nor did he hold himself out as a law firm. From what I can tell, Moe saw the writing on the wall and closed his shop that provided services to attorneys to concentrate on his website that does actually help people for free. He does receive revenues for ads, and his website makes a clear disclosure of such.
Rather than answer Moe's very clearly articulated concerns, you once again resort to character assassination. Please be advised that I have also written a number of posts and comments about you, and have shared information with Moe and Erin Baldwin (who is also not afraid to call a scam a scam).
Even now, you still refuse to man up about your mistake, and your gratuitous article reads more like a personal tantrum than the truth that many of your readers have likely been waiting for.
The specific reason why I have no respect for you is because you KNEW the company closed and reopened after the CA DRE Desist and Refrain article, yet you refused to alert the public. Why would you not have the common courtesy to alert the public? And now you have the cojones to blame regulators for having the gumption to actually enforce laws which GCS and their team of attorneys were well aware.
Shame on you Andelman. And shame on ML Implode. Randall, at least, is telling the truth and Randall had his finger deep in the GCS pie.
Martin, I really don't have anything against you personally. This isn't personal, its about the truth. You readily admit that you aren't qualified to assess companies for compliance, yet you did have a trusted attorney list of which more than 20% had compliance issues or open investigations.
Compliance and business aren't popularity contests or about sitting around talking a good game. In the business world, (especially in the real estate and mortgage industry), we don't have the right or the luxury to make up our own rules or disregard laws we don't agree with.
As someone who was paid commission only for many years and is accustomed to getting results before I am compensated, I disagree that CA DRE advance fee agreements were prohibitive. Real estate and lending have always been about performance before payment. Ask any real estate agent or lender how it is that they are able to function and thrive without being paid in advance.
As you know from our communications, I have not always been so harsh with you and have made many, many attempts to convince you to report the truth. You may call me a fanatic, and that is fine. But a real man would answer my direct concern and debate me on an intellectual level.
As to whether you received money from GCS, you have by your own admission received compensation from GCS. According to your past posts and comments, you did have a business relationship with GCS. You also stated that you did charge, at some point, to screen attorneys. You also do accept donations for the crisis commission.
Whether or not you were paid, you did promote firms- including GCS on your blog. Furthermore, on your blog outside ML Implode, you did have a banner ad for Getmycreditgrade.com (aka GCS). You are also on the ML Implode board for ML's trusted firm list, and ML does charge to be on the list. Of course, by your own admission, you aren't qualified to be on the board and really don't give a flip about compliance or the law.
You talked to Steve at MFI and convinced him to contact Larry Bracco and reconsider his article and placing GCS on the 20 worst mod firm list. It is in his article that you contacted him and spent a great deal of time telling him what a great company GCS was. So please, save me the diatribe.
As to GCS clients getting refunds, you were either smoking what Moe was selling, or are horribly misinformed. Perhaps you are straight out lying through your teeth. Would 40+ complaints and customers mad enough to seek legal action convince you that all was not well in your Fairy Tale land?
Randall Marquis, has already claimed that he can document $100k in fees that were not paid to him and "affiliates". Also, the complaints aren't just for modifications, but for debt settlement as well. I additionally have concerns about GCS' investment arm. What ever happened to the investments with the company closed and files and funds seized? What is the status of Green Credit Investments? Is Green Credit Capital still operating and are all of the investment offerings in good standing?
Now, about the 2500 successfully completed modifications, let us please do some math. To do basic equations, we need some information:
1. During what period did GCS close 2500 modifications? Be specific, Are we talking 2008 to June 2009, or December 2009?
2. How many employees did GCS have during this period? (That directly affiliated modifications).
3. What is the current status, performance-wise, of all of the modifications that were completed?
4. What is the total number of applications that GCS had accepted and collected fees?
5. How many attorneys and RE licensees did they have on staff?
I really do hate to do this to you Martin, but you know how long I have been speaking out on this. I really hope that you will set your ego aside, and really think about what I have said.
Oh damn it, Krista... alright already... since you spent that much time writing your response, I'll go through it and provide a thoughtful response. Not tonight because Grey's Anatomy is on, but over the weekend for sure. And I have no ego whatsoever involved, I assure you.
Martin
Martin she doesn't get you and she doesn't get it. Technically the banks are supposed to follow the guidelines given to them in exchange for billions of taxpayers dollars. Why doesn't she go after them she is very good at getting technical? I think you devote a very small percent of Mandelman Matters to your personal opinion of companies you visited while trying to get your head around this whole crisis. A majority of your writings are calling out the REAL PROBLEM. The biggest SCAM of all is what the government is allowing the banks to do everyday to taxpayers. All this other Scam patrol is a waste of time unless you have that much time.
Cindie, with all due respect, I think you are the one that is not getting my post or comments.
Nowhere have I said that the banking system and lenders are blameless. The mistakes made by lenders aren't the issue nor are the efforts of compliant companies. This is entirely about a regard for compliance, fiduciary duty, and the important of analyzing modification firms based on compliance with laws, and not personal relationships. It is also about honesty and disclosure in the media and possible conflicts of interest.
A lot of people lost money by dealing with the company, and some of them lost their homes. There are a mass of loan modification scams, and its important to protect consumers and industry professionals from them. To pretend there isn't a dark side to the industry is gullible at best.
Your right with all due respect I do not get your post or comments. I think there is a dark side and it is not just in the loan modification business. My personal opinion on the scam side of this is if a grown adult who is a homeowner with the capablilty to sign a contract gets scammed that's their bad don't piss and moan because you made a bad decision learn from it move on. I think scammers should be put in jail for a very long time because there will always be a new scam for them to operate. I think grown decision making adults should not hand over money to a company that they don't know or know personally someone who had successful dealings with. There are so many warnings about loan modification scams everywhere when you call your lender it's on the recording before you talk to someone it was in the advance fee agreements they had to sign in some cases. I really think they have the red flag on that covered. I just felt you were going a little overboard and feel we need that kind of investigative journalism focused on the root of the problem. It would solve everything that is ugly and dark about loan modifications and make you a Super Hero and I mean that sincerely.
Cinde, let me get this straight, you believe its wrong for the banks to rip off borrowers, but when it comes to modifications, it's buyer beware?
Understand that ML Implode, Andelman, and MFI promoted the firm and assured people that the firm did it right.
I never said Andelman didn't write interesting pieces nor have I discounted all of his work. My angst is entirely with him withholding information at a time when disclosing the information might have saved people from being scammed.
And it does matter if people get scammed on loan modifications. Andelman wrote an article about himself and Green Credit, and my comments were germane to the topic. If you don't want to know about the issue and you don't find it material, there are many of his other articles you can read. To suggest that i keep it under my hat because there is so much evil in the world is contrary to the very point that is being discussed.
At least I speak the truth.
It wasn't what you had to say its how much you said about it that bothered me enough to comment. I went to see where this all started and my god so much time and research on Mandelman. He must be more popular than I thought. It seemed like overkill at the time now it just seems like a blogger soap opera. I wish people as talented as yourself would put their talent to a much better and bigger use and help us all out.
My feelings on consumers being scammed is I dont think they can protect theirselves from whatever the banks decide to do regarding their mortgage. The banks are doing whatever they want and lying about doing it and the Government is protecting them. The government gave the banks billions of taxpayer dollars my dollars and the banks are committing FRAUD by not following the guidelines. I just think if more attention was focused on that maybe something might change. That is what would put the scammer out of business. The banks are paying alot of money to protect the consumer from loan modification companies I think it is covered. Was the company in question shut down by the government that is protecting the banks or were they arrested for crime ? I will go check because I do not know. I never felt like Mandelman presented himself like the authority on loan modifications he seems more like a government watchdog and I think he realizes what the homeowner is up against.
Cinde,
If you check my posting history, you will see that I have spoken about a variety of subjects, and don't just pick on bloggers. I was once a member of the ML blog team, and when the GCS issue came up and I did try to warn ML, Andelman, and Steve at MFI. And yes, I have spent an inordinate amount of time investigating the issue as well as communicating my concern.
As to the foreclosure issue, and bailouts, that has been fraud from jump street. You really didn't expect your tax dollars to spent fairly now did you? If you go back to early ML posts, you will find just how outspoken I was with the pre-bailout fraud that was happening openly and notoriously in front of everyone in the industry. But did people in the industry really care if people were buying houses with 100% financing, no income documentation, and sometimes no asset documentation? Did people really care about stated income negative amortization loans? Did anyone care that no income loans drove prices to insane levels that were unsustainable.
Going back to the Helping Families Save Their Homes, bankruptcy cram downs were part of the central plan. I spoke up for bankruptcy cram downs which would have saved homes, and found there was little support in the industry. Even industry professionals sided with the banks on this. Yet it is the only means by which borrowers could force the banks to deal with them.
Even now, many of the modification numbers are ridiculous and trap borrowers in over-encumbered homes which they have no hope of paying off. The reality is that many homeowners would be better off letting the lender have their homes, and purchase again in 3 or more years after prices adjust.
Housing is still inflated, and price correction will take a long, long time based on the actions of the lenders to avoid permanent modifications while suppressing foreclosure inventory. You want to see something scary? Check out FHA data on HUD Neighborhood Watch. You will see that default rates are rising and that the loss mitigation statistics are wanting. Based on the statistics, default severity is increasing as loans languish in limbo.
Did you know HUD allowed FHA approved servicers to outsource functions (which would require FHA approval) to non-approved servicers last year? FHA loans are supposed to have the best loss mitigation options yet the loss mitigation on FHA loans is pitiful.
FHA defaults are rising, and were reduced only slightly last month. Yet if you look at what HUD is doing to reduce defaults, you will find that their only material credit policy change is to implement credit score limits instead of revising debt ratios and making much needed revisions to FHA TOTAL Scorecard. Now here is where it gets fun: setting minimum FICO scores and increasing the down payment requirements for lower score borrowers does not directly reduce home prices. The net impact is a reduction in the volume of ready, willing, and able borrowers.
However, an adjustment to debt-to-income ratios would directly impact prices. Decreasing DTI would have the same impact on affordability as rate increases. This would cause prices to drop unless there was a corresponding decrease to interest rates. The reason why HUD refuses to make policy changes that would impact home prices is because the FHA insurance fund is susceptible to price declines. Price declines increase both defaults and default severity. The fund is also vulnerable to dramatic interest rate changes- both up and down.
The other things that HUD is doing to curtail liability is to increase lender indemnification liability and to deregulate brokers. They are also raising performance standards and increasing their power to sanction lenders. HUD did propose a rule 11/30/09 to terminate broker oversight in exchange for lenders accepting liability for brokers as well as to increase net worth for FHA approved lenders. I believe this is on hold while HUD seeks an increase to indemnification authority. Two bills have been introduced recently for this purpose.
All the while, the economy is choking on inflation and wage pressure caused by outsourcing and off-shoring. Businesses are closing, employment is increasing, and states are going bankrupt. Yet the government says we are recovering.
Senior citizens are not getting cost of living increases, and teachers are being laid off. But the banks got their bailout tax dollars and people that bought overpriced houses using government insured loans with substandard underwriting (via AUS) got their tax credits.
Now let us just suppose that everyone got their loan modification and there were no foreclosures. Would that allow the market to correct? Should some people receive a tax payer subsidy to remain in their home? Now how about if the borrower filed bankruptcy and modified the borrower's loan and reduced to the balance to current market? I'd much rather see the BK judge handle the issue should the bank refuse to work with the borrower. The government never should have been involved.
Needless to say, I'm interested in a variety of issues, and do not solely focus on modification companies. My comments to Andelman are not malicious and are not intended to be character assassination. I responded the way I did because the GCS situation was happening right under my nose for a prolonged period of time. His article did not lay out all of the facts, and at no point did he admit that he might have made a mistake.
In all fairness, Andelman's blog has changed, and he is not prominently promoting trusted firms or writing his "Spotlight On" advertorials. It also appears as if ML's Trusted Firm list has also stalled. I will give Martin credit for also writing more articles with meat. However, it would be a real show of character for Martin to write honestly about the GCS issue, and maybe help improve the industry by writing an article about modification company "Red Flags".
As far as modification companies go, I can see there are some good companies out there. I see the dedication and rising levels of expertise. Professionals that help borrowers shouldn't be stigmatized or categorized with used car salesmen. But for the good companies to survive, the whistle has to be blown on the bad ones, and illegal and questionable business models have to be exposed.
I agree that I have busted Andelman's chops and spent enough of my time on this issue. I can only hope that something good will come out of my effort.
Martin, I wish you well and hope you will think about what I've said to you and why I said it. I apologize for the times I was rude, and for perhaps being a bit over-tenacious.
Thank you for your very informative post. I think the GCS thing bothers you like the Banks getting away fraud bothers me. Why regulatory agencies spend so much time and money investigating scammers when it should be the District Attorney or the Attorney General if it is crime put them jail. Why is it not obivious to all of them if the Banks weren't allowed to operate the way they have been there would be no victims to scam? They are letting the biggest scammer of all get away with it all day long. It is like a big hamster wheel of B.S.. I also think the mortgage brokers got screwed the most. Why were unlicensed loan agents allowed to write loans working for a Corporation? Why are unlicensed persons allowed to write FHA loans but a licensed broker or agent can't unless they jump through hoops and come up with cash? It all just doesnt make sense to me and I am not licensed I have never written loans I went to work for a Mortgage Broker in 2005 handling the servicing of his hard money loans and watched this whole thing go down with no prior real estate or mortgage history. So my personal opinion comes from that perspective. I think good mortgage brokers should become politicians if that is going to be the only way to stop this they cant do much else and you can thank the Banks for that too.
I have been fortunate to have a conversation by phone with Martin. We have never met but I have a different take on all of this. I think that Martin has had good intentions as many people have had good intentions with this mortgage crisis. I am not going to beat up Martin as I do not think it is deserved.
With that being said, no question, the advance fee provisions of the real estate law and commissioners regulations have been around for decades, it is nothing new. For many engaging in advance fees, their not knowing that was negligent. Which brings me to the real point, core competency.
I question the “core competency” of most anyone providing loan modifications assistance for consumers. I have written several articles on this topic and am of the opinion that despite the Obama Administration and media promotion that consumers should contact their lender for assistance and a possible loan modification, for greater than 95% of the consumers, this is the wrong advice. I am of the opinion that all consumers should contact an attorney who has the “core competency” to proper analyze their financial situation and provide sound legal advice to ensure the following:
• Bankruptcy options:
- A second that is completely unsecured due to loss of value may be completely eliminated in a Chapter 13 bankruptcy so why modify it.
- Any deficiency that could pass to a consumer may need to be addressed.
• The consumer may have legal remedies due to errors in the loan documentation that may allow them to rescind their loan or other legal remedies.
• They may be so under water on their loan that no modification is possible or the terms are worthless:
- Loss of job
- Too much debt.
• Sometimes a cash for keys arrangement can be done in which a consumer deeds the house in exchange for leaving it in good condition.
The biggest risk that is commonly overlooked by loan modifiers and persons doing short sales:
• If the consumer did a stated income loan and/or their income was exaggerated in any way, the consumer should not give any information to the lender, and they should immediately seek legal advice.
• Lenders are required to anonymously file a Suspicious Activity Report (SAR) with the Department of Treasury unit, www.fincen.gov, upon becoming aware of any potential mortgage fraud. Such filings are investigated by the FBI.
- Consumers need to be properly advised in the criminal implications of possible mortgage fraud and that the providing of any information to the lender may in fact open that consumer to criminal liability.
- Consumers need to be properly advised in the civil implications of possible mortgage fraud and that the providing of any information to the lender may in fact open that consumer to civil liability.
- The potential for fraud to survive bankruptcy and an exception to the anti-deficiency laws of CCP 580(b) and 580(d). The actual advantages that CCP 580(b) and 580(d) provide for consumers and that walking from their home may have legal benefit depending on their situation.
• Tax issues.
• Impact of legal agreements on loan modifications, short sales and deed in lieu of foreclosure that may actually circumvent consumer protections that are more beneficial than the perceived benefits of loan modifications, short sales and deed in lieu of foreclosure.
That just touches the surface of issues. On those issues I find very few persons have the “core competency” to look at that broad of the legal picture much less persons who actively engage in loan modification without legal training.
So as much as people want to beat up Martin on Green Credit or any long list of other providers, underlying, what Martin is genuinely concerned with is the real people... homeowners. In the quest for all to get answers for a very dire situation of this mortgage crisis, mistakes are made. There is a big difference between making a mistake and committing fraud.
My conclusion from all of this is do not assist anyone in this crisis unless you truly have the core competency to provide the assistance the consumer is requesting. Personally, 99.99% of those doing loan modifications DO NOT have the core competency and 99.99% of the attorneys assisting consumers DO NOT have the core competency. Those are some pretty lousy numbers.
Nice post.
Mahalo
Kindandgentle, you never cease to amaze me with your insight. I agree wholeheartedly with competency levels, and I have brought up the same issues, especially regarding bankruptcy and borrower liability. These are topics I consistently discuss with borrowers in my pro bono work.
I, too, have spoken with Andelman and wholeheartedly agree that he is a quality person. I also think that Steve at MFI is a quality person as I do Aaron. I sat on the data for so long because it was painful for me to bring this out in the open- and still is to this day.
In a perfect world, Andalman would have had his "Aha moment" long ago. I am actually trying to accomplish something here which is to inspire an awakening and awareness. If I thought Martin was a total POS or an idiot, I would not invest the time.
With that said, it is very important for those that are involved in loss mitigation and provide serves to homeowners to consider core competency and the potential liability to the borrower as well as other options that fall outside of negotiated mitigation.
As always, I greatly appreciate your insights and for taking the time to post. I would love the opportunity to discuss a couple of issues on loss mitigation in depth with you. Please fee free to contact me at: kraileyus2@aol.com. The specific question I wish to discuss if whether deficiency Notes on short sales can be discharged through bankruptcy.
Cindie, I agree with you completely, and am glad we have found a common ground. We are much more on the same page than you may realize.
Martin, I do hope that you will consider the things that I have said and understand that my comments were not malicious, but moreover, honest.
Krista-I've been researching the MBS securitization set up as it relates to the modification process and since you obviously have so much technical knowledge I'm wondering if you can clarify something.
I had an accidental back forth on a mortgage news daily blog about 4 months ago with a former capital markets guy in the Voice of Housing. After some preliminary research it seemed apparent to me that there is systemic benefit to MBS pro rata shareholders keeping loans in a perpetual state of modification, and/or to foreclosing.
Also, in the course of the conversation over a blog article about the administration "forcing" the servicers to comply with HAMP requirements, we had an interesting exchange about "safe harbors" provided by the Treasury in the event HAMP conflicts with the terms of an MSA (master servicing agreement) namely that if there was a conflict, Treasury would "safe harbor" the MBS investor from compliance issues.
Although I've had some people say they had copies of these MSAs, I have yet to get a copy; but it appears that this proprietary document holds the magic context of eligiblity requirements for granting a modification?
I guess the short question is: could it be that the loan modification program is just a program designed to help MBS investors and servicers mitigate losses until they have reallocated the loans within a pool to take the foreclosure loss?
At the end of the day, the borrower is still bound by the note and deed of trust signed at the origination of the loan, correct? And if 97% of the trial mods will end in foreclosure, isn't it disengenuous to continue to promote false hope to consumers who will lose their home anyway, since HAMP can't overide the legal agreement created by the MSA with the servicer and MBS investor?
When do we come up with an idea for "life beyond homeownership" and stop the modifying madness??
Frank, you bring up some good points- especially regarding the Safe Harbor provisions afforded by the Treasury. HAMP is not mandatory. Note: MSAs can often be tracked down via SEC filings.
HAMP was never really a program to help borrowers, the main impact is to slow and hide defaults and give the impression of recovery. That is not to say that HAMP won't help many homeowners, but for a large percentage, its only delaying the inevitable.
If the government really wanted to keep borrower's in their homes, bankruptcy reform that would have allowed for cram downs would have been the ticket. BK was initially an important part of the plan, but reform was never passed, and it was set aside.
Most of the mod offers I have seen and heard about are not sustainable. Borrowers, however, have the option of whether or not to continue paying the note and retaining the property or defaulting. Many borrowers are better served by not accepting a modification and moving on when the property is underwater and the borrowers can't work out affordable terms.
Life in no way ends after foreclosure, and it will not stop borrowers from being able to buy again or from finding a better home and lifestyle.
My opinion is that a house is just an object that can be replaced. Although some do grow attached to particular places, most people can adapt to the change. Some may find themselves much happier and will move on to find better homes in the future. If dad is working 6 days a week and mom is always stressed, maybe trying to keep the house isn't the best thing for the family. Especially, when there is an affordable home down the street. Consider that losing a home under these circumstances is not the worst thing that can happen. Cancer or losing a friend or family is so much worse.
With that said, I do not believe that borrowers have the right to destroy homes or defraud note holders. Borrowers should at least try a short sale, and talk to a bankruptcy attorney. I don't advise taking advantage by living free for a year or so. Landlords do shy away from tenants who were abusive in this respect. Also, by unwinding the transaction as responsibly as possible, it will make it easier to buy another home in the future.
I would appreciate a link to that discussion. It sounds like a good one.
Krista,
Thanks for your thoughtful response. I have had no luck getting an SEC filed MSA but will try harder.
I have had a sinking suspicion that HAMP was really designed as a loss mitigation tool for MBS investors to have advance notice of nonperforming loans within their pool to delay foreclosure as long as possible (to the benefit of the junior tranch holders) and then foreclose (to the tax advantage of the senior tranch holders).
I remember the big objection to the "toxic asset" purchase using TARP was based on investors not being able to identify the toxic loans within the multiple derivatives of the original instrument. Presto/whammo you get HAMP and the hapless homeowners telegraph the info for them when they apply for a modification.
Sadly, at the end of the day the borrowers signed a legally binding note and deed of trust as a promise to pay a debt--and hardship modification was not part of that paperwork.
I do wonder something though: Is there any reason to believe that
borrowers should have been given some notice that their debt instrument was being converted into a cash flow instrument when it was initially put into the first MBS pool, and then into each subsequent derivative of the original? I can't help thinking some really smart class action attorney might want to tackle that one.
A letter from one of my clients trying to modify with Indymac indicated they pay out principal and interest to a dozen or more pro rata shareholders. Now in the pre-securitization-slice and dice days, the borrower would have just dealt with the bank/noteholder directly in the event of a hardship modification or forbearance request, right? The bank would risk the loss of the entire loan.
But by converting the debt instrument into multiple cash flow derivatives, the loan becomes much harder to pay off--because each MBS investor bought his slice of the loan betting on guaranteed payment of principal and interest for a set time period, with the risk of loss on the original investment "spread" out in a multi-billion $ pool of loans. Now you are no longer dealing with just the original loan balance, but you have to quantify the "future value" of the loss of both the original loan amount, and the cash flow to each investor investor in the event to of a hardship modification or forbearance request?
Anyway--you are the first person after posting nearly 250 times the past year to affirm that "HAMP was never really a program to help borrowers, the main impact is to slow and hide defaults and give the impression of recovery".
I'm working with local nonprofits on the "life after foreclosure" concept and would love to discuss this more. I'll be in touch.
frankc:
Nice post. I understand what you mean on they have changed the typical "arms length" transaction to a much more complicated one. Spending a lot of time in federal court on mortgage matters, I do not think a judge would be persuaded by that. It is not a prohibited act and a lender is free to securitize its mortgage. However, I do share your view of the impact.
Glad to see that you are spending more time on on post foreclosure rehabilitation as I personally think that is the best tool in this fight. Let the borrowers default and utilize the property to the best advantage of the consumer during the default stage setting up for taking the hit for the loss, banking the money and rehabilitating them as a homeowner 2-5 years down the road when they can buy again (2 yrs. on FHA, 5 with the GSE's). Nothing wrong with renting for a couple of years and prices have all of the appearance that they will be very good at those times. Banks created these complicated situations, let them deal with it, they need us to recover. Homowners are the masses, they are the minority.
Great post K & G. I do agree that borrowers should think long in hard by enabling the banks by continuing to support the mortgages.
If a borrower is upside down and the mortgage can't be negotiated in a win-win situation, the borrower can make sure they ultimately "win" by unwinding the transaction and buying again in a few years when prices are reasonable.
The antithesis is not to play.
While I agree with K & G about the defense and the points made, but I will add from an ethical perspective, that many borrowers may chose a particular lender is because they might trust that company to help in the event that they have a future hardship.
I don't engage in loss mitigation as a business because I don't see how, as a fiduciary, I could entice anyone to pay for services that:
1) They can do for themselves (and I have helped enough borrowers request a trial mod or forbearance to know they can do this themselves).
2) Ultimately, the modification or other solutions are not in the borrower's best interest.
3) There is absolutely no way to guaranty results or satisfaction with services.
Often times, the borrowers need the assistance of an attorney to legally challenge a foreclosure action or enforce a bona fide legal defense. As a broker, I am not qualified or licensed to do this.
Borrowers always must speak to an attorney regarding post foreclosure liability and how to make sure the borrower does not have liability down the road. Borrowers also have to discuss issues such as lien stripping subordinate liens. Again, requires a qualified attorney.
Borrowers must contact a tax professional to determine potential tax liability for debt forgiveness and capital gains. I am not licensed to do this either.
Borrowers should always contact a bona fide HUD approved non profit consumer credit counseling agency and discuss ways that they can legitimately restructure their debts and finances. This should not be confused with debt settlement companies which should be avoided altogether.
If a bank won't offer a win-win modification, the person to call is an attorney to discuss strategic default- not a modification company or an attorney who merely hires licensees or non attorneys to handle the process and negotiation.
Of course, me and "do_the_math" are on the same page. However, I think that the first mistake made is assuming there are ethics involved. These are "arms length" transactions and lenders will merely try to stay "compliant" with the law and no more. Consumers need to get it in their head that lenders, even with all of these promotions to talk to your lender first, are only concerned with themselves and the information they are collecting on the consumer is strictly to mitigate their impact, not the consumers.
I cannot stress enough, if you have done a stated income transaction, DO NOT give any financial information to the lender for a loan modification or short sale until you have seen an attorney to avoid the possibility of mortgage fraud which could lead to civil and criminal implications, if the income is overstated or untruthful in any way.
We are absolutely on the same page in regard to stated income borrowers not giving out their income information or signing a 4506 without talking to an attorney. A borrower who knows that there is a difference between the income reported on the loan application and the actual attorney should NEVER deal with a modification company and speak directly to an attorney. I posted something to this effect on Tickerforum today as well as numerous times.
I agree with your point about securitization not being an ethics violation. Perhaps it time for yet another disclosure that warns borrowers that their loan may be securitized or sold in such a manner as to impede loss mitigation in the event of hardship.
Would like to hear your thoughts on strategic default and how borrowers can unwind their loans, without being abusive, so they can buy another home in a few years. I am not advocating just walking away, and never advocate abandoning property. What I am talking about here is how borrowers can best protect themselves, their assets, and their credit.