Is no one safe from the foreclosure crisis? Various news outlets are reporting that Burt Reynolds is on the verge of losing, not the Best Little Whorehouse In Texas, but his Florida mansion to the bank (click here, here, here, and here for stories). Apparently, the bank is looking to pull down the Evening Shade on the actor because he has not made a mortgage payment since September 2010 and owes approximately $1.2 million on a home valued at $2.4 million. (For those of you who are curious, the house has a swimming pool, private beach, boat dock, cinema and, of course, its own hair salon.) Reynolds has enjoyed many Boogie Nights in the property and on its Longest Yard since he purchased it for $1.5 million in 1994. However, Smokey now appears to have caught up with the Bandit and Reynolds finds himself in the Sharkey's Machine like so many other residents navigating through foreclosure in Florida. Unless there is another Cannonball Run sequel in the works, it looks like Reynolds may find himself Starting Over in a new home.
Surprise! You Don’t Have To Pay As Much As You Thought On That Mortgage
Last week, Bank of America agreed to a multi-billion dollar settlement with upset investors who had purchased securities comprised of subprime mortgages originated by Countrywide Financial (which Bank of America acquired in 2008) and serviced by Bank of America ("Bank Of America Settles Claims Stemming From Mortgage Crisis"). Among other things, the investors claim that that Countrywide "created securities from mortgages originated with little, if any, proof of assets or income," and that Bank of America then "failed to heed pleas for help from homeowners teetering on the brink of foreclosure." While the settlement still needs to be approved by a judge, and has already run into some opposition ("Investors Challenge Bank Of America Settlement" and "Bank Of America's Proposed Mortgage Debt Settlement Criticized"), it was generally seen as the first major concession by a bank in connection with its role in the mortgage meltdown
On the heels of this settlement comes news that Bank of America (along with JPMorgan and a few other lenders) is also taking a more proactive approach with homeowners who are not even in default. As the New York Times reports in its article, "Big Banks Easing Terms On Loans Deemed As Risks," the banks are "quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk." The article tells the story of Rula Diosmas, a Florida (of course) woman who had $150,000 shaved off of the mortgage of her Miami condominium by JPMorgan even though she did not request a modification and was not in default. The bank explained its reasoning as follows:
Banks are proactively overhauling loans for borrowers like Ms. Giosmas who have so-called pay option adjustable rate mortgages, which were popular in the wild late stages of the housing boom but which banks now view as potentially troublesome.
. . .
Option ARM loans like Ms. Giosmas’s gave borrowers the option of skipping the principal payment and some of the interest payment for an introductory period of several years. The unpaid balances would be added to the body of the loan.
. . .
“By proactively contacting pay option ARM customers and discussing other products with better options for long-term, affordable payments, we hope to prevent customers from reaching a point where they struggle to make their payments,” Mr. Frahm [a spokesman for Bank of America] said.
The banks' efforts have not come without some critism, however, including the claim that the banks are behaving in "contradictory and often maddening ways" — showing concern for those who might get in trouble while at the same time being punished by regulators for doing a poor job modifying mortgages that are already in default.