April 6th, 2009
12:47 PM ET

Financial Dispatch: Cracking down on housing scams

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Andrew Torgan
CNN Financial News Producer

In the wake of the Obama Administration’s program to rescue troubled homeowners, a number of federal agencies are teaming up to fight mortgage and foreclosure scams.

The administration's $75 billion effort to help as many as 9 million mortgage holders get new or refinanced loans is drawing a lot of interest from homeowners, Treasury Department officials said.

"Those who would seek to prey on the most vulnerable also seek to intensify their efforts as well," Treasury Secretary Tim Geithner said today. "We will aggressively pursue those involved in mortgage rescue scams."

The Treasury, the Department of Justice, the Federal Trade Commission and the Department of Housing and Urban Development will lead the efforts from Washington. State attorneys general will also participate.

More people in the U.S. have fallen behind on loan payments than ever before.

According to a new study from the American Bankers Association, the percentage of consumer loans at least 30 days late rose to a seasonally adjusted rate of 3.22% in fourth quarter of 2008 - a record high.

Delinquencies rose in nearly every category, including home equity, auto and personal loans. The study also said these credit trends are unlikely to improve before 2010.

According to the ABA, the late payment rate on auto loans made through dealers rose to a record 3.53 percent in the fourth quarter from the third quarter’s 3.25 percent, while late payments on home equity lines of credit rose to a record 1.46 percent from 1.15 percent.

The delinquency rate on credit cards rose to 4.52 percent from 4.20 percent, but remained only slightly above the average over the last four years.

Consequently, one banking analyst is saying that the amount in loans that banks will need to write off will exceed levels seen during the Great Depression.

In a report on the banking sector, Mike Mayo of Calyon Securities says, “The seven deadly sins of banking include greedy loan growth, gluttony of real estate, lust for high yields, sloth-like risk management, pride of low capital, envy of exotic fees, and anger of regulators.”

He says the nation’s banks face a three-fold problem: higher structural risk, cyclical pressures, and “catch-22 government actions.”

Stocks opened to the downside today, despite the wave of economic optimism that boosted markets around the world.

Wall Street is coming off its best four-week run since the 1930s, but could hit some resistance in this holiday-shortened week. Financial markets are closed April 10 for Good Friday.

With the number of jobless in the United States topping 13 million, Sallie Mae - the largest student lender in the country - says it plans to move 2,000 jobs to the U.S. from Mexico and Philippines within the next 18 months as it shifts call center and other operations from overseas.

Six-hundred of the jobs will be relocated to Wilkes-Barre, PA. The locations for the remaining jobs have not yet been determined.

Sallie Mae runs facilities in 20 locations in states ranging from Delaware, Florida, Indiana, Pennsylvania, Texas and Virginia.

Gas prices declined by 1-tenth of a cent overnight to $2.039 a gallon.

Twenty-four states and the District of Columbia have regular unleaded gas prices of $2 and higher. The highest gas prices are in Alaska ($2.498).

Twenty-six  states have regular unleaded gas prices below $2. The cheapest gas prices are in New Jersey ($1.869).

And finally… as the economy melted down last year, so did CEO paychecks.

The average compensation for 200 chief executives at America's largest public companies fell 5.1% last year to $10.8 million, according to a survey published Sunday by the New York Times and research firm Equilar.

The decline marked the first time in five years that top executives' pay packages shrank compared to the year before.

Filed under: Andrew Torgan • Economy • Finance • Gas Prices • Oil • Unemployment • Wall St.
soundoff (8 Responses)
  1. lynn

    What is wrong in America that everytime there is a plan to help people there are scams that defraud the most vulnerable. So much for being such a Christian nation and an exampl of values for the rest of the world.

    April 6, 2009 at 8:56 pm |
  2. LeRoy Rozell

    The housing scams started a long time ago with inflating the value of homes anywhere. Now, it is a scam to attempt to buy one. It is obvious to anyone with bad credit, the goverment is not out to help them. Credit restrictions need to be lifted for the poor and the homeless. A simple goverment guarantee on the mortgage can make this possible. Is this idea too simple?

    April 6, 2009 at 6:23 pm |
  3. Annie Kate

    At least Sallie Mae is bringing back some of the offshored jobs – I hope other companies follow suit. I was disappointed to see that IBM, who has asked for bailout money, announced in the same press release that it would be laying off here in the US but shifting work overseas. No company taking bailout money should be allowed to do this. The bailouts are suppose to help Americans.....

    April 6, 2009 at 5:50 pm |
  4. Lisa in CA

    I'll try to shed a tear for those poor CEOs/upper management.

    As to housing, let me share my experience. I have admittedly let my credit go to Hell in a handbasket to keep a roof over my head. I was out of work, but as a self-employed individual, do not qualify for unemployment. I lived off credit cards while trying to secure employment. I missed some payments but made sure that mortgage payment was met. I called the Loan Modification department to get it re-worked. Guess what? I don't qualify BECAUSE I HAVEN'T MISSED A PAYMENT!!!

    April 6, 2009 at 3:33 pm |
  5. JC- Los Angeles

    Hearing little Timmy Geithner mention that he won't allow people to prey on the most vulnerable is the single most absurd comment all year.

    With an appalling post 9/11 lack of oversight at all levels of governemnt and industry, mortgage fraud reached staggering levels with Geithner's Wall Street colleagues cashing in big time.

    Now that little Timmy has lifted the national carpet and swept under $1 trillion in mortgage fraud, he's creating a Public/Private Investment scam to get his boys paid one more time on the same mortgage fraud.

    Little Timmy knows exactly who "would seek to prey on the most vulnerable."

    April 6, 2009 at 2:32 pm |
  6. KAZ

    We will be right back in the same mess if we give people mortgages that they can't afford. I have not seen an outline on what we are going to do with the people who can't afford thier homes and now can't sell them either.

    April 6, 2009 at 2:19 pm |
  7. May-Tennessee

    Cracking down on the scammers is a wise idea and needs to be done, but they also really need to start cracking down on mortgage companies who hold loans not backed by Fannie or Freddie for these are not protected under the President's plan, their participation is voluntary. What does that mean for folks in trouble on their mortgages which are not Fannie or Freddie? It means those people will fall through the cracks right under the government's nose. How will this happen? Because these companies have their notes insured by AIG who was bailed out by the government...they will be compensated for defaulted loans. In the meantime these so called mortgage companies claim publicly they desire to do whatever it takes to work with homeowners and keep them in their homes...but they are not. They are refusing to help, forcing people into foreclosure. They will then receive their pay-outs from AIG and hold on to these foreclosed homes until the market picks up and sell them at an additional profit. Now if that's not fraud I don't know what is, and something needs to be done to stop it.

    April 6, 2009 at 2:15 pm |
  8. Michael "C" Lorton, Virginia

    Even in life saving economic measures---the "greed grinch" is alive and well--

    April 6, 2009 at 1:07 pm |