Americans face post-foreclosure hell as wages garnished, assets seized

[CityFarmer]

We should never assume debt can be written-off. It will come back one day... May be a drag on US consumer spending...

Americans face post-foreclosure hell as wages garnished, assets seized

NEW YORK - Many thousands of Americans who lost their homes in the housing bust, but have since begun to rebuild their finances, are suddenly facing a new foreclosure nightmare: debt collectors are chasing them down for the money they still owe by freezing their bank accounts, garnishing their wages and seizing their assets.

By now, banks have usually sold the houses. But the proceeds of those sales were often not enough to cover the amount of the loan, plus penalties, legal bills and fees. The two big government-controlled housing finance companies, Fannie Mae and Freddie Mac, as well as other mortgage players, are increasingly pressing borrowers to pay whatever they still owe on mortgages they defaulted on years ago.

Using a legal tool known as a "deficiency judgment," lenders can ensure that borrowers are haunted by these zombie-like debts for years, and sometimes decades, to come. Before the housing bubble, banks often refrained from seeking deficiency judgments, which were seen as costly and an invitation for bad publicity. Some of the biggest banks still feel that way.

But the housing crisis saddled lenders with more than $1 trillion of foreclosed loans, leading to unprecedented losses. Now, at least some large lenders want their money back, and they figure it’s the perfect time to pursue borrowers: many of those who went through foreclosure have gotten new jobs, paid off old debts and even, in some cases, bought new homes.

"Just because they don't have the money to pay the entire mortgage, doesn't mean they don't have enough for a deficiency judgment," said Florida foreclosure defense attorney Michael Wayslik.

Advocates for the banks say that the former homeowners ought to pay what they owe. Consumer advocates counter that deficiency judgments blast those who have just recovered from financial collapse back into debt — and that the banks bear culpability because they made the unsustainable loans in the first place.
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http://www.todayonline.com/business/amer...ets-seized

[greengiraffe]

Moderator ... pls amend the thread heading to US Mortgages / Lending...

I think this piece of development is of significance since it was easy lending and lack of foreclosure laws that brought down Captain America and the rest of the world... hence loosening the tap is of significance... not just to US but certainly may have ripples through the rest of globe.

To me, whilst US is assuming leadership in growth in a crawling global economic growth and hence leadership in global equities uptrend, one should be mindful of bubbly valuations in some sectors and hence further loosening of purse strings to once strapped borrowers may just be the catalysts to the current bull phase setting stage for a potential bubble bursting in 2017...

GG

US mortgage lenders to relax standards
THE WALL STREET JOURNAL DECEMBER 01, 2014 12:00AM

SOME of the largest US mortgage lenders are preparing to further ease standards for borrowers after the release of new guidelines last month from mortgage giants Fannie Mae and Freddie Mac.

The new guidelines, to take full effect from today, resulted from an agreement in October meant to clarify when lenders would be penalised for making mistakes on mortgages they sell to Fannie and Freddie. Lenders have blamed the lack of clarity for tight credit conditions that have made it difficult for many consumers to qualify for a mortgage.

Relaxing the lending standards potentially could make it possible for hundreds of thousands of additional consumers to get mortgages.

Laurie Goodman, director of the Housing Finance Policy Centre at the Urban Institute, said the moves were “going to be big”, but added that it was “going to take time” to see the full impact.

The Urban Institute, a Washington think tank, this year estimated that as many as 1.2 million additional home loans would be made annually if mortgage availability were at “normal” levels.

Some lenders, including Wells Fargo and SunTrust Banks, said borrowers should begin to see initial changes in a few weeks, including faster turnaround times for mortgage applications to be processed.

Currently, it can take two months or longer between the time a consumer makes an application and the loan is made.

Lenders also are expected to widen the scope of the types of borrowers they will accept by reducing credit-score requirements and giving greater leeway to consumers whose credit history suffered because of one-time events, such as a job loss or medical bill.

Economists have long maintained that tight credit could be holding back the housing recovery and dampening economic growth. On Tuesday, the S&P/Case-Shiller Index showed that US home prices grew 4.8 per cent in the 12 months to the end of September, their slowest pace in two years.

After the financial crisis, Fannie and Freddie made banks repurchase tens of billions of dollars in loans that the companies said did not meet their standards. In turn, many lenders stopped making loans to all but the most pristine of borrowers. In many cases, they required borrowers to have substantially higher credit scores and put in place other measures — so-called credit overlays — that were more stringent than what Fannie and Freddie required.

With the new agreement, “I’ve been told with absolute confidence that some lenders are lifting almost all of their overlays”, said David Stevens, president of the Mortgage Bankers Association.

Wells Fargo, the nation’s largest mortgage lender, lifted its credit-score overlay earlier this year, which the bank said was in anticipation of the agreement with Fannie and Freddie. Now it says borrowers can expect a smoother process of getting a loan with less “excessive” paperwork.

“It’s providing greater certainty for all parties so that you can lend more confidently and make the whole judgment process much easier and more clear cut,” said Mike Heid, president of Wells Fargo Home Mortgage.

The Wall Street Journal