Latest Acquisition Extends Consumer Reach of Company’s Real Estate Vertical

MARIETTA, GA- HBN Interactive today announced the acquisition of IAmFacingForeclosure.com, a leading foreclosure help website.

IAmFacingForeclosure.com has grown by 200% during the last two months and is projected to have well over 500,000 UVs (unique visitors) in 2010. This growth is driven by the site’s collection of foreclosure help experts and foreclosure assistance companies.

“This is a hot area,” said Duane LeGate, CEO of HBN Interactive. “Foreclosures continue to plague the real estate market and there are no clear cut solutions for homeowners. Our mission at IAmFacingForeclosure.com is to is to walk the homeowner through the minefield of options and provide them with the service(s) and advice that best suits their personal situation.”

IAmFacingForeclosure.com is a perfect compliment to HBN Interactive’s portfolio of real estate related companies. Some of which include: HouseBuyerNetwork.com which focuses on short sales on behalf of the homeowner, SellMyHouseFast.com which introduces homeowners to quick sale solutions, and ~4,000 other real estate web properties with related resources. Since its establishment in 2004, HBN’s real estate vertical has expanded from a single website to include over 4,000 principal websites which consist of millions of monthly page views.

“We are very focused on helping homeowners face the challenges in today’s extreme real estate market. By leveraging HBN Interactive’s suite of services, homeowners can: sell their house in a quick and efficient manner, short sale their house with HBN’s experts, buy discounted property, and perform various other real estate related transactions.” added LeGate. “We believe the market will continue to struggle for years, and we plan to continue to bring innovative solutions to the market that will benefit homeowners that need immediate assistance.”

About HBN Interactive

Founded in 2004, HBN Interactive is a unique and leading Internet Real Estate Media Company. HBN Interactive has assisted close to one million homeowners needing specialized assistance. HBN Interactive has built a network of the best professional service providers in the real estate arena that can assist both home sellers and home buyers.

HBN Interactive Media Contact
For all media inquiries and interview requests, contact us.

Under pressure from consumer groups and troubled homeowners to prevent further collapse in the housing market, Senate Democrats and Republicans are working together to create a foreclosure relief bill.

Approximately $1.5 million worth of subprime mortgages will reset to higher rates before then end of 2008. And subprime is just the tip of the iceberg. Before the credit bubble has deflated completely, an estimated $1 trillion in defaults and writedowns are expected as bonds, commercial mortgages, leverage loans and other mortgage loans go sour.

Lawmakers are under extreme pressure from some groups to do something to bail out Main Street. Since the bailout of Wall Street firm, Bear Stearns, the pressure has increased considerably.

Although the Democrats have been pushing for broader government intervention for some time now, the Republicans have held firm on their belief that such action might cause more problems than it fixes.  

This week a notable change occurred. The Senate agreed to set partisan differences aside to create legislation that is meant to prevent foreclosures and bolster the ailing housing market. The new consensus is that immediate action must be taken.

On Tuesday, the Senate voted overwhelmingly to move forward with new housing legislation. Late Wednesday, they unveiled the Foreclosure Prevention Act.

Democrats and Republicans have reached a tentative agreement on the core details and will be debating amendments in the coming days. The core of the plan provides:

• A $4 billion fund for local governments to clean up neighborhoods riddled with foreclosed homes.
• $100 billion for mortgage counseling programs.
• $10 billion for federal tax-exempt bonds to help finance and refinance home purchases.
• A $7,000 tax credit to people who purchase newly built homes, foreclosure properties or properties owned by sellers in default.
• A new loan limit for the Federal Housing Administration that will allow borrowers to finance 110 percent of an area’s median home price versus 95 percent.

The Foreclosure Prevention Act also includes special provisions for soldiers. If the bill is signed into law, lenders will not be able to foreclose on a soldier’s home for at least nine months after the soldier returns from active duty. Lenders will also be forced to put a one year rate freeze on mortgages that are held by active-duty soldiers who face a rate reset.

Amendments that are up for debate include a plan that will give bankruptcy judges the power to write down mortgage principal and a plan that will offer tax breaks to homebuilders who have experienced credit losses over the last two years.

If the legislation is approved, it will go before the House of Representatives and eventually President Bush. There is already some doubt as to whether or not it will make it all the way. A White House spokesperson released a statement Wednesday afternoon saying there were “serious concerns about some of the elements.”
 

Federal Reserve Chairman Ben Bernanke publicly urged lenders yesterday to forgive a portion of the principal owed on loans. Bernanke insists the time has come for banks to consider this tactic if they want to prevent foreclosures. 

There is no hard data to quantify how many homeowners are making the decision to walk away from their troubled mortgages, but the general consensus is that the numbers are high enough for lenders to be legitimately concerned.

So what’s a bank to do?

According to Fed Chairman Ben Bernanke, the best thing banks can do to combat the “walk away” trend is to slash the amounts owed on delinquent loans. This was the solution he proposed yesterday to the Independent Community Bankers of America. As one might imagine, the idea received a lukewarm response from bankers.

Nevertheless, Bernanke insisted that restoring equity with a principal reduction could be the most effective way of preventing foreclosures and delinquencies among borrowers who are underwater in their mortgage.

“The fact that many troubled borrowers have little or no equity suggests that greater use of principal write downs or short payoffs, perhaps with shared appreciation features, would be in the best interest of both borrowers and lenders,” Bernanke told the crowd.

Principal balance reductions have been very rare so far. The banks that are offering modifications typically deal in loan extensions or rate reductions.

Bernanke reports that most lenders are reluctant to forgive portions of mortgage debt because it could establish a trend that forces them to write down the principal again and again if home prices continue to fall.

The Fed Chairman argued that while this may be true, lenders still have the opportunity to mitigate losses. He backed up the claim with a recent study that estimates total losses exceed 50 percent of the principal balance in the average subprime foreclosure.

Support for Bernanke

The speech Bernanke made yesterday flies in the face of everything Treasury Secretary Henry Paulson said just one day earlier:

“Being underwater does not affect your ability to pay your mortgage,” Paulson said in his speech. “Any homeowner who can afford his mortgage payments, but chooses to walk away from an underwater property is simply a speculator–and one who is not honoring his obligations.”

What this means is that Bernanke may now be at odds with the Bush Administration. It is very unlikely that Bush, Paulson or anyone else from that camp will endorse the write-down strategy.

On the other hand, the Democrats are keen to put their hands on the problem and may be willing to offer a stamp of approval in the next day or two.

The most opposition will naturally come from banks and investors, who have already taken a beating and may not be looking for seconds.

Homeowners facing foreclosure are often desperate for a way out, but the agencies that claim they can save your home may not be able to help. Foreclosure filings topped 2 million in the United States last year — a 65 percent increase over the previous year.Mave Elise Brown of Housing and Economic Rights Advocates in California said innocence and desperation on the part of the homeowner can make them prime targets of such scam

Foreclosure rescue scams come in creative packages — the most popular are mortgage negotiation and title transfer.

The ploy in mortgage negotiation goes something like this — for a fee, a company can save your home from foreclosure by negotiating with your loan servicer.

The homeowner puts out over several hundred or thousand dollars and never sees the scammer again, and still loses their house.

See the rest of the KCRA.com story

Project Lifeline is the new relief plan that grants a 30-day grace period to homeowners facing foreclosure proceedings. Critics say the plan is for banks, not homeowners.

In mid February, six major lenders (Bank of America, Citigroup, Countrywide Financial, JPMorgan Chase, Washington Mutual and Wells Fargo) voluntarily agreed to an initiative known as Project Lifeline.

Less than a week after the announcement was made, the rest of the lenders in the Hope Now Alliance jumped on the bandwagon. Members of the Alliance include nearly 90 percent of the subprime servicing market and nearly 70 percent of the entire mortgage servicing market.

Although Project Lifeline has been adopted by most U.S. servicers, it will not be extended to all borrowers. The lifeline is aimed at severely distressed borrowers only. Homeowners who are less than 90 days past due will not even be considered.

Furthermore, Project Lifeline is more of a statement of intent than an actual program. All it really does is freeze foreclosure proceedings for 30 days to buy homeowners a little more time to work out their mortgage problems. It is not a workout plan, but a delay that allows borrowers more time to sell, refinance or engage in some type of loan modification program.

It is also worth noting the 30 day freeze is not automatic. All lenders are agreeing to do is initiate contact with borrowers. Homeowners who respond may or may not be considered for the 30-day reprieve. It’s up to the lender to decide who gets it and who doesn’t.

Too Little, Too Late?

Not surprisingly, Project Lifeline has been heavily criticized for being a stall tactic for banks versus an actual lifeline for people who are drowning in mortgage debt.

Some of the banks who have voluntarily agreed to this are so capital impaired that they can’t afford to eat the loans and just let borrowers walk away from an appreciating asset. In other words, it is the banks that desperately need a lifeline.

There is also some question as to whether or not the Project Lifeline gesture is just for show. Although lenders have been foreclosing, most have been willing to sit on a bad loan a lot longer than they normally would.

Terry Francisco, a spokesperson for Bank of America, has admitted that Project Lifeline would have little impact on what the bank was already doing to help borrowers.  Francisco said the real goal of the initiative is to make the borrower process “easy to understand.”

As home prices drop and mortgage payments rise, an increasing number of borrowers are handing in the keys to lenders and walking away from their mortgage.

A new term has been coined for the envelopes that lenders all over the country are receiving from struggling homeowners: jingle mail.

The phrase is used to describe desperate borrowers who are sending their keys back to lenders and walking away from their mortgage obligations. New reports show that this is happening much more frequently as an increasing number of homeowners find they are underwater in their mortgage.

Fitch Rating is claiming that borrowers’ apparent willingness to simply give up on their mortgage has contributed heavily to the high default numbers we are seeing now. On February 1, the company announced they would slash ratings on mortgage debt for this reason.

Does Walking Away Make Sense?

Foreclosure used to be a rare thing, typically resulting from job loss, illness, or a death in the family. But changes in the mortgage industry in recent years have altered the how and why of foreclosure.

Most of the borrowers who are walking away now are doing so because of increasing payments and depreciating assets. There is also the fact that the majority of the borrowers now have nothing to lose–they didn’t put anything down and therefore have very little invested.

Walking away can make sense for them because it can be less costly than going bankrupt in an attempt to save a single asset that is losing value by the day. Of course, this depends heavily upon where the borrower lives.

Different states have different rules for borrowers and lenders. For example, the state laws in California make it difficult for lenders to collect additional money after foreclosing and selling a property. In other states, like Michigan, lenders are allowed to go after the borrower for the difference.

Troublesome for Lenders

Not surprisingly, lenders are disturbed by the jingle mail trend. Wachovia and Bank of America have both discussed the issue in recent conference calls and say there is a definite change in the mindset of borrowers. Wachovia CEO Ken Thompson noted that some of the borrowers had the ability to pay, but weren’t willing to so since they have lost so much equity.

Most of the banks have no real desire to take the homes back as it will be very difficult to recoup all of the money that it is owed. A large number of borrowers overpaid for the home, didn’t put anything down, and didn’t make enough in payments to dent the balance. The chance that banks will break even on these sorts of properties, let alone make a profit, is slim to none.

What Is Happening to the Abandoned Homes?

For the most part, nothing is happening. Vacant homes can be found in nearly every city in America. In the better neighborhoods, the houses sit empty and neighbors take care of the lawn so that their own homes look better. In bad neighborhoods, the houses are sometimes burned out and used for illegal purposes.

There have also been reports of homeless who are taking refuge in abandoned properties. The homeless are outnumbered by vacant houses in many different cities. In Cleveland, for example, there are at least three abandoned houses for every one homeless person.

Brian Davis, the director of the Northeast Ohio Coalition for the Homeless, said the foreclosure crisis is a low-cost (i.e. free) housing option for people who don’t want to sleep outside or take refuge in a shelter. Since many of the abandoned homes still have lights, heat, and running water, they are convenient overnight stops for someone who needs a place to stay.

Countrywide Financial Corp. has teamed up with the Association of Community Organizations for Reform Now (ACORN) to help subprime borrowers avoid foreclosure. All of Countrywide’s borrowers with subprime loans will be eligible for relief, according to an announcement made earlier today.

Although Countrywide completed more than 81,000 home retention workouts in 2007, the lender is still having huge problems with defaults. As of December 31, a whopping 33.64 percent of Countrywide’s subprime loans were delinquent, up from 21.22 percent a year earlier.

Last month, the struggling lender agreed to be bought by Bank of America, the second largest U.S. bank. The deal is projected to be finalized sometime in the third quarter of this year.

In the meantime, Countrywide will open up a new plan to subprime borrowers who need more manageable loans to avoid foreclosure. The lender intends to work with the advocacy group ACORN to formalize workout plans for borrowers.

What makes this plan different from some of the other previously announced initiatives is that relief will be available to all of Countrywide’s subprime borrowers, regardless of their default status. This means that workout options are available for those who are current on their mortgage payments and for those who are not.

Furthermore, borrowers do not need to have an ARM to apply for help. Subprime borrowers who have fixed rate mortgages can also seek out various workout solutions.

Some of the options Countrywide will offer to an estimated 100,000 customers include a loan modification for ARM loans that offers a five-year pre-reset rate freeze and short-term repayment plans. Some borrowers will also have the option to refinance into a prime loan.

It is hard to estimate how much of an impact (if any) Countrywide’s subprime relief plan will have. Approximately 40 percent of current subprime ARM foreclosures can be attributed to borrowers who already had at least one loan modification or repayment plan but defaulted anyway, according to the Mortgage Bankers Association.

Countrywide’s impact will also depend on how many borrowers get repayment plans and how many get loan modifications. Repayment plans are not nearly as effective because the lender takes funds that are owed and tacks them onto the back end of the loan. Although the borrower’s delinquent status is erased, the problem is not.

Repayment plans are the prevailing tactic of the HOPE NOW alliance, which includes 16 of the nation’s largest conventional and subprime mortgage servicers. During the second half of 2007, nearly 75 percent of all subprime workouts involved payment plans versus loan modifications.

Will Countrywide try to forestall the inevitable like the HOPE NOW alliance or will they make a true effort to renegotiate all of their bad loans?

During a conference call with reporters, Acorn president Maude Hurd didn’t offer any estimates about repayment plans and loan modifications, but did say that Countrywide’s new practice will help all subprime borrowers and “fill the gaps” left by other foreclosure relief initiatives.

Mary Jane Seebach, managing director of public affairs for Countrywide, said the company also has intentions to announce future programs that will help prime borrowers and borrowers with pay option loans.

Home equity loans and lines of credit are putting lenders in an even bigger pinch as the number of home equity defaults rises to record levels.

Countrywide Financial Corp, the lender with the nation’s biggest home equity loan book, announced last week its $32.4 billion portfolio of prime home equity lines of credit is deteriorating rapidly. The company took a $704 million charge as a direct result of home equity loan defaults.

And Countrywide isn’t alone. The loss rates are climbing for all lenders, according to Frederick Cannon, an analyst at Keefe, Bruyette & Woods.

Home equity lenders extended $504 billion in new home equity loans and lines of credit in 2006 and $456 billion in 2007. Estimating the extent of any one lender’s exposure to home equity loans is difficult because the risk is generally carried off the balance sheet. In other words, trouble isn’t always obvious until loans have deteriorated past a certain threshold.

What is clear is that defaults are rising. Home equity loan defaults have increased by nearly 50 percent in a year’s time and delinquencies on lines of credit have doubled in the same time period.

Not All Lenders Are Foreclosing

Although equity borrowers are defaulting in high numbers, some banks have been hesitant to foreclose on homes, choosing instead to walk away from the loans altogether.

“More often now than ever before we are writing off the loan,” says Bob Caruso, Bank of America Corp.’s national servicing executive. “The customer still owes the money, but it is no longer an asset on our books.”

This strategy may seem like a step away from the norm, but it is rapidly becoming the most prudent route for a home equity lender. Foreclosing can leave the lender deeper in the red because the owner of the first mortgage must be bought out.

Since falling home prices have insured the property’s value will not be enough to cover the costs of foreclosure in many cases, it’s generally better to just write off the loan.

Lenders Tightening Credit

Sixty percent of the U.S. banks responding to a recent Federal Reserve survey say they have instituted tougher criteria for home equity lines of credit. Lenders have also tightened guidelines considerably on home equity loans.  

Countrywide sent letters to 122,000 customers recently to announce that Countrywide was freezing the ability to draw from existing lines of credit.  The letters were sent to areas where home prices have dropped considerably, according to a Countrywide spokesperson.

Washington Mutual, Citigroup and the USAA Federal Savings Bank have all made similar moves, citing the right to do so under the borrowers’ creditor agreements.

Lenders have also begun to alter their definitions of good credit and ample equity. A score of at least 680 or 700 is now required to get a home equity loan in most cases, according Bob Walters, chief economist for Quicken Loans.

The state of the local housing market is considered by many lenders as well. For example, Bank of America allows borrowers to tap up to 90 percent of their equity throughout much of the nation. But the same lender limits the amount to 80 percent in areas like Miami and Las Vegas, where home prices have fallen.

The Los Angeles Times reported last week that Chase will take follow suit by limiting the maximum amount of equity that can be borrowed to 70 percent in Florida, California and other housing depressed areas.

Although exact details are lacking on the mortgage relief provisions of the economic stimulus package, we do know policymakers plan to use the FHA, Freddie Mac and Fannie Mae to pump life into the housing market.

Congressional leaders and the Bush administration shared parts of a mortgage relief plan Thursday that will increase loan limits for the Federal Housing Administration (FHA), as well as government-sponsored entities Freddie Mac and Fannie Mae.

Policymakers want the FHA, which was originally started to help first-time and low-income homebuyers, to be allowed to help struggling borrowers who are facing default. The plan will also allow the FHA to insure loans up to $730,000, according to House Speaker Nancy Pelosi. This is nearly double the current limit of $367,000.

The current loan limit for Freddie Mac and Fannie Mae is $417,000. There are conflicting reports in regards to how much these limits will change. Pelosi reported the companies will be able to buy or guarantee mortgages up to $729,750 (up to 125 percent of the area’s median home price) in cities with high-cost homes. A news release from House Leader John Boehner says the cap is $625,000.

The change to the FHA is expected to be made permanent, but the increase on Freddie Mac and Fannie Mae’s conforming loan limits would expire after December 31 of 2008. The only way it would continue is if Congress makes the choice to extend it.

What is still up in the air is how high-cost areas will be defined. The current assumption is that data will be used from the National Association of Realtors (NAR) or the Federal Housing Finance Board.

Details aside, there is still a chance the provisions will face opposition from senators, some of whom are against expanding the role of the FHA and the two mortgage companies. All three of the organizations have a huge role already and have had problems in the past because of it.

By its own estimates, FHA will be operating in the red this year. Freddie Mac and Fannie Mae were both deeply in the red during the third quarter of last year and are expected to announce more write downs in the coming weeks.

Lawmakers who are for the changes are suggesting more regulation for the FHA, Freddie and Fannie as a way of compromise. The outcome of this regulation will most likely be dependent on how fast the long-stalled legislation can move.

Select Metro Areas That Will Benefit From Higher Conforming Loan Limits

The Stanford Group Company, a financial services company, estimates the proposed changes to conforming loan limits would have a significant impact on 19 major metropolitan areas.

• Anaheim-Santa Ana, Calif. (proposed limit $729,750)
• Barnstable Town, Mass. (proposed limit $500,750)  
• Boston-Cambridge-Quincy, Mass. (proposed limit $518,375) 
• Boulder Colo. (proposed limit $459,375) 
• Bridgeport-Stamford-Norwalk, Conn. (proposed limit $613,875)  
• Los Angeles-Long Beach-Santa Ana, Calif. (proposed limit $729,750) 
• Miami-Fort Lauderdale-Miami Beach, Fla. (proposed limit $433,500)
• New York-Northern N.J.-Long Island, N.Y./N.J. (proposed limit $595,125)
• New York-Wayne-White Plains, N.Y. (proposed limit $688,625) 
• Edison, N.J. (proposed limit $489,750) 
• Nassau-Suffolk, N.Y. (proposed limit $587,500) 
• Newark-Union, N.J./Pa. (proposed limit $574,625)
• Riverside-San Bernardino-Ontario, Calif. (proposed limit $471,250) 
• Sacramento-Arden-Arcade-Roseville, Calif. (proposed limit $419,625) 
• San Diego-Carlsbad-San Marcos, Calif. (proposed limit $729,750)  
• San Francisco-Oakland-Fremont, Calif. (proposed limit $729,750) 
• San Jose-Sunnyvale-Santa Clara, Calif. (proposed limit $729,750)  
• Seattle-Tacoma-Bellevue, Wash.  $394,700 (proposed limit $76,375) 
• Washington-Arlington-Alexandria Va./Md. (proposed limit $547,500)   

(Note: Stanford’s estimates are based on median home price data from the National Association of Realtors.)
 

An unprecedented federal lawsuit filed Tuesday by the city of Baltimore accuses mortgage giant Wells Fargo of engaging in predatory and discriminating loan practices. City officials estimate they could recoup “tens of millions” in damages.

Homeowners may get up to $5,000 to avoid foreclosure if the city of Baltimore prevails in the lawsuit filed yesterday against Wells Fargo.

Among other things, the city charges Wells Fargo with making black borrowers pay higher fees and interest rates on home loans and refinances.

Wells Fargo was the largest provider of loans in Baltimore between 2004 and 2007 and demonstrated the worst kind of racial disparity in regards to rates and volume of foreclosures, according to the lawsuit.

In 2006, Wells Fargo issued loans with an interest rate that was at least three percent above the federal benchmark to 65 percent of its black customers and to 15 percent of its white customers. The numbers show a clear unbalance.

Wells Fargo refuses to comment on ongoing litigation, but denied any wrongdoing in a recent statement.

“We do not tolerate illegal discrimination against or unfair treatment of any consumer,” Mr. Waetke said. “Our loan pricing is based on credit risk. We are committed to serving all customers fairly–our continued growth depends on it.”

This is not the first time accusations of racial discrimination and predatory lending have been made against a mortgage lender. Ameriquest was accused of predatory lending and settled a $295 million lawsuit with 49 states and the District of Columbia in 2006. Ameriquest customers are still receiving restitution checks.

In July of last year, the National Association for the Advancement of Colored People (NAACP) filed a lawsuit alleging the home loan industry discriminated by steering black borrowers into high-cost loans.

The Baltimore lawsuit is the first attempt by a municipality to recoup losses resulting from foreclosures, according to city officials. Mayor Sheila Dixon estimates the city could win “tens of millions” of dollars that could be funneled into counseling, refinance programs and other outreach efforts.

“Wells Fargo could do a lot, as well as other banks that have engaged in similar practices, to help to curb the flood of foreclosures that the city is experiencing now,” Suzanne Sangree, chief solicitor for the Baltimore City Law Department, said Tuesday during a press conference.