Pipeline

A 'Hot' Cause

John Maxim, a troubled homeowner in Salt Lake City, decided he was willing to lose his car to save his house.

In need of a little over $15,000 to get caught up on his mortgage and prevent HSBC from foreclosing on his home, Maxim took to his personal blog to plead for small loans from family, friends and strangers.

Oh, and he promised to torch his car, a 1993 Ford Escort, live on the Internet as an added bonus if he reached his goal. (Maxim also promised to pay back all of the money that was raised.)

His plight turned into a viral web campaign, and in four days he raised enough to save his home. The sale had been scheduled for the morning of July 26.

According to the blog, Maxim fell behind on his mortgage payments after going through a divorce and losing his adopted son. HSBC told Maxim it was reviewing his case for a possible modification. But a modification was never approved. HSBC said it does not discuss individual customer matters.

This month the home was put up for a foreclosure sale. Maxim needed to pay $21,638.02 to stop the foreclosure. He had just $6,500. Maxim didn't try to gloss over the situation.

"If while reading this you're thinking, 'I'm not sure if he deserves my $5/$10/$20 to get out of this mess,' then I say to you, you are right," he wrote on his blog. "I suggest however, you think of it this way, 'Even though he doesn't deserve it, it would be pretty cool to see a video of him light his car on fire and possibly be arrested.' "

Some of those who gave money to his cause have suggested Maxim donate the car to charity instead. But Maxim has vowed to keep his word and plans to set his car on fire Monday night for the world to see. He might take things a step further: Maxim has proposed selling advertising spots on his car before setting it ablaze and using the money to pay back the 387 individuals who contributed to his cause "immediately."

Fingerprints Please

Federal agencies issued final rules Wednesday establishing registration requirements for mortgage loan originators who work for federally regulated financial institutions.

To comply with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, loan officers of federally chartered banks, thrifts, credit unions and their subsidiaries must register with the Nationwide Mortgage Licensing System and provide fingerprints for background checks. The NMLS is a database created by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators to create accountability and track loan officers.

Each loan originator is required to obtain a unique identifier number through the registry that will remain with them for life. "This will enable consumers to easily access employment and other background information about registered mortgage loan originators from the registry," the final rule said. It will take effect Oct. 1. Federal agencies said the registry could begin accepting federal registrations on Jan. 28. Banks and loan officers have 180 days to comply from the time federal agencies provide an advance announcement of the date the registry will begin accepting registrations.

SAFE Act licensing is a much bigger issue for nonbank mortgage lenders, which, unlike their bank-owned competitors, must meet tougher educational requirements and take tests in every state where they want to be licensed. The nonbanks are struggling to meet their July 31 deadline for compliance with national and state licensing requirements.

Eye on Foreclosures

Fannie Mae and Freddie Mac have increased foreclosures in the past two months on borrowers who failed to get permanent loan modifications under the government's program, according to data from LPS Applied Analytics.

"We're seeing the government-sponsored enterprises starting to pick up foreclosure activity," said Herb Blecher, a vice president at the unit of Lender Processing Services Inc.

Both Fannie and Freddie declined to comment, as they are in the quiet period ahead of second-quarter earnings to be released in early August, representatives for the GSEs said.

Still, the rise in foreclosure starts by the GSEs "is nowhere near" what is needed to clear through the so-called shadow inventory of 4.5 million homes that were 90 days behind on the mortgage or in foreclosure as of June 30, Blecher said. "You start asking yourself … whether we are fixing the problem or delaying the inevitable."

Since 30-day delinquencies fell dramatically in February and March, lenders have been saying that delinquencies have stabilized (though they bounced back up in April and May and fell slightly in June). Blecher is skeptical. "I don't think we can say that we've turned a corner," he said. "We may have stabilized at historically high levels. It's not enough to say that we have a trend toward improvement."

Banks are still not repossessing many properties, LPS found. Instead, banks are letting borrowers stay longer after failing to pay their mortgage. Borrowers who were 90 days delinquent at June 30 stayed in their homes an average of 300 days, a record high, LPS found. Those borrowers who had foreclosure proceedings initiated stayed in their homes an average of 461 days, another record high.