Lenders

As financial regulators and Congress probe more deeply into the delinquencies and foreclosures roiling the subprime home loan market, one key contributing factor is receiving increased attention: the lack of mandatory escrow accounts. According to some industry estimates, a majority of subprime mortgages closed during the housing boom years carried no escrows for property taxes and hazard insurance. That is in stark contrast to the prime mortgage market for consumers with good credit, where mandatory escrow accounts are routine.

A federal class action suit is focusing fresh attention on an issue that's important to homeowners nationwide: Who - or what - tells you how much your property is worth? Is it a live human being? A digitized substitute? Does it really matter? A group of professional appraisers is suing a major mortgage technology firm, charging that it systematically takes their appraisal report information, warehouses it, and then markets it to lenders and developers of electronic substitutes for traditional appraisals.

WASHINGTON -- With millions of Americans facing the prospect of sharply rising mortgage payments, borrowers and their hometowns could face an upsurge in home foreclosures, a top Federal Reserve official told Congress yesterday. "The impact of mortgage delinquency and foreclosure on consumers and communities is one of great concern," said Sandra Braunstein, director of the Fed's Division of Consumer and Community Affairs. "We have much work ahead of us, as there is no one sure and easy fix."

When you apply for a mortgage and get a barrage of irritating and confusing phone calls from competing lenders before noon the next day, can you turn to the government for help? The Federal Trade Commission issued its long-awaited answer to that question this month, and it's already attracting criticism. The agency, which has regulatory oversight powers concerning consumer credit, says it lacks the legal authority to crack down on unwanted "trigger list" phone solicitations to consumers who've applied for mortgages within the preceding 12 to 24 hours.

In the halls and ballroom of Morgan State University's student center, more than a dozen mortgage lenders pressed applications and business cards into the hands of prospective homebuyers, promoting no-money-down loans and various financial incentives. In meeting rooms nearby, counselors warned the same prospective homeowners about the perils of predatory lenders, the importance of fiscal discipline and cautioned that some people may not be ready for the American dream. These are complementary - not mixed - messages, say organizers of the Delta Sigma Theta Homeownership Initiative, which brought several hundred first-time house-hunters to the historically black college yesterday to meet lenders and be schooled in fiscal literacy.

Kickbacks, conflicts of interest, multimillion-dollar out-of-court settlements, high-profile resignations and suspensions under a veil of shame - if only we could throw in an illicit affair. It's hard to believe we are talking about something as unsexy as student loans. Ninety percent of students who receive loans choose their lender based on their school's recommendation. In an age where students leave college with an average of more than $19,000 in loan debt, students should be able to count on their schools for impartial and helpful advice as they navigate a complicated and stressful process.

John Woodard says the notice from his new mortgage company looked like typical junk mail. But it wasn't. It was a letter telling him that his recently refinanced loan had been sold to another lender. By the time the Rosedale homeowner realized he had been paying the wrong lender, he owed thousands of dollars in late fees and he soon racked up more in lawyer bills from fending off foreclosure. "My mortgage company never notified me to send the checks somewhere else," he said. "I did get something in the mail from the new company, but it looked like an advertisement so I thought it was junk."

The idea of politicians tinkering with billions of dollars in the student loan program can make anyone a bit wary. But this time they got it right, with students coming out the winner in legislation passed recently by Congress and to be signed by the president. The law will cut nearly $21 billion in government subsidies to lenders over the next five years. Almost all the money will be plowed back into grants for the poorest students, lower interest rates and loan forgiveness for those in careers that society values but nevertheless underpays.

As homeowners find lenders balking at requests to change the way property taxes are paid -- and to refund excess escrow funds -- state officials and Realtors yesterday said consumers have the law on their side.The General Assembly passed legislation that changes the method of paying property taxes from annually to semiannually, beginning July 1, 2000. In addition to lowering closing costs, the legislation has the side benefit of giving those with escrow accounts a one-time refund that would average $700 per homeowner, according to the Maryland Department of Taxation and Assessment.

Family and friends are the biggest influences in the decision about financing the purchase of a home, a recent survey by the Mortgage Bankers Association of America reports.The survey, conducted to help lenders understand borrower influence and behavior, found previous home-buying experience was the second-largest influence. Of those responding, 60 percent said they were first-time homebuyers.Of respondents who said they were influenced by advertising, 61 percent said print media was most effective, compared with 12 percent who said mailings worked best.

With the number of home foreclosures on the rise again in Maryland, Gov. Martin O'Malley's plan to require mediation before banks can begin proceedings to seize the houses of delinquent borrowers is a good idea, but it doesn't go far enough to help struggling property owners stay in their homes. What's needed are more resources to ensure adequate legal representation for troubled homeowners who have been the victims of predatory lenders. Unscrupulous brokers and agents pocketed millions in fees during the housing bubble by targeting unsuspecting borrowers whom they knew could never repay the loans.

By now you probably all know what a short sale is: a deal in which the lender allows a home to change hands for less than the balance on the mortgage, forgiving most or all of the difference. For months, real estate agents have said there are far more would-be short sales than closed deals. The lenders reject the offers, or they take so long to consider that buyers give up and move on. Thus I was curious to hear what Olivia Surge, who negotiates short sales on behalf of homeowners at the Law Offices of G. Russell Donaldson in Crofton, is seeing now. Compared with 2007, when nine months could go by before lenders would even look at an offer, "things have gotten much, much better," she said.

If you're applying for a loan to purchase a primary or secondary home, or planning to refinance, you should be aware of a little-publicized new set of federal consumer-protection rules that took effect July 30. Among key changes, the new Federal Reserve guidelines require lenders to provide you initial disclosures of your mortgage costs within three business days of your loan application. If you don't get them, you can pull the plug. The rule also prohibits lenders from collecting any fees - except a reasonable charge for checking your credit - until you've been given the loan-cost disclosures.

Tim McCarthy remembers what usually happened in the old days - just a few years ago - when a property appraisal would land on a mortgage lender's desk. "The lenders would get a two-page appraisal, they'd look at the bottom of the second page [at the estimated property value], and just say, 'Next!' " said McCarthy, who owns an appraisal company in Tinley Park, a Chicago suburb. That was when property values seemed to be going nowhere but up, and many lenders giddily presumed that the appraised worth of the collateral for the loan - the house - was a safe bet. Nowadays, chastened by the cascade of bum loans that came back to haunt them, most lenders are casting a wary eye to just about everything in an appraisal, according to McCarthy and others in the field.

Salary: $50,000 Age: 57 Years on the job: 1 How she got started: : Patricia Hull began as a housing counselor more than 20 years ago while working as a real estate agent. She found herself helping primarily low- and middle-income clients find homes. This included researching programs that helped qualify them for mortgage loans, which piqued her interest in housing counseling. In 1987 she decided to take a job with a nonprofit agency that offered housing assistance to low-income buyers.

For many Americans, the mortgage industry's feeble response to the plight of homeowners facing foreclosure has been infuriating. Mortgage servicers and lenders are often tough to get on the phone. Attempts to refinance a loan or extend mortgage payments to avert foreclosure are as discouraging. As a result, foreclosures continue to mount, families are forced to leave their homes and communities are left with an increasing toll of vacant houses. In Baltimore, the impact of the housing crisis has been felt in neighborhoods as diverse as Reservoir Hill and Belair-Edison.

The Baltimore City Council is considering a plan to slow the foreclosure process in hopes of stemming the tide of evictions, which city housing activists have tried to combat recently with protests and, in at least one case, allegedly illegal measures. As the Obama administration moves on a national plan to tackle the mortgage crisis, City Council members Mary Pat Clarke and Bill Henry, both Democrats, have introduced a plan to extend the time between foreclosure and eviction from 14 days to 365 days to encourage lenders to negotiate with owners who are falling behind on loan payments.

As we get ready to say goodbye to 2008, it's worth looking back at the year that was for home buyers, sellers and owners. Frankly, I wouldn't be surprised if this year goes down as one of the worst ever for housing since the Great Depression. Housing values fell by double-digits in many metropolitan areas. Housing starts virtually stopped. Inventories of new and existing homes grew dramatically. Mortgage interest rates remained relatively high, even as the short-term Federal Funds rate plunged to nearly zero by the end of December.

Peer-to-peer lending promised to be an alternative to traditional banks and credit cards for small borrowers. But this fledgling industry, which has been operating freely on the Internet, recently has come into regulators' sights. Regulators argue that some lending sites are essentially selling investments that need to be registered. This has sidelined the largest peer-to-peer lending site, Prosper.com. And the timing couldn't be worse for consumers with so many banks tightening their standards and making it difficult for even some good credit risks to get a loan.

WASHINGTON - A federal grand jury in Los Angeles has begun investigating three of the nation's largest subprime mortgage lenders in the clearest sign yet that prosecutors are investigating whether fraud and other crimes contributed to the mortgage debacle. Grand jury subpoenas have been issued in recent weeks and months to Countrywide Financial Corp., New Century Financial Corp. and IndyMac Federal Bank, seeking a wide range of information, according to sources with direct knowledge of the subpoenas.