Loss Mitigation

Two New York attorneys were convicted of 10 felony counts for their roles in a $25 million mortgage fraud scheme, the U.S. Attorney's Office for the Eastern District of New York announced in a statement Monday. Matthew Burstein, 40, and Aaron Rabinowitz, 40, of the law firm Burstein & Rabinowitz were allegedly involved in a scheme that resulted in over $25 million in fraudulently-obtained loans from Countrywide Financial, Fremont Investment and Loan, IndyMac Bank, Sun Trust Mortgage, Inc., Wells Fargo & Company, and New Century Mortgage Corporation. The defendants could face up to 30 years in prison.

While younger folks are oftentimes viewed as being more prone to taking risks than more elderly people, a study found that this idea doesn’t ring true when it comes to buying a home during an economic downturn. The study was authored by economists from the Federal Reserve Bank of Boston, Anat Bracha and Julian C. Jamison, and examined how the recession affected attitudes toward homeownership. The study found that people who lived in hardest-hit ZIP codes in 2008 were significantly more likely to be confident about owning a home if they are older (over 58), but are significantly less likely to be confident about owning a home if they are younger.

Nearly three-quarters of economists surveyed said they would continue making their mortgage payments even if they were deeply underwater, Zillow reported Thursday. In Zillow's Home Price Expectation survey for June, 71 percent of economists said they would not choose strategic default, even if they owed at least 40 percent more on their mortgage compared to the home's current value. The industry experts were also questioned on their position concerning a government-sponsored program to forgive principal for underwater homeowners. Seventy-two percent said they opposed a principal reduction program, while 28 percent were in favor of one.

In hard-hit state Nevada, more than 60 percent of homeowners are underwater, and about one in 16 properties received a foreclosure notice in 2011, according to a 2012 Face of Foreclosure study released by the Nevada Association of REALTORS (NVAR). With negative equity and foreclosures seeming so commonplace in the state, the stigma of strategic default appears to be fading. ""This year's report shows it's more socially acceptable to strategically default on your mortgage,"" said NVAR President Blane Johnson. When surveyed on the topic, 51 percent of those who were foreclosed on said there is nothing wrong with strategic default as a financial decision while 36 percent said homeowners should not choose to strategically default.

First-time claims for unemployment insurance fell 35,000 for the week ended July 21 to 353,000, the Labor Department reported Thursday. Economists surveyed by Bloomberg had expected 380,000 initial claims. The prior week’s total was revised up to 388,000 from the originally reported 386,000.

Sen. Jeff Merkley(D-Oregon) announced a plan Wednesday to allow underwater homeowners to refinance at lower interest rates through the creation of a Rebuilding American Homeownership Trust. His plans call for a one-time trust he says is similar to the Homeownership Loan Corporation created during the Great Depression. As banks refinance underwater homeowners, the trust would purchase the loans from the banks. Meanwhile, the trust would receive funding from bond sales.

Defendants who operated a national loan modification scam were ordered to pay more than $4 million in penalties and restitution, including $2 million to consumers who were falsely promised loan modifications, California Attorney General Kamala D. Harris announced Tuesday in a statement.

Following promising reports of sales in California's Southland Empire, DataQuick issued another release revealing that foreclosure activity is down in the state. According to the company's data, the number of California homes entering the formal foreclosure process dropped in the year's second quarter to its lowest level since early 2007.

After testing out different scenarios, Moody's Investor Services concluded a widespread adoption of San Bernardino County's proposed use of eminent domain will increase losses for RMBS pools by around 30 percent. The proposal calls for the seizure of underwater mortgages to address the problem of negative equity. Moody's argues seizing underwater performing loans ""would increase RMBS pool losses if other jurisdictions were to adopt it because it would force losses on performing loans that could otherwise have avoided default.""

Three individuals out of California were sentenced for their roles in a mortgage modification scam, SIGTARP announced Monday. Ziad Nabil Mohammed Al Saffar, Sara Beth Bushore Rosengrant, and Daniel Al Saffar were charged with conspiracy to commit wire fraud and mail fraud and sentenced Friday in federal court in San Diego. U.S. District Court Judge Anthony J. Battaglia sentenced Ziad to 21 months in federal prison, Rosengrant to 12 months of home detention as a part of a three-year term of probation, and Daniel to six months home detention as a part of a three-year term of probation.