Borrowers at the mercy of lawyers, default service firms

Borrowers at the mercy of lawyers, default service firms

 

(NEW YORK) Nobody wins when a home enters foreclosure – neither the borrower, who is evicted, nor the lender, who takes a loss when the home is resold. That’s the conventional wisdom, anyway.

 

The reality is very different. Behind the scenes in these dramas, a small army of law firms and default servicing companies, who represent mortgage lenders, have been raking in mounting profits. These little-known firms assess legal fees and other charges, calculate what the borrowers owe and draw up the documents required to remove them from their homes.

 

As the sub-prime mortgage crisis spreads, the volume of the business has soared, and firms that handle loan defaults have been the primary beneficiaries. Law firms, paid by the number of motions filed in foreclosure cases, have sometimes issued a flurry of claims without regard for the requirements of bankruptcy law, several judges say.

 

Much as Wall Street’s mortgage securitisation machinery helped to fuel questionable lending across the United States, default, or foreclosure, servicing operations have been compounding the woes of troubled borrowers. Court documents say that some of the largest firms in the industry have repeatedly submitted erroneous affidavits when moving to seize homes and levied improper fees that make it harder for homeowners to get back on track with payments.

 

Consumer lawyers call these operations ‘foreclosure mills’. ‘They get paid by the volume and speed with which they process these foreclosures,’ said Mal Maynard, director of the Financial Protection Law Centre, a non-profit firm in Wilmington, North Carolina.

 

John and Robin Atchley of Waleska, Georgia, have experienced dubious foreclosure practices at first hand. Twice during a four-month period in 2006, the Atchleys were almost forced from their home when Countrywide Home Loans, and the law firm representing it said they were delinquent on their mortgage. Countrywide’s lawyers withdrew their motions to seize the Atchleys’ home only after the couple proved them wrong in court.

 

The possibility that some lenders and their representatives are running roughshod over borrowers is of increasing concern to bankruptcy judges overseeing Chapter 13 cases across the country. The US Trustee Program, a unit of the Justice Department that oversees the integrity of the nation’s bankruptcy courts, is bringing cases against lenders that it says are abusing the bankruptcy system.

 

Joel Rosenthal, a US bankruptcy judge in the Western District of Massachusetts, wrote in a case last year involving Wells Fargo Bank that rising foreclosures were resulting in greater numbers of lenders that ‘in their rush to foreclose, haphazardly fail to comply with even the most basic legal requirements of the bankruptcy system’.

 

Law firms and default servicing operations have made it harder for borrowers to design repayment plans, or workouts, consumer lawyers say. ‘As I talk to people around the country, they all unanimously state that the foreclosure mills are impediments to loan workouts,’ Mr Maynard said\. \– NYT

 

Source: Business Times

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MAS likely to retain $ policy, or tighten it

MAS likely to retain $ policy, or tighten it

 

Currency strategists expect US$ to hit new all-time lows of S$1.32 to S$1.36 by end-2008

 

By LARRY WEE

 

(SINGAPORE) In response to strong price pressures at home and abroad, the Monetary Authority of Singapore is expected to maintain its current policy stance for the trade-weighted Singapore dollar or S$NEER, or even tighten it a notch further, when it issues its semi-annual monetary policy statement next month, say currency strategists.

 

In its last policy statement on October 10 last year, the MAS left intact its policy of a modest and gradual appreciation of the S$NEER, which has been in place since April 2004, but also decided to ‘increase slightly the slope of the S$NEER policy band’.

 

In practical terms, currency researchers estimate that this probably raised the annual rate of trend appreciation for the Sing dollar from 2 per cent to closer to 3 per cent currently.

 

But with price pressures at home and abroad now forcing consumer prices here to 25-year highs in the past two months, there’s a possibility that the MAS may even want to nudge such trend appreciation a notch higher – even if most don’t expect it to re-centre the mid-point of its undisclosed trading bands for the S$NEER, or make any changes to the width of those bands.

 

CPI readings for the Republic hit 6.6 and 6.5 per cent highs in January and February this year, compared to 4.4 per cent in December last year. And, compared to full-year rises of 1 and 2.1 per cent in 2006 and 2007, the Ministry of Trade and Industry raised its official 2008 forecast for headline CPI to a 4.5 to 5.5 per cent range last month, from an earlier estimate of 3.5 to 4.5 per cent.

 

Joseph Tan, a senior strategist at Fortis Bank here, sees the local CPI topping out closer to 7 per cent before falling back, but argues that the MAS may well want to raise trend appreciation for S$NEER a touch higher, to a 4 per cent annual rate. In currency terms, this could translate into another new all-time high of S$1.32 vis-a-vis the US dollar by the end of this year.

 

Explained Mr Tan: ‘I think there’s a real danger that food and energy prices will continue to remain at elevated levels this year; oil prices, for example, may continue to trade above US$100 a barrel even in H2.

 

‘We also have to remember that price pressures at home are not only coming from the effects of higher GST, but extends to the spillover effects from rising house prices and rentals. I think the MAS will need to check inflation there too – because if the US economy bottoms out later this year, we could well see house prices here shooting up again.’

 

Barclays Capital’s regional economist Leong Wai Ho concedes that such inflation concerns – and others – have also persuaded him to think in terms of a steady to firmer MAS stance next month.

 

‘I think it’s no longer just an inflation story, but an issue of cost competitiveness now – which renders policy decision-making even more difficult.’

 

Mr Leong, who expects the US dollar to finish 2008 closer to S$1.34, pointed to anecdotal evidence such as a Cushman & Wakefield report that Singapore’s office rentals had vaulted 10 notches higher in 2007, to seventh most expensive – surpassing even the rates charged in mid-town Manhattan.

 

On top of that, he warned, local price pressures have spilled over from the consumer to the production side as well, citing all-time highs in a Q4 2007 URA tender price index.

 

On balance, however: ‘It’s become less clear that the MAS can tighten further now that external forces have deteriorated faster than expected, due to a rapidly slowing US economy, so we expect them to maintain the current status quo without re-centring or changing the slope of the band,’ said Mr Ho.

 

Claudio Piron, JP Morgan’s head of Asia forex research, also believes the MAS is likely to retain its current status quo, and his firm is looking for the greenback to finish the year closer to S$1.36 – with risks to the downside of that.

 

He explained that for the moment, headline inflation remains high, domestic economic conditions are robust in terms of consumer demand and jobs, and external trade hasn’t fallen off a cliff. But should the US slowdown deepen, commodity price pressures could ease later this year.

 

‘The other thing to point out here is that the S$NEER is somewhat of a blunt tool that may not solve all the price pressure problems – so the authorities here may need to look at some other additional policies to alleviate the pressures faced by those worst-hit by rising prices at home – both on the business and individual level,’ he added.

 

Since the early 1980s, the MAS has adopted the S$NEER as its main monetary policy tool for offsetting imported price pressures in the very open local economy.

 

Estimates of the model employed by the MAS to fine-tune the local currency’s international value suggest its current policy of modest and gradual appreciation should translate into trend S$NEER appreciation of approximately 2.5 to 3 per cent per annum – fine-tuned by the local central bank inside estimated trading bands of between 1 and 2 per cent on either side of a gradually rising central value.

 

Source: Business Times

Mortgage relief to be expanded: Bush

Mortgage relief to be expanded: Bush

 

Monday • March 31, 2008

 

President George W Bush said the government will expand efforts to help homeowners avoid foreclosure as Democrats increase pressure on his administration to reduce unaffordable home-loan payments.

 

The White House is “committed to building on” its programme to help borrowers refinance mortgages, Mr Bush said in his weekly radio address yesterday. Officials are weighing measures to “provide some additional help to some homeowners”, White House spokesman Tony Fratto said.

 

Support is growing among policy makers, including Federal Reserve chairman Ben S Bernanke, to urge lenders to write down the principal on loans to keep homeowners from abandoning their properties.

 

Mr Bush has so far resisted using government funds or guarantees to stem the surge in mortgage foreclosures.

 

A plan being considered seeks to tackle underwater loans, or mortgages that are larger than the value of a home, the Washington Post reported yesterday, citing unidentified officials.

 

The Federal Housing Administration will encourage banks to forgive part of the debt and refinance smaller mortgages with backing from the government, the Post said. — Bloomberg

 

Source: TodayOnline

Address change: Aren’t these rules contradictory?

Address change: Aren’t these rules contradictory?

 

Monday • March 31, 2008

 

Letter from GOH KIAN HUAT

 

I REFER to the report “Changed your address? Prove it” (March 26).

 

With effect from tomorrow, Singapore identity card (IC) holders who want to report a change in address will have to produce proof such as a bill, statement or letter sent to their new address.

 

This new procedure aims to prevent false reporting of address changes — some parents, for example, may make use of a third party address to secure a choice primary school for their children.

 

Bills within the last three months, including those from Internet service providers, insurance and telecommunications companies or Singapore Power, or statements within the last six to 12 months from the Housing and Development Board, Land Transport Authority (LTA) or the Central Provident Fund (CPF) Board can be accepted as documentary evidence.

 

But being able to provide these documents may also mean that the person has failed to report his change of residential address within 28 days as required under the National Registration Act.

 

Will the Immigration and Checkpoints Authority (ICA) take the offenders to task? If not, then how will the 28-day rule be enforced? Is it still relevant?

 

If anyone is unable to provide an acceptable document, he may submit an application to the ICA to enable a letter to be mailed to him, which he can then use as proof. Even then, it is still possible for anyone to make arrangements with third parties to use their address.

 

In addition, under the current one-stop reporting procedure, IC holders who report a change of address to the ICA or police are not required to make separate reports to other government agencies such as the CPF Board or the LTA.

 

Now, it appears that the new address has to be reported to these agencies first in order to get a statement billed to the new address — which would then be used as documentary proof for the ICA. Isn’t this taking a step backwards?

 

What if the LTA or the CPF Board require an identity card to be produced first to effect the change of address at their end?

 

Source: TodayOnline

Bush readying plan to rescue home owners

Bush readying plan to rescue home owners

 

Proposal encourages lenders to forgive part of debt and refinance mortgages

 

WASHINGTON – THE Bush administration is finalising a plan to rescue thousands of home owners facing foreclosure by helping them refinance into more affordable loans, the Washington Post said.

 

The proposal is aimed at assisting borrowers who owe their banks more than their homes are worth because of declining home prices, the newspaper reported in its Saturday edition, citing unnamed government officials.

 

If enacted, it would mark the first time the White House is committing federal dollars to help the most hard-pressed borrowers.

 

President George W. Bush said on Saturday that the government would expand efforts to help home owners avoid foreclosure.

 

The White House is ‘committed to building on’ its programme to help borrowers refinance mortgages, he said in a weekly radio address.

 

Officials are weighing measures to ‘provide some additional help to some home owners’, White House spokesman Tony Fratto said.

 

Under the plan, the Federal Housing Administration (FHA) would encourage lenders to forgive a portion of these loans and issue new, smaller loans in exchange for the backing of the US government, the Post said.

 

Two leading Democratic lawmakers have proposed a similar programme to expand the FHA, so that it absorbs more failing mortgages once lenders have erased some of the loan amount.

 

Senate Banking Committee chairman Christopher Dodd and House Financial Services Committee chairman Barney Frank are expected to push their FHA plan when lawmakers return to Washington this week.

 

Bush administration officials have told the Post that they believe they can accomplish some of the same goals of the legislation through regulatory changes, though important details need to be nailed down.

 

Administration officials told the Post they opposed some aspects of Mr Frank’s legislation, including a provision to spend US$10 billion (S$13.8 billion) buying vacant foreclosed homes.

 

The plan could dampen criticism from Democrats, who say the administration has so far been more concerned with helping Wall Street than with aiding those losing their homes in the foreclosure crisis that threatens to push the US economy into a deep recession.

 

But it could agitate conservatives, who might view the programme as another government bailout, the Post said.

 

The plan is unlikely to be unveiled before Mr Bush returns from a trip to Europe this week, officials told the paper.

 

Source: Straits Times

No sale, but agent wants commission

No sale, but agent wants commission

 

Firm files claim for $4,000 against flat owners… and loses

 

WHY should you pay for service which you never received?

 

By Tay Shi’an

 

 

30 March 2008

 

WHY should you pay for service which you never received?

 

That was what a family in Ang Mo Kio asked when they refused to pay their housing agent because the latter allegedly failed to help them sell their flat.

 

But the real estate company said it was the family that did not want to proceed with the deal after it had found a buyer.

 

The company filed a claim against them at the Small Claims Tribunal for its commission of about $4,000 in January.

 

More than 1 1/2 years after the family hired the agent to sell their three-room flat, the case was settled, on 17 Mar.

 

The tribunal ordered the family to pay the realtor just $250 – half the $500 option fee received from the potential buyer.

 

The order was met with relief by fishmonger Tan Tian Siong, 60, and his wife, Madam Hong Yin Ching, 48, who said they put their home up for sale because of severe financial difficulties.

 

The couple, who have a combined monthly income of $700, have three children.

 

Their 21-year-old son is intellectually disabled, while their 8-year-old son was born with a cleft lip and his right arm had to be amputated at the elbow when he was 3, after an illness.

 

Their 22-year-old daughter is in polytechnic and the money from the sale of the flat was meant to pay for her education.

 

Said Madam Hong in Mandarin: ‘We’re so glad it’s finally over. It was so stressful.’

 

The real estate company, ERA Realty Network, said it had claimed the commission as it had secured a ready and willing buyer for the flat.

 

But Mr Eugene Lim, ERA’s assistant vice-president, said the company accepted the tribunal’s decision.

 

The saga started in August 2006, when the Tans hired ERA agent Jeremy Ang, and put their Ang Mo Kio flat on the market.

 

They thought it should be easy to sell their flat and Mr Ang found them a buyer in December that year. But, at the last minute, the buyer backed out.

 

Then in April last year, Mr Ang found them another set of buyers, who wanted to buy the flat for $193,000.

 

The Tans said the potential buyers signed an option to purchase and paid them an option fee of $500 on 22 Apr.

 

After they received a copy of the option form from Mr Ang, they said they realised there was no start or expiry date on it.

 

They showed a copy of the dateless option form to The New Paper.

 

The Tans claimed that for one month, they kept calling Mr Ang but could not reach him.

 

They called HDB and found out that an option to purchase usually expires in two weeks.

 

Tired of waiting, they called HDB in late May to cancel the application to sell the flat.

 

They showed The New Paper a letter from the HDB dated 29 May confirming the cancellation.

 

That same week, they received a bill from ERA for $4,053 as commission.

 

The Tans ignored the bill and filed a complaint against the agent with the Consumers Association of Singapore.

 

Said Madam Hong: ‘Why do we have to pay him commission when he didn’t manage to sell my flat after one whole year? I would rather use the money to pay for my children’s needs.’

 

In July, they received a lawyer’s letter from the potential buyers.

 

The potential buyers claimed they had given Mr Ang another $500 to exercise the option on 3 May and asked why the Tans had cancelled the sale.

 

The buyers also lodged a caveat – a notice of their claim to the property – against the Ang Mo Kio flat.

 

Said Madam Hong: ‘We were so shocked. We never received the $500 exercise fee.’

 

They had to hire a lawyer, and after several rounds of letters, the potential buyers agreed to withdraw the caveat, and each side paid its own legal fees.

 

The Tans’ bill came to about $1,500. They borrowed from relatives to pay it.

 

But ERA’s Mr Lim has a different version of what happened.

 

MUTUAL UNDERSTANDING?

 

He said that there was a mutual understanding between the Tans and the potential buyers that the option form be left undated until the buyers got a loan approval letter from the bank.

 

That was why it was eventually dated 2 May. And he said the Tans were fully aware of this.

 

He said ERA tried several times to pass the $500 exercise fee to the Tans, but the couple kept rejecting the money. The buyer’s agent also tried to do so.

 

After the case was decided last Monday, Madam Hong said: ‘It’s like a weight is finally off our shoulders. Now, we can finally move on.’

 

Source: The New Paper

What to double-check when filing taxes

What to double-check when filing taxes

 

The deadline for individual income tax returns is just around the corner. Lorna Tan looks at common mistakes taxpayers make

 

THIS is the time of the year when taxpayers file their income tax returns – a mundane exercise for most. But for taxpayers who fail to report accurately, the penalty could be painful, involving fines or even a jail term.

 

As a result of the hot property market last year, two groups of taxpayers – Singaporeans who rent out their properties and real estate agents – can expect to be scrutinised closely this year.

 

Although every taxpayer is expected to file his returns responsibly, the Inland Revenue Authority of Singapore (Iras) is urging landlords and real estate agents to exercise extra care when filing this year.

 

Said Iras: ‘As the rental market had been active in 2007, Iras will put more emphasis on rental income declaration so as to ensure that taxpayers report their rental income correctly.’

 

Boosted by a buoyant economy and population growth, residential rents surged more than 40 per cent last year.

 

It is no wonder that Iras expects to step up checks on taxpayers who do not declare their full rental income or who make wrongful claims for expenses against their rental income.

 

Iras noted: ‘Our checks will include verification of gross rental and expenses and requests for supporting documents.’

 

Property agents can expect the same treatment from Iras, which will be checking and verifying the details of their income declarations.

 

This year, online tax returns must be completed by April 18; hard-copy forms must be posted to Iras by April 15.

 

According to Iras, there are several areas where individual taxpayers tend to make mistakes. These include the reporting of rental income as well as claims for parent relief or child relief.

 

For the self-employed, common mistakes include wrongful declaration of income and wrongful claims for expenses.

 

WHAT INDIVIDUALS SHOULD WATCH

 

Rental income, expense claims

 

FAILURE to report the gross rental income collected is a very common mistake. In most cases, taxpayers omit the income they get for furniture and fittings.

 

In a tenancy agreement, the gross rent is usually broken down into various components: rent for premises, rent for furniture and fittings, and service charges. When declaring rental income, taxpayers need to give the gross or total figure.

 

Other mistakes include reporting rental income based on estimates as well as incorrect expense claims. Taxpayers should note that expenses such as mortgage interest incurred on personal loans are not allowable. You can claim interest only on your mortgage loan.

 

Non-tax-deductible expenses include the cost of renovation, depreciation of furniture and fittings, and the legal costs incurred to secure the first tenant.

 

Deductible expenses are interest on your mortgage loan, property tax, fire insurance, commission paid to get a subsequent tenant, and expenses on repairs and maintenance.

 

Taxpayers should provide a working computation of how they arrived at the net rental income, with details of deductible expenses for each property.

 

In order to substantiate the income declared and expenses claimed, taxpayers should keep supporting documents such as tenancy agreements, mortgage interest statements, and invoices and receipts showing the expenses incurred.

 

·  Case study

 

Businessman Patrick Soon (not his real name) rented out a property, but did not declare the rental from the furniture and fittings. He thought he needed to declare only the rental for the premises.

 

He also claimed for personal medical and overseas travel expenses against his rental income.

 

After factoring in the rental for furniture and fittings and disallowing the private expenses, Iras found his additional taxable income came to about $100,000 a year. Additional tax and penalties were also imposed, according to Iras.

 

Parent relief

 

TAXPAYERS can claim this relief if they supported their parents, grandparents or great-grandparents in the previous year.

 

Common problems include duplicate claims and non-eligibility because of the dependant’s income level or age. Like many taxpayers, you might not be aware that this relief can be claimed only if the following conditions are met:

 

·  The dependant must have been 55 or above in the previous year;

 

·  His or her annual income (including dividends, interest and pensions) did not exceed $2,000 in the previous year;

 

·  He or she lived in Singapore in the previous year;

 

·  If he or she did not live in your household, you incurred $2,000 or more to support him or her; and

 

·  No one else is claiming this relief in respect of the dependant.

 

·  Case study

 

Ms Margaret Ang (not her real name) claimed the relief for both her parents, who had lived in her household for assessment years 2005 to 2007.

 

Iras found her father’s income had exceeded $2,000 in each of the years from 2004 to 2006. The relief in respect of her father had to be withdrawn; only that in respect of her mother was allowed.

 

Child relief for working mums

 

WORKING mothers who were married, divorced or widowed in the previous year can claim this relief. However, some do not realise they cannot do so if their children are not Singapore citizens.

 

·  Case study

 

Ms Selina Lee, a non-Singapore citizen, claimed the relief for her three children for assessment years 2005 to 2007.

 

The relief was withdrawn when Iras discovered that all three children are not Singapore citizens.

 

WHAT TO AVOID IF YOU ARE SELF-EMPLOYED

 

MISTAKES made by sole proprietors and those in partnerships include reporting of income under an incorrect category and wrongful claiming of expenses.

 

Many also keep incomplete records, for example, they don’t always hang on to receipts for public transport and entertainment expenses, which must be incurred for business purposes only.

 

·  Case study

 

Mr Robert Chan (not his real name) is a real estate agent who earns commission income. In his tax returns for assessment years 2005 and 2006, he claimed substantial deductions for transport expenses.

 

Subsequent checks by Iras revealed some of these expenses were incurred in respect of his private car, so the deductions were not allowed. However, the remaining claims were allowed after he was able to produce receipts to show that they were public transport expenses incurred in the course of his business.

 

Mr Chan had also claimed entertainment and gift expenses based on estimates. Without enough documents to substantiate the claims, those expenses that could not be fully substantiated were disallowed as deductions.

 

The additional taxable income totalled $126,000 for the two assessment years.

 

Source: Straits Times