Connecticut State Official Accused Of Mortgage Modification Fraud

In an ironic twist, a Connecticut state employee who manages fraud investigations for the state’s welfare department has been charged with mortgage modification fraud.

Lynwood Patrick Jr., 39, of East Hartford, Conn., was arrested at his home on a charge of wire fraud, according to the U.S. Attorney’s office. He was released on a $150,000 bond after appearing before a federal judge in Hartford.

According to the criminal complaint, Patrick is employed as the director of investigations for the State of Connecticut’s office of quality assurance in the department of social services.

Authorities allege that between November 2012 and May 2013, Patrick applied for a mortgage modification under the Home Affordable Modification Program through JPMorgan Chase. However, he allegedly fabricated State of Connecticut pay stubs and lied about his assets in order qualify for the program.

Specifically, Patrick claimed that he had $500 of total assets in one checking account to show that he had experienced a loss of income causing a hardship, when, in fact, he had thousands of dollars spread out over multiple accounts at several institutions and his rate of pay had not diminished.

Patrick’s arrest appears to follow a failed effort to establish several income-producing residential properties, according to a bankruptcy he filed in Hartford in February, the U.S. Department of Justice says in its release. The Chapter 7 filing shows Patrick had an interest in three properties that have been foreclosed upon and two that are in foreclosure.

If convicted, Patrick faces up to 20 years in prison.

In his job with the state, Patrick is responsible for coordinating and conducting activities to prevent, detect and investigate fraud, waste, abuse and overpayments in federally funded welfare programs, such as Connecticut Medicaid, Care4Kids, Supplemental Nutritional Assistance and Connecticut Energy Assistance programs.

 

HUD Changes Rules For Distressed Asset Stabilization Program

Investors that purchase pools of distressed loans through the U.S. Department of Housing and Urban Development’s (HUD) Distressed Asset Stabilization Program (DASP) are now required to delay foreclosure for a year, as opposed to the previously required six months, HUD has announced.

This way, servicers will have more time to evaluate all borrowers for the Home Affordable Modification Program or similar loss mitigation programs, HUD says in a release.

In addition, HUD is changing its rules for its Neighborhood Stabilization Outcome sales program, which is part of the DASP. Specifically, when investors sell the pools of loans, they must first be marketed to nonprofits, ahead of other investors. This includes giving nonprofits a first look at vacant properties, allowing purchasers to re-sell notes to nonprofits and offering a nonprofit-only pool.

HUD explains that servicers were previously allowed to foreclose after six months if a loan was not performing. What’s more, they were encouraged - but not required - to assess a borrower’s qualifications for loss mitigation programs.

The DASP already requires investors and servicers to take whatever means necessary to ensure that 50% of the loans in a pool are performing at any given time. This is to ensure that entire neighborhoods do not fall into severe blight or have a disproportionately high number of vacant properties.

The rule changes come after a group of nonprofits sent a letter to federal officials expressing its concern that some investors are directing their servicers to fast-track the foreclosure process for the sake of avoiding long and costly foreclosure timelines. The suspected “pro-foreclosure campaigns” are resulting in fewer homeowners having a chance at loss mitigation, the group alleges.

It should be noted, however, that investors that buy pools of distressed loans through HUD’s DASP are committed to ensuring those loans become re-performing or that the borrowers are offered appropriate loss mitigation options, such as loan modifications or short sales.

In HUD’s April 24 release, Genger Charles, acting general deputy assistant secretary in the office of housing, says the rule changes “reflect our desire to make improvements that encourage investors to work with delinquent borrowers to find the right solutions for dealing with the potential loss of their home and encourage greater nonprofit participation in our sales.”

“The improvements not only strengthen the program, but help to ensure it continues to serve its intended purposes of supporting the [Mutual Mortgage Insurance] Fund and offering borrowers a second chance at avoiding foreclosure,” Charles adds.

In addition, investors and servicers will be subject to stronger reporting requirements, including tougher penalties for not complying with quarterly reporting responsibilities and a new requirement to report on borrower outcomes even when a note is sold after the original purchase, HUD says.

 

MBA: Delinquencies Dropped In Q1

The national delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 5.54% of all loans outstanding at the end of the first quarter - the lowest level since the second quarter of 2007 - according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The delinquency rate, including loans at least one payment past due but not including loans in the process of foreclosure, decreased 14 basis points from the previous quarter and 57 basis points from one year ago.

About 2.22% of mortgages were in some state of foreclosure at the end of the first quarter - down five basis points from the fourth quarter of 2014 and down 43 basis points from the same quarter one year ago. This was the lowest foreclosure inventory rate since the fourth quarter of 2007.

The percentage of loans on which foreclosure actions were started during the first quarter was 0.45% - a decrease of one basis point from the previous quarter and unchanged compared to the first quarter of 2014.

The serious delinquency rate - the percentage of loans that are 90 days or more past due or in the process of foreclosure - was 4.24%, a decrease of 28 basis points from the previous quarter and a decrease of 80 basis points from the first quarter of 2014.

“Delinquency rates and the percentage of loans in foreclosure continued to fall in the first quarter and are now at their lowest levels since 2007,” says Joel Kan, the MBA’s associate vice president of industry surveys and forecasting.

“The job market continues to grow, and this is the most important fundamental improving mortgage performance. Additionally, home prices continued to rise, as did the pace of sales - thus increasing equity levels and enabling struggling borrowers to sell if needed.

“At the state level, 27 states saw a decline in foreclosure inventory rates over the quarter. New Jersey, New York and Florida had the highest percentage of loans in foreclosure in the nation in the first quarter. Florida’s foreclosure inventory rate peaked at 14.5 percent in 2010 and was down to 4.8 percent in the most recent quarter - helped by rapidly improving local economies and job markets [and] leading to increased housing demand, strong home price growth and more opportunities for distressed loans to be resolved,” Kan says.

 

Radian Offers Job Loss Protection Insurance

Radian Guaranty Inc., the private mortgage insurance subsidiary of Philadelphia-based Radian Group Inc., has launched a job loss insurance program called Radian MortgageAssure that is designed to reduce the risk of job loss-related late or missed mortgage payments while offering lenders further protection against default.

According to Radian, this is the only program of its kind currently offered by a mortgage insurer. Under the program, if a participating homeowner falls behind on his mortgage payments due to an involuntary job loss and meets the conditions of the program, Radian MortgageAssure will provide up to six monthly mortgage payments, for a maximum monthly benefit of up to $1,500 or a total protection of $9,000 during the two-year coverage period.

Offered exclusively to Radian’s lending partners, Radian MortgageAssure will be effective for mortgage insurance applications received on or after May 1, and coverage will begin on the day the loan closes.

 

Black Knight: Mortgage Delinquencies Fall To Lowest Level In Nine Years

The national mortgage delinquency rate fell to 4.7% of loans in March - down an impressive 12.18% compared to February, according to Black Knight Financial Services.

It was the largest month-over-month decline in the delinquency rate in nine years.

The firm’s Mortgage Monitor report also finds that the number of borrowers who were underwater on their mortgages in March decreased by 1.6 million to just over 4 million.

That’s the good news. The bad news is that about 77% of borrowers who were in foreclosure in March were underwater. What’s more, about 72% of borrowers who were delinquent (90 days or more past due) in March were underwater. That means there’s still plenty of risk in these loans for investors and servicers.

Florida and California continued to have the highest number of properties underwater, according to the report, while Nevada and Florida had the most borrowers with negative equity.

Ben Graboske, senior vice president for Black Knight Data & Analytics, says, “Negative equity distribution varies considerably depending upon geographical location and home values within a given market.”

“Our most recent data shows that just over eight percent of borrowers are currently underwater on their mortgages, representing a nearly 30 percent reduction in the negative equity rate since last year,” Graboske says in a release. “We also observed that 29 percent of underwater borrowers are seriously delinquent on their mortgages and that borrowers in negative equity positions make up 77 percent of all active foreclosures. In fact, one of every three borrowers in active foreclosure has a current loan-to-value ratio of 150 or more - meaning they owe 50 percent more than their homes are worth.”

With regard to the drop in delinquencies, Graboske points out that it was “across all stages of delinquency - 30, 60, 90 and 120-plus days - with 30-day delinquencies hitting their lowest level in over 10 years.”

“The month’s data also showed that roll rates - loans rolling into a more delinquent status - have improved across the board, as well,” Graboske adds. “For every 10,000 loans that were current at the end of February, only 73 borrowers missed a payment in March, marking the lowest current-to-30 roll rate in over 15 years.”

Graboske says roll rates for loans 30-to-60 and 60-to-90 days delinquent hit their lowest levels since March 2006.

In addition, he says, “The rate of loans curing from 30-days delinquent to current status was 40.7 percent, the highest level since March 2005 and slightly above the 2000 to 2005 average of 40.4 percent.”

Delinquency and Default

Connecticut State Official Accused Of Mortgage Modification Fraud

 

 

 

 

 

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