Thursday, February 24, 2011

Comments on Cramming

The FTC will hold a workshop on cramming-when unauthorized third-party charges appear on a consumer's phone bill, on May 11th. The FTC is collecting comments on this issue as well. You can find out more by going to their website at:


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Obama seeks multibillion dollar settlement of loan servicing cases

The fact that struggling home-owners have faced challenges securing loan modifications, avoiding foreclosures, or even speaking with someone who could offer real assistance is not news. Last fall, allegations that bank employees signed off on foreclosure documents without reviewing the facts in the cases echoed concerns that consumer advocates had voiced for several years. Examinations of the "robo-signing" issue revealed other weaknesses in the document and foreclosure processes which had again already been raised by consumer advocates. Now, the federal government is pushing for banks to agree to a meaningful settlement.

In Maryland, Senator Brian Frosh has introduced several bills which address the problems with "robo-signers" and defects in the current document foreclosure process. Delegate Doyle Niemann is introducing legislation in March to make Maryland's innovative foreclosure-mediation program more consumer-friendly. MCRC is supporting these efforts.

Read about the national settlement proposal below from today's Wall Street Journal:

U.S. Pushes Mortgage Deal

Obama Proposal Seeks Multibillion-Dollar Settlement of Loan-Servicing Cases


The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force America's largest banks to pay for reductions in loan principal worth billions of dollars.

Terms of the administration's proposal include a commitment from mortgage servicers to reduce the loan balances of troubled borrowers who owe more than their homes are worth, people familiar with the matter said. The cost of those writedowns won't be borne by investors who purchased mortgage-backed securities, these people said.

If a unified settlement can be reached, 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, these people said.

But forging a comprehensive settlement may be difficult. A deal would have to win approval from federal regulators and state attorneys general, as well as some of the nation's largest mortgage servicers, including Bank of America Corp., Wells Fargo & Co, and J.P. Morgan Chase & Co. Those banks declined to comment.

A settlement could help lift a cloud of uncertainty that has stalled the foreclosure process since last fall. Economists have warned that foreclosures need to proceed for the housing market to continue on a path to recovery. It's unclear how many borrowers would benefit from a deal. Servicers have thus far had difficulty managing the volume of troubled loans.

So far, most loan modifications have focused on shrinking monthly payments by lowering interest rates and extending loan terms. Banks, as well as mortgage giants Fannie Mae and Freddie Mac, have been shy to embrace principal reductions, in part due to concerns that many borrowers who can afford their loans will stop paying in the hope of being rewarded with a smaller loan. But some economists warn that rising numbers of underwater borrowers will drag on housing markets and the economy for years unless more is done to help them.

The settlement terms remain fluid, people familiar with the matter cautioned, and haven't been presented to banks. Exact dollar amounts haven't been agreed on by U.S. regulators and state attorneys general. Regulators are looking at up to 14 servicers that could be a party to the settlement.

The deal wouldn't create any new government programs to reduce principal. Instead, it would allow banks to devise their own modifications or use existing government programs, people familiar with the matter said. Banks would also have to reduce second-lien mortgages when first mortgages are modified.

Several federal agencies have been scrutinizing the nation's largest banks over breakdowns in foreclosure procedures that erupted last fall. Last week, the Office of the Comptroller of the Currency said only a small number of borrowers had been improperly foreclosed upon. But the regulator raised concerns over inadequate staffing and weak controls over certain foreclosure processes.

A settlement must satisfy an unwieldy mix of authorities, including state attorneys general and regulators such as the newly formed Bureau of Consumer Financial Protection, who support heftier fines. They must also appease banking regulators, such as the OCC, that are concerned penalties could be too stiff.

"Nothing has been finalized among the states, and it's our understanding that the federal agencies we are in discussions with have not finalized their positions," said a spokesman for Iowa Attorney General Tom Miller, who is spearheading a 50-state investigation of mortgage-servicing practices.

Last autumn, units of the nation's largest banks were forced to suspend foreclosures amid allegations that bank employees routinely signed off on foreclosure documents without personally reviewing case details. In subsequent examinations, federal bank regulators said they found deficiencies and shortcomings in document procedures and other violations of state law.

At issue now is a debate over who has been harmed by improper foreclosure practices, and how much. The OCC's examination concluded only a "small number" of borrowers were improperly foreclosed upon, and banks have argued that any settlement should reflect that fact. Other federal agencies and state officials say banks exacerbated the woes of troubled borrowers by resisting the necessary investments in staff and technology to provide timely, effective help.

Under the administration's proposed settlement, banks would have to bear the cost of all writedowns rather than passing them on to other investors. The settlement proposal focuses on pushing servicers who mishandled foreclosure procedures to eat losses, by writing down loans that they service on behalf of clients. Those clients include mortgage-finance giants Fannie Mae and Freddie Mac, as well as investors in loans that were securitized by Wall Street firms.

Bank executives say principal cuts don't necessarily improve payment patterns, and have told other parties involved in the talks that principal reductions could raise new complications. First, it will be difficult to determine who gets reductions and who doesn't. And even if banks agree to a $20 billion penalty, the number of mortgages that can be cured with that number is limited, one of these people said.

If a single settlement can't be reached, different federal agencies could seek smaller penalties through regular enforcement channels, and banks could face the prospect of separate civil actions from state attorneys general.

Any settlement could be one of the largest to hit the mortgage industry. In 2008, Bank of America agreed to a settlement valued at more than $8.6 billion related to alleged predatory lending practices by Countrywide Finance Corp., which it acquired that year.

—Robin Sidel contributed to this article.


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Monday, February 21, 2011

Things we protect and things we don't

Here are some things we protect with performance bonds in Maryland:
  • Sewage sludge removal;
  • Hazardous waste removal;
  • State construction projects;
  • New home construction;
And here are some things we don't protect:
  • Home-improvement projects that cost more than $20,000
What's wrong with this picture?

I live in a historic neighborhood in Baltimore City, MD. I love the tree-lined streets, the old, stately homes, and the 'character' found in the plasterwork, wood floors, and details. Yet, this character can be pricey to maintain or to imitate through careful home improvements designed to restore a home to its former glory.

As a former Sierra Club staff member, I know that small changes add up in terms of energy conservation. I do what I can to respect the earth and conserve energy. Yet, environmentally sustainable home-improvement projects are often more expensive in the short-run.

Shouldn't home-owners who choose to stay in cities or embark on green renovations be protected as well as those home-owners who have smaller jobs (who are protected under Maryland's Guaranty Fund)? Shouldn't they be protected in the same way that those who build new homes are? Shouldn't they be protected in the same way that state construction projects are?

If you agree, let your legislator know.

Tomorrow, the House Economic Matters committee will be hearing MCRC's proposals to require contractors to purchase performance bonds for larger jobs; publish the name and license number of contractors so home-owners can make informed decisions, and include stronger consumer protections and disclosures in contracts.

Call or email your legislators and ask them to support HB 362 with amendments.


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Saturday, February 19, 2011

Protect home-owners they way we protect public works

MCRC is working with home-owners who lost $1 million dollars to a licensed home-improvement contractor. We want contractors who work on larger renovations to purchase a performance bond to protect home-owners. Maryland requires performance bonds on its construction projects-why not offer that same protection to Maryland families?

Read more about it here:


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Sunday, February 13, 2011

Consumers better off without debt settlement

New research from the Center for Responsible Lending compares consumers that used debt settlement firms with those that settled their debts on their own. Not surprising, consumers who did it themselves saved money because they were often able to negotiate a hardship rate of 10% APR and were able to pay off the debt more quickly. Researchers found that any fee above 18% results in a net loss for the consumer.

MCRC is supporting Del. Vaughn's bill in the House which caps fees at 20% of the debt, provides stronger consumer disclosures, and regulates lawyers who run debt settlement firms as well as other debt settlement providers.

For a one-page factsheet of CRL's research, contact MCRC at:

Contact your legislator here: tell them you support regulating these firms-Marylanders need real debt relief.


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No link between credit and job performance

MCRC is working with a broad coalition of advocates to support legislation that will limit employers use of credit reports and credit scores. Employers will be able to use credit if a bona fide, job-related reason exists. Traditionally, women, minorities, and youth tend to have lower credit scores. Moreover, as MCRC testified, if a struggling home-owner receives a loan modification through the federal HAMP program, these partial payments are often reported as delinquent to credit agencies. A vicious cycle ensues-trying to save one's home leads to poorer credit, which may limit one's ability to gain work.

Read more about the bill here:

Call your state delegate and senator and tell them you support the bill. You can find out who your legislators are and their contact information here:

Contact MCRC and let us know what they say. Email us at: marceline@marylandconsumers. org


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