Well, when a lender waives prepayment penalties on “pick-a-pay” option-ARM, things must be pretty bad. And it wants out of the whole neg-am loan business. And here’s the proof:

Effectively immediately, Wachovia is waiving all prepayment fees associated with its Pick-A-Pay mortgage to allow customers complete flexibility in their home financing decisions. This includes all Pick-A-Pay mortgages on 1-4 unit residences.

Additionally, for all new loan originations, Wachovia is discontinuing offering products that include payment options resulting in negative amortization.

“I think they’ve come to the stark realization that the product was risky,” said Kevin Stein, associate director of the California Reinvestment Coalition. “They’re bleeding.”

Wachovia shares fell 3.9% to $15.58 during afternoon trading on Monday. The stock has lost 70% of its value in the past year.

For those interested in taking part of State Attorney General Jerry Brown’s lawsuit against Countrywide’s alleging “deceptive” business practices, take heart! We have the information you need:

Consumers who believe they have been victimized by Countrywide Consumers should file a complaint by contacting the Attorney General’s Public Inquiry Unit in writing at Attorney General’s Office California Department of Justice Attn: Public Inquiry Unit P.O. Box 944255, Sacramento, California ZIP code is 94203 or through an online complaint form you can find here.

The case is People v. Countrywide, Los Angeles Superior Court case number LC081846.

California Attorney General Jerry Brown filed a lawsuit today against Countrywide Financial charging that the company forced risky loans on unassuming customers. That means the state joins Illinois in suing the company. Read on:

[Brown] alleged that Countrywide also pushed pre-payment financial penalties that boosted profits and kept people from refinancing out of the loans.

The lawsuit singles out a variety of “teaser rate” loans that Countrywide and other lenders specialized in as housing prices rose. Those offered interest rates as low as 1 percent.

The state said many borrowers mistakenly assumed those were permanent rates because Countrywide often offered that impression. Borrowers then quickly found themselves making higher monthly payments than they expected or could afford.

He gets even more detailed on his own press release where he takes the company to task for “Hiding total monthly payment obligations by selling homeowners a second mortgage in the form of a home equity line of credit,” and “Making borrowers sign a large stack of documents without providing time to read the paperwork.” 

 Oh, it gets interesting every day in the State of California!

I should have noticed something was up when I saw them pulling down the Countrywide Loans signs in Benicia’s Southampton Plaza. I just saw them put up WaMu posters this weekend. That shouldn’t last long either!

A few weeks ago, I talked about how Nehemiah Corp. was getting a lot of heat from the feds for getting people into homes with little if any down (by having the seller pay the down payment.) In today’s Wall Street Journal, it’s revisited again, but home builders are also being taken to task. Some, including Nehemiah Corp.’s CEO, feel all the blame on programs like his is “scapegoating.” Read on:

The FHA estimates that down payments provided by nonprofit groups account for 34% of all 200,000 loans backed by the FHA so far this year, up from 18% in all of 2003 and less than 2% in 2000. And the agency says that borrowers are two to three times as likely to default on their payments when they receive a down payment from a nonprofit.

In current versions of the FHA modernization bill, the Senate would eliminate the down-payment programs and a vote on the bill is expected this week; the House version keeps the program in place. Rep. Frank said in an interview that he believed a compromise could be reached with the Senate that would preserve the program but with tougher lending requirements. “No one is talking about leaving it untouched,” he says.

Personally, if I hear someone utter the words “They need skin in the game” I will kick them. I think that only applies to people walking away, and as I’ve said before, most people are dragged kicking and screaming from their homes. How you can afford it should be based on your salary/paycheck, not whether or not it’s morally beneficial to save $10,000.

As always, comments are always appreciated.

The local office of the U.S. Department of Justice didn’t want to be left out yesterday, so they released a statement that was pretty much lost in the hoopla about 406 others being arrested and charged. Anyway, they were locals, some of which explain why the foreclosure crisis got started –falsifying documents. Read on:

Four involved in an alleged round-robin of bribes and kickbacks to and from a Long Beach Mortgage Co. loan officer to boost commissions and falsify subprime loan applications may have cost millions and contributed to the current foreclosure crisis.

William T. Bridge, 41, of San Francisco, pleaded guilty Monday to filing a false tax return and three counts of paying kickbacks to Dublin resident John Ngo, 27, a Long Beach Mortgage Co. loan coordinator, between 2003 to 2006 and violating the Real Estate Settlement Procedures Act of 1974 (RESPA). Bridge admitted he made more than $10,000 a year from criminal activity in three years and paid Ngo more than $120,000 between 2003 and 2007.

Joel Blanford, 40, of San Ramon, was indicted June 12 on six counts of mail fraud and one count of conspiring to launder money. From 2003 to 2005, while working as a sales representative for Long Beach Mortgage, Blanford allegedly paid Ngo in cash and checks to falsify documents and ignore verification. The indictment said that Blanford allegedly received more than $1 million in commissions and other compensation.

Ngo, of Dublin, who is charged with lying to a federal grand jury that he received no money, pleaded guilty in December and is scheduled to be sentenced on July 14. Bank records later showed that between 2003 and 2007, Ngo received more than $100,000 in checks and bank transfers.

When asked, spokeswoman Lauren Horwood said, “(The department) views Long Beach Mortgage as a victim in the case and they were cooperative throughout the investigation.”

Long Beach Mortgage Co.  was part of WaMu, it’s subprime lender, and they closed it in 2007. As one ex-loan agent in Antioch told me, there was a saying around his local office, “If you can’t get it done, call Long Beach.”

Perhaps if you’re in foreclosure, you might take heart that two guys from Bear Stearns who wildly traded your mortgage for profit were arrested today in New York. (Photo of Ralph Cioffi courtesy of the NY Times.)

The two funds had names as obtuse as the complex subprime securities in their portfolios — High Grade Structured Credit Strategies Fund, and its riskier sister offering, the High Grade Structured Credit Strategies Enhanced Leverage Fund.

And on Thursday, the two fund managers, Ralph R. Cioffi, 52, and Matthew Tannin, 46, who just 18 months ago reveled in their status as top hedge managers in a firm at the vanguard of the mortgage boom, surrendered to federal agents.

Prosecutors are also expected to claim that Mr. Cioffi’s decision in March to move $2 million of the $6 million that he had invested in one of the funds to a less risky Bear Stearns fund is proof that he was putting his interests ahead of investors to whom he owed a fiduciary duty.

When I read this, I thought, “Well, of course, she’s a nurse! They do anything to keep them!” which may be wrong. Anyway, the WSJ had this story about a nurse whose employer gave her a $5,000 interest-free loan to help pay her mortgage when she fell behind.

She’d fallen two months behind after a work injury last year forced her to take a lengthy leave of absence at reduced pay. “If it wasn’t for Baptist, I don’t know where I’d be,” says Ms. Rosario, a single mother of three who also cares for her elderly parents.

But then, I saw another part of the story, although small where a company owner is also helping a little (remember, folks, $2,000 is a lot of money outside of California.)

Read the rest of this entry »

According to a breaking news report by the Wall Street Journal, the federal government and various lender have come to an agreement to better loan modifications for those in foreclosure. More accountability? Maybe. Remember, this is all voluntary, not mandatory, by lenders.

Borrowers seeking help should receive an acknowledgment of their request within five business days once received by the lender, the agreement says, and would in most cases receive a final decision on whether they will receive help with their loan within 45 days. Lenders would also promise to stay in touch with borrowers while reviewing a particular loan — calling, emailing or sending a letter about the status of their help request

Wow, this story is getting uglier and uglier. Apparently Angelo Mozilo, former CEO of Countrywide, liked to keep his friends close and his “enemies” closer by giving them sweet deals on loans. From Conde Nast’s Portfolio’s investigation:

Senators Christopher Dodd, Democrat from Connecticut and chairman of the Banking Committee, and Kent Conrad, Democrat from North Dakota, chairman of the Budget Committee and a member of the Finance Committee, refinanced properties through Countrywide’s “V.I.P.” program in 2003 and 2004, according to company documents and emails and a former employee familiar with the loans.

Other participants in the V.I.P. program included former Secretary of Housing and Urban Read the rest of this entry »

I’m writing a story today and need any of your help! As long as you promise not to write anything profanity-laden and hopefully coherent, you will be featured in my daily story on people “walking away” from homes.

In my experience, most people are being dragged from their homes by sheriff’s deputies, and very few of these people are choosing to leave their home. While there are a few people of means walking away because they can, they seem to be the minority.

Am I wrong? What’s your opinion?