Two O.C. loan officers indicted in Las Vegas foreclosures case

In what appear to be the first criminal charges to stem from the fracas over improper foreclosures last year, two Southern California title loan officers have been indicted by a Nevada grand jury for allegedly filing tens of thousands of improper documents related to Las Vegas-area foreclosures.

The Clark County grand jury charged Gary Trafford, 49, of Irvine and Geraldine Sheppard, 62, of Santa Ana on 606 counts, alleging that the two headed up a vast “robo-signing” operation that resulted in the filing of tens of thousands of fraudulent foreclosure documents.

The documents were filed with the Clark County recorder’s office between 2005 and 2008, according to the indictment. The two title loan officers worked for the firm Lender Processing Services, a foreclosure processing company based in Florida that has been used by most of the largest banks in the nation to process home repossessions.

"I am not allowed to speak with you. I have no comment at this time," Sheppard said when reached by phone. Trafford could not be reached for comment.

The two have not been arrested, a spokeswoman for Nevada Atty. Gen. Catherine Cortez Masto told The Associated Press. LPS said in a statement that it is working with the authorities.

The company, in its statement, acknowledged that some of its documents were flawed but said the documents did not result in wrongful foreclosures.

“I am deeply committed to ensuring that LPS meets rigorous standards of professional conduct and operating excellence,” LPS Chief Executive Hugh Harris said in the statement. “I have full confidence in the ability of our leadership team and over 8,000 dedicated employees to deliver on that commitment."

Trafford is charged with 102 counts of offering false instruments for recording, a felony; false certification on certain instrument, a felony; and notarization of the signature of a person not in the presence of a notary public, a misdemeanor.

Sheppard is charged with 100 counts of offering false instruments for recording, a felony; false certification on certain instruments, a felony; and notarization of the signature of a person not in the presence of a notary public, a misdemeanor.

The indictment says that two title loan officers directed the fraudulent notarization and filing of paperwork used to initiate foreclosure on homeowners in the Las Vegas area. Nevada alleges that the two directed their employees to forge foreclosure documents, notarize the signatures on the documents they had forged and then file the fraudulent paperwork with the Clark County recorder's office in order to begin foreclosures on homes throughout the county.

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Many Americans say they will have to work until they're 80

-- Alejandro Lazo

twitter.com/alejandrolazo

Photo: A foreclosure sign in front of a bank-owned home for sale in Las Vegas. Credit: Robyn Beck / AFP/Getty Images

Study: In some areas, risky loans punished the rich more than the poor

 

Five years into the housing bust, are rich or poor homeowners more likely to suffer foreclosure?

It all depends on which part of the country you're in, according to a Center for Responsible Lending study.

Low- and moderate-income borrowers have been most affected in cities such as Detroit, Cleveland and St. Louis, where weak economies meant home prices didn't rise much even while much of the nation was caught up in the housing bubble, the nonprofit CRL said.

However, in areas that had strong housing appreciation before the collapse, such as California and Nevada, the opposite is true. In these areas, middle- and higher-income borrowers have been most likely to fall into foreclosure, according to CRL's study of 27 million mortgages over five years.

The explanation, CRL said Thursday, is that higher-income borrowers in expensive boom states wound up with a disproportionate number of high-risk loans, as did the lower-income residents of cities with weak economies and housing markets.

The rich borrowers were stretching to buy homes by using supposedly prime adjustable-rate loans requiring interest-only payments at first, or pay-option mortgages that allowed them to pay so little that their loan balance rose instead of fell. 

Overall, the CRL said, there was remarkably little difference in foreclosure rates between low- and high-income people who took out home loans from 2004 to 2008.

Among lower-income borrowers in that group, 15.9% had been foreclosed on or were seriously delinquent (meaning 60 days or more in arrears) by February 2011, the CRL study found.

Among middle-incomes borrowers, 14.7% fell into those categories, with 14.6% of high-income borrowers in the same straits.

But those slight differences contrasted with big gaps when researchers sorted troubled borrowers by type of housing market.

In weak markets, more than 10% of low-income borrowers had lost their homes to foreclosure, while less than 4% of higher-income borrowers had homes repossessed.

In the topsy-turvy world of the boom housing markets, more than 9% of higher-income borrowers had lost their homes, compared to less than 4% of low-income homeowners.

The study also found that:

-- Among homeowners who received loans from 2004 to 2008, 2.7 million households, or 6.4%, had lost their homes to foreclosure as of February 2011. Another 8.3%, or 3.6 million households, were at serious risk, defined as in the foreclosure process or more than 60 days past due on their mortgages.

-- The majority of people affected by foreclosures have been non-Latino white families. However, African American and Latino borrowers are more than twice as likely to lose their home to foreclosure as non-Latino white households -- 25% compared to 12%.

-- Racial and ethnic disparities in foreclosures persist even among higher-income groups. About 10% of higher-income African American borrowers and 15% of higher-income Latino borrowers have lost their home to foreclosure, compared with 4.6% of higher-income non-Latino white borrowers, the CRL said.

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-- E. Scott Reckard

 Photo: Foreclosed homes behind padlock in North Las Vegas. Credit: Jewel Samad / AFP/Getty Images

Fewer home loans going bad but foreclosures on rise

Far fewer borrowers are delinquent on their home loans these days, a Mortgage Bankers Assn. report shows, but new foreclosure actions are on the rise in states like California, showing the nation still has much pain to endure before the housing crisis subsides.

Private analysts say the nation is only halfway through the wrenching grip of the foreclosure epidemic. And that's reflected in the housing market, where home sales and prices continue to sag in many areas despite record low interest rates.

Five years into the crisis, 7.99% of all U.S. home loans were behind by at least one payment in the third quarter but not yet in foreclosure, the mortgage trade group said Thursday. That's down by nearly half a percentage point from the second quarter and more than a percentage point from a year earlier.

But the group's statistics showed how banks are reasserting themselves against troubled borrowers after slowing the process for nearly a year amid increased scrutiny from regulators.

The percentage of loans on which foreclosure actions were started during the third quarter was 1.08%, up from 0.96% in the second quarter. California had the nation's fifth-highest rate of new foreclosures: nearly 1.5% in the latest quarter.

The percentage of U.S.loans somewhere in the foreclosure process at the end of the third quarter was 4.43%, up slightly from a year earlier. The rate of homes in foreclosure was highest in Eastern and Midwestern states that route all home repossessions through the courts, with Florida at more than 14% and New Jersey at 8%.

California, which for years had one of the highest rates of loans in foreclosure, has fallen to 19th on the list because its foreclosure process doesn't normally require court action and is among the most streamlined in the nation. In other words, even as the rate of new foreclosures increases, the repossessions are being handled quickly.

Of states that handle foreclosures without going through court procedures, Nevada was the only one high on the total foreclosure-rate list, with nearly 8% of its mortgages in foreclosure.  

In a separate report Thursday, mortgage finance giant Freddie Mac said the typical rate on a 30-year fixed-rate home loan early this week was an even 4.0%, a statistically insignificant rise from 3.99% a week earlier. The 15-year fixed loan rates rose to 3.31% from 3.30%.

Expressing some optimism, Frank Nothaft, an economist for the trade group, said the economy "is showing potential for further gains in the near term" as the near-record low mortgage rates persist.

Retail sales rose for the fifth straight month in October, consumer confidence rose for the third straight month in early November to the highest reading since June, and home-builder confidence exhibited a back-to-back monthly increase in November to the strongest level since May 2010, Nothaft said, citing various surveys.

RELATED:

Banks' foreclosure activity picks up

Victims of improper foreclosure practices can submit claims

Many Americans say they will have to work until they're 80

-- E. Scott Reckard

Photo: San Jose protesters target Bank of America. Credit: Paul Sakuma / Associated Press

Federal Housing Administration could require bailout, audit finds

There is a nearly 50% chance that the Federal Housing Administration will require a taxpayer bailout as the struggling housing market continues to eat away at the cash reserves of the agency, which insured about one in seven residential mortgages issued this year, according to a government audit released Tuesday.

The reserves, which are not supposed to be below 2% of projected losses, continued to fall this year, dropping to 0.24% from the already seriously low level of 0.5% last year, the report said. The drop was caused by the FHA's cash reserves falling by $2.1 billion, to just $2.6 billion.

But under the report's baseline projection for housing prices, which assumes they will drop 5.6% in 2011 before rebounding next year to 1.3% growth, the FHA would not need a bailout, the report said. In fact, the reserve fund would return to its mandated 2% level by 2014, slightly earlier than projected last year.

"It would take very significant declines in home prices in 2012 to create a situation in which the current portfolio would require any kind of additional support," said acting FHA Commissioner Carol Galante. She said the agency's reserve fund continues to be "actuarially sound."

But the report by an independent actuary found that if home prices continue to decline next year, the FHA probably would need a bailout. The size of the bailout would depend on how much housing prices drop.

If the FHA needs taxpayer money to keep it afloat, it does not have to seek approval from Congress or the White House. The agency has existing authority to tap the U.S. Treasury for funds.

The FHA, which was created during the Great Depression to help revive a devastated housing market, has never required taxpayer assistance. It has been playing a major role in the housing market since the subprime housing bubble burst, and most of the losses come from loans it guaranteed that were made before early 2009.

With its reserves dwindling because of losses on insurance for those loans, the FHA took steps in late 2009 to improve its finances. Those steps included requiring higher premiums and better credit scores from borrowers. Those moves have helped buffer the agency against the continued slide in housing prices, and the high average credit score of 700 for borrowers whose loans were insured last year set a record for the FHA, Galante said.

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FHA may be setting up repeat of housing bubble, lawmakers worry

-- Jim Puzzanghera in Washington

Photo: A house for sale in Glendale in September. Credit: Getty Images

Falling prices mean rising affordability, California Realtors say

Call it the silver lining of falling home prices.

With low interest rates and cheaper housing throughout the Golden State, the percentage of homebuyers who could afford to purchase a home increased in the third quarter, a real estate group said Thursday.

The number of households who could afford a home priced at the statewide median of $292,120 rose in the third quarter, according to an index produced by the California Assn. of Realtors. Fifty-two percent of California households could afford that price, compared to 51% in the second quarter.

Now if these households would only buy.

Beth L. Peerce, president of the group, said in the news release that one problem potential homebuyers could face is tight credit. Many first-time buyers don’t qualify for a loan, she said. Indeed, some analysts have noted that banks have tightened their loan criteria since the housing crash. But it was those loose lending standards that caused the real estate bubble in the first place, so many other analysts also argue that more carefully scrutinizing borrowers is appropriate.

The federal government has been providing enormous support to the mortgage market through loans backed by the Federal Housing Administration, though it has recently taken steps to scale back that support.

In California, potential buyers needed to earn at least $61,530 a year per household to qualify for the median-priced home. The median is the point at which half the homes in the state sold for more and half for less.

The real estate group calculated the monthly payment for a mortgage on such a home to be $1,540, including taxes and insurance, and assuming a 20% down payment and a 4.63% effective composite interest rate.

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-- Alejandro Lazo

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Photo: A home on the market in Altadena features a sign of the times. Credit: Associated Press

 

Banks, regulators start massive review of foreclosures

Some people who lost their homes to a foreclosure system wrought with error and misconduct may now request their cases be independently reviewed and potentially may be compensated.

A large-scale review of foreclosures that occurred in 2009 and 2010 began on Tuesday with federal regulators requiring the nation’s largest mortgage servicers to start mailing letters to potential victims. Independent consultants that the banks were ordered to hire in April will conduct the assessments. More than 4 million borrowers could be eligible.

“The independent foreclosure review is a significant component of the mortgage servicers’ compliance with our enforcement actions,” said John Walsh, acting Comptroller of the Currency, who along with the Federal Reserve and Office of Thrift Supervision ordered the reviews. “These requirements help ensure that the servicers provide appropriate compensation to borrowers who suffered financial harm as a result of improper practices identified in our enforcement actions.”

The actions affect 14 large mortgage servicers that were required to correct the shortcomings and errors in their foreclosure processes. The outreach effort that began Tuesday is a first step.

Each mortgage servicer is required to mail one letter to each customer who is eligible for the review. An advertising campaign will also begin shortly to get the word out to people potentially harmed by the errors, federal officials and bank representatives said Tuesday.

A financial compensation schema for borrowers found to have been foreclosed on improperly has not been developed yet, and neither banking officials nor regulators gave an estimate for how much the actions would cost the banks.

The actions by the federal regulators come after it was revealed last year that banks employed so-called robo-signers, people who signed foreclosure documents en masse without properly reviewing them; took back their homes even though they were being reviewed for a loan modification; and made other errors in the foreclosure and servicing processes.

The enforcement orders are separate from work being done by a committee of attorneys general that also hope to reach a settlement with the nation’s largest banks over faulty foreclosure practices. Those negotiations remain ongoing, even though some states have voiced concern over the direction of the negotiations, and California has dropped out altogether.

A website for borrowers who want to learn more about the federal claims process has been created, IndependentForeclosureReview.com, as has a toll-free phone line, (888) 952-9105.

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-- Alejandro Lazo

twitter.com/alejandrolazo

Photo: A foreclosure notice hangs in the window of a home on Sand Pine Trail in the gated Willow Walk community in Hemet. Credit: Gina Ferazzi / Los Angeles Times

 

California state housing agency reverses on foreclosures

A state-run housing agency at least temporarily has suspended the practice of foreclosing on a small number of borrowers who rented out their homes.

The office of Senate President Pro Tem Darrell Steinberg (D-Sacramento) on Friday announced that the California Housing Finance Agency had agreed to his request to halt the foreclosures, even though the homeowners had not fallen behind on their monthly payments.

Earlier this week, Senate investigators issued a report that said the agency, known as CalHFA, initiated or threatened foreclosures on about 200 borrowers because they were no longer living in the homes as required by state regulations and interpretations of federal tax law.

The borrowers, who owed more on their properties than their market values, moved out for a variety of personal reasons but did not want to sell the homes at losses.

"The agency is making the right decision during difficult economic times," said Steinberg. "Struggling families, who are working to do the right thing in meeting their obligations, shouldn't be saddled with an extra, unnecessary burden."

The agency said it finances $4.2-billion worth of low-interest mortgages through the sale of tax-free bonds. U.S. Internal Revenue Service Rules specifically prohibit that the money from the sale of bonds be lent to home buyers who do not live in the properties.

Nevertheless, the agency in a letter to Steinberg and Senate Housing Committee Chairman Mark DeSaulnier (D-Concord) said it asked its board of directors to revisit the issue of owner-occupancy at its January board meeting. In the meantime, it is temporarily ceasing foreclosure proceedings  against "those who may be renting out their residence while staying current on their payments."

DeSaulnier said he is asking the agency to make the change permanent. "CalHFA serves predominately low-income, first-time home buyers," he said. These Californians should not fear foreclosure when they are doing everything right."

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-- Marc Lifsher

Photo: A foreclosed Glendale home in September. Credit: Kevork Djansezian / Getty Images

Obama administration touts refinancing program as economic boost

Obama administration officials touted an overhaul of a program to allow more underwater homeowners to refinance as a boost to the broader economy, although they were unable to project how many people the initiative would help.

"Today’s announcement is a very significant step in moving more families who have met their responsibilities into a position to refinance at significant savings," Gene Sperling, the top White House economic adviser, told reporters Monday.

Sperling and Housing and Urban Development Secretary Shaun Donovan noted that with mortgage interest rates at record lows, a homeowner can save an average of about $2,500 a year by refinancing. The additional money in the hands of a consumer would help stimulate the economy, which in turn would help stabilize the housing market.

"It's the equivalent of a substantial tax cut for these families," Donovan said.

The independent Federal Housing Finance Agency on Monday announced major changes to the administration's 2½-year-old Home Affordable Refinancing Program, which has helped 894,000 homeowners refinance.

The most significant change is to expand eligibility to more people who owe more on their homes than it is worth. The FHFA will remove a limit that prevented participation in the program by borrowers who owed more than 125% of the value of their homes.

Borrowers would have to be up-to-date on their mortgages, with no late payments in the previous six months and no more than one late payment in the last 12 months. Only people with loans owned by seized housing finance giants Fannie Mae and Freddie Mac are eligible, and those loans must have been sold to the firms by May 31, 2009.

The administration officials stressed that the expansion of the HARP program was only one step in dealing with the struggling real estate market, but one that could be taken without requiring the partisan-gridlocked Congress to pass legislation.

White House Communications Director Dan Pfeiffer said President Obama was trying to find ways to help the economy that do not depend on Congress, which has balked at passing his new jobs package. Administration officials are calling the push for such executive action "We can't wait."

Obama will highlight the refinancing rules during an appearance Monday in Nevada, which is one of the state's hardest hit by the foreclosure crisis, along with California and Florida.

"When Congress won't act, this president will," Pfeiffer said.

Sperling said the administration was trying to find the right combination of programs to reverse the foreclosure crisis.

"The president is committed to attacking the housing crisis on all fronts," Sperling said. "This significant effort on refinancing … is an important part of that arsenal but it’s only one part."

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Home-loan refinancing to get easier

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Plan would allow refinancing of some underwater mortgages

— Jim Puzzanghera in Washington

 Photo: Housing and Urban Development Secretary Shaun Donovan. Credit: Bloomberg

 

 

 

Scam watch: Facebook lottery, unclaimed money, foreclosure rescue

Here is a roundup of alleged cons, frauds and schemes to watch out for.

Facebook lottery - Mark Zuckerberg, Facebook Inc.'s founder and chief executive, is a savvy businessman. As much as you may want to believe it, he's not going to just hand you $1 million. The Better Business Bureau is warning consumers to delete emails that say they've won $1 million in "our 2011 Sweepstakes (Facebook Inc).” The emails are not from Facebook and recipients should not click on links in the email to claim the "prize." The links will likely install malware –- harmful or malicious programs -– on the recipient’s computer, the BBB said. Or they'll lead to an email reply from a scammer asking to be paid in advance to cover taxes or fees on the nonexistent prize.

Unclaimed property - The Better Business Bureau is warning about another email offer that sounds too good to be true -- and probably is. The emails advise recipients that they have "millions of dollars" of unclaimed money available to them, if they call an overseas telephone number. Anyone who calls the number will end up on the line with a scammer who wants to get personal information such as bank account, credit card and Social Security numbers, the group said. If you receive an email claiming you have unclaimed property, chances are it is a scam. The best option is to delete it. Many states do hold unclaimed money from long-ignored bank accounts, returned tax refunds and other places. But they do not send out emails advertising this. Instead, many states have websites that consumers can search for unclaimed money.

Foreclosure rescue - Many financial scams target people in distress. Federal prosecutors in Arizona say a Phoenix man duped at least 1,800 people into paying him for a bogus offer to help people avoid foreclosure. Luis Belevan, 34, pleaded guilty this month to charges related to the scheme. Prosecutors said he had told people about to lose their homes that he could buy their homes and offer restructured loans at much lower monthly payments. Homeowners paid $1,595 up front, but got nothing in return, according to prosecutors. As part of a plea agreement, Belevan, who has agreed to pay more than $2 million to victims, faces a maximum sentence of five years in federal prison.

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--Stuart Pfeifer

Photo: Mark Zuckerberg, Facebook Inc.'s founder and chief executive. Credit: Bloomberg

 

 

 

 

 

 

 

Number of Californians entering foreclosure jumps in third quarter

A big August surge in foreclosure actions by Bank of America and Bank of New York sent the number of California homeowners entering foreclosure to levels not seen in a year.

The third-quarter jump in notices of default, the first formal step in the foreclosure process, came after such filings had dropped to a three-year low earlier this year. Defaults were up 25.9% from the prior quarter, according to according to San Diego-based DataQuick, a real estate information service.

Banks have fired up the foreclosure-processing machinery in recent months after a long lull as they tried to negotiate settlements with regulators over faulty foreclosure practices. That slowdown created a backlog after a slew of investigations were launched following last year’s so-called robo-signing scandal, where banks used improper practices and documents to foreclose on troubled homeowners.

“Obviously, some lenders and loan servicers have begun to plow through their backlogs of delinquent loans more aggressively,” DataQuick president John Walsh said in a statement.

California properties received an estimated 71,275 notices of default during the three months ended Sept. 30, with some properties receiving multiple notices due to more than one loan. The majority of those loans were from the peak bubble years of 2005, 2006 and 2007, when lending practices were at their loosest, DataQuick said.

Separate third-quarter data released earlier this month by the Irvine-based firm RealtyTrac showed the number of homes entering foreclosure surged in states where repossessions take place largely outside of the courtroom. These nonjudicial states include California, Nevada, Arizona, Oregon and Washington.

Experts said that these Western states would experience any foreclosure surge first, as it is easier to get the process rolling again in these places.

While more California homes entered the foreclosure process in the third quarter, the number of homes taken back by banks continued to decline, according to DataQuick. The number of filed trustees deeds -- which are the papers that record the repossession of a home -- declined 8.4% from the prior quarter and dropped 14.3% from the third quarter of 2010. A total of 38,895 trustees deeds were filed in the third quarter.

Experts said that banks are probably waiting for some kind of settlement to be hammered out before really picking up the pace on foreclosures again. The increase in new California proceedings comes as talks over a broad foreclosure settlement by state attorneys general with the nation's five-largest mortgage servicers have experienced setbacks -- dragging on far longer than expected.

California recently stepped out of those discussions, declaring it would pursue its own path.

RELATED:

California bows out of probe of mortgage lenders

Kamala Harris a key player in settlement over mortgage crisis

Kamala Harris explains decision to exit mortgage settlement talks

-- Alejandro Lazo

twitter.com/alejandrolazo

Photo: A foreclosure notice hangs in the window of a home on Sand Pine Trail in the gated Willow Walk community in Hemet. Credit: Gina Ferazzi / The Los Angeles Times

Consumer Confidential: Sales up, Chris Tucker in trouble

Here's your not-fade-away Friday roundup of consumer news from around the Web:

--Nothing like a little retail therapy to make the economic blues go away. Consumers stepped up their spending on a variety of retail goods in September, according to the Commerce Department. They spent more on autos, clothing and furniture last month to boost retail sales 1.1% -- the largest gain in seven months. Auto sales rose 3.6% to drive the overall September increase. Still, excluding that category, sales increased a solid 0.6%. The government also revised the August figures up to show a 0.3% increase after initially reporting no gain. Not a great showing, but not so bad either.

--You're not the only one feeling a pinch. Court records show comedian Chris Tucker is facing foreclosure on his multimillion-dollar mansion in central Florida. Records show SunTrust Banks filed papers against the California resident with Lake County courts earlier this week. According to documents, Tucker bought the 10,000-square-foot lakefront home for $6 million in 2007 -- before the housing market crashed. The bank claims he still owes more than $4.4 million, but the county property appraiser has the home currently assessed at $1.6 million. Tucker is best known for starring alongside Jackie Chan in three "Rush Hour" films.

-- David Lazarus

Photo: Court records say "Rush Hour" star Chris Tucker, right, with Jackie Chan, faces foreclosure on his Florida home. Credit: Glen Wilson / New Line Cinema

 

Bay Area home sales pick up as prices fall

As prices fell, Bay Area home sales picked up in September from the same month a year prior.

Sales were up 6.6% from the same month a year ago. As is typical, sales fell from August to September, down 10.2%, to total 6,749 homes sold last month, according to real estate research firm DataQuick of San Diego.

The median price for the region fell 7.6% from the same month a year prior and was down 1.4% from August, hitting $365,000.The median is the point at which half the homes in the region sold for more and half for less.

Foreclosures and other so-called distressed properties remain a big part of the market. Foreclosures accounted for 25.6% of the resale market last month, down from a revised 25.7% in August and 27.5% in September 2010.

Short sales -– when the home is sold for less than the outstanding debt on the property -– made up 20.1% of the Bay Area market last month. That was up from 18.2% of August and 15.4% in September 2010.

RELATED:

California bows out of probe of mortgage lenders

Kamala Harris a key player in settlement over mortgage crisis

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-- Alejandro Lazo
Twitter.com/alejandrolazo

Photo: A San Francisco neighborhood. Credit: Getty Images

Massachusetts prepares to sue banks over foreclosures

Massachusetts Atty. Gen. Martha Coakley said she is preparing to sue the nation's big banks for allegedly wrongfully foreclosing on borrowers after having "lost confidence" in settlement talks aimed at resolving the matter.

The banks -- Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. -- are in settlement discussions with state and federal officials and seeking releases that would protect them from future lawsuits.

California Atty. Gen. Kamala Harris bowed out of the negotiations last week, saying the banks were asking for too much and vowing that her office would launch a more rigorous investigation.

Coakley has said she won’t sign on to a deal that includes broad legal release. New York, Delaware, Nevada, Kentucky and Minnesota have also signaled that they are unhappy with the proposed deal being discussed because of legal release from liability being offered to the banks.

New York and Delaware have been cooperating in their own probes separate from the coalition.

Coakley has indicated she would not support an agreement that was too easy on the banks or potentially impeded further investigations.

Below is her full statement released Wednesday:

“I have lost confidence that the banks will bring to the table an agreement that properly holds them accountable for wrongful foreclosures. Because our office for some time has anticipated that result, we have begun preparing for litigation. Our office is aggressively proceeding with efforts to file lawsuits regarding creditor misconduct in connection with unlawful foreclosures, including the failure to establish the right to start a foreclosure as well as filing false or misleading documents with registries in the Commonwealth. We will, as we have in the past, use our resources to hold the big banks accountable to fully protect homeowners and restore a healthy economy.”

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California bows out of probe of mortgage lenders

Kamala Harris a key player in settlement over mortgage crisis

Kamala Harris explains decision to exit mortgage settlement talks

-- Alejandro Lazo

twitter.com/alejandrolazo

Photo: Activists rally in San Jose earlier this year. Credit: Associated Press.

 

California breaks from 50-state probe into mortgage lenders [Updated]

 

California Atty. Gen. Kamala Harris will no longer take part in a national foreclosure probe of some of the nation's biggest banks, which are accused of pervasive misconduct in dealing with troubled homeowners.

Harris removed herself from talks by a coalition of state attorneys general and federal agencies investigating abusive foreclosure practices because the nation's five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered, Harris told The Times on Friday.

The big banks were also demanding to be granted overly broad immunity from legal claims that could potentially derail further investigations into Wall Street's role in the mortgage meltdown, Harris said.

“It has been  a process of negotiating and sitting at a table in good faith, but ultimately I have decided that we have to go our own course and take an independent path. And that decision is because we need to bring relief to Californians that is equal to the pain California experienced, and what is being negotiated now is insufficient," Harris told The Times in an interview.

Harris delivered the news in a letter sent Friday to Iowa Atty. Gen. Tom Miller, who has been leading the 50-state coalition.

[Updated 5:36 p.m.: Iowa Atty. Gen. Tom Miller, who has been leading the negotiations, vowed to press on.

“California has been an important part of our team and has made a significant contribution to this case,” Miller said in a statement. “However, the multistate effort is pressing forward and we fully expect to reach a settlement with the banks.”]

The removal of California from the discussions is a major blow to fraying efforts by the coalition, which has been trying to strike a settlement deal with the big banks for months. The move by Harris to reject the settlement talks is also a key departure from efforts by the Obama administration, which has been pushing for a fast resolution to the so-called robo-signing scandal that erupted last year.

“This whole concept of a settlement on foreclosure abuse is probably dead,” said Christopher Whalen, the founder of Institutional Risk Analytics. “Nobody in their right mind is going to opt into a settlement right now.”

For California homeowners, the move means the probable end of an opportunity for relatively quick relief stemming from revelations last year that banks improperly foreclosed on troubled borrowers. Key reforms to mortgage-servicing and foreclosure practices pushed by the attorneys general may also be delayed.

Harris has faced increasing pressure in recent weeks from inside and outside the state to reject any deal that was considered too weak, particularly as the foreclosure crisis in the Golden State appears to be worsening.

Among the states with the highest foreclosure rates, California led the pack in new foreclosure proceedings last month, with an increase of 55% over July, according to data from Irvine-based RealtyTrac. Metro areas in the inland parts of California posted big jumps in August, with Riverside and San Bernardino counties soaring 68%, Bakersfield 44% and Modesto 57%.

In rejecting the 50-state talks, California also widens the riff among law enforcement officials nationwide over the best approach to pursuing banks for mortgage misdeeds.

New York Atty. Gen. Eric Schneiderman, who was originally part of the 50-state negotiations, has launched a wide-ranging investigation into Wall Street's role in the mortgage meltdown -– focusing on the efforts to bundle low-quality mortgages into sophisticated bonds.

Schneiderman has been highly critical of the proposed 50-state settlement and expressed concern that his counterparts in other states may let the banks off too lightly and provide immunity from other efforts to bring them to account for misdeeds. Schneiderman has also won support from attorneys general in Delaware, Nevada, Massachusetts, Kentucky and Minnesota, some of whom have launched their own investigations.

A spokesman for Schneiderman, Danny Kanner, welcomed Harris's move.

“Attorney General Schneiderman looks forward to his continued work with Attorney General Harris and his other state and federal counterparts to ensure those responsible for the mortgage crisis are held accountable and homeowners who are suffering receive meaningful relief,” said Kanner.

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Photo: California Atty. Gen. Kamala Harris speaks at a news conference in May to announce the creation of the California Attorney General's Mortgage Fraud Strike Force. At left is Los Angeles Mayor Antonio Villaraigosa. Credit: Mel Melcon / Los Angeles Times

California breaks from 50-state probe into mortgage lenders

California Atty. Gen. Kamala Harris will no longer take part in a national foreclosure probe of some of the nation's biggest banks, which are accused of pervasive misconduct in dealing with troubled homeowners.

Harris removed herself from talks by a coalition of state attorneys general and federal agencies investigating abusive foreclosure practices because the nation's five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered, a person familiar with the matter said.

The big banks were also demanding to be granted overly broad immunity from legal claims that could potentially derail further investigations into Wall Street's role in the mortgage meltdown, the person said.

The removal of California from the discussions is a major blow to fraying efforts by the 50-state coalition that has been trying to strike a settlement deal with the big banks for months. The move by Harris to reject the settlement talks is also a key departure from efforts by the Obama administration, which has been pushing for a fast resolution to the so-called robo-signing scandal that erupted last year.

For California homeowners, the move means that gone is the chance for quick relief stemming from revelations last year that banks improperly foreclosed on troubled borrowers. Key reforms to mortgage-servicing and foreclosure practices pushed by the attorneys general may also be delayed, affecting hundreds of thousands of Californians facing the loss of their homes.

But Harris has faced increasing pressure in recent weeks from inside and outside the state to reject any deal that was considered too weak, particularly as the foreclosure crisis in the Golden State appears to be worsening.

Among the states with the highest foreclosure rates, California led the pack in new foreclosure proceedings last month, with an increase of 55% over July, according to data from Irvine-based RealtyTrac. Metro areas in the inland parts of California posted big jumps in August, with Riverside and San Bernardino counties soaring 68%, Bakersfield 44% and Modesto 57%.

In rejecting the 50-state talks, California also widens the riff among law enforcement officials nationwide over the best approach to pursuing banks for mortgage misdeeds.

New York Atty. Gen. Eric Schneiderman, who was originally part of the 50-state negotiations, has launched a wide-ranging investigation into Wall Street's role in the mortgage meltdown -– focusing on the efforts to bundle low-quality mortgages into sophisticated bonds.

Schneiderman has been highly critical of the proposed 50-state settlement and expressed concern that his counterparts in other states may let the banks off too lightly and provide immunity from other efforts to bring them to account for misdeeds. Schneiderman has also won support from attorneys general in Delaware, Nevada, Massachusetts, Kentucky and Minnesota, some of whom have launched their own investigations.

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-- Alejandro Lazo and Nathaniel Popper

Photo: California Atty. Gen. Kamala Harris speaks at a news conference to announce the creation of the California Attorney General's Mortgage Fraud Strike Force. Credit: Mel Melcon / Los Angeles Times

Troubled homes hanging over U.S. housing market drop

Call it a sliver of a silver lining for America's beaten down housing market: The inventory of troubled U.S. homes not yet listed for sale is diminishing.

Homes in foreclosure -- or headed into foreclosure -- are being sold at a fast enough clip to chip away at the so called "shadow inventory" that hangs over the U.S. market, Santa Ana data provider CoreLogic reported Tuesday. Shadow inventory at the end of July was down to 1.6 million units, representing a five-month supply of homes.

That means that there are 1.6 million homes in the pipeline not listed for sale. This is down from 1.9 million units, a six-month supply, from about a year ago.

"The steady improvement in the shadow inventory is a positive development for the housing market," CoreLogic Chief Economist Mark Gleming said. "However, continued price declines, high levels of negative equity and a sluggish labor market will keep the shadow supply elevated for an extended period of time."

The company derives the estimate for shadow supply, or pending supply, by taking the number of so-called distressed properties not listed on any real estate listing services. It considers distressed properties to be those that are either bank-owned or delinquent by three-plus months.

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Photo: Boulder County Sheriff's Deputy Patrick Gallagher checks the final paperwork during a home foreclosure last week in Longmont, Colo. Credit: John Moore / Getty Images

Foreclosure reforms could take a year or more

The chief federal regulator for many of the largest financial institutions said reforms to the nation's foreclosure system will take "a year and more" to complete.

Citing pervasive misconduct in the way banks repossessed homes from borrowers, federal regulators ordered the nation's biggest 14 banks to overhaul their procedures and compensate homeowners injured financially by wrongdoing or negligence.

In remarks to the Institute for International Finance in Washington on Friday, acting Comptroller of the Currency John Walsh said that because of the complexity of the reforms needed, the process would not be a fast one.

"I wish it could be completed more quickly, but it’s important that it be done correctly and in a way that assures fair treatment for homeowners who underwent foreclosure proceedings," he said. "That’s the only way to restore confidence in the system, and it is my hope that the assurance that both past errors and future practices are being corrected will restore confidence much sooner."

The details of the independent reviews of each mortgage servicer ordered to reform its practices by the various federal regulators who conducted the probes will be made public shortly, Walsh said. The amount of money that banks will pay to borrowers remains "open-ended and will only be known when the process ends."

Borrowers who were foreclosed on in 2009 and 2010 are allowed to request a review of their case if they feel they have been wronged by banks' practices. The orders signed by the banks in April required them to hire independent consultants to design a process to review each case.

The banks efforts will include a "massive campaign" to contact borrowers through mailing, tracing techniques used in class action filings and through an advertising campaign, Walsh said. His comments came on a day that a separate group of regulators -- a coalition of attorneys general and federal agencies -- held meetings with the nation's largest mortgage servicers in hopes of hammering out a settlement with them over faulty foreclosure practices.

"Any enforcement actions or settlement agreements they undertake will place additional requirements on the servicers, and it is essential that we harmonize the requirements of our orders with those of other regulators if and when they are reached," Walsh said. "It just doesn’t make any sense to have multiple sets of requirements and standards apply to the same servicers operating in the same markets."

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Photo: An eviction team removes clothing from a foreclosed home this week in Longmont, Colo.

Credit: John Moore/Getty Images

California home sales rise in August, but prices dip

Home sales in California jumped in August, but that was mostly due to a quirk in the calendar, with more business days than usual for the month. The state's median home price dropped year-over-year for the 11th consecutive month.

Sales of so-called distressed properties -– homes where the borrower was either in default or where the property was a foreclosure -- continued to make up more than half of California's market for previously owned homes, according to a report by the real estate information firm DataQuick of San Diego.

Sales statewide were up 8.8% in August over July and 10.2% from the same month a year earlier. A total of 34,239 properties in the Golden State sold last month, with Southern California accounting for 52% of those sales.

"The sliver of positive news here is that, no matter how you look at it, last month's sales beat the year-ago numbers, which were pretty lousy," DataQuick President John Walsh said in a statement. "Lower prices and mortgage rates lured some homebuyers off the sidelines last month, but too many others lacked the confidence to step into the game."

The median price, the point at which half the homes sold for less and half for more, declined 1.2% in August from July and dropped 4.2% from the same month a year earlier, to $249,000. The state’s median home price remained 12.7% above the most recent bottom, hit in April 2009.

Foreclosure properties made up 34.6% of homes sold statewide, up from 34.5% in July and down from 35.6% in August 2010. Short sales -– in which a bank allows a property to be sold for less than the outstanding debt on the property -– made up an estimated 17.8% of sales. That was up from 17.3% in July but down from 18.0% in August 2010.

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Home sales up in Bay Area while median price declines

Sales of Bay Area homes increased in August from the same month a year earlier but remained below average for the month. Prices continued to drop. The median home price fell in August from the same month a year earlier for the 11th consecutive month.

Sales of so-called distressed homes –- where the borrower is in default or the home is in foreclosure –- made up half of the market for previously owned homes, according to San Diego real estate firm DataQuick.

Sales were up 9.1% from the prior month and 12.2% from the same month a year prior. A total of 7,513 new and previously owned properties sold. The median, which is the point at which half the homes sold for more and half for less, declined 1.1% from the prior month and was down 3.9% from a year prior to hit $370,000.

“The sliver of positive news here is that, no matter how you look at it, last month’s sales beat the year-ago numbers, which were pretty lousy,” said John Walsh, DataQuick president. “Lower prices and mortgage rates lured some homebuyers off the sidelines last month, but too many others lacked the confidence to step into the game."

Sales of foreclosed homes made up 26.4% of the resale market while short sales -– where the bank allows a home to be sold for less than the debt on the property -– made up about 18.6% of the market.

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Photo: San Francisco. Credit: Getty Images

 

Bank of America ramps up foreclosure proceedings

Bank of America Corp. is stepping up its foreclosure activity in states where a court order is not needed to take back a home. Bank of America is the nation’s largest mortgage servicer, and other big banks could follow suit, according to analysts.

“Nobody really wants to be a leader in foreclosed properties but, for better or worse, that is what Bank of America is,” said Guy Cecala, publisher of Inside Mortgage Finance Publications.

Bank of America has improved its repossession practices and has increased foreclosures in the so-called non-judicial states, such as California and Nevada, where a court order isn’t required to take back a home, spokeswoman Jumana Bauwens said. Such a pickup is necessary if the real estate market is to get over its long slump, she added.

“Strong gains like that from July to August demonstrate our progress,” Bauwens said. “We are seeing continued improvements in foreclosure volumes in many areas of the country, and that is a potential harbinger for housing market recovery.”

In California, Bank of America ratcheted up the number of notices of default on homeowners by 182.4% from July to August, according to a preliminary analysis by San Diego-based research firm DataQuick. The bank filed new foreclosure proceedings on 6,478 homes in the Golden State.

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Twitter.com/AlejandroLazo

Photo: Members of the Home Defenders League rally in front of a Bank of America branch in San Jose.  Source: Associated Press