May 2012 – Newsletter


SHORT SALES

Fannie Mae (FNMA/OTC) announced today that it is directing servicers to expedite short sale
transactions and improve transparency on short sale reviews. The new guidelines are part of the
Federal Housing Finance Agency’s Servicing Alignment Initiative to better match the servicing
and loss mitigation standards of Fannie Mae and Freddie Mac.

“Short sales are an important tool to help prevent foreclosures and minimize losses,” said Leslie
Peeler, senior vice president, National Servicing Organization, Fannie Mae. “Short sales can be
very complex transactions involving multiple parties. By requiring quicker reviews and improving
servicer reporting requirements, Fannie Mae will make the process more efficient and
transparent. Expediting short sales and avoiding foreclosure is in the best interests of borrowers,
communities and taxpayers.”

Under the new guidelines, servicers will be required to acknowledge receipt of a short sale offer
within three business days and notify the borrower within five business days if the information is
incomplete. Within thirty days, the servicer must send an evaluation notice or notify the borrower
that the offer is still under review. If the offer cannot be fully evaluated within 30 days, the servicer
must update the borrower on the status each week thereafter. Servicers will also be required to
keep Fannie Mae apprised if a short sale evaluation takes longer than 30 days.

Fannie Mae has taken a number of steps to make the short sale process more efficient, including
implementing a Short Sale Assistance Desk to help real estate professionals in targeted markets
work out challenges in individual short sales. Fannie Mae completed 70,025 short sales in 2011
and 69,634 in 2010.

thenichereport.com – April 2012

_____________________________________________________________________________________________________________________________________________________________________________________________________

Bankruptcy Law

The federal student loan program seemed like a great idea back in 1965: Borrow to go to college
now, pay it back later when you have a job. But many borrowers these days are close to flunking
out, tripped up by painful real-life lessons in math and economics. Surging above $1 trillion, U.S.
student loan debt has surpassed credit card and auto-loan debt. This debt explosion jeopardizes
the fragile recovery, increases the burden on taxpayers and possibly sets the stage for a new
economic crisis.

With a still-wobbly jobs market, these loans are increasingly hard to pay off. Unable to find work,
many students have returned to school, further driving up their indebtedness. Average student
loan debt recently topped $25,000, up 25 per cent in 10 years. And the mushrooming debt has
direct implications for taxpayers, since 8 in 10 of these loans are government-issued or
guaranteed.

President Barack Obama has offered a raft of proposals aimed at fine-tuning the system and
making repayments easier. Yet the predicament of debt-burdened former students has failed to
generate much notice in the Republican presidential campaign. Instead, the candidates are
dismissive of government student loan programs in general and Obama’s proposals in particular.
Former Pennsylvania senator Rick Santorum went so far as to label Obama “a snob” for urging all
Americans to try to obtain some form of post high-school education — even though some polls
show over 90 per cent of parents expect their children to go to college.
Front-runner Mitt Romney, the former Massachusetts governor, denounces what he calls a
“government takeover” of the program. Newt Gingrich, the former speaker of the House of
Representatives, calls student loans a “Ponzi scheme” under which students spend the borrowed
money now but will “have to pay off the national debt” later in life as taxpayers. And Texas Rep.
Ron Paul wants to abolish the program entirely. Lifting student debt higher and higher is the
escalating cost of attending schools, with tuition increasing far faster than the rate of inflation. And
enrolment has been rising for years, a trend that accelerated through the recent recession, fueling
even more borrowing.

Mark Zandi, chief economist at Moody’s Analytics, argues that government loans and subsidies
are not particularly cost-effective for taxpayers because “universities and colleges just raise their
tuition. It doesn’t improve affordability and it doesn’t make it easier to go to college.”
“Of course, it’s very hard on the kids who have gone through this, because they’re on the hook,”
Zandi added. “And they’re not going to be able to get off the hook.” It’s not just young adults who
are saddled.

“Parents and the federal government shoulder a substantial part of the postsecondary education
bill,” said a new report by the Federal Reserve Bank of New York. And some of the borrowers
are baby boomers, near or at retirement age. The Fed research found that Americans 60 and
older still owe about $36 billion in student loans. Overall, nearly 3 in 10 of all student loans have
past-due balances of 30 days or more, the report said.

Complicating the picture further: Like child support and income taxes, student loans usually can’t
be discharged or reduced in bankruptcy proceedings, as can most other delinquent debt. This
restriction was extended in 2005 to also include student loans made by banks and other private
financial institutions.

“This could very well be the next debt bomb for the U.S. economy,” said William Brewer,
president of the National Association of Consumer Bankruptcy Attorneys.

“As bankruptcy lawyers, we’re the first to see the cracks in the foundation,” Brewer said. “We
were warning of mortgage problems in 2006 and 2007. The industry was saying we’ve got it under
control. Nobody had it under control. Now we’re seeing the same signs of distress. We’re seeing
huge defaults on student loans and people driven into financial difficulties because of them.”

A report by his group noted that missing just one student loan payment puts a borrower in
delinquent status. After nine months, the borrower is in default. Once a default occurs, the full
amount of the loan is due immediately. For those with federal student loans, the government has
vast collection powers, including the ability to garnishee a borrower’s wages and to seize tax
refunds and Social Security and other federal benefit payments. Nigel Gault, chief U.S. economist
at IHS Global Insight, said the student loan crisis may not torpedo the financial sector as the
mortgage meltdown nearly did in 2008, but it could slam taxpayers and the still-ailing housing
market.

“When student loans don’t get repaid, debts are going to be transferred from the borrower to the
taxpayer,” further raising federal deficits, he said. And overburdened student-loan borrowers may
fail to qualify for mortgages and “stay much longer in their parents’ homes,” Gault said. Young
adults forming households have historically been the bulk of first-time home buyers — and their
scarcity could dampen any housing recovery.

“When kids do graduate, the most daunting challenge can be the cost of college,” Obama said in
his State of the Union address, asking Congress to extend a temporary cut — due to expire in
July — in federal student-loan rates. The reduced federal rate is now 3.4 per cent. If the cuts
aren’t extended, it will rise to 6.8 per cent.

Still, Obama said, “We can’t just keep subsidizing skyrocketing tuition. We’ll run out of money.”
Obama also asked Congress to extend the current tuition tax credit, double work-study jobs over
five years and let borrowers consolidate multiple student loans at reduced interest rates. But in
this intensely partisan year, any congressional action seems dubious.

“I wish I could tell you that there’s a place to find really cheap money or free money and pay for
everyone’s education, but that’s just not going to happen,” Romney says. “Now the government
is taking over the student loan business. I think you’ll get less competition.”

The government has not taken over the student loan business. The private loan industry is still
writing student loans, usually at interest rates far above the government ones. What the
Republicans are zeroing in on is a section in Obama’s health care overhaul that eliminated big
banks as middlemen in managing federal school-loan programs. Also, the new federal Consumer
Financial Protection Bureau is clamping down on the lightly regulated private student loan
industry.

Santorum, who now says calling Obama a “snob” for promoting higher education was “probably
not the smartest” choice of words, has been seeking to rally blue-collar support by emphasizing
that many jobs do not require college degrees — and suggesting many colleges are liberal
bastions.

nacba.org – April, 2012

_____________________________________________________________________________________________________________________________________________________________________________________________________

Mortgage Modification

The government’s Home Affordable Modification Program (HAMP) continues to add borrowers to
its roster each month, but the pace has slowed.

Data released Friday by Treasury and HUD shows 19,940 permanent HAMP mods were granted
during the month of March. That’s down 10 percent from the 22,263 permanent mods completed
in February and down 45 percent from 36,432 in March 2011.

Raphael Bostic, HUD assistant secretary, says fewer borrowers are falling behind on their
mortgage these days. “We’re making important progress in providing relief to homeowners under
the Obama administration’s programs,” Bostic said.

As of the end of March, there were 794,748 borrowers in active permanent HAMP modifications,
and 76,218 of these also had payments reduced on a second lien or the lien extinguished
entirely through the Second Lien Modification Program (2MP) of the government’s mortgage relief
effort.

Bostic notes that in addition to HAMP modifications, homeowners are finding relief under the
Home Affordable Refinance Program (HARP). Nearly half a million families have taken advantage
of HARP, standing to save on average $2,500 a year, Bostic explained.

Though he described these efforts as providing “significant positive benefits,” Bostic followed that
with an appeal to lawmakers to help improve program results. “[W]e are asking the Congress to
approve the President’s refinancing proposal so that more homeowners can receive assistance,”
he said.

While HAMP activity has slowed, other government-assisted foreclosure alternatives have held
fairly steady. During March 2012, 4,486 homeowners received a short sale or deed-in-lieu of
foreclosure through the Home Affordable Foreclosure Alternatives Program (HAFA).
There were 4,340 HAFA deals put in place the month before and 5,447 a year earlier in March
2011. To date, servicers have completed a total of 40,252 HAFA transactions.

dsnews.com – May 2012

SHORT SALES

Fannie Mae (FNMA/OTC) announced today that it is directing servicers to expedite short sale
transactions and improve transparency on short sale reviews. The new guidelines are part of the
Federal Housing Finance Agency’s Servicing Alignment Initiative to better match the servicing
and loss mitigation standards of Fannie Mae and Freddie Mac.

“Short sales are an important tool to help prevent foreclosures and minimize losses,” said Leslie
Peeler, senior vice president, National Servicing Organization, Fannie Mae. “Short sales can be
very complex transactions involving multiple parties. By requiring quicker reviews and improving
servicer reporting requirements, Fannie Mae will make the process more efficient and
transparent. Expediting short sales and avoiding foreclosure is in the best interests of borrowers,
communities and taxpayers.”

Under the new guidelines, servicers will be required to acknowledge receipt of a short sale offer
within three business days and notify the borrower within five business days if the information is
incomplete. Within thirty days, the servicer must send an evaluation notice or notify the borrower
that the offer is still under review. If the offer cannot be fully evaluated within 30 days, the servicer
must update the borrower on the status each week thereafter. Servicers will also be required to
keep Fannie Mae apprised if a short sale evaluation takes longer than 30 days.

Fannie Mae has taken a number of steps to make the short sale process more efficient, including
implementing a Short Sale Assistance Desk to help real estate professionals in targeted markets
work out challenges in individual short sales. Fannie Mae completed 70,025 short sales in 2011
and 69,634 in 2010.

thenichereport.com – April 2012

_____________________________________________________________________________________________________________________________________________________________________________________________________

Bankruptcy Law

The federal student loan program seemed like a great idea back in 1965: Borrow to go to college
now, pay it back later when you have a job. But many borrowers these days are close to flunking
out, tripped up by painful real-life lessons in math and economics. Surging above $1 trillion, U.S.
student loan debt has surpassed credit card and auto-loan debt. This debt explosion jeopardizes
the fragile recovery, increases the burden on taxpayers and possibly sets the stage for a new
economic crisis.

With a still-wobbly jobs market, these loans are increasingly hard to pay off. Unable to find work,
many students have returned to school, further driving up their indebtedness. Average student
loan debt recently topped $25,000, up 25 per cent in 10 years. And the mushrooming debt has
direct implications for taxpayers, since 8 in 10 of these loans are government-issued or
guaranteed.

President Barack Obama has offered a raft of proposals aimed at fine-tuning the system and
making repayments easier. Yet the predicament of debt-burdened former students has failed to
generate much notice in the Republican presidential campaign. Instead, the candidates are
dismissive of government student loan programs in general and Obama’s proposals in particular.
Former Pennsylvania senator Rick Santorum went so far as to label Obama “a snob” for urging all
Americans to try to obtain some form of post high-school education — even though some polls
show over 90 per cent of parents expect their children to go to college.
Front-runner Mitt Romney, the former Massachusetts governor, denounces what he calls a
“government takeover” of the program. Newt Gingrich, the former speaker of the House of
Representatives, calls student loans a “Ponzi scheme” under which students spend the borrowed
money now but will “have to pay off the national debt” later in life as taxpayers. And Texas Rep.
Ron Paul wants to abolish the program entirely. Lifting student debt higher and higher is the
escalating cost of attending schools, with tuition increasing far faster than the rate of inflation. And
enrolment has been rising for years, a trend that accelerated through the recent recession, fueling
even more borrowing.

Mark Zandi, chief economist at Moody’s Analytics, argues that government loans and subsidies
are not particularly cost-effective for taxpayers because “universities and colleges just raise their
tuition. It doesn’t improve affordability and it doesn’t make it easier to go to college.”
“Of course, it’s very hard on the kids who have gone through this, because they’re on the hook,”
Zandi added. “And they’re not going to be able to get off the hook.” It’s not just young adults who
are saddled.

“Parents and the federal government shoulder a substantial part of the postsecondary education
bill,” said a new report by the Federal Reserve Bank of New York. And some of the borrowers
are baby boomers, near or at retirement age. The Fed research found that Americans 60 and
older still owe about $36 billion in student loans. Overall, nearly 3 in 10 of all student loans have
past-due balances of 30 days or more, the report said.

Complicating the picture further: Like child support and income taxes, student loans usually can’t
be discharged or reduced in bankruptcy proceedings, as can most other delinquent debt. This
restriction was extended in 2005 to also include student loans made by banks and other private
financial institutions.

“This could very well be the next debt bomb for the U.S. economy,” said William Brewer,
president of the National Association of Consumer Bankruptcy Attorneys.

“As bankruptcy lawyers, we’re the first to see the cracks in the foundation,” Brewer said. “We
were warning of mortgage problems in 2006 and 2007. The industry was saying we’ve got it under
control. Nobody had it under control. Now we’re seeing the same signs of distress. We’re seeing
huge defaults on student loans and people driven into financial difficulties because of them.”

A report by his group noted that missing just one student loan payment puts a borrower in
delinquent status. After nine months, the borrower is in default. Once a default occurs, the full
amount of the loan is due immediately. For those with federal student loans, the government has
vast collection powers, including the ability to garnishee a borrower’s wages and to seize tax
refunds and Social Security and other federal benefit payments. Nigel Gault, chief U.S. economist
at IHS Global Insight, said the student loan crisis may not torpedo the financial sector as the
mortgage meltdown nearly did in 2008, but it could slam taxpayers and the still-ailing housing
market.

“When student loans don’t get repaid, debts are going to be transferred from the borrower to the
taxpayer,” further raising federal deficits, he said. And overburdened student-loan borrowers may
fail to qualify for mortgages and “stay much longer in their parents’ homes,” Gault said. Young
adults forming households have historically been the bulk of first-time home buyers — and their
scarcity could dampen any housing recovery.

“When kids do graduate, the most daunting challenge can be the cost of college,” Obama said in
his State of the Union address, asking Congress to extend a temporary cut — due to expire in
July — in federal student-loan rates. The reduced federal rate is now 3.4 per cent. If the cuts
aren’t extended, it will rise to 6.8 per cent.

Still, Obama said, “We can’t just keep subsidizing skyrocketing tuition. We’ll run out of money.”
Obama also asked Congress to extend the current tuition tax credit, double work-study jobs over
five years and let borrowers consolidate multiple student loans at reduced interest rates. But in
this intensely partisan year, any congressional action seems dubious.

“I wish I could tell you that there’s a place to find really cheap money or free money and pay for
everyone’s education, but that’s just not going to happen,” Romney says. “Now the government
is taking over the student loan business. I think you’ll get less competition.”

The government has not taken over the student loan business. The private loan industry is still
writing student loans, usually at interest rates far above the government ones. What the
Republicans are zeroing in on is a section in Obama’s health care overhaul that eliminated big
banks as middlemen in managing federal school-loan programs. Also, the new federal Consumer
Financial Protection Bureau is clamping down on the lightly regulated private student loan
industry.

Santorum, who now says calling Obama a “snob” for promoting higher education was “probably
not the smartest” choice of words, has been seeking to rally blue-collar support by emphasizing
that many jobs do not require college degrees — and suggesting many colleges are liberal
bastions.

nacba.org – April, 2012

_____________________________________________________________________________________________________________________________________________________________________________________________________

Mortgage Modification

The government’s Home Affordable Modification Program (HAMP) continues to add borrowers to
its roster each month, but the pace has slowed.

Data released Friday by Treasury and HUD shows 19,940 permanent HAMP mods were granted
during the month of March. That’s down 10 percent from the 22,263 permanent mods completed
in February and down 45 percent from 36,432 in March 2011.

Raphael Bostic, HUD assistant secretary, says fewer borrowers are falling behind on their
mortgage these days. “We’re making important progress in providing relief to homeowners under
the Obama administration’s programs,” Bostic said.

As of the end of March, there were 794,748 borrowers in active permanent HAMP modifications,
and 76,218 of these also had payments reduced on a second lien or the lien extinguished
entirely through the Second Lien Modification Program (2MP) of the government’s mortgage relief
effort.

Bostic notes that in addition to HAMP modifications, homeowners are finding relief under the
Home Affordable Refinance Program (HARP). Nearly half a million families have taken advantage
of HARP, standing to save on average $2,500 a year, Bostic explained.

Though he described these efforts as providing “significant positive benefits,” Bostic followed that
with an appeal to lawmakers to help improve program results. “[W]e are asking the Congress to
approve the President’s refinancing proposal so that more homeowners can receive assistance,”
he said.

While HAMP activity has slowed, other government-assisted foreclosure alternatives have held
fairly steady. During March 2012, 4,486 homeowners received a short sale or deed-in-lieu of
foreclosure through the Home Affordable Foreclosure Alternatives Program (HAFA).
There were 4,340 HAFA deals put in place the month before and 5,447 a year earlier in March
2011. To date, servicers have completed a total of 40,252 HAFA transactions.

dsnews.com – May 2012

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