• Be 90+ days late on their payments
• Show affidavit of financial hardship
• Not have filed for bankruptcy
• Have taken out the mortgage before Jan 1, 2008

Fannie, Freddie Unveil Plan to Modify Loans [WSJ]

Fannie, Freddie Work on Mass Loan Modification Plan [WSJ]

A Town Drowns in Debt as Home Values Plunge [NYT]

For more of this story, tune in to CNBC's On The Money, tonight, starting at 9pm.

PREVIOUSLY: Consumerist Attends Robert Allen's Get Rich Quick In Real Estate Seminar
Despite Subprime Implosion, Robert Allen's Troops Still Pitch "Get Rich Quick In Real Estate With No Money Down"

Massive Effort to Save Mortgages [WSJ] (Photo: respres)

Crisis explainer: Uncorking CDOs from Marketplace on Vimeo.Basically, the CDO manager has a champagne bottle filled with mortgages. Every month when the debtors pay their mortgages, it fills the bottle with payments. The cork pops off and he pours the bubbly over a tray of glasses, each one representing a tranche of increasing risk.

The glasses at the top, rated AAA, get paid first and the least amount, and the bubbly flows down to AA, BBB, BB and equity, the tray at the bottom.

The party gets bad when people stop paying their mortgages. Now the bubbly only reaches the first levels, and the BB and the equity don't get paid at all. To make it worse, we have a SECOND CDO manager.

His bottle, instead of being filled with the mortgages, is filled with the BB-rated securities. When a few people stop paying on the first bottle, that means his bottle has no juice at all. He has a whole champagne glass tower with glasses rated AAA through BB like the first one, but it's not getting filled up at all. Then the champagne towers fall over and crash and Wall Street evaporates and there's runs on the bank some wisenheimer paints the Wall Street bull's balls blue. That's CDOs for you.

If you enjoyed that one, he also made another video explaining Credit Default Swaps, which are what brought AIG down.

Crisis explainer: Uncorking CDOs [Marketplace]

Credit Crisis Drives Stocks Down Sharply [NYT]

Fed Statement on Goldman, Morgan Stanley [WSJ]
Goldman, Morgan Scrap Wall Street Model,Become Banks in Bid to Ride Out Crisis [WSJ] (Photo: Getty)
PREVIOUSLY: It's "The End Of Wall Street As We Have Known It"

1. Don't panic/worry. It's not going to do you any good at best and at worst it can lead you to make some very poor financial moves.

2. Learn from what's going on. How would you have liked to have had all your retirement savings in Lehman Brothers stock? Key learning: diversify. If you have a large percentage of your portfolio in any single company, especially your employer's stock, you're taking on a big risk. Spread your money out and you'll be much better protected.

3. Focus on your career. Your career is your single biggest financial asset. As long as it's going strong, you have a very reliable safety net in your earning potential. Take some opportunities to improve your earning power/marketability/job security by attending a seminar or two, volunteering for a new project that adds to your experience base and delivers needed results for your employer, and networking with others just in case a change is needed. Making yourself a better, more marketable employee is never a bad decision — and these days it's one solid investment you can bank on.

4. Increase your emergency fund. Having a bit more financial cushion is a good idea these days. To save more, consider cutting spending where you can. Funny how a simple, innocent purchase in good times seems very frivolous these days. It's a cliché, but that twice-daily latte that runs you $8 total adds up to almost $3,000 a year. Is coffee really that important to you or would you rather be a bit more financially secure? Maybe it's not coffee for you and there's certainly no reason to eliminate all of life's pleasures, but there are areas of spending we all have that can be cut back a bit and not really cramp our styles much.

5. Keep investing. Yes, the stock market has been brutal of late. That's the bad news. The good news is that stocks are as low as they have been in some time. It's a great buying opportunity if you have ten or more years before you need the money. Prices may go down further in weeks and months to come (no one knows for sure), but if history is any indication, you'll do very well if you can hold out for a decade or two. 401(k)s are especially good investments. Look at it this way: even with the big losses in the stock market, you're still ahead of the game if you get free money from your employers' 401(k) match.

Those are a few of our tips. What would you add to the list?

— FREE MONEY FINANCE

(Photo: Kevin Dean)

laserjobs: The way things are going the FDIC will probably end up with WaMu. So as long as you are under the FDIC limits you will probably be with the safest bank around soon: WaMu Federal.

[Dealbook] (Photo: Maulleigh)

Fed to Loan A.I.G. $85 Billion in Rescue [NYT] (Photo: Getty)

A joint investigation by the NYT and 20/20 showed Lehman Brothers did business with mortgage broker First Alliance, charged with making fraudulent mortgages and engaging in predatory lending. First Alliance customers complained about extremely high fees and higher interest rates than what they signed up for. An internal memo by a Lehman brothers exec called First Alliance a mortgage "sweatshop" whose employees "leave their ethics at the door." First Alliance settled charges with the FTC in 2002, and then went out of business.

Lehman Brothers defended its business relationship with the company, calling itself "an underwriter, not a regulator." Today, they finally learned their lesson.

Lehman Had Long Relationship With Suspect Mortgage Brokers [ABC] (Photo: Getty)

The $50 & Up Underground House Book [Official Site]
$50 and Up Underground House Book [KK.org]

I have noticed a lot of comments on my Confession from yesterday, and thought I would follow up on some of these.

First of all, anything that I mentioned having to do with bankruptcy was what I learned in investigating bankruptcy laws. I am not a lawyer, I am not in pursuit of a J.D, etc. If you happen to know bankruptcy law I would be interested to learn about it. From experience I have never seen or heard of a mortgage being forgiven by chapter 7. I guess I wouldn't unless they had called to gloat. I implore anyone to seek legal advice please! Don't take my word for it at all. I was told that when someone mentions bankruptcy (at all) to stop any collections and cease the call, even if they needed help. That's the reason I warned against it.

Secondly, it would seem that a majority of people think that I am either a homeowner with a bad experience or a disgruntled employee. I can admit that I was frustrated with Wells Fargo, hence me quitting, but that I did indeed work there. Collections, sixth floor, disaster, escalation, and some loss mitigation (cross trained to help out loss mitigation).

Now I don't know the site that Stanwell is referring to, but it could not have been my site. In my training class there were 4 people (myself included) that were over the age of twenty. My training class consisted of twenty-some people. Do the math. Out of those 20 or so people me and one other were the only ones with any college experience. Most of the people in that class had graduated high school the summer before. 2 of my 4 supervisors did not have college degrees either. I don't mean to insinuate that they were not intelligent because of this, it's just that I would like the biggest investment in my portfolio (the mortgage) to be handled by someone who knows what they are doing and can spell. The last part is no joke: in loan comments there were misspellings that would make E.B. White spin in his grave. One rep wrote "homeowner diseesed as of 05/07." Really?

Morale is low because, compared to everyone else at my campus, they treated us collectors like crap. The other WFHM collector mentions that time between calls isn't counted. It was for me. I was a part of a team that blended (because time between calls had been getting extended), which means that in between taking collections calls I was making collections calls. On a typical day I would say that any given "blender" would talk to (not necessarily collect on, though) 100-200 people. A good deal of those were frustrated people that would hang up. I was told that they needed to turn up the speed (how fast the calls come) because I had about 10% down time the day before. There were probably 9 or 10 of us that did this, all the while being paid the same as those of us who didn't.

As for QA: Wells records all their calls with date and time stamps, however *most of the time* they monitor the calls that they grade live, if it isn't a busy month. I have no doubt that they monitored a call as late as 9:30. I didn't mean to insinuate that they NEVER graded anyone after 12pm, they just listen less and less as the day goes on.

Loss mitigation is indeed overwhelmed, but they aren't doing anything to help themselves out either. I was told on more than one occasion to "just handle the call" when a borrower would call on an active loss mitigation account (which prime inbound collections at my site was told not to handle). I was also given information that I knew to be wrong at least half the time. On a few occasions loss mit reps would place me on hold but forget to hit the mute button, and I would hear them talking about me. This wasn't common at all, but if it happened to me I would imagine it happened to others.

My supervisors stressed to me that Wells Fargo wants to help your call, so long as it is within the 6-7 minute average handle time. That's not a lot of time to give customers the individual attention they need. Anything after 6 minutes and I was told "transfer it to customer service." Customer service was used as the panacea at my site, even though we would frequently transfer calls that had nothing to do with customer service. It wasn't uncommon to get a call from C/S that had originally gone to collections. It frustrated people, and frustrated people get mad.

There are multiple collections sites. I can tell you that from my experience, Fort Mill, SC is the worst. San Bernardino, CA seemed to be the best of them, and as always there are exceptions on both sides. I can only speak for my site, and the experiences that I had with others. I will say that I had a great experience with a rep in CA. She went totally above what she was expected to do and helped me out a great deal.

There are a few things I forgot to mention in my confession as well:

1. Make sure WFHM is reporting your credit correctly. More than once I found accounts where the credit reporting has been messed up by a representative. They aren't supposed to touch it, but frequently will. WFHM will dispute it for you, but it seems to be a long road.

2. WFHM's SCRA (Serviceman's Credit Relief Act) was changed about a year ago to reflect the new policies that they were putting into place. If you have the SCRA active on your account ask what is covered. From the calls I received it would seem that WF did not communicate this. I believe they changed the way the fees were assessed, interest rate, and ability to make collections calls. I am not 100% sure on that though. If you know more about this, Stanwell, please share. I don't agree with it, but there wasn't much I could do. I wasn't a part of Special Loans.

PREVIOUSLY: 12 Confessions Of A Home Mortgage Collector

I was the best at what I did at Wells Fargo Home Mortgage (WFHM) for years. What did I do? I was a collector. At Wells, collectors are in charge of most aspects of a loan, notably ability to repay (like repayment plans) and loss mitigation aspects (loan modifications, etc). I was also part of WFHM's disaster team. I no longer work there, thank god (and can take bathroom breaks that total more than 6 monitored minutes a day!). Here's what I learned that can save you from people like the kind I used to be:

1. Chances are your mortgage is serviced (worked) by someone who has just graduated high school. A large majority of WFHM employees in major call centers have no college experience.

2. WFHM Training barely mentions loan laws and regulations. I had to download my own copy of the Fair Debt Collection Practices Act, and even then most people in WFHM have been told that they are "legally outside of the FDCPA."

3. Do not threaten bankruptcy. Legally we had to get the names of all those who mentioned bankruptcy to corporate attorneys, and that results in a fee. Bankruptcy will not forgive a mortgage debt.

4. Fight your bankruptcy fees with a passion! WFHM tacks on all fees regarding bankruptcies on to the loan, but these fees are not simple document fees. They are normally multiple $600+ fees regarding attorneys. WFHM will not talk about these practices with collectors. I have seen upwards of $4500 in fees regarding ONE chapter 13 bankruptcy, and when I was asked to send documentation of these fees I was told we "could not."

5. WFHM wants to appear concerned about foreclosure, but their actual policies tell a different story. In the two years that I worked in the servicing call center the repayment plans constantly went DOWN in number of months available. In other words, when I started we could spread out a missed payment or 3 over 18 months; when I quit it was only 6 (on a Freddie Mac loan). Making things harder to repay does not help people avoid foreclosure.

6. WFHM does not actively investigate instances of deceptive lending practices. More than once I got an account that was a predatory loan, and WFHM will not do anything about it (even after telling us they would).

7. The Loss Mitigation department has NO CLUE what they are doing. The department that is supposed to be in charge of Load Modifications and such will almost always "lose" key documents to the modifications, and you will go into foreclosure. I normally kept track of loans that went to Loss Mit and 85% of the time 3 months later it had not been touched. If the loan was 4 months past due that now makes it 7 months past due. These are not low numbers either, we are talking about 85% of tens of thousands of loans.

8. Call center employees frequently hang up or transfer homeowners back into queue to avoid work. I would say it happened on 1 out of 3 calls. If someone needs to "transfer" you for a simple question, politely ask why. If you detect any attitude whatsoever speak with a supervisor.

9.Call early in the day. Calls are monitored by Quality Assurance (QA) in the mornings. All the reps know this. Low QA scores for collectors means no end of month bonus (if other criteria is met). In some cases that means an extra $300. Collectors take this very seriously.

10. Morale is dangerously low at WFHM. Most employees leave without notice or give 1 days notice. WFHM wants to achieve 98% utilization, meaning that only 2% of the day can go without talking to someone (in other words, 540 seconds without talking to someone in an 8 hour shift). Nepotism is also rampant at WFHM. The employee handbook states that family members are not supposed to have a superior-subordinate relationship in the same department, yet on my floor alone there were at least 2 supervisor-underling families.

11. Don't argue about the due date. The due date, on 99.5% of loans, is the first. I cannot count how many people, on a daily basis, argue this. As soon as you argue the due date, don't expect any help from the collector. Collectors at WFHM hate this more than anything else. A grace period is a GRACE period, not a blanket due date.

12.Know what you are doing when you call, because likely the collector will not. Also, if you can, deal with a local agency about your loan being past due. It's not something to be embarrassed about. At the end of month Wells has a delinquency rate of something like 2.5% (grossly inaccurate). With an 8.5M loan portfolio that means 212,500 people are late with you. Use this website to find a counselor.

He was replaced by Alan Fishman, former president and COO of Sovereign Bank. The company has also entered a "memorandum of understanding" with the Office of Thrift Supervision, which is like probation for banks, requiring it to disclose lots of info to regulators throughout the year. Killinger built WaMu into one of the nation's largest thrift banks, but then got the bank into too much of the sub-prime mortgage business and over-aggressively expanded its retail outlets. His rolling head joins a line of other recently executed banks CEOs, Wachovia's Ken Thompson, Merrill Lynch's Stanley O'Neal and Citigroup's Charles Prince.

How much severance is he getting? WSJ says:

People close to the situation said Mr. Killnger would retire under the terms of his employment contract with no extra severance benefits. According to the most recent Securities and Exchange Commission filing related to Mr. Killinger's compensation, he held 1.2 million shares of common stock as of Dec. 31, 2007, currently worth about $5.2 million. He also has $14.9 million in deferred compensation and $3.5 million in pension benefits, according to the filing.

WaMu Placed On Probation As It Ousts CEO Killinger [Dow Jones] (Thanks to Dariush!)

Inflating Home Appraisals: Buyers could borrow enough to cover closing costs, but ended up owing more than the house is worth.

Flipping Loans: Moving unqualified buyers to loans that don't require documentation, knowing they couldn't afford it

Coaching: Brokers told buyers to overstate or even double their stated income in order to qualify for loans.

Watch the clip, inside...

[via Today Show]

Glass-Steagall was passed under the Roosevelt administration in 1933 in direct response to the Wall Street shenanigans that ushered in the Great Depression where banks shoved their own depositors into buying the stocks the banks were dealing. The basic idea was to keep banks from speculating with the savings that American citizens were entrusting within their vaults.

Its repeal, under the Gramm-Leach-Bliley Act, drafted and passed by a Republican congress, and signed by Billiam Jefferson Clinton, allowed commercial banks to merge with investment banks. For instance, Citigroup merged with Traveler's Insurance (although this merger was announced in 1998, before the act was passed, at the time Citigroup CEO Sanford I. Weill said that he spoke with the Feds and, "that over that time the legislation will change...we have had enough discussions to believe this will not be a problem.").

Now, on the one side they could sell mortgages to homeowners, and then invent fancy investment structures which they sold on Wall Street. Because they were "covered" on both ends, banks felt free to sell increasingly dicey mortgages, just so long as another sucker was picking up the garbage. This sucker was picking it up because he had a plan to repackage it and sell it to another sucker, and so on. Eventually we end up with no-doc stated income interest-only option-ARM no money down mortgages being repackaged as "sound investments" being sold as "stable assets" for city pension plans to park their money in. (See "Subprime Meltdown As Told By Stick Figures").

We can only imagine the level of machination exerted over those 30 years, but we do know this. Robert Rubin was Secretary of Treasury, which had oversight over Glass-Steagall regulation. Days before he resigned, Glass-Steagall was repealed. Just over a year later, he became chairman of the Citi executive committee, with an annual compensation of $40 million, a position he still holds, despite Citigroup's $24 billion in subprime-related losses.

(Photo: Joy Of The Mundane)

[via Boing Boing]

Pain goes through the roof [Los Angeles Times] (Thanks to Nicole!)

...this graph from Credit Suisse is the most sobering thing I've seen in a while. Mortgage_rate_resets It shows that most of the interest rate resets ahead aren't subprime, but are instead Alt-A and option-ARMs...

Alt-A is the category of loans made to consumers with FICO scores just above the subprime threshold. Option ARMs give borrowers several payment options, including making a minimum payment that does not even cover the interest that accrued in the last month. This means it's pretty easy for an option ARM to end up underwater, even in a market where prices are holding steady. If real estate prices are dropping, it is even more likely that an option ARM will end up upside down, which makes refinancing near impossible. The bulk of the Alt-A and option-ARM resets are coming in 2010-2011. A lot of things could change before then. But we might just be seeing the tip of the iceberg in the housing market.

Is This Just a "Sub-Prime" Mortgage Crisis? [Credit Slips]

House Financial Services Committee chairman Barney Frank (D-MA): "We now have confirmation of two facts we have known for some time: one, the Federal Reserve System is not a strong advocate for consumers, and two, there is no Santa Claus. People who are surprised by the one are presumably surprised by the other."

Center For Responsible Lending: "riddled with loopholes"

Center for Economic Policy Research: "Why couldn't Greenspan have done this seven years ago?"

David Wyss, chief economist at Standard & Poor's: "We always lock the barn door after the horse has gone.'' Fed officials are hoping to "restore confidence in this category'' of mortgages so lenders "will start making these loans again."

Senate Banking Committee Chairman Christopher Dodd (D-CT): "a clear signal that legislation is necessary to help protect homeowners from abusive and predatory lending practices."

(Photo: Getty)

So who do you blame, her, or the layers of finance guys who gave the thumbs up? Is it a confederacy of dunces, or of the greedy? Either way, they got their commission payments, and she, well expecting a foreclosure any day, has put all her belongings in a crate in the yard and the only thing left inside is the mattress she and her children sleep on.

How the Heck Did This Woman Get a Mortgage? [All Financial Matters]

32 More Foreclosures Dismissed for Lack of "Documentation" [LoanWorkout] (Thanks to Bill!)

2 weeks ago both my wife and I got a summons, that let us know that our landlord was being sued by the bank he financed the house through, for not paying his mortgage since July of this year...

Now I'm a younger guy and haven't had much experience with matters such as this, I didn't know what to do, not to mention well stressed over the matter.

I was frantically asking advice from anyone and everyone I knew. Some said keep paying your rent and just make sure there is a paper trail, others stated don't pay it and save the rent money for the eventual move(if the house gets foreclosed they usually kick you out, or so I'm told, and its usually really really short notice, 24hours).

Eventually I spoke to a lawyer, mind you his specialty wasn't in this area of law, but his suggestion was not to pay the rent and save it for the move.

So we didn't pay rent and so far the landlord has not contacted us. My question is was this the right move to make and what are my obligations/risks in a situation such as this (specifically being a renter who's home is potentially getting foreclosed)?

-Eric

If you paid a security deposit, you're still entitled to get that back from the landlord.

Keep saving for the move, which will probably take first and last month's rent and a security deposit. Consider pre-packing up your non-essential items. Assuming your landlord doesn't discover a secret box full of gold coins and pays off his mortgage, you're going to have 24-72 hours from the inevitable eviction notice to get out of Dodge.

You really need to get familiar with Florida state laws for this, though. Consider contacting your local bar association and asking for a referral to a lawyer specializing in tenant rights.

RELATED: href="http://www.bankrate.com/brm/news/real-estate/20071109_foreclosure_eviction_renters_a1.asp#one">Foreclosure can leave renters homeless [Bankrate]
As Owners Feel Mortgage Pain, So Do Renters [NYT]