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East Orange Takes on Fannie and Freddie

Joe Tyrrel, East Orange Takes on Fannie Mae, Freddie Mac Over Dealings with Investors (N.J. Spotlight, March 1, 2016)

http://www.njspotlight.com/stories/16/03/01/east-orange-takes-on-fannie-mac-freddie-mac-over-dealings-with-investors/#

In his article, Mr. Tyrrel points out that Fannie Mae and Freddie Mac are selling troubled home loans to “Wall Street banks, hedge funds and private equity groups.”

Mayor Lester Taylor is making an important stand for East Orange and protesting the alse of bad mortgages to Wall Street “for-profits” rather than “nonprofits” who might make an effort to keep homeowners in their homes. When private groups (i.e., hedge funds, private equity) step in to buy delinquent mortgages and foreclosures from government entities like Fannie and Freddie, they have one goal -- repossess and flip the real estate for a windfall profit. Their business model all too frequently involves displacing residents and selling in an auction style environment with little to no concern for the long-term impact on communities.

East Orange, in particular, is especially hard hit.  There are numerous vacant homes, property values are depressed, and communities have been upended, all of which leads to diminished tax revenues.  The vicious cycle contributes to neighborhood blight.

Is this Much Ado About Nothing?  Not at all.  As Mr. Tyrrel points out, according to In a 2014 study, the Department of Housing and Urban Development (“HUD”) determined that 80% of loans were bought by private “for-profits,” but of the 20% of loans bought by “nonprofits” home retention was 3 times as high.  Groups like New Jersey Community Capital (NJCC) are eager to buy up Fannie and Freddie laons and to offer mortgage modifications to help keep homeowners in their homes.  Half the loans in the United States are owned or guaranteed by Fannie Mae.  So, if East Orange is in any way representative, it stands to reason that if groups like NJCC buy-up these loans, as a group, they will be 3 times as likely to remain with the homeowner.

On the other hand, private buyers are reticent to provide any meaningful loss mitigation, as to do so is contrary to their business model.  We see it every day in fighting foreclosure cases. Sometimes these lenders will tell the Court that "investor guidelines" or “investor restrictions” prohibit them from offering any loss mitigation options or they will indicate that the "investor" does not participate in favorable government programs like HAMP or the Fannie Mae Streamlined Modification. Thus, homeowners lose real substantive loss mitigation options when their loans change hands from government not-for-profit GSEs to private profit-seekers.

Joe Tyrrell quotes Mayor James in talking about a laborious modification process and a closed bid process. The lack of good old-fashioned fair dealing and transparency throughout is troubling. The utter lack of concern for community and family is reprehensible.

If you have additional questions and need to consult a foreclosure attorney you can find additional information by visiting our website or calling our office at (201) 529-8024.