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Borrower Faux Pas

A three-judge appellate panel has reinstituted foreclosure proceedings against a Miami couple who created a fake promissory note and convinced a trial judge to discharge their entire mortgage debt.

Carlos and Marianne Hernandez created and recorded a "new unilateral promissory note," last year with the help of their lawyer. The new note listed their lender, the former Washington Mutual Inc., as the borrower and the couple as the lender, according to a June 22 opinion by 3rd District Court of Appeals Judge Angel A. Cortinas.

The couple convinced former Miami-Dade Circuit Court Judge Peter Adrien that they had paid the entire $328,000 in principal, interest and fees on their mortgage.

Last year, the judge granted the couple's motion to vacate a May 2009 judgment against them, cancelled a foreclosure sale and dismissed their case with prejudice.

Lawyers for JP Morgan Chase & Co., which acquired Washington Mutual in 2008, did not attend the hearing because they did not receive a copy of the motion to vacate, according to the appeals court ruling.

The appeals court referred the couple's attorney Paul B. Woods to the state bar for "potentially unethical conduct."

Servicer Licenses?

In finalizing its rule on the licensing and registration of loan officers, the Department of Housing and Urban Development reversed course and is now suggesting that employees working on loan modifications for mortgage servicers should be licensed by the states, says Kris D. Kully, a lawyer at K&L Gates LLP.

HUD removed a provision from the final rule that would have delayed licensing for employees of mortgage servicers who perform loan modifications.

Kelly said the final rule leaves the issue to the Consumer Financial Protection Bureau, which assumes responsibility on July 21 for administering the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.

Limiting Loan Limits

Even if Congress and the Obama administration allow federal loan limits to fall back to pre-crisis levels in October, as expected, the limits will still be higher than they need to be, professors at The George Washington University School of Business have determined.

"In the wake of significant declines in home prices, we believe the [Federal Housing Administration] could reduce its loan limits by approximately 50% and still almost entirely satisfy its target market," said Robert Van Order, co-author of the FHA assessment report from the university's Center for Real Estate and Urban Analysis.

"That would reduce its currently large market share, which is difficult for FHA to manage," he said.

Reducing its maximum loan limits by nearly 50% would still enable the FHA to serve 95% of its historic target market — first-time, minority, and low-income homebuyers, the report said.

To serve this target market, the report concludes that FHA only needs a market share of somewhere between 9% and 15% percent of total mortgage originations. Current estimates put its market share at about 30% of originations.

Congress and the Obama administration have proposed allowing the maximum loan limits on mortgages insured by FHA and purchased or securitized by Fannie Mae and Freddie Mac to expire in October.

That means in the most expensive markets the limit will fall to $625,500 from $729,750. Congress first raised the limits on FHA, Freddie Mac and Fannie Mae loans in 2008, and since February 2009, the limits have been extended by Congress on an annual basis.

According to an analysis by the Department of Housing and Urban Development, the impact from this change will be small, with only about 3% of loans endorsed in 2010, and 2% of loans endorsed so far in 2011, being affected.

"FHA's expansion played a major role in keeping the housing market afloat during the economic collapse of 2008 and 2009," Van Order said.

"However, we now are left with large loan limits that were set when home prices were at the top of the bubble. They don't reflect current market conditions and are unlikely to assist the FHA in reaching its historical constituencies."

Bared In Florida

Another instance of an allegedly wrongful seizure of a home has surfaced in Florida.

According to a story late last month on the website of Tampa Bay television station WTSP, Chris Boudreau returned to his home in Brooksville after being away for a few weeks to find the locks changed and the house stripped bare of his possessions, including a couch, a TV, a DVD player, and his wife's wedding dress.

Boudreau had missed a couple mortgage payments to his lender 21st Mortgage Corp. of Knoxville, Tenn., his lawyer Tom Altman, told the news station, but there were no foreclosure proceedings in effect.

A spokesperson for the lender, a Berkshire Hathaway company that provides financing primarily to manufactured home buyers in the Southeast and Southwest, declined the station's request for a comment.