Faith4Business

By RUTH SIMON And NICK TIMIRAOS

U.S. banks are resisting efforts by state attorneys general to force them to cut the amounts owed by some borrowers facing foreclosure. Yet mortgage companies already have reduced home-loan balances for more than 100,000 borrowers.

How much larger the number will grow is likely to be at the center of negotiations this week aimed at reaching a settlement to the nationwide investigation of mortgage-servicing practices.

Officials from Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc.'s GMAC unit have been summoned to Washington for a Wednesday meeting with state attorneys general and at least three U.S. agencies, according to people familiar with the situation.

It will be the first faceoff since the five companies, the largest home-loan servicers in the U.S., got a 27-page "term sheet" earlier this month from state attorneys general that would require the servicers to consider more borrowers for principal write-downs.

In addition, some of the financial penalties resulting from any settlement are "very likely" to be used for reductions in loan balances for certain borrowers, said Iowa Attorney General Tom Miller, who is spearheading the 50-state investigation. Even among state officials, there are disagreements as to whether shrinking loan balances is a good idea.

The "term sheet's principal reduction proposals may actually foster an unintended 'moral hazard' that rewards those who simply choose not to pay their mortgage," the Florida, South Carolina, Texas and Virginia attorney generals wrote in a March 22 letter to Mr. Miller.

The chief executives of Bank of America and Wells Fargo have questioned the fairness of writing down loans, while claiming the costs could be enormous if widespread principal reductions are triggered by a settlement.

Read More: http://online.wsj.com/article/SB10001424052748703576204576226980831330892.htm...%3Darticle 

Wikipedia:

The Troubled Asset Relief Program, commonly referred to as TARP, is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector which was signed into law by U.S. President George W. Bush on October 3, 2008. It was a component of the government's measures in 2008 to address the subprime mortgage crisis.

We the American Public saved the banks from their poor investment choices in the subprime mortgage market...  TARP Money...  

100,000 Helped in a nation of 350 Million...  This is exactly why the the TARP bail out did little to restore the economy.  It never got trickled down to the individual.  It just preserved the solvency of the banks.  

How about a percentage reduction for all loans taken out during the time period the predatory loan scams where going on.  After all it was the loose lending tactics that drove the real estate bubble thus causing higher loan balances to begin with...

Via Business Insider, Image Charlie Engle

It is a topic of neverending frustration.

Despite the millions of ridiculous mortgages made during the peak years of the housing bubble, despite the billions of dollars of profits raked in by Wall Street and mortgage firms like Countrywide, despite the ensuing financial crisis that nearly brought the economy to its knees, no one has been held criminally responsible.

With the exception of a couple of mortgage investors on Wall Street, in fact--both of whom were justifiably acquitted--no one has even been charged with crimes.

Well, almost no one.

After an exhaustive investigation that included multiple agents, multiple criminal theories, dumpster diving, disguises, impersonations, and a secret wire, the government has finally nailed one alleged mortgage crook.

His name is Charlie Engle.

He's an ultra-marathoner.

And a homeowner.

A homeowner who may have overstated his income on a "liar loan."

Read more: http://www.businessinsider.com/charlie-engle-2011-3#ixzz1HphaRvUr

"Nothing more clearly shows how little God esteems his gift to men of wealth, money, position and other wordly goods, than the way he distributes these, and the sort of men who are most amply provided with them." - Jean De La Bruyere

In December of 2006 I relocated half way across the country.  This was a good thing because I had accepted a promotion for a new position. During the relocation process my wife and I made several house hunting trips to the area searching for a new home.  Once we found it I went about arranging our financing for a mortgage.  After applying with several banks and mortgage lenders I thought I had found a good deal. I had shopped the rate, points and other closing costs for the best terms.  After numerous phone calls I had a good offer from a promenade national bank and I was ready to lock the rate. That is when a competing loan officer with company X caught me on the phone and I told her about the deal I was about to accept with the bank.  She reassures me that she could beat the deal I was about to make and she did.  I don't now recall all of the specifics but it was a better rate by approximately a quarter of a point with exactly the same terms. She told me that this was a loan with the same 30-year fix rate mortgage the bank was offering.  So thinking I had a better deal I locked the rate with company X.  

Flash Forward One Month:

My wife and I arrived at the closing company excited and filled with anticipation about closing on our new house.  We literally had the moving van waiting at the curb to bring in our furniture.  The closing was a marathon of signatures.  As usual there was a competent assistant that walked us through tons of legal paperwork.  Despite her explanations I try diligently to read as much as possible before signing my life away. Eventually, we got to the mortgage paperwork and the assistant reviewed the terms of the loan quickly.  I paused because the terms she described were not what I had agreed to previously with the loan officer. Instead of the 30-year fixed rate I was promised, the loan they had prepared was a lower monthly adjustable rate mortgage. After expressing my reservations the reply I got was that this was a better loan; the rate was lower and it would save me money every month given the lower payment.  I told the closing company employee that this was not what I had agreed to and I that I wanted the loan with fixed terms per my previous agreement. They explained that this apparent error was in my benefit and to correct it with a fixed rate loan would take several days to prepare. The bottom line, I was left to either accept the loan as it was or to walk and wait several days until the correct loan paperwork could be prepared.  

There have been many news stories on this topic over the last several years. Therefore, I tell this story, one because it is true. Second because it is full of greed and deception both on micro/personal and macro/national scale.  For starters the loan officer who agreed to terms with obviously no intent of selling me the loan I requested.  This was a classic bait and switch move.  Secondly, the closing company and their employees who were likely in some form of collusion given their attempt to facilitate the deal with quick responses to my concerns. But lets take this up the corporate ladder several levels higher to the executives at company X who where signing off on entire books of business that made up loan packages such as these.  Packages that when the rates climbed, as they eventually did, would be un-payable by the mortgagee.  The more money that was put in force or loaned out meant larger bonuses and commissions for all involved. Those executives at the top who were issuing and approving these loan packages were intelligent investors who knew exactly what they were doing.  I cannot help but wonder what justifications were used to convince themselves that this was good sound business. It would seem that they told themselves that if the mortgagees were willing to accept loans with such bad terms then it was not their fault.  Here lies the sin, "Am I my Brother's Keeper?"  But lending money to someone knowing that in time they would not have the ability to repay the debt is unethical and immoral regardless of legality.  

I can't help but picture in my minds eye some executive sitting on the back of their yacht contemplating what they likely would have described as an, "Ethical Dilemma."  This moment, however brief, was the exact moment they put a price tag on their ethics, morals and values.  

I walked. Had I signed the paperwork I would have more than likely lost everything including my house.  As we now know the rates did go up. And many people were not able to make their house payments resulting in the loss of their homes. These defaulting loans set into motion spiraling real-estate prices that has been a driving force behind a massive financial crisis that our economy has yet to recover.  I later found out that many of my neighbors had a similar experience and some fell victim to the deceptive tactics used at the closings.  These monthly adjustable loans were mostly for houses they could not have afforded otherwise.  I personally saw several of these people lose their houses and fall into financial ruin.  One couples marriage even ended in divorce months after the bank had taken back their home. Their financial peril no doubt contributed to the demise of the marriage. They had five children.  

Greed and Deception carry a heavy price.  One that an entire nation continues to bear.

For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows. But thou, O man of God, flee these things; and follow after righteousness, godliness, faith, love, patience, meekness. --1 Timothy 6:10,11

I did not want to name "Company X" who was offering the adjustable loan using such tactics as described above because it was not necessary for the story, but lets just say it happened country wide.