Near Half of Homeowners in “Loan Modification” Programs Face Higher Monthly Payments; Failure of Voluntary Industry Efforts Hikes Pressure on Incoming Obama Administration, New Congress to Clear Way for Court-Supervised Modifications.

WASHINGTON, D.C. — Much hyped “foreclosure prevention programs” relying on voluntary loan modifications are failing to reach a significant number of troubled homeowners and are often backfiring when they do so, according to newly updated research released by the National Association of Consumer Bankruptcy Attorneys (NACBA). The across-the-board failure of these much ballyhooed “fixes” for the foreclosure crisis are expected to result in the new President and Congress facing considerable new pressure to clear the way for court-supervised loan modifications that will prove more beneficial for homeowners.

The findings released by NACBA come on the heels of a dire new projection from Credit Suisse that “over 8 million foreclosures (are now) expected” over the next four years in the U.S.  That astounding level accounts for 16 percent of all mortgages –- including 59 percent of all subprime mortgages and more than 11 percent of all other mortgages, including Alt-A, options ARMS and even those in the prime category. This new forecast from Credit Suisse is up sharply from the two to six million foreclosure range cited in previous estimates from industry sources.

The new data presented today from Professor Alan White, Valparaiso University School of Law, Valparaiso, IN, is updated through November 2008 ( and shows that:

• Less than 10 percent of the time do the voluntary programs result in a reduced principal loan balance with more than half of modifications capitalizing unpaid interest and fees into larger and more drawn out debt on the back end of the mortgage; and

• Only about a third (35 percent) of voluntary mortgage modifications reduce monthly payment burdens for homeowners, with nearly half (45 percent) actually saddling distressed homeowners with increased payments under the modifications.

Just how badly are the voluntary modification programs flopping? To answer that question NACBA reviewed the publicly available data about the reach to date of the much-hyped programs. In one prominent case – the Hope for Homeowners Act FHA refinancing program passed by Congress with much fanfare earlier this year on the strength of forecasts that 400,000 homeowners would be aided – there have been only 312 applications to date — and no mortgage modifications whatsoever have taken place. This is consistent with the most recent estimates from the National Association of Attorneys General that "nearly 8 out of 10 seriously delinquent homeowners are not on track for any loss mitigation outcome … up from 7 in 10 in previous reports.”

Henry Sommer, president, National Association of Consumer Bankruptcy Attorneys, Philadelphia PA., said: “Court-supervised loan modification is urgently needed to deal with this problem. We call on the incoming Obama administration and the new Congress to adopt this solution without delay. The American home mortgage foreclosure crisis has gone from the danger zone to the full-blown crisis stage. The number of foreclosures is growing rapidly and is reaching well beyond the subprime world to the American middle class. Despite a proliferation of voluntary programs, we are not seeing evidence of a meaningful number of sustainable loan modifications.”

Professor Alan White, Valparaiso University School of Law, Valparaiso, IN, said: “American homeowners are carrying 10.5 trillion dollars in mortgage debt, a number that has risen by 250 percent in the past decade. While banks have written down more than half a trillion in mortgages and mortgage-related securities, homeowners have gotten little or no relief. A broad range of economists from Nouriel Roubini to Ben Bernanke to Martin Feldstein have recognized the need to deleverage the American homeowner. The excess mortgage debt is depressing home prices and consumer spending, and acting as a drag on the broader economy. Empirical evidence from mortgage servicer reports to investors shows that for the most part, the necessary deleveraging of homeowners is not happening.”

Alys Cohen, staff attorney, National Consumer Law Center (NCLC), Washington, DC, said: “Sadly, the magnitude of the foreclosure crisis dwarfs the response to date from the financial services industry, regulators and lawmakers. The lack of aggressive and meaningful solutions from federal policymakers is baffling, particularly given that most economists, including the Chairman of the Federal Reserve Board and the Chair of the FDIC, have recognized that the financial crisis can be resolved by only by dealing with its root cause – the escalating millions of mortgage foreclosures … The foreclosure crisis will not be resolved through voluntary efforts on the part of the financial services industry alone. Despite widespread efforts to encourage voluntary loan modifications, it is clear that the financial services industry has failed to implement a loan modification strategy on a scale that matches the urgent crisis we are facing. Bankruptcy courts must be empowered to implement economically rational loan modifications where the parties are unwilling or unable to do so on their own. Loan modifications through the bankruptcy courts can help accomplish this on a sufficient scale and timeframe to have a meaningful impact. Congress should lift the ban on judicial modification of primary residence mortgages, as part of the solution to stemming the tide of avoidable foreclosures and stabilizing the housing market and the broader economy. The need is urgent. The time for action is now.”

When NACBA, NCLC, Consumer Federation of America (CFA) and the Center for Responsible Lending (CRL) called on Congress in April 2007 to move aggressively to stem the growing flood of home foreclosures, it was estimated that some 2 million homeowners were at risk of foreclosure. And, at the time, the financial services industry accused the organizations of being overly pessimistic about the likely toll of foreclosures. However, it turns out we were low-balling quite significantly the number of foreclosures.

As of September 2008, a full 1.2 million homeowners with subprime loans already had lost their homes to foreclosure. Another 1.7 million families with subprime loans are seriously delinquent and at risk of losing their homes in the very near future. Credit Suisse (“Foreclosure Update: Over 8 million foreclosures expected,” December 2008) now estimates that 8.1 million mortgages will be in foreclosure over the next four years, representing 16 percent of all mortgages. Disturbingly, Credit Suisse finds that the problem has spread from subprime loans to Alt-A, option ARMs, and even prime loans.


Bowing to the demands of the financial services industry that created the foreclosure crisis in the first place, every program put in place to prevent foreclosures has relied on the voluntary cooperation of mortgage servicers who handle the mortgages that, in most cases, are owned by securitized trusts that have issued bonds to investors. It is painfully obvious that these voluntary programs have failed to stem the tide of foreclosures. The few successful attempts at mortgage modification, such as the FDIC efforts with IndyMac, have largely dealt with those rare mortgages that are still owned by a single lender, rather than securitized loans.

Voluntary programs are failing for a variety of reasons that cannot be changed without action by the Obama Administration and new Congress:

• Multiple owners make voluntary modification impossible. Many borrowers and even their servicers simply cannot locate the holders of the mortgage to negotiate with, or there are multiple owners all of whom would have to agree to modification; the loans have been sliced and diced so many times that all of the owners cannot be found and brought into the process.

• Fear of investor lawsuits blocks voluntary modifications. The servicer has obligations to the investors who have purchased the mortgage-backed securities through pooling and servicing contracts, and the interests of these investors conflict. Servicers are hesitant to modify the loans because they are concerned that it will impact different tranches of the security differently, and thereby raise the risk of investor lawsuits when one or more tranche loses potential income. At least one servicer has already been sued. Under the current system, the legally safest course for the servicer clearly is foreclosure.

• Piggyback seconds block voluntary modifications. Perhaps the most intractable problem is the fact that a third to a half of all 2006 subprime borrowers took out piggyback second mortgages on their homes at the same time they took out their first mortgages. In these cases, the holders of the first mortgages have no incentive to provide modifications that would free up borrower resources to make payments on the second mortgages. At the same time, the holders of the second mortgages have no incentive to support effective modifications by waiving their rights, which would likely cause them to face a 100 percent loss. The holders of the second mortgages are better off waiting to see if a borrower can make a few payments before foreclosure.

• Overwhelmed servicers are not set up to negotiate modifications. Hundreds of thousands of borrowers are asking for relief from organizations that traditionally have had a “collections” mentality of trying to foreclose as quickly as possible. They know how to foreclose, and the foreclosure process has been increasingly automated to maximize the fees the servicers receive. Many receive no extra compensation for working on modifications. These servicers are not disposed to postponing foreclosure or equipped to handle case-by-case negotiations. Many also have monetary incentives to foreclose rather than modify.

In practice, these roadblocks – all of which were warned of months ago by NACBA and other groups – have resulted in gridlock in the voluntary modification programs. Consider these examples:

• Hope for Homeowners Act — This law, passed with much fanfare last spring, provides an FHA refinancing if the servicer agrees to accept slightly less than the value of the home in satisfaction of the debt. The thought was that servicers would agree to accept less than 100% payment if that payment was guaranteed by the government. It was expected that the program would help 400,000 homeowners but since it opened in October, fewer than 312 people have applied for the program and no loans have been modified. The result? As Credit Suisse notes in its December 2008 report: “While loan modifications and similar interventions (such as the Hope for Homeowners FHA refinancing program) could help to reduce the march of foreclosures, the proliferation of generally timid loan mod programs with confusing loan features raises significant doubt as to whether the current loan mod momentum is sufficient to reduce foreclosures materially … modified loans remain a small percentage of delinquent loans and loans in foreclosure, even though servicers have ramped up their efforts in recent months.”

• Hope Now — This voluntary effort by the industry, promoted by the Administration, has produced more public relations than real results. Homeowners have great difficulties getting answers because the services do not have adequate staff to deal with requests. When some accommodation is reached, servicers virtually never reduce loan principal and often enter into repayment agreements that do not even reduce loan payments. Studies have shown that most of the workouts negotiated through Hope Now provide at best temporary short-term relief from foreclosure, and in a large percentage of cases, the homeowner cannot keep up with payments because the agreement does not adequately modify the loan. As of September 2008, Hope Now worked out loan modifications resulting in lower monthly payments for 266,087 homeowners; loan modifications with the same or HIGHER monthly payments for 226,667 families; and 780,000 short term repayment plans.

• FDIC/IndyMac – This effort covers 65,000 borrowers who are more than two months delinquent on their mortgage, but doesn’t reduce the outstanding debt in any meaningful way and therefore has not attracted much interest. So far, 7,200 homeowners have modified their loans under this program. And, after a two-month moratorium on foreclosures pending the modification program, IndyMac foreclosures in November skyrocketed 242 percent from October, according to Mark Hanson of the Field Check Group.

Most recently, FDIC Chairwoman Bair has proposed a program that would, like Hope for Homeowners, provide government guarantees as a carrot to entice servicers to make modifications of interest rates and defer principal payments under a formula based on the debtor’s ability to pay. If the payments are modified by at least 10 percent, (but only for five years) the government would guarantee 50 percent of the loan losses. The Treasury Department noted that this program could actually give servicers an incentive to make minimal modifications and then foreclose to collect the guarantees.

While NACBA applauds FDIC Chair Bair’s commitment to homeowners, it fears that, other than in cases where a planned foreclosure would be more lucrative for the servicer, this program also would have few takers. It is likely that, for all the same reasons plaguing existing programs, servicers would be unwilling to make meaningful modifications of most loans voluntarily. Moreover, the program does nothing to deal with the problem of piggyback second mortgages, often the riskiest loans given by the most irresponsible lenders. Holders of second mortgages can block the modification of the first mortgage, even though the second mortgage typically would be wiped out in a foreclosure sale. Absent reductions in principal, the program will neither sufficiently reduce payments nor prevent later foreclosures when homeowners need to move or cannot refinance to resolve a financial problem. As even Federal Reserve Board Chairman Bernanke has noted, “With low or negative equity … a stressed borrower has less ability (because there is no home equity to tap) and less financial incentive to try to remain in the home.” At best, the Bair proposal would help only a small number of homeowners and, in most cases, only postpone the foreclosure problem – at considerable expense to taxpayers.


The National Association of Consumer Bankruptcy Attorneys ( is the only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. Formed in 1992, NACBA now has more than 3200 members located in all 50 states and Puerto Rico.

NC Attorney General Cooper goes after Charlotte foreclosure rescue scams

Firms take struggling homeowners’ money, fail to save their homes

North Carolina Attorney General Roy Cooper is taking legal action to stop three Charlotte, NC area foreclosure rescue companies from charging high fees but failing to save consumers’ homes.
“So-called foreclosure rescue schemes prey on desperate homeowners, pushing them even closer to losing their homes,” said Cooper. “We’re pushing back by enforcing the law and giving consumers better options.”

Cooper announced that he has filed suit against the following companies and their agents: Robert E. Cassell, Jr., doing business as American Mortgage Assistance in Fort Mill, SC; Home Assure, LLC and its vice president Michael Grieco of Charlotte, NC; and Metrolina Mortgage Relief, LLC and its president Jeffery Mika of Charlotte, NC.
Cooper made the announcement at the Better Business Bureau (BBB) of the Southern Piedmont, which has assisted with the cases.
“Homeowners turn to foreclosure rescue services because it sounds like the solution to all of their problems,” said Tom Bartholomy, president and CEO of the BBB of Southern Piedmont. “We want homeowners to know that anyone who charges you an advance fee for foreclosure help is trying to scam you and is breaking the law.”

In 2005, Cooper worked with state legislators to make it illegal for any foreclosure assistance business to collect fees upfront.
In complaints filed in Wake County Superior Court, Cooper asked the court to bar the three companies and their employees from taking any money from North Carolina consumers for debt adjusting or foreclosure assistance services. The Attorney General is also seeking refunds for consumers, civil penalties and cancellation of all contracts.
As alleged in the complaints, American Mortgage Assistance, Home Assure and Metrolina Mortgage Relief solicit homeowners who are facing foreclosure through web sites and searches of court records. The companies deceive consumers with claims that they are experts who will be able to save them from foreclosure. They collect substantial fees from homeowners, typically equal to one month’s mortgage payment, and then promise to negotiate with their lenders. In fact, the defendants do not provide any meaningful help, or they fail to tell consumers that they cannot prevent foreclosure.
Homeowners’ stories, filed as affidavits with the complaints, illustrate how these companies operate:

• One Charlotte homeowner fell behind on her mortgage payments after losing her job. She paid Metrolina Mortgage Relief $762 for help after the company’s president, Jeff Mika, guaranteed she would not lose her house. The homeowner called Mika several times but got no help from him and eventually had to declare bankruptcy.

• Another homeowner was forced to move in with her daughter in Charlotte after Home Assure took $1,000 from her but failed to do anything to save her Anderson, SC home from foreclosure.
• A High Point couple paid $769.73 to American Mortgage Assistance for foreclosure relief. For three months, the company claimed it was negotiating with their lender. Ultimately, the couple was told they would have to pay $5,000 before the lender would agree to negotiate. Their home was foreclosed on in July.

“Homeowners who fall victim to foreclosure assistance scams lose critical time and precious money that could be better spent on real solutions,” Cooper said. “Many families are struggling to pay their mortgages, and it’s in all of our interest to help them avoid unnecessary foreclosures.”

Legitimate foreclosure assistance counseling is available at no cost from non-profit agencies throughout North Carolina, and nationally through the HOPE hotline (1-888-995-HOPE), which can connect North Carolinians with free resources in their own communities.
The Attorney General’s Consumer Protection Division received three complaints against American Mortgage Assistance, eight against Home Assure, and seven against Metrolina Mortgage Relief. Many of those complaints were shared with the Cooper’s office by the BBB. Consumers can file complaints with Cooper’s office by calling 1-877-5-NO-SCAM toll-free within North Carolina or visiting


For North Carolina homeowners who are facing foreclosure, Chapter 13 bankruptcy may be an option. To find out how Chapter 13 bankruptcy might help you protect your home from foreclosure, call our Hickory office at (828) 327-2240 or our Boone office at (828) 262-0500.

Bankruptcy “Reform” Fails to Deliver

Tough new laws don’t prevent rich or poor from filing

When Congress passed bankruptcy law reform in 2005, it was supposed to provide greater protection for the poor, while forcing the more well-off to pay their debts. It has done neither, according to a new study co-authored by University of Iowa Law School professor Katherine Porter.

Porter and her co-researchers documented that the incomes of bankruptcy debtors in 2007 were statistically indistinguishable from those who filed bankruptcy before the change in the laws in October 2005, in part because there were so few high-income debtors to begin with.

The findings are the result of a study by Porter and six co-authors from the Consumer Bankruptcy Project, who collected and compared nationwide data on families who filed bankruptcy in 2007 with similar data collected from families filing before the laws were changed. Their newly released study suggests that bankruptcy reform did not deliver its intended effect.

The new bankruptcy law used an income-based screen called a "means test" to push alleged "abusers" out of bankruptcy altogether or to force them to repay their debts in chapter 13 repayment bankruptcy cases. But the researchers suggest that the complications and costs associated with the means test may have discouraged hundreds of thousands of people from bankruptcy even when they needed help.

At the same time, the researchers found little evidence that people who could afford to pay their bills – a group specifically targeted by the reforms in an effort to combat abuse of the protection – actually filed for bankruptcy.

The researchers also discovered that families filing for bankruptcy were much more deeply in debt than their counterparts who filed before the laws changed. In 1981, the typical household in bankruptcy owed debts that equaled about 17 months of their income. By 2001, that figure had risen to more than 30 months of income.

By 2007, the typical bankrupt household faced debt obligations that would require them to use all their income for 39 months to pay their creditors. Much of this growth has been in credit card debt.

"Over the past 25 years, household debt loads have been rising, but families now wait until they are in much more trouble before they file bankruptcy," Porter said.

Researchers also found that debt collectors may not be providing accurate information, and debt collectors appear to be falsely telling people that bankruptcy may not be available as an option when in fact it still is. Nearly a quarter of those who filed said that debt collectors discussed bankruptcy with consumers and warned the debtor that they would not qualify, or that the IRS would audit them if they declared bankruptcy.  These claims by debt collectors are simply scare tactics and blatant lies.

The study, "Did Bankruptcy Reform Fail?" will be published in a forthcoming issue of the American Bankruptcy Law Journal. It’s the first major paper from Phase IV of the Consumer Bankruptcy Project, a joint effort of legal scholars, sociologists and medical school professors. It reports on the first nationwide random sample of people filing for bankruptcy, collecting data from interviews, surveys, and court records of people who filed bankruptcy in the first part of 2007.

Get the truth.  Don’t believe the lies from debt collectors or misinformation about bankruptcy from well-intentioned friends.  To find out how bankruptcy really works and how you can save your home from foreclosure and protect your family’s possessions from creditor threats and harassment, call our Hickory office at (828) 327-2240 or our Boone office at (828) 262-0500.


While the Federal Reserve has slashed its benchmark rate to 1 percent, many consumers are still getting hit with higher rates and fees on their credit cards, according to the Wall Street Journal. Though average credit card rates have fallen slightly as the Fed has cut interest rates, banks and retailers are trying to offset rising losses in their credit card operations by raising rates and fees across a broader spectrum of their existing customers.

Chase is raising its rates on credit card cash advances and overdraft protection, as well as its default rate, which is triggered when cardholders exceed their credit limit or are late on their payments. The bank will also start charging a new $10 monthly service fee to some cardholders who have been carrying large balances for at least two years, while raising their monthly minimum payments to 5 percent of their outstanding balance, from 2 percent.

Citibank and American Express have been notifying groups of cardholders that they will be raising their regular interest rates by two to three percentage points. In addition, American Express is raising its rates on cash advances, late payments and defaults, increasing its foreign-exchange fees to 2.7 percent from 2 percent on its consumer and small-business cards and eliminating ways to earn rewards on one of its popular cards.

NC and 10 other states reach agreement with Countrywide to help nearly 400,000 homeowners facing foreclosure

North Carolina Attorney General Roy Cooper says agreement will offer help to more than 5,000 NC homeowners

Raleigh: Mortgage lender Countrywide Financial Corporation has agreed to provide approximately $8 billion in home loan and foreclosure relief to as many as 397,000 homeowners across the country including more than 5,000 in North Carolina, Attorney General Roy Cooper recently announced. Eleven states including North Carolina reached the agreement with Charlotte-based Bank of America, which acquired Countrywide in July of 2008. The agreement is expected to provide $71 million in reduced mortgage payments to more than 5,000 North Carolina borrowers.

“Thousands of North Carolinians who are struggling to pay their mortgages and keep their homes will get relief thanks to this agreement,” Cooper said. “Other mortgage companies need to step up to the plate with similar plans to help homeowners facing foreclosure.”

Under the settlement, Countrywide has agreed to modify loans for eligible borrowers so they will be better able to afford to keep their homes. Modifications may include an automatic freeze or reduction in interest rates, conversion to fixed-rate loans, and refinancing or reduction of the principal owed. Under the modifications, first-year payments of principal, interest, taxes and insurance will be targeted to equal 34 percent of the borrower’s income.

Countrywide has also agreed to stop making problematic high-cost mortgages and payment option adjustable rate mortgages. In addition, Bank of America and Countrywide will pay $150 million to participating states to help consumers who have already lost their homes to foreclosure.

Bank of America and Countrywide will also pay up to $70 million for relocation assistance to borrowers unable to stay in their homes, and will waive up to $60-$80 million in prepayment penalties and default fees.

The settlement resolves allegations that Countrywide used unfair and deceptive tactics in making and servicing home loans. As a result, homeowners were often stuck with unfair loans they couldn’t afford.

Countrywide is the largest provider of subprime mortgages in the United States. Countrywide is expected to start the loan modification program by December 1, 2008, and the company has said that it will reach out to eligible customers by that date. Countrywide has also said that it will halt foreclosure proceedings against homeowners who are likely to qualify for loan modifications under the agreement.

Countrywide customers can call 800-669-6607 toll-free for more information or visit the company’s
website at

North Carolina residents who are facing foreclosures and who are not Countrywide borrowers can get free help by calling the HOPE Hotline toll-free at 888-995-HOPE 24 hours a day, seven days a week.

“Families are hurting and they need help,” NC Attorney General Cooper said. “It’s in all of our interest to help homeowners find a way out of foreclosure when possible.”

Along with North Carolina, attorneys general in Arizona, California, Connecticut, Florida, Illinois, Iowa, Michigan, Ohio, Texas and Washington are participating in the agreement with Countrywide.


As more people struggle under credit card debt, many banks are intensifying their collection efforts, the Wall Street Journal reported recently. Citigroup Inc. has hired more collectors, increased the frequency of calls to delinquent customers and expanded programs that let borrowers temporarily postpone payments or settle debt for less than the borrowers owe.

Bank of America Corp., meanwhile, is contacting late-paying customers earlier than it has in the past. The moves come at a time when rising unemployment and a credit crunch are forcing more consumers to default on their credit card payments.

The percentage of bank credit card accounts that are delinquent rose to 4.51 percent in the first quarter — the latest available — from 4.41 percent in the year-earlier quarter, according to the American Bankers Association. Banks reported increases in delinquency rates in their second-quarter earnings reports, and they expect the problems to get worse.

Banks are under tremendous pressure to shore up their balance sheets amid an onslaught of bad loans and mortgages. Financial institutions are responding by working past-due accounts more aggressively. They are putting their best collectors on their toughest-to-collect accounts (those that are at least 60 or 90 days past due), hiring outsourcing firms to supplement their internal efforts and putting new hires on accounts that are in the early stages of delinquencies, according to experts.


Legislation Will Help Homeowners Keep Loans Affordable And Reasonable

Raleigh – North Carolina Gov. Mike Easley called on the General Assembly to give quick approval to legislation that will help thousands of homeowners with exploitive subprime mortgages avoid foreclosure. The legislation requires that borrowers receive at least 45 days notice before foreclosure proceedings are started and directs the NC Banking Commissioner to work with individual borrowers and their lenders to find ways to save their homes.

“Many subprime borrowers were placed into loans in which interest rates increased, and which they simply could not afford,” Easley said. “We have all been looking to the federal government to step in and do something about these foreclosures and they have done nothing. So we decided we would do it on the state level. And if nothing else, we can at least help the people of North Carolina.”

The bill, sponsored by state Rep. Dan Blue (D-Wake), requires that lenders give borrowers with subprime loans 45 days written notice before filing foreclosure proceedings. It also establishes the “State Foreclosure Prevention Project,” under which NC Commissioner of Banks Joe Smith will help lenders and borrowers work out solutions to avoid foreclosures. Smith will have the authority to bring the mortgage companies, housing counselors, community groups, state agencies and others together to help borrowers stay in their homes. It also authorized the Commissioner of Banks to extend the filing date for a foreclosure for up to 30 days if there is a potential to work out terms. There is no cost to the taxpayers.

North Carolina has been a model for the nation in protecting borrowers from unscrupulous lenders. Legislation championed in 1999 by the governor when he was attorney general was the first to address predatory lenders. Last year, the governor signed laws that limited the amount mortgage brokers could charge and added additional protections for borrowers from abusive adjustable-rate mortgages as well as requiring lenders to ensure that loan terms matched a borrower’s ability to pay.

North Carolina ranks second in the nation, Easley noted, for financial institutions based in the state. “When the banks come together and support something, it means something nationally and people take notice,” he said. “If we can make this work, that is something that can help us sell it around the country.”

Because of the state’s leading efforts at imposing strong regulation, the state has fewer sub-prime loans, ranking 45th in the nation in concentration of subprime lending. The state has fewer adjustable rate loans, half the national average. As a result, the state has had less mortgage fraud, ranking 33rd out of the 44 reporting states. The foreclosure rates in North Carolina have not been as severe as in other regions. Foreclosure actions increased 9 percent in 2007 to 49,498.

For more information on mortgages and foreclosure, visit the State Commissioner of Banks’ web site at:

NC Superior Court Judge Stops Premier Subprime Credit Card Solicitations

N.C. judge puts restraining order on credit card company

A North Carolina Superior Court judge has ordered an Arizona company to stop contacting consumers in North Carolina and offering them credit cards.

North Carolina Attorney General Roy Cooper’s office says Premier Nationwide Corp.
of Scottsdale, Arizona, has previously contacted consumers by mail and phone, offering them pre-approved credit cards with high credit lines and low interest. Those who agreed to the deal were asked to pay an upfront processing fee of $379.00 and then told to contact a bank to get their credit cards. But when they did so, they were often told to fill out a credit-card application — which was usually denied, Cooper’s office says. The office received complaints that Premier Savings refused to refund the processing fee.

Cooper’s office says a judge placed a temporary restraining owner on the company, preventing it from contacting North Carolinians. The office is seeking a court order that would require Premier Savings to repay consumers and pay fines to the state.

"With tough economic times, the last thing consumers need is to pay for help they don’t receive," Cooper says in a statement. "We’ll keep working to hold companies to their promises."

Hope Now’s Successes May Be Over Rated

According to a story written by Lynnley Browning in a recent edition of the New York Times, Hope Now, the White House’s initial answer to the country’s mounting foreclosures, is failing to provide much help to struggling homeowners, largely because it is operated by the very people who caused the problem in the first place.

Hope Now was established in July of 2007 to serve as a portal for homeowners with subprime mortgages to enter the system and seek help.  Persons calling the program’s hotline would be plugged into credit counselors and appropriate lenders’ representatives, who would, ostensibly, assist them in resolving their problems. The program was expanded in February with the addition of "Project Lifeline" which extended the program to prime and Alt-A borrowers and put a 30-day moratorium on foreclosures in place for those who seek help.

In March 2008, Hope Now released data on its results through the end of January. They claimed to have been responsible for a total of 1,035,000 loan workouts which included 758,000 repayment plans and 278,000 loan modifications. A modification occurs any time any term of the original loan contract is permanently altered – through a reduction in rate, forgiveness of a portion of the principal, or change in the maturity date. A repayment plan allows the borrower to become current and catch up on missed payments without any substantial or permanent alteration of the loan terms.

The report stated that the number of modifications as opposed to repayment plans has been rising steadily. In the third quarter of 2007, 19 percent of all workouts were modifications; in the fourth quarter it was 35 percent; and in January, 50 percent of the workouts were modifications – 45,320 modifications vs. 48,155 repayment plans.

Ms. Browning, however, reports quite different results.

Everyday, she states, more than 4,500 people call Hope Now, but few of them appear to be getting the relief they are hoping for. "One reason is that the financial powers behind Hope Now – mortgage lenders, loan servicers and big investors – are reluctant to change loan terms substantially if doing so hurts them."

She says that the group is coming under fire from within and without for putting the interests of lenders over those of borrowers. Hope Now’s executive director Faith Schwartz is an executive at the subprime lender Option One Mortgage.

Hope Now is run out of the Housing Policy Council, which in turn is part of the Financial Services Roundtable, the influential financial services lobby. The Roundtable and another big industry group behind Hope Now, the American Securitization Forum, oppose any government housing effort that would require them to take losses on bad mortgage loans. Another component of the Hope Now alliance, the non-profit Homeownership Preservation Foundation, was established in 2003 with a $20 million grant from GMAC-RFC, a mortgage lender.

Ms. Browning’s article states that Hope Now employs just three people. Most of its work is done through committees staffed by senior bank and mortgage executives who are part of the Financial Services Roundtable.

Hope Now counselors are urged to follow the guidelines of the American Securitization Forum which represents financial companies that bundle mortgages for sale to investors. The Forum’s executive director George Miller told The Times that it represents the interests of investors and "we want to minimize losses on bad mortgages and maximize recovery."

The group’s guidelines on loan modifications advise lenders to modify loans case by case rather than across the board. Both the Forum and the Roundtable oppose calls to open up bankruptcy courts for struggling homeowners, a move that could lead to further losses for their members.

The Times article maintains that even Hope Now is unsure of its effectiveness. It does not break out the number of loan workouts that occur as a result of its efforts and those that might have happened anyway. Some people who work with Hope Now say it has done little to keep the housing crisis from deepening.

According to the Homeowners Preservation Foundation, only about four percent of callers to the Hope Now hotline end up talking in person with a mortgage counselor.

"Hope Now is a failure," said Michael Shea, the executive director of the Acorn Housing Corporation, a large counseling agency that is part of the Hope Now alliance. "It’s industry-dominated."

U.S. Senate Throws Out Single Most Needed Step to Help Millions of American Families Keep Their Homes

Joint Statement from Civil Rights, Consumer, & Housing Groups

Washington, DC – More than 15 national organizations (listed below) issued the following joint statement in response to the Foreclosure Prevention Act and its failure to include bankruptcy measures:

"The Senate Housing package misses the single most significant step needed to help the 20,000 American families with subprime loans that are losing their homes each week through foreclosure: the bankruptcy amendment.

We are left with a bill loaded with special considerations for mortgage companies and builders that does very little for homeowners who were sold predatory loans by mortgage lenders.

Any final bill hammered out between the U.S. House and Senate that is a serious effort to stem the foreclosure crisis must include meaningful relief to families to modify their mortgage in bankruptcy. Bankruptcy relief will stabilize communities, keep more than half a million families in their homes and provide lenders at least as much income as they would receive through foreclosure.

As the Senate bill stands, we will continue to see foreclosures tear down communities and wipe out the most important source of financial security that most Americans have.

We are encouraged that there is recognition that the bill under consideration by the U.S. Senate today is only part of the solution. Without bankruptcy relief, Congress will be condemning hundreds of thousands of American families this year to losing their homes.

Center for Responsible Lending

Leadership Conference on Civil Rights


American Federation of Labor and Congress of Industrial Organizations

Consumer Action

Consumer Federation of America

Consumers Union

Lawyers’ Committee for Civil Rights Under Law

NAACP Legal Defense & Educational Fund, Inc.

National Association of Consumer Advocates (NACA)

National Association of Consumer Bankruptcy Attorneys (NACBA)

National Consumer Law Center

National Association of Neighborhoods

National Community Reinvestment Coalition

National Council of La Raza

National Fair Housing Alliance

Opportunity Finance Network

Service Employees International Union (SEIU)