Mortgages

The Obama administration's plan to stave off foreclosures could fall flat in California, where nearly one-third of mortgage holders are underwater on their loans -- many of them by amounts that would disqualify them for government-sponsored refinancing. The problem is likely to be especially acute in areas like the Inland Empire, where homes have lost more than 40% of their value in the last year and nearly half the homeowners owe more on their loans than the properties are worth.

Two people were sentenced Monday after pleading guilty to grand theft for taking at least $700,000 from homeowners looking to prevent foreclosure, the California attorney general's office said. Rosa Conrado, 51, of San Bernardino, charged with six counts, was sentenced to 72 months in prison, and Martin Jesus Flores, 33, of Baldwin Park, got three years' probation on one count. Alejandrina Maldonado, 33, of St. Lucie, Fla., was sentenced Feb.

The latest development in the mortgage market fomenting outrage in the streets and condemnation across the media spectrum is the spectacle of rich investors -- Wall Street traders, hedge fund operators, even former executives of the detested Countrywide Financial Corp. -- buying up delinquent home loans, reworking terms for borrowers, and selling them off to new investors at a handsome profit. Here's what I think about these bottom feeders: God bless them.

A legal battle between units of Countrywide Financial Corp. and American International Group Inc. could provide a rare window into the collapse of the financial and real estate markets. In a lawsuit filed this week, Countrywide Home Loans Inc. complained that the insurer didn't cover more than $43 million in losses from failed real estate loans, many of which were bundled and sold as securities -- even though Countrywide paid more than $342 million in premiums to insure the loans.

A snapshot of the reeling mortgage industry, released Friday by federal bank regulators, illustrates the challenges the Obama administration faces with its $95-billion plan to help lower mortgage payments for struggling borrowers. In the last three months of 2008, most troubled borrowers were being offered not true modifications but breathers on payments followed by a resumption of the original mortgage terms, or even higher payments.

President Obama, meeting with homeowners at the White House, said the government's efforts to drive down interest rates had fueled a surge in refinancing -- putting money into many homeowners' pockets during the current economic crisis. But almost all the refinancing so far involves borrowers with conventional mortgages who are not in serious financial trouble. The president's own programs for helping troubled homeowners are just beginning to get off the ground.

Policies aimed at easing home loan terms for troubled borrowers may not be as effective in preventing foreclosures as more direct aid to homeowners, Federal Reserve economists have found.

The Los Angeles City Council is poised to vote today on a plan to help distressed homeowners in the northeast San Fernando Valley by putting up city money for "silent second mortgages" that could encourage financial institutions to modify home loans. The pilot program would make available $1 million from the Community Redevelopment Agency to help 20 to 30 homeowners in Pacoima and neighboring communities who are in foreclosure. "If we can make this work . . .

Banks could get incentive payments for allowing borrowers to sell their homes at a loss rather than go through foreclosure under new guidelines issued Thursday for the Obama administration's $75-billion housing plan. The program, known as Making Home Affordable, focuses on paying lenders to modify distressed borrowers' loans so that payments are cheaper. But under this expansion of the program, lenders can also receive incentive payments if the homeowner's loan is not modified.

Alleging that 10 brokers made millions of dollars at the expense of retirees, federal regulators accused them Thursday of misrepresenting complex and illiquid mortgage investments as safe and suitable for conservative investors. The Securities and Exchange Commission, in a civil fraud lawsuit filed in West Palm Beach, Fla., federal court, said the brokers worked for Brookstreet Securities Corp. of Irvine, which went out of business in 2007.