Wednesday, March 9, 2011


The bankruptcy court denying the bankruptcy trustees' request to avoid debtors' mortgages due to allegedly defective acknowledgments.

City in Bankruptcy

While the banking industry has recovered from the recent economic downturn, Vallejo, Calif., is still in bankruptcy since filing for chapter 9 protection in May 2008, the New York Times reported today on some aspects of city life under bankruptcy. The police force has shrunk from 153 officers to 92 and calls for any but the most serious crimes go unanswered. Residents who complain about prostitutes or vandals are told to fill out a form. Three of the city's firehouses have also been closed to try and shore up the city's finances. Nationally, there is growing concern about the state of municipal finance. The U.S. has nearly $3 trillion in municipal bonds outstanding. Though some are backed by specific projects like airports and toll roads, most are general-obligation bonds; local taxes are used to pay the interest on those bonds before other expenses. Detroit is in financial trouble because of its shrinking population, as are any number of towns in the former steel region of Western Pennsylvania. Many former industrial cities are burdened with governments that are out of proportion to their shrunken tax bases. Local budgets were stretched even before the recession; now, diminished tax receipts coupled with public employee pension liabilities have threatened their ability to balance budgets.

SVC-2011-02: Updates to the Mandatory Retained Attorney Network (03/01/11)

In the Servicing Guide, Part VIII, Section 104.01: Fannie Mae-Retained Attorneys, Fannie Mae outlines its mandatory network of retained attorneys to handle all foreclosure and bankruptcy matters (as well as post-foreclosure legal proceedings and activities) relating to conventional or government mortgages held in its portfolio or that are part of an MBS pool that has the special servicing option or a shared-risk MBS pool for which Fannie Mae markets the acquired property. The network initially included 31 jurisdictions with the expectation that additional jurisdictions would be added over time.

New Jurisdictions
Fannie Mae is adding the following fourteen jurisdictions (the new jurisdictions) to the mandatory retained attorney network:

New Mexico
District of Columbia

Fannie Mae has posted on an updated list of attorneys in the new jurisdictions who are eligible to receive foreclosure and bankruptcy referrals relating to Fannie Mae mortgage loans (the Retained Attorney List). Attorneys may be added or removed from the Retained Attorney List from time to time. Servicers are responsible for periodically checking the Retained Attorney List to ensure they are using the most current list.

Referral Requirements and Effective Date
The effective date for mandatory use of the attorneys on the Retained Attorney List in the new jurisdictions is May 1, 2011; however, servicers are encouraged to use these attorneys as soon as possible. On and after the effective date, servicers are required to direct all new Fannie Mae foreclosure and bankruptcy referrals in the new jurisdictions to a retained attorney.

Foreclosure and bankruptcy referrals made prior to the effective date in the new jurisdictions may remain with the original attorneys (or trustees) to whom they were referred. In addition, if a foreclosure referral is made before the effective date to an attorney that is not on the Retained Attorney List, that attorney may handle any subsequent bankruptcy that arises before completion of the foreclosure or reinstatement of the loan if the attorney has the necessary qualifications.

In all cases, the servicer must advise the attorney to whom the referral is made that Fannie Mae owns or securitizes the mortgage loan being referred. The Fannie Mae retained attorney to whom a foreclosure referral is made will handle any subsequent bankruptcy case, and the Fannie Mae retained attorney to whom a bankruptcy referral is made will handle any foreclosure following resolution of the bankruptcy case, unless Fannie Mae approves a deviation from this policy. However, if a foreclosure is being processed by a Fannie Mae retained attorney and a bankruptcy that affects the property is filed in another jurisdiction, the servicer must refer the bankruptcy to an attorney on the Retained Attorney List for the jurisdiction in which the bankruptcy is filed. After the bankruptcy case is resolved, if foreclosure is still necessary, the servicer must refer the matter back to the attorney on the Retained Attorney List that originally handled the foreclosure proceeding.

Special Guidelines for Nevada
The guidance set forth in the Servicing Guide, Part VIII, Section 104.03: Servicer-Retained Attorneys/Trustees and Special Rules for Nevada, with regard to obtaining evidence of title and managing Nevada foreclosures are hereby revoked. Servicers are required to refer foreclosure and bankruptcy referrals to the Nevada attorneys identified on the Retained Attorney List after the effective date. Servicers are not authorized after the effective date to refer foreclosure matters to trustee companies in Nevada.

Special Guidelines for Puerto Rico
Effective immediately, for new foreclosure and bankruptcy referrals in Puerto Rico, servicers may use either the Fannie Mae retained attorney for Puerto Rico or qualified attorneys of their choice in accordance with Part VIII, Section 104: Referral to Foreclosure Attorney/Trustee of the Servicing Guide. Servicers who choose not to use the Fannie Mae retained attorney for Puerto Rico will be required to reimburse Fannie Mae for any losses that may occur because the attorney they selected failed to meet his or her responsibilities diligently.

Jurisdictions Not on the Retained Attorney List
For jurisdictions that are not included on the Retained Attorney List, Fannie Mae will continue to rely upon servicers to select and retain qualified attorneys of their choice to handle Fannie Mae foreclosure and bankruptcy matters in accordance with the Servicing Guide requirements.

Servicer Responsibility for Managing and Monitoring Retained Attorneys
Servicers are reminded that they are responsible for managing and monitoring all aspects of the performance of any retained attorney to whom they make a referral, including loss mitigation activities, cure rates, and timeline performance. The servicer will not be required to reimburse Fannie Mae for any losses incurred because the retained attorney failed to properly meet his or her responsibilities, nor will the servicer be subject to the imposition of compensatory fees related to deficiencies in the performance of the retained attorney -- as long as the losses or deficiencies are unrelated to any failure by the servicer to monitor or manage the performance of the retained attorney or failure of the servicer to provide, on a timely basis, required or requested documents, information, or signatures to the retained attorney. If compensatory fees are assessed against the servicer, the servicer may not seek or receive payment or reimbursement of the compensatory fees from the retained attorney.


Servicers should contact their Servicing Consultant, Portfolio Manager, or Fannie Mae’s National Servicing Organization’s Servicer Support Center at 1-888-FANNIE5 (1-888-326-6435) if they have any questions about this Announcement.

Gwen Muse-Evans

Vice President

Chief Risk Officer for Credit Portfolio Management

Committee Votes to Kill Two Housing Programs, Delays Decision on Two

The House Financial Services Committee voted Thursday to scrap two foreclosure relief programs - one that gives underwater homeowners a federal refinancing option through FHA's Short Refi Program, and a second that provides temporary assistance to unemployed homeowners through the Emergency Mortgage Relief Fund. The two bills now move to the full House for debate. The committee was also planning to consider two separate bills to end the Home Affordable Modification Program (HAMP) and HUD's Neighborhood Stabilization Program, but votes on these have been pushed to next week.

related news

Unemployment Rate Drops Below 9%

The national unemployment rate fell to 8.9 percent in February, as employers added 192,000 jobs to their payrolls, according to figures just released by the U.S. Department of Labor. The rate is down from 9.0 percent in January and 9.4 percent as recently as December.

Without Loan Giants, 30-Year Mortgage May Fade Away

Housing experts say that if the federal government shuts down housing finance giants Fannie Mae and Freddie Mac, the 30-year fixed-rate mortgage loan, the steady favorite of American borrowers since the 1950s, could become a luxury product, the New York Times reported today. Interest rates would rise for most borrowers, but urban and rural residents could see sharper increases than the coveted customers in the suburbs. Lenders could charge fees for popular features now taken for granted, like the ability to "lock in" an interest rate weeks or months before taking out a loan. Life without Fannie and Freddie is the rare goal shared by the Obama administration and House Republicans, although it will not happen soon. Congress must agree on a plan, which could take years, and then the market must be weaned slowly from dependence on the companies and the financial backing they provide.

In related news, a New York Times editorial today said that Republican proposals for the government to get out of the antiforeclosure business could result in hundreds of thousands of additional foreclosures and steeper price declines. House Republicans have introduced bills to eliminate four federal antiforeclosure programs and replace them with nothing, according to the editorial. There is no dispute, according to the editorial that HAMP, the Obama administration?s main antiforeclosure plan, is lagging behind its goal to modify troubled loans for three million to four million homeowners. Of the $30 billion intended for the effort, only $1 billion has been spent so far to permanently modify 608,000 loans. The editorial said that much of the problem lies with the participating banks. Legislation and regulation that gets tougher on the banks could help fix those problems, including enactment of a transparent process for homeowners to challenge banks' decisions, stiffer penalties for banks that do not meet HAMP standards and a streamlined process for converting trial modifications to permanent ones

Banks Face More Mortgage Loan Write-Downs under Settlement Proposal

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March 3, 2011

Banks Face More Mortgage Loan Write-Downs under Settlement Proposal

U.S. banks received a proposal yesterday from state attorneys general and several federal agencies that could require them to reduce loan balances of troubled mortgage borrowers, the Wall Street Journal reported today. The document, sent to the nation's largest mortgage servicers, does not specify penalties or fines but instead represents a detailed code of conduct for how they must treat borrowers throughout the loan-modification process. Banks have yet to receive a separate settlement proposal to pay for damages prompted by the foreclosure-document handling crisis that began last fall. Yesterday's document focuses instead on improving the way that banks treat borrowers who are seeking modifications or are going through foreclosure. The proposal represents the clearest indication that state attorneys general are working with the Obama administration and other regulators to pursue a significantly broader settlement against the banks. Some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers.

GA HUD Booklet

Are You at Risk of Foreclosure? Know someone who may be having difficulty making house payments? We want you to know your options and act now to avoid bigger problems later.

The attached booklet is a compilation of information to guide and assist you. It is also available online (   – to print in booklet format, select 8½ x 11 inch paper, 2-sided print, flip on short edge).

We encourage you to provide this information to individuals and families in your community who may be in need of assistance in Georgia.

It contains valuable guidance, points of contact, and web links to sources of free assistance from HUD and other federal agencies, national and local government and non-profit partners, including what to do if your lender won’t work with you and how to identify and report a loan modification or foreclosure rescue scam.

Remember, you can always contact a HUD-approved housing counselor for free foreclosure avoidance counseling. Some HUD-approved agencies offer assistance in languages other than English. Call 1-800-569-4287 or visit to find one near you.



The Federal Trade Commission (FTC) announced yesterday that it has charged a national operation with marketing bogus loan modification services, according to an FTC press release. U.S. Mortgage Funding Inc., Debt Remedy Partners Inc., Lower My LLC, David Mahler, Jamen Lachs and John Incandela, Jr. allegedly violated the FTC Act and the FTC's Telemarketing Sales Rule by falsely claiming they would obtain mortgage modifications that would make consumers' loan payments substantially more affordable. According to the FTC's complaint, the defendants targeted financially distressed consumers using direct mail, the Internet and telemarketing, and falsely promised they would get loan modifications to make consumers' mortgages much more affordable, or fully refund their money if they failed. The defendants charge up to $2,600 for their services and typically ask for half of the fee up-front, claiming a success rate of up to 100 percent.


A new study finds that the Massachusetts health care reform law—a model for national reform—did not improve coverage and has left many still struggling with medical debt, the Los Angeles Times reported today. Proponents of the national health care reform enacted last year have claimed that it would reduce medical bankruptcy in the United States by helping more Americans get insurance. The new study published today in the American Journal of Medicine suggests that a reduction in bankruptcies is unlikely. To gauge whether health care reform in Massachusetts has eased bankruptcies, the researchers looked at a random sample of Massachusetts bankruptcy filers in July 2009, sending surveys to almost 500 households. They compared their results to national and Massachusetts data collected in 2007, before the Massachusetts reform was implemented in 2008. They found that while the percentage was down slightly, medical bills still contributed to 52.9 percent of all bankruptcies in the state. Absolute numbers of medical bankruptcies were up by a third. Total bankruptcies in Massachusetts went up 51 percent between 2007 and 2009.,0,981846,print.story

Food Type

According to this I'm a mixed Food Type- Along with 68.4% of All Females.  This test has some issues.  It asks things like what would I  prefer to eat, not what I  actually eat  and how I feel.   It also gives me choices for deseret beteen cheese cake, fruit, fruit pie or any deseret.  Hello if it ain't milk chocolate I don't want it period- and then I am picky about my chocolate.

I thing i'm a protein type- I  feel bad when  i eat too many carbs.

Short Sales a Failure According to CA Survey

Ninety-four percent of Realtors surveyed by the California Association of Realtors participated in a short sale transaction during 2010, demonstrating the growing presence of short sale listings in today's distressed real estate environment. Despite increased market interest in the short sale as an alternative to foreclosure, the survey found that fewer than three out of five actually close in California. The trade group says this fact illustrates "the complexity and difficulty of navigating lenders' and servicers' short sale procedures."

“The lack of standardization, long approval process, and lack of lender approvals are hampering what should be a 45-day short sale process,” Peerce said. “Instead we’re hearing the typical response time for lenders is at least 60 days, and in many instances, their response time exceeds six months.”

More than half (63 percent) of Realtors said that lenders took more than 60 days to return a written response of the approval or disapproval of the short sale agreement submitted. Only 4 percent said they received a written response in less than 14 days.

Dodd-Frank Making Matters Worse

Fourth quarter data from CoreLogic reveals negative and near-negative equity mortgages account for 27.9 percent of all residential properties with a mortgage nationwide, and the company says recent legislation could make a gloomy situation even darker for the hardest-hit states. Negative equity increased in the last quarter of 2010, rising from 10.8 million properties underwater in the third quarter to 11.1 million in the fourth. Today, about 23 percent of all residential properties with a mortgage are already underwater.

Settlement Servicer Details

The robo-signing settlement presented to servicers by government agencies and attorneys general last week features 27 pages of rules and regulations. Though the details of the settlement have been released to the public, they are in no way final and will go through many rounds of negotiations before government officials and servicers can come to an agreement. There is speculation that reaching a resolution will be a daunting task, but officials are hoping the process will be complete in the next two months.

27 page settlement terms posted here:


FHA Powers

As one of the few backers of low-down-payment mortgages in a time of stringent lender underwriting, the Federal Housing Administration has become a primary means of financing for U.S. home buyers, the Wall Street Journal reported today. However, as the government moves to reform the mortgage market, the FHA is heading for some changes that could limit borrowers' access to the loans or make them more expensive. About 56 percent of mortgages for a home purchase were FHA-insured in 2009, up from 6 percent in 2007, according to a report from the George Washington University School of Business. Many FHA borrowers are first-time buyers drawn by a down-payment requirement of just 3.5 percent of a home's purchase price

Business Bankruptcies Fall in February as Consumer Woes Persist

Data provider Epiq Systems Inc. reported that 5,973 companies filed for bankruptcy in February, marking a 2.8 percent decline compared with January filings, Dow Jones Daily Bankruptcy Review reported today. Against those declines, overall bankruptcy filings grew by 6.9 percent during February to 109,178 filings, according to data released Monday. "Some folks and businesses are just now running out of gas," said John Penn of Haynes and Boone LLP. "There's only so long you can [extend and pretend] until there's nothing left." Epiq's data showed that chapter 11 filings slowed to 984 during Februrary, down from 1,049 filings in January.

Bank Chief Rejects Idea of Reducing Home Loans

Showing resistance for the first time against government pressure to write off tens of billions worth of mortgage debt, Bank of America executives said yesterday that the idea was unworkable and warned that it would be unfair to borrowers who had managed to stay current on their loans, the New York Times reported today. "There's a core problem that if you start to help certain people and don't help other people, it's going to be very hard to explain the difference," said Brian T. Moynihan, the chief executive of Bank of America. "Our duty is to have a fair modification process." All 50 state attorneys general, as well as a host of federal agencies, are pushing for a settlement over investigations into foreclosure abuses by major mortgage servicers that could cost the industry $20 billion or more. Industry experts estimate that nearly a trillion dollars worth of mortgage debt is "underwater," a result of house prices having fallen since the original loans were made. Federal officials hope a settlement with the servicers will help individual borrowers and provide a cushion for the weak housing market.

Tuesday, March 8, 2011

Law is a Business

Law school teaches you to think like a lawyer but, to succeed in today's legal marketplace, you must also think like a businessperson. As the profession becomes increasingly bottom-line-oriented, business and management skills are essential to advancement within your organization and for optimally servicing your clients' needs. Each case or transaction involves money in some way, and every lawyer in private practice is running a business.

Bankruptcy Means Test Figures Changing March 15, 2011

The Bankruptcy Means Test figures are changing again on March 14, 2011 and I am once again reminded of how absurd the means test is. When the US Trustee posts new means test figures, I alway take a careful look at the numbers and compare them to determine how it will affect my clients. Increases in deductions or changes in median income can make be the difference between passing or failing the test.
I don’t understand how anyone is expected to live on these made up figures.  They don’t reflect reality or adjust for what a family really spends.  The distance someone has to drive to work has no bearing on the case, nor the cost of their actual car or home maintenance.  There was no increase in the operating costs for automobiles,  despite the fact that the price of gas is rising.

Just to show you how absurd it is the allowance for housekeeping supplies for two people is a dollar more than for three people.  Does the government think that three people need less cleaning products or use less toilet paper than two?  The person  setting this obiviously doesn't have a 5 yr old!

 As people are loosing their jobs and the median income drops, more will be required to take the means test which could say that Chapter 7 bankruptcy is presumed to be an abuse of process.  The bankruptcy Means Test will apply to, and potentially hurt, more people as unemployment rises and salaries drop.
If the median income figures for a state drops, it lowers the bar for debtors who will be subjected to the means test and the possibility of being denied help in Chapter 7 bankruptcy.

If debtors fail the means test, they often have to file a Chapter 13 repayment plan if they want to file bankruptcy. If a debtor is above median income, that Chapter 13 repayment plan will last for five years. Unfortunately, even though the means test says there is money available to make the Chapter 13 plan payments, real income and expense comparisons show that there is less or even no funds left once regular living expenses are paid.

Families who might not have had to take the means test prior to November 1st, 2009  may now subject to take, and maybe fail the test. My experience with the means test has been that it is most unfair to people just above median income since many necessary, common, reasonable and/or actual expenses are not allowed as deductions on the means test.

In Florida  the new figures are as follows:

one household member   $40,029
two                                $50,130
three                               $54,595
four                                $65,135

add $7,500 for each member in excess of four

National out of pocket healthcare costs per person
under 65  $60
over 65 $144

Administrative Expenses Multipliers

11 U.S.C. § 707(b)(2)(A)(ii)(III) allows a debtor who is eligible for chapter 13 to include in his/her calculation of monthly expenses the actual administrative expenses of administering a chapter 13 plan in the judicial district where the debtor resides.  The chapter 13 multiplier (for the State of Florida) needed to complete Official Bankruptcy Forms 22A and 22C (Statement of Current Monthly Income and calculations) is set forth below. Form 22A is the form most chapter 7 debtors will complete and the multiplier is
entered on Line 45.b; Form 22C is the form most chapter 13 debtors will complete and the
multiplier is entered on Line 50.b.


FLM Middle District of Florida 7.4%

FLN Northern District of Florida 10.0%

FLS Southern District of Florida 9.8%
Collection Financial Standards for Food, Clothing and Other Items

Expense               One Person             Two Persons               Three Persons                    Four Persons

Food                     $300                       $537                           $639                                   $757

Housekeeping supplies $29                   $66                              $65                                    $74

Apparel & services       $86           $162                            $209                                  $244

Personal care products & services
                                    $32                   $55                              $61                                      $67

Miscellaneous               $87                   $165                            $197                                    $235

Total                             $534                 $985                            $1,171                                 $1,377

More than four persons Additional Amount Per Person
For each additional person, add to four-person total allowance: $262
Bankruptcy Allowable Living Expenses – National Standards (See 11 U.S.C. § 707(b)(2)(A)(ii)(I))
Housing CostsA family of  2 in Pinellas w/ a mortgage or rent = $874 housing
A  family of 4 $1026     
Hillsborough                              $967          family 4    $1136

Pasco                                      $746                            $875

Operating Costs for Car
one car $244 two cars $488

Ownership Costs for Car
one $496
two $992

New articles

 HSBC Joins Bank of America and Chase in Temporary Suspension of Foreclosures pending Review

Regulators Near Agreement on Mortgage Risk Rules

 Article on How Much Do I Really Owe on My Delinquent Mortgage? Three Answers Later

 MERS Transfers Upheld in Five States

Restitution for Botched Foreclosures as High as $20 Billion

 Research Article on BAPCPA and Mortgage Morass

Kansas senator files for bankruptcy

"A state senator who serves on the Ways and Means Committee and other financial panels has filed for personal bankruptcy.

Andover Republican Ty Masterson says most of his debts are from a failed business in 2006. The Wichita Eagle reports Masterson lists more than $800,000 in unsecured debts that aren't tied to assets or collateral."
See even the powerful and rich file bankruptcy, there is no shame in it.

Email Ethics

Wells Fargo Exits Wholesale Reverse Mortgage

Wells Fargo has announced that it is closing its wholesale reverse mortgage business in two weeks. "This move allows us to focus on forward mortgages and our other products and programs," says Kathleen Vaughan, executive vice president, in a statement to its reverse mortgage brokers. "We will accept reverse mortgage applications through close of business on Friday, March 18, and the wholesale reverse pipeline must fund by Saturday, April 30."

Wells Fargo is the nation's largest retail reverse mortgage originator, and this aspect of its business will remain in place. The San Francisco-based institution is the second major lender to wind down its reverse mortgage operations - Bank of America announced last month that it was shutting down its reverse mortgage activities.

SOURCE: Wells Fargo

McCalla Raymer

McCalla Raymer, a Georgia-based legal provider in the default servicing space, has opened a Panama City, Fla., office location that will primarily service the firm's recent expansion into Florida.

The office is McCalla Raymer's third location in the state. The company also has offices in Fort Lauderdale and Orlando.

SOURCE: McCalla Raymer

Operation Watchdog Entangles 15 FHA Lenders

Fifteen direct-endorsement lenders that failed to underwrite loans to Federal Housing Administration (FHA) standards could face more than $23 million in civil enforcement actions following a recommendation by the U.S. [read more]
The 15 lenders at the heart of Operation Watchdog included the following:

Lombard, Ill.-based 1st Advantage Mortgage;

West Bloomfield, Mich.-based Birmingham Bancorp Mortgage Corp.;

Flint, Mich.-based Mac-Clair Mortgage Corp.;

Southlake, Texas-based Alacrity Lending Co.;

Millersville, Md.-based Dell Franklin Financial;

Farmington Hills, Mich.-based D&R Mortgage Corp.;

Englewood, Colo.-based Assurity Financial Services LLC;

Arlington, Texas-based Americare Investment Group;

Sugar Creek, Mo.-based American Sterling Bank;

Cheshire, Conn.-based Webster Bank;

Lakeway, Texas-based Alethes LLC;

Edison, N.J.-based Security Atlantic Mortgage Co. Inc.;

Memphis, Tenn.-based First Tennessee Bank NA;

Atlanta-based Pine State Mortgage Corp.; and

Great Neck, N.Y.-based Sterling National Mortgage Co. Inc

House to Wait for Senate to Act on "Swipe" Changes, Bachus Says

House Financial Services Committee Chairman Spencer Bachus (R-Ala.) said that U.S. House lawmakers will wait for the Senate to introduce changes to the Federal Reserve's proposal that would cap debit card "swipe" fees, Bloomberg News reported yesterday. The House panel's decision to wait for action by the Democrat-controlled Senate may delay the legislative attack on a rule that may cost banks including Bank of America Corp. and JPMorgan Chase & Co. as much as $12 billion in annual revenue. Sen. Richard Durbin (D-Ill.), who fought to require fee caps under the Dodd-Frank Act, said that he will block efforts to change that provision of the regulatory law. Fed Chairman Ben S. Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair have questioned the measure, saying that an exemption for banks and credit unions with less than $10 billion in assets might have the unintended consequences of making the smaller firms less competitive.

Senate Democrats Want SEC, CFTC Funding Restored

Senate Democrats late on Friday unveiled their version of a federal budget that restores funding for the Securities and Exchange Commission and the Commodity Futures Trading Commission to the full levels proposed by the president: $1.26 billion and $286 million, respectively, the Deal Pipeline reported yesterday. On Feb. 19, the House Republicans approved a plan that cut more than $60 billion from Obama's budget, slashing money for health reform, the Environmental Protection Agency, student aid and public broadcasting, along with money for the SEC and the CFTC. The Republican plan would fund the SEC and CFTC budgets at $1.1 billion and $186 million respectively, levels that would force both agencies to cut back on staff and technology at the same time they are assuminig their new Dodd-Frank Act responsibilities. Republicans also moved to bar the Obama administration from using czars to run various programs including the Troubled Asset Relief Program

Attorneys General Push for Loan Reductions, Seek Bank Accord

State attorneys general are pushing lenders to reduce loan balances and said that they hope to reach a final settlement with banks over their mortgage-servicing and foreclosure practices within two months, Bloomberg News reported today. The states along with federal agencies submitted a 27-page settlement proposal last week to the country's five largest mortgage servicers and aim to reach an agreement that leads to more loan modifications for homeowners having trouble making their payments, attorneys general said yesterday. The companies that received the settlement terms service 59 percent of U.S. home loans and include Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Ally Financial Inc. and Citigroup Inc. The settlement sheet seeks to force procedural changes on servicers, including banning companies from initiating foreclosure proceedings while a loan modification is pending, providing borrowers with a single point of contact, and informing borrowers of denied modifications in writing.

AGs' Servicer Reform - The 27 Pages of Proposed Settlement Terms

The proposed 27-page settlement term sheet, provided to the five largest mortgage servicers by a national coalition of state Attorneys General and reportedly also by federal banking regulators.

The proposed terms touch on a variety of areas, including:

- Foreclosure and Bankruptcy Information and Documentation, including: (a) standards for affidavits and sworn statements in foreclosures and bankruptcies; (b) verification of borrower account information; (c) documentation of rights to note and chain of title; and (d) quality assurance systems and audits;

- Loss Mitigation Requirements, including: (a) a loss mitigation requirement; (b) prohibition on "dual tracking;" (c) requirements for a single point of contact and single electronic record; (d) outreach efforts for loss mitigation; (e) independent auditing for SCRA compliance; (f) loss mitigation "portals" for borrowers and housing counselors; (g) specific loss mitigation timelines; (h) independent review of loss mitigation denials; (i) required support and funding for state-based foreclosure prevention hotlines; (j) application of the FHA Short Refinance Program to non-FHA loans; (k) staffing and technology requirements; (l) standardization and disclosure of proprietary loan mod programs; (m) principal reductions; (n) second lien loan modifications; (o) free document delivery services through national retailers; (p) consideration of final or "back-end" DTI in loan modification applications; (q) monetary incentives and other provisions for short sales; (r) transfer of servicing issues; and (s) other loss mitigation related matters;

- Restrictions on Servicing Fees, including: (a) requirements that all such fees and bona fide, reasonable, and disclosed in detail to borrowers; (b) maintenance of a fee schedule for disclosure to borrowers; (c) limits on attorneys fees; (d) prohibition on so-called "pyramiding" of late fees and other late fee restrictions; (e) limits on third-party fees; (f) and requirements for lender-placed insurance;

- General Servicer Duties and Prohibitions, including: (a) a duty of good faith and fair dealing to borrowers; (b) a duty to ensure that distressed properties and charged-off loan properties do not become blighted; and (c) a duty not to unreasonably delay foreclosures and transfers of title as to abandoned properties;

- General Prohibitions, including: (a) prohibitions on deceptive conduct; (b) prohibitions on funds payment requirements that are more expensive to consumers than certified checks or attorneys checks; and (c) requirements to communicate with representatives of the borrower who provide written authorization and other reasonable assurances of authorization;

- Monetary Relief, in an unstated amount; and

- Compliance Review and Monitoring, including: (a) data reporting to federal and state regulators as to compliance with the settlement; (b) third-party review by auditor selected by the Ags and the CFPB, and (c) penalties for non-compliance.