Fannie Mae has just announced a new Deed-for-Lease Program (D4L) that allows eligible borrowers facing foreclosure (or their tenants) to stay in their primary residences. Under D4L, the borrower transfers ownership of the property to the lender through a deed-in-lieu of foreclosure and the borrower (or the tenant) signs a lease for up to 12 months. The program is designed for borrowers who don't qualify for other workout solutions, including modifications, or who do not meet their obligations under the modification. This program will hopefully minimize displacement of families and deterioration of neighborhoods that often occurs when homes are left vacant. The rent may not exceed 31 percent of the family's gross income. Fannie reserve the right to market the property during the lease term and may sell it to an investor subject to the lease.

For the full news release, click here.

The Chicago Tribune is reporting that at least seven Midwestern homeowners who refinanced their homes through Counselors Title are now wondering what's going to happen to their homes, and what happened to the $1.6 million that was supposed to pay off their loans. These homeowners have been given notice of foreclosure due to the fact that the check sent to their lenders to pay off their loan in connection with a refinance has bounced.

The Illinois attorney general's office confirmed last week that it is investigating the now-shuttered Counselors' Title, a real estate title insurance agency that had six offices in Illinois, Indiana and Ohio, after receiving three consumer complaints. The state also began investigating two other, but unspecified, title companies in the past several months. All the complaints involve mortgage refinancing and situations in which the payoff checks to the original mortgage holders bounced or wire transfers were never deposited in accounts.

Late Friday, the Illinois Department of Financial and Professional Regulation issued a cease and desist order against Counselors and its three principals, James Erwin and Shari Erwin of Chicago and Damian Sichak of Homer Glen, meaning they cannot easily operate a title agency in Illinois. The Erwins are both currently licensed attorneys in the state of Illinois. "It will be on their records with the state of Illinois," said spokeswoman Sue Hofer. "We have no authority to make victims whole. We can stop them from doing it to the next person, but don't have the legal authority to reverse the financial loss."

The department also said it is assisting the attorney general's office in its investigation.

Title insurance is an important but rarely questioned part of the mortgage process. In a home purchase in Illinois, a seller pays for an owner's policy that protects the buyer's interest in the property up until the point of sale. The buyer pays for a policy protecting the lender. When a homeowner refinances a mortgage, they are required to buy a new lender's policy. Few opt to purchase a new owner's policy, which some experts say could protect a homeowner if problems occur with the refinancing.

The crux of the problem for these homeowners who closed their transactions at Counselors' offices is that Ticor Title Insurance Co., a national title insurance underwriter, says it terminated its underwriting agreement with Counselors before those closings occurred.

One of the lenders involved, Chase, said last week that it plans to pursue parallel paths, negotiating with Ticor to cover the loan payoff and also foreclosing on one of the homes. "We may have to pursue foreclosure, but we will work to protect the borrower's credit record by keeping that separate from the foreclosure action and, ultimately, this would allow us to let the borrower stay in the home," said bank spokesman Tom Kelly.

If the foreclosure goes through and Chase purchases the property at the sheriff's auction, the bank plans to allow the homeowner to remain in the home he built in 1993 while it waits to get paid by the title company.

For the entire article in the Chicago Tribune, click here.

There was a great article a couple of weeks ago that I wanted to blog about today regarding lenders losing borrowers' mortgage paperwork. This is especially pertinent in the current foreclosure crisis we are in because many borrowers have legal defense against the foreclosure proceedings.

It used to be when a borrower was in foreclosure, the courts just rubber stamped the paperwork and the foreclosure was rarely contested. Now, any time I have a client who calls me who is in foreclosure, I highly recommend that they look at any defenses they have against the foreclosure.

For example, on October 9th in federal bankruptcy court in the Southern District of New York, the court ruled that PHH Mortgage hadn't proved its claim to a delinquent borrower's home in White Plains and wiped out a $461,263 mortgage debt on the property. Yes, you read it right! The mortgage debt was wiped out per court order.

If the lender can't come forward with your paperwork and proof of ownership, judges are not looking kindly on their rights to foreclose on a borrower's home. Many notes have been lost in the shuffle due to the regular process of bundling loans and selling them to investors. Many of these notes were not adequately documented or tracked. In some cases, no one knows really who even owns the loan.

So if you are in trouble and in danger of foreclosure, please contact an attorney to find out your options.

The Senate today voted to extend and expand a tax credit for homebuyers on a 98-0 vote, The House is expected to follow suit within days, and President Obama is expected to sign it into law.

The legislation would extend the $8,000 credit for first-time homebuyers until April 30. It is set to expire at the end of the month. It also would provide a new $6,500 tax break for existing homeowners who want to move up to a new home, as long as they have lived in their current residence for five consecutive years out of the last eight.

The bill also would increase the level of qualifying incomes to $125,000 for individual tax filers and $225,000 for joint filers. Those earning up to $145,000 individually or up to $245,000 jointly would receive a smaller credit that decreases as income rises. The tax credits apply to home purchases of $800,000 or less.