Mortgage servicers, who collect monthly payments on home loans, are allowed to charge homeowners for items such as property inspections, lawn mowing and other services designed to protect the lender’s financial interest in the property, the FTC said.  But as the housing market collapsed, Countrywide created subsidiaries to do the work, then marked up the price of those services by 100% or more, charging homeowners the fees to increase profits from default-related services in bad economic times, the FTC said.  “Life is hard enough for homeowners who are having trouble paying their mortgage. To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible,” FTC Chairman Jon Leibowitz said.

Countrywide also failed to tell borrowers when it added new charges to their home loans and made “false or unsupported claims” to borrowers about the how much they owed on their loans, the agency said. The marked-up fees were collected as part of repayment plans, mortgage modifications, foreclosures or bankruptcies.  The settlement creates a $108-million fund to provide refunds to homeowners who were overcharged before July 2008, when the company was bought by Bank of America.

Bank of America agreed to settle the charges “to avoid the expense and distraction associated with litigating the case,” it said in a statement. The settlement involved no admission of wrongdoing, BofA said. The settlement requires the company to stop the practices.  Once the court approves the settlement, the FTC said it would notify eligible homeowners in a process that could take several months. The agency has a website with more information, at the FTC website.

One reason is that figuring out whether to stay or walk requires calculations too complicated and time consuming for the average homeowner to perform. For those who don’t want to do the calculations themselves, the online “Does It Make Financial Sense To Walk Away & Rent?” The calculator at YouWalkAway.com can help.

Just enter in your home’s value, what rent you would pay for a comparable home, your annual mortgage tax savings, your housing debt and mortgage interest only payment, how long you plan to stay in your home and expected depreciation or appreciation of your home, among other figures. To estimate your home’s value, the site Zillow.com and this Home Price Calculator can help. To estimate depreciation or appreciation, the average of how much your property would go up or down over the designated years you would plan on staying in the home, you may want to stick with the historical appreciation rate of around 3 to 4 %, Professor White said.  The calculator will then tell you how much you’ll save or lose by walking away. You’ll need to decide whether the savings, if any, are worth walking away. In making your decision, you may also want to consider foreclosure costs and the impact on your credit as well as other factors in the equation.

According to Professor White, even if it would make financial sense to walk away, many people don’t because of emotional constraints, including the desire to avoid shame and guilt as well as an exaggerated fear of the consequences of foreclosure — emotions encouraged by everyone from the government to the media. “This moral norm is perpetuated by all kind of institutions and individuals,” Professor White said. How much would you save or loss if you walked away? Will you stay or walk?  Article was written by JENNIFER SARANOW SCHULTZ

When it comes to loan modification plans, the industry is crowded with many self-proclaimed “loan-modification consultants” who often end up being scam artists.  Hopefully, Arizona’s new law will help eliminate the loan mod companies profiting on their scams that have given good loan modification companies a bad name in Arizona.  Do your research when considering a loan modification law firm or foreclosure prevention lawyers.  The article was written by Bob Hertzog who is a mortgage broker operating in Phoenix, Arizona.

Ohio attorney general Richard Cordray singled out Uri Gofman of Beachwood, Ohio, as the scam’s ringleader, saying he enlisted family, friends and others to invest in his real estate company, Real Asset Fund, with promises of profit. Mr. Gofman’s alleged enterprise began with seed money from an investor who transferred funds from a bank account in Latvia.

The scheme involved using straw buyers to purchase homes, falsely claiming home improvements were performed on houses in order to refinance them and then selling houses to unqualified buyers with the assistance of real estate agents, mortgage brokers and title companies. The defendants, who were unavailable for comment, allegedly siphoned off more than $31 million in profits from their criminal enterprise. Eventually, 358 of the homes fell into foreclosure. The Cuyahoga County Mortgage Fraud Task Force was formed in December 2007. To date, 289 defendants have been indicted on mortgage fraud charges involving $111 million in loans on 812 homes, 616 of which are now in foreclosure.

The Home Affordable loan modification program maintains a specific criteria so it is imperative to understand if you qualify for refinancing or loan workouts. Borrowers must currently have a mortgage serviced by Fannie Mae or Freddie Mac.

The Obama administration’s program has two parts: one to work with lenders to restructure the loan terms for up to 4 million homeowners; the second, to refinance up to 5 million homeowners into more affordable fixed-rate loans. For the loan modification program, borrowers who are eligible will have to provide their most recent tax return and two pay stubs, as well as an “affidavit of financial hardship” to qualify for the loan modification program, which runs through 2012. Homeowners are only allowed to have their first and second mortgage loans restructured once, and the loan relief program is only applicable for home loans that closed prior to January 1 2009, or earlier. Home mortgage loans for single-family homes that are valued more than $729,750 are not eligible for the federal loan modification plan.

There was also skepticism that mortgage lenders and banks would be willing to participate. “I’ve just seen so many of the refinancing and foreclosure prevention programs not work,” said Jason Cardiff, president of Kelly Media Group, a full-service marketing company that services mortgage lenders, law firms and loan modification companies. Cardiff continued, “Southern California borrowers with mortgages above the $700,000 loan amounts are not excited that they have been excluded from this financial relief funded by the recent stimulus package.” Mr. Cardiff was asked about the fairness of the mortgage relief bill and he responded, “No it’s not fair, but helping some borrowers is better than not helping any homeowners.”

Nationalization is scary, but so is the alternative: The malaise and mismanagement we have witnessed since the financial system started breaking down last summer.  US Government looks to quell nationalization fears; FDIC says additional mortgage relief and financing aid will hinge on stress test without nationalization yet taxpayers have invested billions bailing out subprime lenders and banks, with precious little to show for it.

Can nationalization be much worse?  Granted, there are great risks to nationalization. For starters, there is the basic philosophical quandary. It’s tough for a country to take over a large swath of its banking sector and still tout itself as the first, best bastion of capitalism.  Execution risks abound too. University of Chicago business school professor Raghuram Rajan notes that nationalized banks would be subject to political pressures. They might weaken the economy by keeping failing companies alive. And nationalization would amount to a government rescue of bank bondholders, who don’t deserve the help.  The economic arguments are persuasive. But they ignore policy realities that indicate a well-managed and limited nationalization effort could be a net benefit. Nationalized banks could serve broader interests, such as increasing lending and providing mortgage relief.  The effort to spur mortgage lending has had little discernible effect on private-sector banks.

Taxpayers have invested $350 billion in the bank bailout so far, with $350 billion more on the way. The money has not had the intended effect of spurring lending or eliminating so-called toxic assets. One sign of how this could be different came from Great Britain. Northern Rock, a bank nationalized last year by the British government, on Monday announced a plan to write $7 billion in new mortgage loans this year and nearly double that next year.  Read complete article by David Greising.