Interview with Reuben Dunn, author of

A House Divided Cannot Stand.

Some time ago I read about a soon to be published book on mortgage modifications written by an experienced mortgage industry professional. Because of my involvement with my brother in his mortgage modification business I tracked down the author, Reuben Dunn, and arranged both this written interview and a live blog radio interview scheduled for the evening of September 23rd on my Books and Politics Show. In addition to reading the following I

hope you will listen to the live interview which will be more comprehensive and that you will call in to ask questions. It is on Monday night at 7:00 p.m. California time, Monday, September 23rd, and you can find it at: www.blogtalkradio.com/angelsandwarriors. Just look for the Books and Politics Show. The following is my written interview with Reuben: Reuben please tell us about your background and what qualifies you to talk about mortgage modifications. I have over 18 years experience with consumer credit finance and debt counseling. I have experience with underwriting loans, both on a non-secured and a secured basis. For the past 4 and a half years I have worked exclusively with mortgage modifications. During this time I worked at Bank of America, initially in their Home retention Department. I finished my time with them as an Account Specialist in the Office of the President and CEO, working on escalated modification requests and complaints. There was a recent settlement between major banks and the Attorney Generals from various states where the banks paid billions of dollars because of alleged violations in conjunction with mortgages and mortgage modifications. Could you explain what illegal practices the banks were accused of and what the money from the settlement will be used for?

Simply put, this agreement settles state and federal investigations finding that the five largest mortgage servicers in the country ( Ally/GMAC - Bank of America - Citi - JPMorgan Chase - Wells Fargo) routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct. Both of these practices violate the law. This was known as Robo-Signing. The settlement provided benefits to borrowers in the signing states whose loans are owned by the settling banks as well as to many of the borrowers whose loans they service. The Settlement also provided for monies to be distributed to certain homeowners who had lost their homes to foreclosure. In June of this year, the National Mortgage Settlement Administrator distributed approximately $1.5 billion in settlement funds to certain borrowers who lost their home to foreclosure. Payments were mailed June 10 through June 17, 2013, and were for amounts of approximately $1,480.00 You might want look at this URL for reference: http://www.nationalmortgagesettlement.com/f aq Is there any justification for the robo signing that was practiced by many banks?

No. None at all. I do understand what may have driven bank management to do this however, high volume of delinquent mortgages, a push to get these issues resolved. It was wrong. It harmed both the homeowners as well as the reputation of several banks. The ripple effect of these actions are still being felt today. Most people who obtain a mortgage from a bank assume that their bank is the one making the loan. In fact, many such loans are sold to investors and the bank merely acts as a servicing agent. Could you explain how this works? Most banks will carry their own mortgage programs that are sold to homeowners who meet specific criteria, .e.g, income, credit history, debt and expenses. Those homeowners who do not meet these criteria are then referred to other investors, including Freddie Mac, Fannie Mae, FHA, USDA , Bank of New York, etc. Loans that are not bank held are referred as being 3rd party servicers. Banks will buy bundles of mortgages will fit their sales and marketing profile. The homeowner is notified when these mortages are sold off to other lenders. Bank of America for example will sell in bulk form, those mortgages that no longer fit their sales and investment profile. They will also buy in bulk mortgages that fit these same profiles. The thing to remember is that the original terms and conditions of the

mortgage are not changed, payments are the same, and delinquencies are still in effect. I have read that it is sometimes to the advantage of a servicing agent to force a foreclosure when both the investor and the home owner would be better served by a modification. Is there any truth to this and could you explain why or why not? I have heard this rumor for several years and just do not buy into it. Foreclosure is a loselose proposition for both the homeowner as well as for the lender. The homeowner loses out due both losing the home as the rather toxic effect that a foreclosure will have on their credit rating. The lender loses out simply due to the lost investment; they are already losing money on the mortgage loan itself, as well as the missed payments. Putting a house under foreclosure means that the house will eventually be sold off at a far less amount than either the original amount loaned, or what the current fair market value of the property is. It is in their best interests to try to keep the homeowner in the property. There are some cases where the investor does not participate in any sort of modification program, either the banks or the government program. These sorts of mortgages are generally going to be the low end of the subprime mortgage, will have a severe delinquency attached to them, or the homeowner will have an extremely poor credit

rating. In these rare cases, the homeowner will have the option of either repaying the back debt, or putting the house on the market as a short sale. I will say that this is the severe exception to the rule. I have never been in the position of automatically putting a foreclosure order through, nor have I heard any of my former colleagues at Bank America, for example, get this sort of instruction. Your book explains the income requirements for obtaining a mortgage modification and I understand that there are also acceptable ranges for expenses that the homeowner can have to secure a modification. When a modification applicant does not meet either of these standards does the bank advise them how far off they are? Why or why not? As a rule we would not tell them how far off they are from meeting lending qualifications concerning income; the reason being that some homeowners, in an act of desperation, would then resubmit new income information that has been, to put it kindly, massaged, to fit the requirements. The main problem with this is that if a modification is done with inaccurate information, the homeowner will suffer for it in the long term. If there were problems with too much debt, I would suggest to the homeowner that they proactively reach out to their other debtors and see if arrangements could be

made to accept a reduction in payments, after explaining to them why this request was made. I am aware of one bank that declined a mortgage modification because a computer model determined that the modification could not be made at 31% of the homeowner income. However, the computer model calculated the property tax payment rather than accept the amount that the homeowner had submitted with his application. It was pointed out to the bank that the computer model was wrong since the property was in California and had very low property taxes because of Prop 13 since the homeowner had owned the property for a long time. The bank representative said nothing could be done once the computer rejected the application. What should be done in such a case? I am not really sure how to answer this one, as each lender will have their own processes and internal guidelines to follow for their in-house modification processes. When I was doing underwriting for an in-house modification the property tax information was obtained by us from the customer directly, both over the phone, and in some cases, in hard copy, they would send in a copy of their property tax statement. If there were any discrepancies of information the customer would be expected to bring them up at the time of application. Taking all of this into consideration it is doubtful that the application would have been declined on this single fact alone; property tax

is taken into consideration, in many cases whether or not it is delinquent or not. If the homeowner is able to provide written confirmation from their County Tax Office that the tax information has been amended, then they should be able to resubmit the needed information in a new application. Not knowing what the specific bank concerned was, nor all of the specific details of this file, it is hard to come to a specific conclusion. All I can say is that when a homeowner informed me that some information was not correct, they were invited to resubmit it to me. Again, simply having a change in the amount of money paid for County Taxes alone would not necessarily cause an application to be declined. California passed a law prohibiting third party modifiers, other than lawyers, from collecting advance payment for modification services. Do you think such a law is in the best interest of the homeowners? I think that overall it is in the best interest of the homeowner to know that if they are paying an upfront fee for modification assistance, that the company that they are doing business with is regulated, in this case by the California Bar Association. Prior to this legislation, not only in California, but nationally as well, there were

no legal requirements for anyone to follow when setting up a modification assistance company. This meant that anyone could set up shop, advertise as a modification expert and then wait for business. In the early days of the modification crisis, there were hundreds of companies all over the United States doing just that. In many cases, they were charging upfront fees of several thousand dollars and, many times, guaranteeing to the homeowner not only a modification, but both forgiveness of back debt, reduced interest rate, as well as a principle reduction of the outstanding balance. The problem was that these were empty promises for the most part, and many of these companies would simply take the up front fees, send in the paperwork to the banks and lenders, then do nothing else, except move on to the next customer. I have had many conversations with homeowners who had been scammed but these kinds of companies. On one occasion I attempted to contact a modification company a week after receiving some paperwork, only to find that their phone number had been disconnected. The company took several thousand dollars from the homeowner and disappeared. Fortunately I was able to work directly with the homeowner and work out a modification solution for them.

At least now, with the requirements as they are, concerning law firms, there is a better recourse for the homeowner to pursue should they need to. The State Bar Associations in the country take an extremely dim view of law firms who fail to deliver. With housing prices on the rebound and many mortgages that were underwater, with the loan amount in excess of the home value, do you believe mortgage modifications will cease to be a problem in the near future? No. here in the State of California, for example, both housing prices and the interest rates are increasing, as they are across the nation. Earlier this week there was a spot on the local news that said that the guidelines for buying a new home are now harder than ever before. While the news about the housing prices and interest rate rise, and the tighter lending guidelines is long overdue and welcome, let us not forget that this only applies to homeowners who are currently buying their homes; it has nothing to do with the several million homeowners who are underwater and in trouble today. I think that the only way that the modification problem/crisis will be cease to be a problem in the near future, would be if the banks and lenders stopped taking applications for

assistance today. Drawing a line in the sand and saying that after this date there would not be any further assistance provided. That is the only way I can see in having this problem cease in the near future. Fortunately, for the distressed homeowner, this will not happen, and both the government and the lending institutions will continue to provide assistance. The question perhaps should be asked what can be done to speed up the process. Well, I have felt that looking at the modification policies for both the private sector and the government sector, insofar as some form of Principle Balance reduction, a portion of the outstanding debt forgiven/ written off in some cases, would make the playing field a bit more level. Having a lender buyback program where the lenders get the property title back, and then, if the homeowner can afford the rent, renting/leasing back the home to the occupier. Several lenders already do this with the majority of those being offered this opportunity, being able to remain in the residence due to their being able to afford the rent. I think there needs to be better care and conditioning of the homeowner should it be found that they are simply not able to meet any sort of repayment options due to their level of income.

Several lenders are taking the lead on this, and are mirroring the HAMP program of offering relocation assistance to the homeowner, should it be necessary for them to move out of the home, due to short sale, deed in lieu of foreclosure, or through foreclosure itself. This is a problem that took several years to cascade into existence, and it will take a few more years to get sorted out, assuming that the number of homeowners who are seeking help, does not increase as it has been doing over the past twenty four months. Ok Reuben, I am going to end the written interview at this point. I do have some follow up questions concerning the answers you have given above and also some additional questions concerning the recently announced plan to phase out Freddie Mae and Fannie Mac and have investors bear more of the risk with home loans but those can all wait until our live radio interview. For those readers who would like more information about mortgage modification from Reuben I recommend his book, A House Divided Cannot Stand, which will be available soon on Amazon. And I also suggest that it would be well worth your while to listen in to our live interview and be prepared to ask questions about anything that is not crystal clear. You will be able to get up to date information about the date A House Divided Cannot Stand will be published. And if you have a friend who faces foreclosure, or other serious financial

problems concerning their home mortgage, advise them to listen in as well.