Outrageous | Good Deeds Punished: State-Run Mortgage Lender Forecloses on Californians Current on Their Loans

Now this makes sense… /sarcasm

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Good Deeds Punished: State-Run Mortgage Lender Forecloses on Californians Current on Their Loans

A report prepared for the California Senate Rules Committee
October 24, 2011

California Senate Office of Oversight and Outcomes

Executive Summary

Despite the housing slump, the California Housing Finance Agency is taking an unusually strict line with borrowers who are trying to avoid severe losses by renting out their residences, in some cases foreclosing even though the borrowers are willing and able to continue paying. The practice not only puts borrowers in a bind – it costs the agency money.

Battered by the real estate downturn, the California Housing Finance Agency, known as the state’s affordable housing bank, recently shifted its focus from making low-interest home loans to reducing foreclosures in
the overall market.

“Preventing foreclosures will not only benefit the families directly impacted, it will help stabilize neighborhoods, communities and the entire California economy,” according to the state agency’s latest annual report. Yet CalHFA is forcing some of its own borrowers into foreclosure – even though they stay current on their mortgage payments. The agency is trapping others in homes that they have outgrown.

These borrowers want to rent out their CalHFA-financed homes because of a change in life circumstances, such as getting married or having children. In a normal real estate market, they would have sold their houses or condos and paid off their mortgages. Selling now means severe losses. Instead, they hope to lease out their residences until the housing market begins to recover.

But unlike state housing finance agencies in most other states, CalHFA is hewing to a strict policy of allowing rentals only if the borrower is facing an unforeseen economic hardship such as the loss of a job.

It has foreclosed on at least 21 borrowers who were violating its requirement that a borrower occupy the home for the life of the mortgage.

That number may just be the start. Another 49 borrowers who rented out their residences are delinquent, likely headed for foreclosure. Still more, 186, are renting out their CalHFA-financed homes without permission.

CalHFA is telling these borrowers they must return to their homes, pay off their loans in full, seek a waiver or face foreclosure.

Much of this activity has occurred within the past year. So far in 2011, the agency has sent out 218 “acceleration” letters, notifying borrowers that they are in technical default and must take action or face foreclosure.

As the housing crisis continues, these numbers will keep growing.

The agency says it doesn’t know how many borrowers were denied permission to rent and as a result remained in homes they no longer consider suitable or moved back in to avoid foreclosure.

Nor does it seem to have a firm grasp on the size of the problem. Between May and October 2011, the agency provided the Senate Office of Oversight and Outcomes three widely varying sets of statistics of borrowers who were denied permission to rent or renting without its approval.

The state of affairs at CalHFA should not be confused with the larger foreclosure crisis among private lenders, in terms of the number of people affected or the causes. But the relatively small number of borrowers squeezed by CalHFA’s policy find themselves in a unusual situation not seen in the private sector: They are willing and able to live up to their commitments, only to be told that their mortgage payments will no longer be accepted.

Among those who have run afoul of CalHFA’s policy is Marcia Wold. The Mountain View school teacher bought a condo in Sunnyvale with a CalHFA loan. She loved living in a quiet place with a pool a few steps
from her door, so happy to have her own washer and dryer that she actually looked forward to doing laundry. But after marrying a man with a young son from a previous marriage, she concluded they could not live in her 724-square-feet place. She moved into the house that her husband co-owns with his parents.

Even after she rented out her condo, she was losing $1,000 each month.

Still, she was determined to meet her obligation to keep paying her note until she could sell or refinance. Somehow, CalHFA found out she was renting and foreclosed.

Wold cried the weekend before the foreclosure sale.

“They took away a part of me, because I worked so hard for it,” she said.

“This represented that I had made it. And they took that away from me.”

CalHFA also denied Wold’s request to forego reporting the technical default to credit reporting agencies. Her credit rating has dropped from a stellar 802 to 679, complicating the couple’s hopes to refinance the Los Gatos house where they now live.

Other borrowers told our office that they are remaining in or returning to properties they have outgrown to avoid foreclosure.

“I think it’s a horrible program,” Dan, an active duty member of the Navy, said in an interview. Dan is headed for foreclosure because he rented out his 820-square-foot condo at a loss after getting married and having a child. “It’s almost like predatory lending. You expect something like that from Countrywide, but not from (an entity) with the name California in the title.”

Not only does the policy disrupt the lives of the borrowers – it costs CalHFA money. Each foreclosure, on average, translates into $38,000 in uninsured losses for the agency. Now that two CalHFA insurance funds
have been wiped out by foreclosures, each new default costs more than $50,000 in uninsured losses.

CalHFA officials say they must adhere to the policy because of an opinion from the bond counsel for many of its issuances. The bond counsel interpreted a section of the Internal Revenue Code as prohibiting renting.
It advised CalHFA that federal law requires a borrower whose loans come from tax-exempt bonds to remain in the residence for the life of the mortgage. Most other states surveyed by our office, facing the same wave of rental requests from distressed homeowners, interpret the IRS code differently.

They say that it’s enough for borrowers to live in the property for a reasonable time. Only two states – Nevada and Georgia – maintain policies of foreclosing on borrowers who rent but are current on their payments. A Georgia official said his agency has not had to resort to that type of foreclosure for several years.

The IRS limits the number of loans that don’t comply with the owneroccupancy requirement to 5 percent. CalHFA officials believe that exceeding the cap could threaten the tax-exempt status of the bonds that have traditionally funded their single-family loan program.

Yet, even if the agency granted a waiver to every property now being leased without permission, the total would add up to only 1.68 percent of its loans – well below the IRS limit.

Officials for other state housing agencies say that another reason they don’t foreclose is to avoid financial losses. They also point out that foreclosing on borrowers who are in a bind because of the upside down market runs counter to their mission.

“We’re not going to be foreclosing on homes if they’re making their mortgage payments in this market,” said Lisa DeBrock, homeownership program manager for the Washington state Housing Finance
Commission.

Minnesota is one of the states that take a more forgiving approach. Years ago, the state decided not to foreclose on borrowers who moved out and rented because of a change in life circumstances.

As a Minnesota Housing official told our office, “Life happens down the road.”

Full report below…

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4closureFraud.org

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Good Deeds Punished: State-Run Mortgage Lender Forecloses on Californians Current on Their Loans

Comments
15 Responses to “Outrageous | Good Deeds Punished: State-Run Mortgage Lender Forecloses on Californians Current on Their Loans”
  1. CaitlinO says:

    Thank you, Mildred, for being a sane voice in the wilderness.

    One of my sisters is hopelessly upside down on a VA loan facing many of the same kinds of restrictions described in this article. Should we assume that the Veterans Administration has somehow been sucked into some Jesuit/nazi/NWO/Rome plot? Why not blame this mess on the Martians while we’re at it?

    I’m a firm believer in Occam’s Razor and the simplest explanation here is simply that some institutions, like the CA state lender and the VA, have not adjusted their policies to reflect today’s mortgage realities. They’re not evil, not corrupted by the ‘other,’ not out to get you, they’re just institutions moving at institutional speed which have not caught up yet to the fact that the entire housing paradigm has been upended.

    That’s all. No conspiracy, just the historical lags of human organizations.

  2. Ron Moss says:

    Not to change the subject but to change the subject From Romney to Ron thats not to far away for you to think but now you can understand my thinking. Ron Paul has a thirty year record of being wise to the bankers. Don’t doube me on it He knows how tro fire Ben Bernanke and why. And nobody owns him he is a free man. Liberty is his Dr. No nick name.

  3. I vent…Yes…that is past history carried forward…but we are dealing with what is happening today….Today it is the world that is angry and many millions have woken up….We cannot change what or where it started……..but this is today……this is what we are confronted with….End the Federal Reserve….it is counterfeit money….a fake…worth nothing….it feeds the criminals who have caused massive financial damage to our country and the world…..We must have complete control of the money. Why this country ever allowed a ‘private’ corporation to control our money is insane….and one can only think of those who held the position in the U.S. Treasury as one who wore a mask….and have/had deep pockets……We must charge the President with Treason….and past Presidents with same….for siding with the NWO that planned to ruin America. Remember this all just didn’t start…. CONgress needs to all be removed from office, except those who have sided with all the people and helped our country by speaking up and all must have clean records from past….there are a few that have been there for the people. Until this is done….it will only get worse…..we have no choice at this time. We must have our Constitution and the Bill of Rights back ….that is our right.

  4. Bobbi Swann says:

    How can this be legal? What I don’t understand is why haven’t these borrowers filed counter suits agains the CAL HFA. Housing Finance Authorities are funded by FEDERAL tax dollars for their bond issuances. Someone needs to do some research and homework on the authority of the HFA and whether that interpretation by their ‘counsel’ would be in conflict with another opinion by a tax authority, such as a CPA. Surely there must be someone who can challgenge this situation instead of just sitting back and letting them foreclose on these people!

    • lvent says:

      Bobbi, This is NWO terrorism being committed from within..This is treason..Sad thing is, this is only the begining of the blackmail and extortion coming there way…Isn’t Cali a non-judicial state…The people of Cali should all stop paying.. An attorney told me a while back, the more people who go into fraudclosure, that means no one is in fraudclosure and the banks then cannot fraudclose…I think he said it would have to take at least half of the country to quit paying the mortgage….My pretender lender servicer told me to stop paying the mortgage until I got my loan mod package…I asked her, That won’t put me in foreclosure..? She told me..you are always in foreclosure. Nice huh…? For what the U.S. Government have allowed these NWO criminals to put the American people through, they should all be forced to resign by We The People. It is no way to live..It is stressful and destructive to society….all to save the criminals who are working for the NWO towards our demise…Time to tell the politicians they are all fired and for everyone to stop paying for everything…student loans, mortgages, property taxes, credit card bills…stop using their debit and credit…!!

      • I vent……this government is of the NWO….for at least 30 years and more ….it has gone against this country….we all know by now all that has happened since 2000 for sure….everything was an inside job…why is the Unitd States involved with the World Bank since the mid 40’s ….and the UNITED STATES BEING THE LARGEST SHAREHOLDER BY FAR IN THE WORLD BANK……OWNED BY the crimonal nazi’s…ROME……?? TREASON HAS FILTERED THROUGHOUT ALL OR GOVERNMENT….they are the NWO …..their silence speaks the truth…..can you hear the silence ?? Our own government wants this country to be taken over by the NWO…PEOPLE NEED TO UNDERSTAND THIS….IT’S THE GOVERNMENT THAT IS OUR TRUE ENEMY….IT HAS BEEN FOR MANY YEARS. WAKE UP……………..

      • housemanrob says:

        Marilyn….This post proves….to me that it is not about foreclosure….but it is about the destruction of America!

      • ROB….That is the way I read all the articles….I look in deepth not surface. Surface is the frosting that hides the fallen cake to make it look so perfect…..until you cut the cake you see no fallen unlevel cake….but once you cut the cake you see what was hidden below the frosting.
        I, too, see only destruction….we have advanced nowhere…..if so, where? It’s the same everyday…just different articles to hide the fallen cake.

      • housemanrob says:

        Marilyn……meanwhile the situation is getting worse…not better! The banks don’t ever cooperate and Obama and the powers that be…….just continue to ride us in circles…..like circus horses!

      • lvent says:

        Marilyn, The Jesuits have been trying to own America since the founding of America….They are behind all of the wars, the assassinations, the manufactured economic crisises..The Fed… taxes…. the last Great Depression, 9/11…the current manufactured financial crisis..All of the presidents were puppets except for J.F.K…and we know what he got for telling the CIA he was their boss….anything a president does that is not on there agenda is an impeachable offense or they get shamed, humiliated or killed….. Nixon resigned because he got caught trying to get his name off of anything that tied him to the J.F.K assassination….Clinton would have been thrown out if he did not go along with their evil plans…They set up Elliot Spitzer for investigating them…That is what they do..look for weaknesses they can use against you….

      • Rob….I agree with you….the banks are not going to corporate…they are following their owners rules and demands….to take it all from the people…bottom line….they were paid very high rewards to do their job…Rome saw to that….and so has the government been paid well to see that all goes as planned. .if not…they too may be past tense…………..
        It is upto the people of this country….just how long we will stand the corruption and the Treason….treason has been proven….not only now but in the past. There are living presidents and VP’s who are also guilty and many others……and they all know who they are.
        Until we start cleaning out Washington DC and end the Federal Reserve…..nothing will be solved. And this cannot wait till the next election that is a year away.

    • Hi all,
      One of the challenges owe all face in these trying times is to respond emotionally to something which is clearly offensive without:
      a. knowling all the facts–none of us do
      b. perhaps without having a bais understanding of the orking of the organization in question

      I DO NOT have allthe facts in this case
      However, I do have a great deal of experience working with state housing agencies AND a very strong background in real estate, foreclosure (and related issues) and understanding mortgage documents. As a trainer for foreclosure intervention (my students were attorneys, REALTORS and housing counselors)
      I am writing to ask that the posters on this site not lose sight of the particular details in each situation raTHER THAN JUMP TO THE CONCLUSION THAT EVERYTHING WHICH DOES NOT GO JUST THE WAY A CONSUMER WANTS IT means that someone or some organization is out to get them. that is NOT always the case.

      Like in this case.

      It is legal ( in ALL the states) for a lender to foreclose on your loan IF you have purchased it as a primary residence and the you then lease it out- & YOU DON”T LIVE THERE AS YOUR PRIMARY RESIDENCE.

      That is a violation of the terms of your mortgage and foreclosure is an OPTION the lender has. Having said that, could the CAL housing authority find another solution; perhaps they could, certainly some other states have chosen not to enforce their rights just because they can.

      My reason for writing is to ask each of you to verify the facts of YOUR situation, starting with reading your own personal mortgage (which has the same language in it) so that you remain more credible because you are speaking from an informed position rather than an emotional one.

      Second, do not dilute the impact of the FIGHT by calling someone or some agency out when they are RIGHT/LEGAL in their behavior.

      cal housing agency IS OPERATING WITHIN THEIR LEGAL RIGHTS.

      I will not respond to even one negative comment to or about me. This fight is too important for insignificant crap.

      We lose credibility if we take off on a tangent when we are wrong.

      Grounds for excelarating the note include:

      a. abandonment (including leasing it out)
      b. sale of the property without permission–(yes, that included selling on contract and doing a quit claim
      deed to an investor but not recording it)
      c. letting someone else assume the payments–without lender approval (that could be leasing it out or
      some other terms to let someone else ASSUME the payments)

      None of these involve MISSING payments, but all of these actions could legally lead to foreclosure.

      And in this case, CAl HA and all the other state housing agencies, they have made an investment into the property and the terms of their loans are:

      a. neither hidden
      b. nor significantly different from ALL other mortgages as relates to what constitutes default and what the
      consequences will be

      Remember, I am just passing on some facts here so there is no need to yell at me or get mad. Read your docs.

      Hope this helps.

      • housemanrob says:

        Mildred…..You are trying to instill reason where there isn’t any……..millions of us lost our homes after being conned into fraudulent mortgages……try lining up all of the Americans that lost everything and telling them what you posted here……you would be booed….hissed…..and run out of town…….

      • Mildred….I don’t deny your past experience or where you have come from or are going…but may I suggest that since you have such expertise in the issues of foreclosures and foreclosure intervention…it would be very helpful to list what the banks have done…such as fraudulent deliberate actions from the closing on or even before……each mortgage may be somewhat different but the frauds have a pattern… very consistent…holding to the same pattern of practice.of fraud…
        We have been at this for many years now and we certainly know what the documents state. You must follow this site as you have now commented on it so you know all what we have said. Yes, some are emotional…and they have a right to be emotional…but soon they learn just what has really gone on behind all the mortgages and than anger sets in. Most of us are very well educated in the field of foreclosures …so we know what is right and what is wrong. Just list and tell the people what to look for..to help them….not the rights of what a bank or documents can do. You are living in the far past when foreclosures were very few and far apart…..but let’s address millions that have lost their homes…because you and I both know there is alot more than what you are saying…..there is 2 sides to these foreclosures….one is the bank and the other are the victims who are holding fraudulent documents….and the banks cannot find the original Notes….and the bank did not lend any money. So let’s hear what you have to say about the Note and the lending……for starters.

      • lvent says:

        Mildred, can you explain to me why they altered the mortgage after the closing? Forged mine and my husbands initials next to the alteration and recorded that altered document ? …There is NO LIEN ON MY PROPERTY…THE RECORDERS OFFICE GOT RIGHT TO MY COLLATERAL DEED WITH NO LIENS ATTACHED….The clerk told me no one has recorded a proper release or assingment in 19 years…the clerk told me because of this, my house is paid for, I can live in it, sell it or do whatever I want with it…yet I am still fighting fraudclosure….When they committed the CLASS 3 FELONY OF FORGERY UNDER ILLINOIS LAW (720 ILCS 5/17-3), A PERSON COMMITS THE CRIME OF FORGERY WHEN, WITH THE INTENT TO DEFRAUD, THEY KNOWINGLY, (1) MAKES OR ALTERS ANY DOCUMENT APPARENTLY CAPABLE OF DEFRAUDING ANOTHER OR AT ANOTHER TIME, OR WITH DIFFERENT PROVISIONS, OR BY AUTHORITY OF ONE WHO DID NOT GIVE SUCH AUTHORITY: (2) ISSUES OR DELIVERS SUCH DOCUMENT KNOWING IT TO HAVE BEEN THUS MADE OR ALTERED; OR (2) ISSUES OR DELIVERS SUCH DOCUMENT KNOWING IT TO HAVE BEEN THUS MAD OR ALTERED: OR (3) POSSESS, WITH THE INTENT TO ISSUE OR DELIVER, ANY SUCH DOCUMENT KNOWING IT TO HAVE BEEN THUS MADE OR ALTERED: OR (4) UNLAWFULLY — USES THE DIGITAL SIGANTURE, AS DEFINED IN THE FINANCIAL INSTITUTIONS ELECTRONIC DOCUMENTS AND DIGITAL SIGNATURE ACT; OR (5) UNLAWFULLY — USES THE SIGNATURE DEVICE OF ANOTHER TO CREATE AND ELECTRONIC SIGNATURE OF THAT OTHER PERSON, AS THOSE TERMS ARE DEFINED IN THE ELECTONIC COMMERCE SECURITY ACT……AND THEY ENTERED THAT ALTERED MORTGAGE DOCUMENT IN THEIR FRAUDCLOSURE COMPLAINT…WITH NO ASSIGNMENT EVER RECORDED…TO THEM…EVER..AND THEY STAMPED OVER ALL OF THE FORGERIES IN SUBSEQUENT FILINGS…….ILLINOIS LAW REQUIRES THAT ANY TRANSFER OF THE NOTES MUST BE RECORDED…AND MILDRED, THAT IS JUST THE TIP OF THE ICEBERG..DON’T GET ME STARTED…..THEY ARE CRIMINALS COMMITTING FEDERAL CRIMES IN CIVIL COURTS..AND SUBMITTING FALSE, FRAUDULENT FORGED EVIDENCE IN CIVIL COURTS…TO STEAL HOMES, THEY HAVE NO LEGAL RIGHT TO TAKE AT ALL…AND THEY NEVER LENT US ANY MONEY…THEY COMMITTED MASSIVE COLLATERAL MORTGAGE FRAUD IN OUR NAMES.AND THEIR DEBT IS MASSIVE AND UNSUSTAINABLE……AND THEY ARE STEALING HOMES THEY HAVE NO LEGAL RIGHT TO TAKE FOR THEIR OWNERS WHO WERE ONLY INVESTORS IN THE MONEY FLOW…IT WAS A GAMBLE…THEY ALL MADE TRILLIONS ON…AND THEY DO NOT OWN OUR HOMES..GET ON BOARD MILDRED, THIS WAS A HITLER PLAN BY THE RULING ELITE TO STEAL EVERYTHING FROM THE PEOPLE UNDER THE GUISE OF DEBT…WHICH IS NOT OUR DEBT…IT IS WALL STREETS DEBT…

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