Testimony before the Joint Economic Committee, U.S. Congress, Washington, D.C.

Testimony before the Subcommittee on Oversight and Investigations, Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

Testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

Testimony before the Subcommittee on Insurance, Housing, and Community Opportunity, Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

Testimony before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.. Chairman Bernanke presented identical remarks before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate on July 14, 2011

Testimony before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

Testimony before the Subcommittee on Financial Institutions and Consumer Protection, Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

Testimony before the Committee on Agriculture, Nutrition, and Forestry, U.S. Senate, Washington, D.C.

Mortgage Documentation and other Servicing Issues
Foreclosure is a legal process initiated to terminate a borrower’s interest in a property and is permitted only when the borrower has defaulted on the debt obligation for a specified period. The process allows the lender to sell the property and use the proceeds to satisfy the borrower’s unpaid debt to the extent it is secured by the property. Foreclosure requirements are generally established by state laws and each state has its own statutes, rules, and court decisions pertaining to foreclosures.

Some 23 states, known as judicial foreclosure states, require foreclosures to be reviewed and approved by a court. Nonjudicial foreclosure states have different processes for foreclosures that do not require the creditor to obtain court approval for a foreclosure, but instead impose varying waiting periods and documentation, filing, and notice requirements after a default occurs and before a foreclosure sale may take place. In nonjudicial foreclosure states, the homeowner typically has access to the court in a foreclosure matter only if the homeowner initiates a suit to stop the foreclosure process or seeks protection in a bankruptcy court.

Because mortgage servicers maintain the official accounting of all amounts paid and owed by borrowers, they serve as the critical link between borrowers and mortgage holders. In addition, servicers manage loan defaults, including the negotiation of loan modification and repayment plans with borrowers. Should the servicer decide to initiate foreclosure, it would often do so as the agent for third parties, such as securitization trusts. In this regard, servicers have responsibilities to investors holding residential MBS. Servicers also have responsibilities to borrowers to maintain accurate and complete records of payments received, amounts advanced, notifications made to borrowers, and changes of payment terms with respect to any mortgage modification discussions.

Foreclosure documentation typically requires an assertion that the agent bringing forth the action has the legal right to foreclose and that the loan is in default. The document filings contain details of the transactions and the amounts owed. These documents typically include attestations signed by individuals who have personal knowledge of the facts and who are properly authorized to make such assertions. In most jurisdictions, the documents must be signed by these individuals in the presence of a notary, following proper notarization procedures. Lenders and servicers are responsible for ensuring that the individuals who sign these documents are duly authorized and have appropriate knowledge of the facts and circumstances. In addition, lenders and servicers are responsible for ensuring the accuracy of records and the facts recited in the foreclosure documents.

State and local laws govern the recordation process for real estate transfers and mortgage filings and assignments. Given the multiple sales and assignments of mortgage loans that often occur, concerns have been raised regarding investors’ or servicers’ rights to initiate foreclosure actions. Although state-by-state practices vary considerably, generally the noteholder has the right to initiate foreclosure, once default has occurred, if an original note can be produced and the current holder’s ownership is verified. If there is no controversy concerning ownership of the note, but rather an inability to locate original documents, processes usually allow for foreclosure to proceed, albeit at some cost and delay. If there is some question of ownership, the investor or servicer may be required to produce evidence of ownership before a foreclosure can proceed.

Since matters regarding real estate titles and foreclosures are generally governed by state law, state attorneys general are undertaking a joint review of lenders and servicers focusing on the reported problems in foreclosures. In addition, numerous federal agencies have launched investigations, including the examinations in process by the federal financial regulators.

The Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and the Federal Reserve are conducting an in-depth review of practices at the largest mortgage servicing operations. The interagency examinations and reviews focus on foreclosure practices generally, but with an emphasis on the internal control breakdowns that led to inaccurate affidavits and other questionable legal documents being used in the foreclosure process. The agencies are reviewing firms’ policies, procedures, and internal controls, including sampling loan files. We have also solicited the views of consumer organizations to help detect problems at specific servicers. The agencies expect the initial on-site portion of our work to be completed by the end of the year. The agencies plan to publish a summary overview in early 2011 that will describe the range of industry practices found in the examinations and identify weaknesses requiring remediation.

The Federal Reserve has supervisory and regulatory authority for bank holding companies and their nonbank subsidiaries, as well as for approximately 800 state-chartered banks that are members of the Federal Reserve System (state member banks), and certain other financial institutions and activities. We work with other federal and state supervisory authorities to ensure the safety and soundness of the banking industry, foster the stability of the financial system, and provide for fair and equitable treatment of consumers in their financial transactions. The Federal Reserve is engaged in both regulation, which involves establishing the rules within which banking organizations must operate, and supervision, which involves reviewing the efforts of banking organizations to abide by those rules and remain, overall, in safe and sound condition.

The Federal Reserve serves as the primary federal regulator for two of the 10 largest servicers affiliated with banking organizations, one a holding company affiliate and the other a state member bank. The Federal Reserve is participating with the other federal banking agencies in examining the foreclosure policies and practices of the other large institutions. For additional information on foreclosure processes, we have sent a self-assessment questionnaire to other Federal Reserve-regulated institutions that engage in mortgage servicing but are not part of the interagency examination effort.

While quite preliminary, the banking agencies’ findings from the supervisory review suggest significant weaknesses in risk-management, quality control, audit, and compliance practices as underlying factors contributing to the problems associated with mortgage servicing and foreclosure documentation. We have also found shortcomings in staff training, coordination among loan modification and foreclosure staff, and management and oversight of third-party service providers, including legal services. It is for this reason that we expanded the review to include an examination of pre-foreclosure loans, or those past due but not yet in the foreclosure process, and certain third-party service providers. As examiners identify weaknesses, they will require firms to take remedial action and, when necessary, require servicers to address resource shortfalls, training and coordination problems, and control failures.

It is important to recognize that the extent of these problems is not the same across all firms. Nonetheless, the problems are sufficiently widespread that they suggest structural problems in the mortgage servicing industry. The servicing industry overall has not been up to the challenge of handling the large volumes of distressed mortgages. The banking agencies have been focused for some time on the problems related to modifying mortgage loans and the large number of consumer complaints by homeowners seeking loan modifications. It has now become evident that significant parts of the servicing industry also failed to handle foreclosures properly.

While we are still in the process of determining the extent of these problems and the required supervisory response, it is clear that the industry will need to make substantial investments to improve its functioning in these areas and supervisors must ensure that these improvements occur. Moreover, fixing the problems in the mortgage servicing industry may also require thinking about some fundamental structural changes to the current mortgage system. I will discuss the issue of structural solutions to these issues in more detail later in my testimony.

Testimony before the Subcommittee on Housing and Community Opportunity, Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

Testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

Testimony before the House Committee on Financial Services, Washington, D.C.

Testimony before the Financial Crisis Inquiry Commission, Washington, D.C.

Testimony before the Financial Crisis Inquiry Commission, Washington, D.C.

Testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.. Chairman Bernanke presented identical remarks before the Committee on Financial Services, U.S. House of Representatives, on July 22, 2010

Testimony before the Subcommittee on Security and International Trade and Finance, Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

Testimony before the Subcommittee on Domestic Monetary Policy and Technology, Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

Testimony before the Subcommittee on Oversight and Investigations, Committee on Financial Services, U.S. House Of Representatives, Southfield, Michigan

Testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

Testimony before the Subcommittee on Domestic Policy, Committee on Oversight and Government Reform, U.S. House of Representatives, Atlanta, Georgia

Testimony before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

Testimony before the Subcommittee on Financial Institutions, Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

Testimony before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

Testimony before the Subcommittee on Security and International Trade and Finance, Committee on Banking, Housing, and Urban Affairs, Washington, D.C.

Testimony before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

Testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

Testimony before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.. Governor Tarullo presented identical remarks to the Committee on Banking, Housing, and Urban Affairs, U.S. Senate on July, 23, 2009

Testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.. Chairman Bernanke presented identical remarks before the Committee on Financial Services, U.S. House of Representatives, on July 24, 2009

Testimony before the Subcommittee on Domestic Monetary Policy and Technology, Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

Testimony before the Subcommittee on Domestic Monetary Policy and Technology, Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

Testimony before the Joint Economic Committee, U.S. Congress, Washington, D.C.

Testimony before the Committee on Oversight and Government Reform, U.S. House of Representatives, Washington, D.C.

Testimony before the Subcommittee on Securities, Insurance, and Investment, Committee of Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

Rate Lock Advisory – Monday Feb. 23rd

Monday’s bond market is currently down slightly despite stock losses. The Dow is currently down 53 points while the Nasdaq has lost 20 points. The bond market is currently down 4/32, which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point.

The bond market and stock indexes are well off earlier levels. The stock markets opened in positive territory with the Dow up nearly 75 points earlier and the Nasdaq up 11 points. The bond market was down 12/32 during early trading, but as the stock markets have given back early gains and slid into negative ground, bonds are rising. This is likely as a result of investors shifting funds into bonds to escape the expected volatility in stocks. Some analysts are predicting stocks to fall further in the near future and bonds are benefiting.

This week brings us the release of six pieces of economic data for the bond market to digest along with some very important tes timony from Fed Chairman Bernanke. Two of the reports are considered to be of low importance, but a couple of them are considered to be of fairly high importance. None of this week’s relevant data is being released today.

Tomorrow morning brings us the first of this week’s data with the release of February’s Consumer Confidence Index (CCI) during late morning trading. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. Since consumer spending makes up two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show a decline in confidence from 37.7 in January to 36.0 this month. A lower reading would be considered good news for bonds and mortgage rates.

Mr. Bernanke will deliver the Fed’s semi-annual testimony on the status of the economy late tomorrow morning. He will be speaking to the Se nate Banking Committee and market participants will watch his words very closely. The Fed Chairman is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what he says during this testimony. Look for him to address the banking and housing crises specifically and their impact on the overall economy. His testimony begins at 10:00 AM ET with a prepared statement then is followed by Q & A with committee members. I am expecting to see the markets fluctuate during this session, possibly affecting mortgage rates also.

Overall, look for plenty of movement in bond prices and mortgage rates this week. I think we will see the most movement either tomorrow or Thursday, but Friday may be fairly active also. This would be a good week to maintain contact with your mortgage professional.

If I were considering financing/refinancing a home, I wou ld…. Float if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rate Lock Advisory – Sunday Feb. 22nd

This week brings us the release of six pieces of economic data for the bond market to digest along with some very important testimony from Fed Chairman Bernanke. Two of the reports are considered to be of low importance, but since we have data being posted every day of the week except for tomorrow, it is likely that we will see plenty of movement in mortgage rates the next few days.

Tuesday morning brings us the first of this week’s data with the release of February’s Consumer Confidence Index (CCI) during late morning trading. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. Since consumer spending makes up two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show a decline in confidence from 37.7 in January to 36.0 this month. A lower reading would be considered good news for bonds and mortgage rates.

Mr. Bernanke will deliver the Fed’s semi-annual testimony on the status of the economy late Tuesday morning. He will be speaking to the Senate Banking Committee and market participants will watch his words very closely. The Fed Chairman is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what he says during this testimony. Look for him to address the banking and housing crises specifically and their impact on the overall economy. His testimony begins at 10:00 AM ET with a prepared statement then is followed by Q & A with committee members. I am expecting to see the markets fluctuate during this session, possibly affecting mortgage rates also.

January’s Existing Home Sales report will be posted late Wednesday morning. This is one of the least important reports of the week, along with Thursday’s New Home Sales report. They measure housing sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates. The Existing Home Sales report is expected to show an increase in sales but new home sales are expected to fall slightly.

The only important data scheduled for release Thursday is January’s Durable Goods Orders data. This data gives us an important measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. A larger drop than the 2.3% that is expected would be good news for the bond market and mortgage rates. This data is quite volatile from month-to-month, so large swings are fairly normal.

The first of two revisions to the 4th Quarter GDP reading is scheduled for release Friday morning. Analysts’ forecasts currently call for a decline of 5.4%, indicating that the economy was weaker in the last quarter of the ye ar than initially thought. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market.

The last piece of data scheduled for release this week is the University of Michigan’s revision to their Index of Consumer Sentiment for February. Current forecasts show this index revising slightly higher than previously thought. The preliminary reading was 56.2 and is now expected to stand at 56.5, indicating that consumer sentiment was slightly stronger than previously thought. This index is important because it helps us measure consumer confidence that translates into consumer willingness to spend.

Overall, look for plenty of movement in bond prices and mortgage rates this week. I think we will see the most movement either Tuesday or Thursday, but Friday may be fairly active also. This would be a good week to maintain contact with your mortgage professional.

If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.