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Showing posts with label mortgage. Show all posts
Showing posts with label mortgage. Show all posts

Saturday, May 21, 2011

Upwardly mobile in Brazil: Pedicures as a path from Rio slum to a mortgage (The Christian Science Monitor)

Rio de Janeiro – A paper cap corralling her long, curly hair and a white paper mask muffling the lilt of her salon gossip, Meire adjusts a neon ring of light and peers businesslike at the calloused foot of a client lying on a white leatherette recliner. Pedicures are serious business in this mecca of sun worship and sandals.

As lowly a job as it may seem to bathe, poke, pluck, and massage other people's feet, this job is golden. It has boosted Meire up the socioeconomic ladder and out of the slums: By serving the middle and upper classes in her cubicle at Ipanema's Spa do Pe (Foot Spa), she has herself entered Brazil's burgeoning middle class.

"I love what I do," she often says, as she straightens up from hunching over a client's newly buffed feet. And that's despite a three-hour round-trip bus commute to work five days a week – and frequent house-call detours she makes for extra cash.

IN PICTURES: The Rising Global Middle Class

Meire, who asked that the Monitor not use her real name for security reasons, is living the middle-class dream that is spreading across the globe. Her income – the equivalent of $1,000 a month – has enabled her to get a mortgage on a small house on a tree-lined street 15 minutes from her parents' home in the giant Jacarezinho favela, or slum. Brazil's middle class, swelling with people like her who have achieved higher levels of education than their parents, is now estimated to include half the nation's population of 191 million. The burgeoning consumer appetite, say economists, buffered the country from the world recession that began in 2008: Unlike the United States and much of Europe, Brazil's economy is booming, with 7.5 percent gross domestic product growth in 2010.

Thanks to a constitutional provision for universal education enacted in 1987, Meire got a high school diploma. She worked at a General Electric light bulb factory for six years after high school. But when incandescent bulbs lost market share, the factory closed. Meire's diploma saved her: It qualified her to take an 18-month specialized salon course.

"Brazilians are consuming more because they're working more, and they're working more because they went to school," says economist Marcelo Neri, who last year produced the Getulio Vargas Foundation study "The New Middle Class in Brazil: The Bright Side of the Poor." Mr. Neri adds that enrollment in technical schools such as the one where Meire got her training grew 75 percent from 2004 to 2010.

The favela where Meire grew up is famous for a section where drug addicts openly use crack, undisturbed. And security is hardly provided by police: She recalls how she and a companion awoke in a favela apartment four years ago surrounded by police who threw a packet of cocaine on their bed in a mistaken-identity extortion bid.

Her parents still live there, in a house of concrete rooms stacked atop each other in three stories, so close to a house across the alley that a neighbor can lean over and serve lemonade to visitors.

Even for those most determined to get ahead in life, favelas are full of pitfalls. Meire's first boyfriend, a cocaine addict, promised he'd stop using drugs if she had sex with him. She became pregnant at 16 – in 1994 – with her first daughter. But the boyfriend was killed in 2001 by a drug lord because his habit was leading to crimes that stirred up trouble for the community.

Despite being left alone in difficult circumstances, in November 2008 Meire performed some financial acrobatics and took out one of the Brazilian government's increasingly available low-cost 20-year loans to buy a 1930s-era yellow two-bedroom house with a front porch.

"My mother said 'You're crazy,' and I said 'You get things done if you're crazy,' " Meire recalls. " 'Otherwise I'll be here in Jacarezinho seeing the days go by.' "

Later, she made a sentimental discovery: The bungalow with its decorative stone chimney had been her mother's dream home. As a child, her mother had walked by it on the way to school, dreaming daily of it being hers. "She wept when she saw my new bedroom set," says Meire, who paid the equivalent of $47,000 for the home.

To realize her mother's dream a generation later and make her down payment, Meire withdrew the equivalent of $4,700 from her government-stipulated workers' fund account, and sold her furniture. She also had to prove to the bank providing the home loan that she had a hefty balance in her account. But after scrounging for the down payment, she didn't have a hefty balance. So friends shifted cash into her account to make it look that way.

This is what economists call "social capital." The fact that Brazilians turn mostly to family and friends for help is one of the fragilities of the new middle class. Analysts say government institutions need to be stronger, more reliable and accountable, offering greater access to microcredit and low-cost housing.

Meire's oldest daughter, now 16, was joined by a half sister, now 12. Thanks to their mom's determination and resourcefulness, both study at a private school and plan on college; they share a computer and regularly use the Internet. In summer, all three sleep in one air-conditioned bedroom.

It is a peaceful place Meire has made for her family. Though she leaves a bill unpaid each month to make ends meet, she says her financial scramble is nothing.

"In the favela you wake up in the night hearing shootouts," she sighs, stretched out one late-summer Sunday morning in her air-conditioned bedroom. "The peace of mind [here] is worth the cost."

SOUND OFF: Reinvention: How might your job history mimic this woman's?

IN PICTURES: The Rising Global Middle Class


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Wednesday, May 4, 2011

Feds sue Deutsche Bank for mortgage fraud, to recover millions in insurance payments

NEW YORK (AP) — The federal government sued Deutsche Bank Tuesday, saying the bank committed fraud and padded its pockets with undeserved income as it repeatedly lied to benefit from a government program that insured mortgages.

The lawsuit in U.S. District Court in Manhattan seeks to recover hundreds of millions of dollars in insurance claims the government had to pay when homeowners defaulted on their mortgages.

The lawsuit also asks for punitive damages. The government said the bank made substantial profits between 2007 and 2009 from the resale of the risky mortgages, leaving the government to foot the bill for loans that defaulted. The mortgage insurance is issued by the Federal Housing Administration.

The lawsuit said the bank carried out the fraud through its subsidiary, MortgageIT, which employed more than 2,000 people at branches in all 50 states. Deutsche acquired MortgageIT in 2007.

At a news conference, U.S. Attorney Preet Bharara said the bank "repeatedly and brazenly" engaged in a pattern of reckless lending for mortgages "that were really ticking time bombs," sometimes failing even to verify that a mortgage applicant had a job.

"In fact, they often seemed to treat red flags as if they were green lights," he said.

Still, the prosecutor said the government found no evidence of the criminal intent necessary to take the case beyond a civil lawsuit.

"Every lie is not a crime," he said.

In a statement, Deutsche Bank spokeswoman Renee Calabro said the bank has received the complaint and was reviewing it.

"We believe the claims against MortgageIT and Deutsche Bank are unreasonable and unfair, and we intend to defend against the action vigorously," she said.

Calabro said nearly 90% of the activity described in the lawsuit occurred before Deutsche Bank acquired MortgageIT, which had been an FHA lender operating with government oversight for almost a decade.

Since last fall, federal regulators and attorneys general of all 50 states have been investigating lenders accused of cutting corners and using flawed documents to foreclose on many homeowners. In some cases, employees of financial institutions engaged in so-called robo-signing ? approving documents in foreclosures without actually reading them. Foreclosure-fraud class-action lawsuits are also piling up against major banks nationwide.

Bharara said it "would not be a fantastical stretch to think we are looking at other lending institutions as well."

The lawsuit against Deutsche Bank sought to recover more than $386 million that the Department of Housing and Urban Development has paid out in FHA insurance claims and related costs.

It said HUD had paid more than $97 million in FHA claims and related costs arising out of more than 600 mortgages that defaulted within six months.

HUD sets the rules for the FHA mortgage insurance program, including requirements relating to the adequacy of the borrower's income to meet mortgage payments, the borrower's creditworthiness and the appropriateness of the valuation of the property being purchased.

The lawsuit said Deutsche Bank and MortgageIT failed to comply with HUD rules and regulations regarding required quality control procedures, and then lied about their purported compliance.

The government said the quality control violations were egregious, including the failure to review all early payment defaults and to implement minimal quality control processes.

The lawsuit noted that MortgageIT hired an outside vendor, Tena Companies, to conduct quality control reviews of closed FHA-insured loans in 2004 but then never read letters that Tena wrote identifying serious underwriting violations.

"Instead, MortgageIT employees stuffed the letters, unopened and unread, in a closet in MortgageIT's Manhattan headquarters," the lawsuit said.

Associate Press Writer Derek Kravitz in Washington contributed to this report.

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For more information about reprints & permissions, visit our FAQ's. To report corrections and clarifications, contact Standards Editor Brent Jones. For publication consideration in the newspaper, send comments to letters@usatoday.com. Include name, phone number, city and state for verification. To view our corrections, go to corrections.usatoday.com.We've updated the Conversation Guidelines. Changes include a brief review of the moderation process and an explanation on how to use the "Report Abuse" button. Read more.

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Tuesday, April 19, 2011

Ex-CEO of mortgage giant convicted of $3B fraud

The former CEO of what used to be one of the largest mortgage companies was convicted today of a $3 billion fraud, the Associated Press reports.

A federal jury in Alexandria, Va., found Lee Farkas, onetime chairman of Florida-based Taylor Bean & Whitaker, guilty on all 14 counts of bank, wire and securities fraud. He was taken into custody pending sentencing July 1.

Prosecutors called it one of the largest bank frauds in U.S. history and one of the most significant convictions stemming from the recent financial crisis. The fraud contributed to the collapse of Alabama-based Colonial Bank, the sixth-largest failure in U.S. history.

Six others pleaded guilty and agreed to testify against Farkas.

The gang of suit-and-tie thieves also tried to scam more than $500 million from the Troubled Assets Relief Program, the taxpayer-funded bank bailout.

Farkas, 58, took the stand during the two-week trial and proclaimed his innocence.

"I didn't believe at the time I committed any crimes and I don't believe now that I committed any crimes," Farkas said.

Prosecutors disagreed, saying the evidence was overwhelming:

They said the fraud began in 2002, when Taylor Bean overdrew its main account with Colonial by several million dollars. Midlevel executives at Colonial agreed to transfer money into Taylor Bean's accounts at the end of each day to avoid generating overdraft notices, a process known as "sweeping."

As the hole grew to well over $100 million, Taylor Bean and a handful of Colonial executives concocted a scheme in which Taylor Bean sold hundreds of millions in worthless mortgages to Colonial - mortgages that had already been sold to other investors. More than $1 billion in such phony mortgages were eventually sold to Colonial, which listed them on its books and on its quarterly reports as legitimate assets, prosecutors alleged.

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Thursday, April 14, 2011

Federal Government Orders 16 Mortgage Lenders to Reimburse Homeowners

Associated Press

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The federal government on Wednesday ordered 16 of the nation's largest mortgage lenders and servicers to reimburse homeowners who were improperly foreclosed upon.

Government regulators also directed the financial firms to hire auditors to determine how many homeowners could have avoided foreclosure in 2009 and 2010.

Citibank, Bank of America, JPMorgan Chase and Wells Fargo, the nation's four largest banks, were among the financial firms cited in the joint report by the Federal Reserve, Office of Thrift Supervision and Office of the Comptroller of the Currency,

The Fed said it believed financial penalties were "appropriate" and that it planned to levy fines in the future. All three regulators said they would review the foreclosure audits.

In the four years since the housing bust, about 5 million homes have been foreclosed upon. About 2.4 million primary mortgages were in foreclosure at the end of last year. Another 2 million were 90 days or more past due, putting them at serious risk of foreclosure.

Critics, including Democratic lawmakers in Congress, say the order is too lenient on the lenders. House Democrats introduced legislation Wednesday that would require lenders to perform a series of steps, including an appeals process, before starting foreclosures.

"I want to know what abuses (the government agencies) identified, which banks committed them and how their proposed consent agreement is going to fix these problems," said Rep. Elijah Cummings, D-Md., the ranking member of the House Government and Oversight Committee. "Based on what I have read ... I am not encouraged at all."

The other lenders and service providers cited by the agencies include: Ally Financial Inc., Aurora Bank, EverBank, HSBC, MetLife Bank, OneWest Bank, PNC, Sovereign Bank, SunTrust Banks, U.S. Bank, Lender Processing Services and MERSCORP.

Citigroup said in a statement that it had "self-identified" needed changes in 2009 and that it has helped more than 1.1 million homeowners avoid foreclosure.

"We are committed to working with our regulators to further strengthen our programs in these areas and meeting these new requirements," the company said.

Ally Financial, formerly known as GMAC, said it had not found "any instance where a homeowner was foreclosed upon without being in significant default."

Without specifically identifying instances of bad foreclosures, the government agencies noted in its report that the "deficiencies in foreclosure processing observed among these major servicers may have widespread consequences for the housing market and borrowers."

John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer housing watchdog, said the government's action is a year too late. It does little to help those who are just now wrestling with a foreclosure and those who have already been displaced, he said. Rather than moving swiftly to seize people's homes, the banks should have done a better job helping people lower their mortgage payments through modification programs, he said.

"This should have happened a long time ago," he said. "There are so many people who, if they had received a meaningful modification, could have stayed in their homes."

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Wednesday, April 13, 2011

Regulators order mortgage firms to repay homeowners for wrong foreclosures

and that it planned to levy fines in the future. All three government agencies said they would review the foreclosure audits.

In the four years since the housing bust, about 5 million homes have been foreclosed upon. About 2.4 million primary mortgages were in foreclosure at the end of last year. Another 2 million were 90 days or more past due, putting them at serious risk of foreclosure.

MORE: Critics say new rules aren't tough enoughSTORY: States help homeowners avoid foreclosureCritics, including Democratic lawmakers in Congress, say the order is too lenient on the lenders. House Democrats introduced legislation Wednesday that would require lenders to perform a series of steps, including an appeals process, before starting foreclosures.



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