NEW YORK – July 28, 2011 – Ocwen Financial Corp., a servicer of residential mortgages, launched a new loan modification program to reduce the principal on a mortgage for delinquent borrowers, but the borrowers must agree to let loan investors share in future appreciation of the home’s value when the market recovers.
Through the Shared Appreciation Modification program (SAMs), Ocwen will write down the principal of the loan to 95 percent of the home’s current market value. The amount written down will then be forgiven in one-third increments over a three-year timespan, as long as the homeowner remains current on the modified mortgage.
Then, “when the house is later sold or refinanced, the borrower must share 25 percent of the appreciation with the investors that own the loan; borrowers keep 75 percent of the gain,” the company notes.
Loan modifications will be available only to homeowners in negative equity.
“Like all modifications, SAMs help homeowners avoid foreclosure. But they also restore equity,” says Ocwen CEO Ronald Faris in a public statement about the program. “That’s a significant benefit to the customer and, we believe, the economy and housing market. Psychologically, it’s important too. Our analytics tell us that an underwater mortgage is one-and-a-half to two-times more likely to default than one with at least some positive equity.”
The program, which is expected to be rolled out into 33 states, is one of the first principal reduction programs started by a private company.
Source: “Ocwen Unveils New Principal Reduction Program,” HousingWire (July 26, 2011) and “Ocwen Offering Mortgage Modifications That Restore Equity for Underwater Borrowers,” GlobeNewswire (July 26, 2011)
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Thursday, July 28, 2011
Monday, July 11, 2011
Sarasota - Manatee Foreclosure 'rocket docket' grounded
By TODD RUGER
Published: Sunday, July 10, 2011 at 5:05 p.m.
The foreclosure "rocket docket" came to Sarasota and Manatee counties two years ago in a flurry of controversy, with hundreds of people standing to lose their home in hearings scheduled to take less than two minutes.
Last month, those expedited court proceedings ended without any hubbub. State funding ran out to pay retired judges and other court workers needed to handle up to 250 foreclosure cases a day.
The loss leaves Sarasota's court system to choke on more than 15,000 pending foreclosures — so many cases that properties can languish in the court system for years before a foreclosure auction.
The end of expedited hearings mean that banks trying to seize homes quickly could see more delays. That may be good news for homeowners, who might have more time before they are forced to move out of their homes.
But experts say it is bad news for the housing recovery because the faster foreclosed properties can be resold to new owners, the faster housing values can recover.
And it will hurt those belonging to homeowner's associations, who have to make up the excess costs when nobody is paying assessments on a property caught in the legal system.
Judges in Sarasota and Manatee counties will still look at ways to whittle down the backlog, but only when they have extra time.
The rocket docket, Circuit Judge Lee Haworth said, will now be more like "a Vespa docket."
The effort to expedite foreclosures began as a way to to handle the huge increase in cases and to stop lenders from purposefully delaying their own cases.
Many lenders allowed cases to founder because when they legally retake the properties they become responsible for paying taxes, insurance and maintenance costs until homes are resold.
When attorneys representing banks do not push cases through the court system, it can leave houses sitting empty for years, putting downward pressure on home values in that neighborhood.
Without the rocket docket, which had court officials set hearings for older cases, judges will have to rely on attorneys for lenders to push the cases through to a foreclosure sale by scheduling hearings. But 30 to 40 percent of those lenders have instructed their attorneys not to hurry the cases for financial reasons, Haworth said.
"So if a party or an attorney has some reason not to move the case, then we don't have any way to move the cases forward on our own," said Haworth, the 12th Judicial Circuit's administrative judge over foreclosures.
Gulfcoast Legal Services in Sarasota, which represents those who cannot afford attorneys, went to most rocket docket sessions to catch homeowners who needed help but did not know the legal system.
"I think it's probably good news for the homeowners who are trying to work something out with their lender," Gulfcoast Managing Attorney Elizabeth Boyle said. "We may see lenders make more reasonable offers as the crisis lingers on."
Rocket dockets used around the state have been criticized in some cases for rushing foreclosures without giving homeowners a chance to fight the seizure of their home. Defense attorneys who saw repeated mistakes in paperwork from lenders contend the speed of the hearings could mean some homeowners slipped through the cracks or lost property they should have kept.
While some lenders are content with letting the cases sit, homeowners who pay assessments and their homeowner associations are frustrated because they wind up losing money while no one pays the fees on a foreclosed house.
Once a bank claims ownership, it can sell the house, or begin paying the fees itself.
"The association has to wait for the banks to get hearing time, which may be a couple months down the road," said Sarasota attorney Michelle A. Stellaci Rowe, who represents homeowner associations in foreclosures.
"As each month goes by, assessments are lost. It can add to thousands and thousands of dollars for the association," Stellaci Rowe said. "The people who are paying have to pay more, they have to carry the burden for those who don't pay."
As of this week, the soonest hearing time available for some types of foreclosure hearings was four months out, Haworth said.
At the last rocket docket hearing in Sarasota County, Senior Judge Harry Rapkin dismissed about 60 foreclosure cases caught up in legal issues because they were handled by a foreclosure firm that abandoned the cases.
New firms were not yet ready to handle the cases, which dated back to 2007. Now those cases will have to start over at the beginning of the foreclosure process.
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