Showing posts with label Foreclosures. Show all posts

Thursday, November 18, 2010

A Great Explanation Of The Foreclosure Mess In The USA

The Tea Party's Foreclosure Rant Is Totally Wrong

Gary Anderson | Nov. 16, 2010, 9:50 PM | 669 |

(I have worked to understand the issues of the housing Ponzi scheme since I saw a bubble of inventory growing back in 2005. Here, I will discuss the fatal flaw regarding most reactions to people who are fighting for their houses when behind on their payments.)

I want to focus on the rule of law as it applies to foreclosures. Essentially, we are seeing mortgages that have been divided from their loan documents. This is not supposed to happen. So when someone is in a position to be turned out of their homes for non-payment, there are people who cannot prove they have the right to foreclose, who are going into court, using fake papers, and getting judges and sheriffs to improperly foreclose on the owners.

But we have a history of both English common law and 400 years of US property law that has allowed the US to prosper. If this certainty of title, certainty of who owns the loan and who has the right to foreclose is not sorted out, then we weaken the rules. We weaken the rule of law.

That is why it is necessary for people who are concerned about the law to make sure that people are not stealing property that they cannot prove is theirs. If anyone thinks that the big banks were not involved in the original housing scam that resulted in foreclosurgate, please read this.

The Santelli Rant

It is my hope that people will no longer be distracted by Rick Santelli. He was the motivation for the Tea Party. I am not here to tell you all the Tea Party movement is bad. Some is good. I have argued that many of the leaders and funders of the Tea Party are bad.

The Santelli rant that motivated the Tea Party was a rant that was factually inaccurate. The Tea Party is founded on this rant, and that foundation is fatally flawed. Indeed, the Chicago and St. Louis Tea Parties, the first Tea Parties formed on February 22, while the rant took place on February 19, 2009, cite Santelli's rant as their inspiration. Santelli said that those borrowers who were underwater were "losers." The tone was clearly derogatory as it means that the borrowers were poor quality people. The claim is actually inaccurate. I can prove that it is inaccurate. We must understand that Santelli is a paid employee of CNBC, a network that I watch and have observed defending the big banks over many years.

The tag "losers" implies that these people understood the nature of the Ponzi that was going on around them, that they made a bet and lost. I would say that by far the vast majority did not understand it. Furthermore, the price appreciation of the houses was artificial based upon the easy money loans themselves.

People were told they could refinance later. They were told that real estate always goes up. They were told that if they didn't get in they would be locked out of the market. Almost every day on CNBC, David Lereah of the National Association of Realtors (NAR), was allowed to come on and say these things.

So then, this was a very sophisticated scam that included bankers, real estate professionals and mortgage professionals. Underwater borrowers were victims of a very sophisticated and lawless scam. The lawlessness centers on the corruption and taking away of underwriters, who have historically protected sound and honest banks. The underwriters were the law, the authority, of the banks regarding good loans and solvency. While not having sound underwriting violates no governmental law, it violates the principles that guide banking. Take away sound underwriting and you are guaranteeing bank insolvency and government bailouts of the biggest banks. That is exactly what happened.

Not only was it a sophisticated scam, but it was a scam that deliberately corrupted the underwriting process. These underwriters were important assets to banks because they always made sure in the past that people would not buy "too much house" based on their incomes. But with the new plan, the desire banks had for everyone to "qualify," so that they could get as many mortgages as they could to pool into the mortgage bonds sold abroad and to cities and counties, resulted in the massive Ponzi that has caused foreclosuregate.

To repeat, because this is so important: The banks needed warm bodies to qualify for mortgages. So they took away the police of mortgages, the underwriters, and left it to buyers to determine how much house they could afford. Now,this is not good, because underwriters are well trained and knowledgeable about the process, but home buyers were not at all skilled at this process. The banks wanted it this way because they could show the investors that they would be getting a good investment, as prices artificially appreciated.

But it was a process built on sand, and the crash has now resulted in the real lawlessness of illegal foreclosures, called foreclosuregate.

People Behind on Their Payments Should Be Foreclosed Upon? Maybe Not!

We must understand that the housing bubble drove prices up artificially. People would not have qualified for mortgages, or if they did they would not have been given equity loans, without proper underwriting. Many people would have had houses that they could afford, had this Ponzi scheme not created the motive to drive prices up on the part of the banks.The Ponzi was set up by the banks, starting with the Bank of International Settlements in Basel, which is the central bank to our Federal Reserve Bank and the other central banks.

So, most people who are being ousted, many without documentation, should never have been put in this position of humiliation in the first place. Banks are not supposed to behave like this. They are not supposed to grant loans willy nilly, drive up the price of houses to unsustainable levels, and then mop up through the foreclosure process after the storm that they caused.

It is my hope that people will understand, and give some slack to people who choose to fight the banks. They are doing all of us who own property a favor. They are strengthening the title process, and it must be done or your title may be clouded in the future!

The Entire Article Is Published on Hubpages.

Tags: Foreclosure-Gate, Tea Party, Gary Anderson | Get Alerts for these topics »

Monday, September 20, 2010

Another Nail In The Coffin For The Foreclosure Machine-If You Buy A Foreclosed House From The Bank It Could Have A Defective Title

SATURDAY, SEPTEMBER 18, 2010
Latest Real Estate Time Bomb: Title of Foreclosed Properties Clouded; Wells Fargo Dumping Risk on Hapless Buyers
Another ticking time bomb in the realm of real estate bad behavior is bound to go off sooner rather than later, and it is likely to impede normalization of values of residential property.

As readers no doubt know, there is a lot of actual and shadow residential real estate inventory in the US. The time from serious delinquency to foreclosure has lengthened considerably, due not just to crowded court dockets, but also bank/servicer disinclination to take possession (reasons include that investors take a dim view of bank real estate holdings; the bank is liable for expenses, most important real estate taxes, once it takes possession; more foreclosures would lead banks to have to write down clearly overvalued second mortgages, leading to losses and lowering bank capital levels).

Most analysts have argued that it would be preferable to accelerate the process of clearing the overhang of housing inventory, since prices need ultimately to return to price level in relationship to incomes and rent rates more in line with long standing historical norms. And the officialdom seems to accept this view, since Fannie and Freddie are pressuring servicers to move faster on foreclosures.

But what if this resolution process has new land mines planted in it? What if there are not widely understood impediement to foreclosed properties ending up with new owners? If there are good reasons buyers will have reason to be leery of buying houses out of foreclosure, we could have a lot of homes sitting vacant, a blight on neighborhoods and a source of even greater losses to banks and investors.

Yet it appears that the very same sort of corners-cutting that led financial firms to shovel money to weak borrowers could impede working through the inventory of seized residential real estate. An article discusses an analysis by AFX Title, a title search company, that shows problems with title on foreclosed properties to be widespread:

As the number of real estate foreclosures skyrockets, the odds are higher that a home you live in today, or at some point in the future may have had a foreclosure in its history. Even if the foreclosure has long since passed, a loophole in the way mortgages are recorded can create a serious title defect for future owners. Title analysis performed this month by AFX Title has detected this error to be common in random samples of properties it reviewed. “This could affect the property ownership of millions of homes nationwide” said David Pelligrinelli, of AFX Title. “The mortgage recording method which created this title flaw did not exist until recently. As title abstractors are just seeing this problem emerge now but a wave of title claims is coming over the next year or so.”….

The problem is created through a break in the chain of mortgage ownership. Until the 1980’s, most mortgages were loans between the homeowner and a bank, who lent the money directly. More recently, the mortgage financing system transformed into an international system of securitization, with mortgage lenders packaging their loans into securities, bought and sold by investors like stocks. These transactions even split individual mortgages into sections, where each loan could have parts owned by different investment banks.

The transfer of ownership in these mortgage backed securities (MBS) was done with contracts on the balance sheets of Wall Street investment banks, such as Morgan Stanley and Goldman Sachs. The company who originally appeared to make the loan was normally a retail lending company such as Countrywide or Lending Tree, who typically acted as a sales company, and sometimes remained contracted to service the loan.

In the event that the loan goes into foreclosure at a later date, the then-current owner of the loan files the foreclosure and sells the property to a new owner, often at auction. The land records would show a deed of transfer from the investment bank to the new owner. This creates a break in the chain of ownership of the mortgage rights. In many cases, the transfer of ownership of the mortgage loan has gone from the original lender, through several owners, and then to the foreclosing bank, none of which is recorded on the property title history. Technically, the foreclosing bank has no recorded title rights to foreclose in the first place…

There are reports that some title insurers are indicating that they will not insure for this title defect.

Yves here. Some readers may take this all to be unduly alarmist. But confirmation that this problem is real and potentially serious comes via a new “gotcha” practice by Wells Fargo on foreclosure sales. Wells is sufficiently concerned about the risks of selling properties out of foreclosure that it is springing an addendum on buyers, shortly before closing, which effectively shifts all risk for any title deficiency on to the buyer.

Now why is this a big deal? Go reread the boldfaced sentence above. If a bank like Wells does not have the right to foreclose, it cannot have clean title to the property. So the bank could conceivably be selling something it does not own.

Let’s say you buy a vase from a store. You open the box when you get home and find out the box is empty. You’d clearly be within your rights to get your money back.

With the Wells Fargo addendum, even if the bank has sold you the equivalent of an empty box, you have no recourse to Wells. Zero. Zip. Nada.

Let’s go back and give a bit of context. Wells is encouraging buyers in foreclosures to use its attorney and title insurers and reportedly offers to split fees. So the bank is taking steps to steer buyers not to get legal advice. This matters because the problems in this document would not be evident to a layperson. And it’s not even evident to lawyers not expert in real estate; I learned about this situation because a lawyer I know who does a fair bit of real estate work had been contacted by a friend of his, a lawyer looking to buy a house over foreclosure. Wells had presented the prospective buyer with this supposed “standard” addendum on the day of closing and said they would not negotiate it (you can read it in full at ScribD). The buyer was advised not to sign it.

On the surface, this document may not seem all that troubling. But what it does, in effect, is say “Warning, warning, you are buying a property out of foreclosure, there is risk here, and you can’t hold us responsible for anything we told you in the sale process.” (see paragraphs 1 and 2). Now the not-trivial problem with that is: how can you possibly evaluate the risk of buying a property out of foreclosure without asking the current owner? And if the current owner isn’t legally responsible for what they say, or more important, what they deny is a problem, they buyer cannot perform effective due diligence. This vitiates a principle that is well embodied in most areas of consumer and business law, that a seller is liable for the representations he makes about his wares.

Now specifically, the potential problem with the deal is the bank in many states will at best be giving the buyer a “quitclaim” deed (the addendum finesses this in paragraph 18, that the buyer only gets a “special/limited warranty deed. As the lawyer who took a dim view of this addendum put it, “This is like the ‘Special Olympics,’ not like ‘You are my special someone’.” That means the bank is merely transferring whatever it interest it has.

But per the AFX article above, the bank may own nothing. It may have foreclosed without having a clear enforceable right to the property (this is the basis of the burgeoning number of cases where borrowers are successfully challenging the bank/servicer’s right to foreclose, because it cannot prove it actually owns the note, which is the IOU between the borrower and the lender; if you don’t own the note, in 45 states, you have no right to enforce the lien on the property).

Now this little problem can be solved by title insurance, right? Well, guess what, some title insurers have exited the business, some others are starting to write policies with meaningful exceptions when they can’t go to the courthouse and find a clear chain of title. Oh, and Wells is trying to steer you towards their title insurer. What do you think the odds are that their title insurance policy doesn’t have exceptions?

So what is the risk? The lawyer explains:

The typical (unsophisticated) buyer thinks that because they have a lawyer at closing (no matter whose lawyer it is), a title policy, etc…….that they are all safe and sound. They struggle through one of these REO transactions for a month or two, finally get in the house, something bad goes wrong, and they find out that 1) the title policy won’t cover them and 2) the land isn’t unique (see the nasty provision in paragraph 27 on “specific performance”), so a refund is all you get – and you are out on your ear. Hopefully, with a refund – and that may be the best outcome. But if somebody comes in, and voids a foreclosure, your title policy doesn’t pay – Wells Fargo has clearly disclosed that this was a foreclosure, so you only got what they had (nothing), and you have no recourse, no insurance, and guess what, an unsecured loan for half a million bucks.

Given how many sales will be done out of REO, and the rising number of problems surfacing with making sure that mortgage securitizations took all the steps to become the real party of interest in a particular property, it is only a matter of time before we see some blowups of the sort the attorney was worried about, of a buyer shelling out hard dollars for a house, or taking a big mortgage, and winding up with nothing. And a few incidents like that getting the press they deserve will put a pall on REO sales.

Think the risk isn’t real? Then why has Wells bothered to insist that REO buyers sign a new type of addendum, when it has been selling REO for decades? This effort to shift all title risks on to the buyer is a tacit admission of problems. And look at the document itself. The buyer has to initial it in eight places as well as sign it. That’s a clear statement of Wells’ intent to shift the risk to the buyer.

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Topics: Banking industry, Legal, Real estate, Risk and risk management

Email This Post Posted by Yves Smith at 4:42 am

Thursday, September 16, 2010

One More Reason That The Foreclosure Machine Will Lock Up In 14 Months

The Mortgage Industry Secret that Prevents You from Getting a Loan
The cascade effect of mortgage buy-backs within the industry is limiting or locking out consumers from getting a mortgage.
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Repurchase Demands result in fewer mortgage products for the qualified borrower.
Reno, NV (PRWEB) September 15, 2010
If your credit is good and you’ve tried to get a home loan, you may have found yourself in the perplexing position of being told you aren’t qualified—even if you are. What’s going on here? The answer is a secret problem in the mortgage-lending business called Repurchase Demands (loan buy-backs)—and they are slowly strangling the industry. “Thus, fewer loan products are available for the qualified borrower,” says Scot Baker, a mortgage repurchase defense expert.
The problem started with the popping housing bubble in 2007. As the financial system collapsed, so did mortgage loans that had been securitized. This caused a systematic failure at Freddie Mac, Fannie and Ginnie Mae (the sources for FHA and VA loans). Congress demanded that these institutions become solvent after two major bailouts.
Today, Fannie Mae, Freddie Mac, and the Mortgage Insurance Companies are pushing back on loans up to 5 years old to the aggregators (Wells Fargo, Citigroup, Chase, Bank of America, etc.), who in turn are forcing buy-backs on the originators (Main Street mortgage companies). In the first quarter of 2010, these agencies forced lenders to repurchase $3.1 billion in mortgages, up 64% from one year earlier. Additionally, Ginnie Mae pushed back $15.5 billion in loans in the first quarter 2010 versus $4.9 billion in the year ago quarter. To further complicate things, the FDIC is pushing back on loans they inherited from seized banks, most notably Indy Mac.
The effect of loan buybacks is far-reaching and one of the major obstacles to a housing recovery. Repurchase demands have led to fewer lenders, an increase in loan loss reserves, increased overhead to handle the buyback demands, fewer choices for the consumer, and a lack of loan product availability for everyone, especially the self-employed. The overall effect on lenders is to tighten guidelines, a move to more time-consuming underwriting of each file, and a reluctance to take reasonable risks.
The result: You can’t get a loan, even if you’re qualified.
“Most of the trouble with ‘bad loans’ in the past centered around stated income loans above 80% loan-to-value, loose underwriting guidelines and pricing models that enticed lenders to place borrowers in loans not in the borrowers’ best interest,” Mr. Baker says. “However, my company, Pyramid Quality Assurance, sees a large percentage of buy-back demands on loans the originating lender underwrote to the program rules and guidelines in place at the time. Facts arising after the loan origination—such as job loss, new debt, misreading of the credit reports or closing documents—are being asserted as reasons for pushback. We help Main Street mortgage companies defend against repurchase demands.”
“An optimistic view is that the mortgage industry will deal with this issue for at least 2 more years. Realistically, it is likely that the high level of pushback will continue for 3 to 5 years,” Baker said.
About Scot Baker
Scot D. Baker is Sr. V.P. of Business Development at Pyramid Quality Assurance, a full-service loan analytics firm specializing in Repurchase Defense and Quality Assurance. Mr. Baker has over 20 years of mortgage banking experience. He can be reached at 877.706.5791 X 214 or sbaker.pyramidqa.com.
About Pyramid Quality Assurance.
Pyramid Quality Assurance, LLC http://www.pyramidqa.com/index.html is a full service analytics firm with extensive experience in mortgage industry Quality Assurance programs and Loan Repurchase Defense. Our senior staff have successfully defended Repurchase Defense cases, saving our clients millions of dollars. The company utilizes a comprehensive analytical approach providing easily understood solutions tailored to our clients’ needs. PQA’s process allows our clients to increase efficiencies, leading to increased profits, improved cash flow and lowered loan loss reserves. Pyramid Quality Assurance works with small to large banking and mortgage banking institutions, home builders and investors across the U.S.A.
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Bank Repossessions Of Homes Set New Record In August,2010

Bank Repossession of Homes Sets New Record in August

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On Tuesday September 14, 2010, 3:22 pm EDT
The nation's banks repossessed a record number of homes in August, according to industry sources. RealtyTrac, an online foreclosure sale site, will release its monthly numbers on Thursday, but sources there confirm the number of repossessions will come in just shy of 100,000 for the month.

That is the highest since the site began tracking in 2005. July's repossession number was the second highest on record. The last highest was 93,777 in May of 2010.

Notices of Default, which are the first step in the foreclosure process, are up slightly but mostly thanks to a jump in California, where the numbers had been artificially low of late, as banks tried to modify borrowers.

"With respect to the NOD increase, I think it is the modification redefault wave beginning to build and new modifications slowing to a trickle, indicating banks have lost their primary borrower re-leveraging tool," says mortgage industry consultant Mark Hanson.

Yesterday J.P. Morgan Chase (NYSE: jpm) cited the "shadow inventory" of foreclosed properties as one of their primary reasons for pushing back their expectations for a housing recovery as far as 2014. No question, a growing supply of repossessed properties will put further downward pressure on home prices, especially given the current 12.5 month supply of existing homes already for sale.

The question now is: Where does the government go from here? Some argue that housing needs to correct on its own, without artificial stimulus, as painful as it will be, in order to recover fully. What the Obama Administration has to decide is, will that correction, involving millions of foreclosures, take too large a toll on the greater economy?

Questions? Comments? RealtyCheck@cnbc.com

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85 Comments
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Comments 1 - 10 of 85First PrevNextLast

00A Yahoo! User Tue Sep 14, 2010 11:54 pm PDT Report Abuse
you notice yahoo hides this news and does not put it on the main yahoo finance page?
Reply

00A Yahoo! User Tue Sep 14, 2010 11:53 pm PDT Report Abuse
and with this dose of reality, why is the stock market up 8-10% in the last ten days?

America is broken and the Fed is in charge of giving people the illusion all is fine with his insidious propping up of the stock market with the pomo swaps.
Reply

17Jennifer Tue Sep 14, 2010 04:12 pm PDT Report Abuse
I love the isolationists and libertarians! They just want to be left alone, to "free ride" on all the benefits of living in an organized society. If they had their way, they would be protecting their homesteads, guns in hand, from roving gangs of murderous criminals out to steal anything of value.

Not my idea of utopia. I'd rather just pay the taxes and vote.
Replies (1)

51Rich Tue Sep 14, 2010 03:48 pm PDT Report Abuse
There is no other way but to let housing find it's own level. All the Fed wants to do is let that happen over a period of years, not all at once. This way the virtually free money that they give to the banks (and we do too at no interest) can be lent out to make some money to offset the mortgage losses on their books. It is the Fed's attempt at a controlled crash.
Reply

92OlLady Tue Sep 14, 2010 03:31 pm PDT Report Abuse
People are giving up hope. The summer of recovery was the summer of the bitter truth. The housing market will not recover for decades and there is little point in trying to hang on for things to get better.
Replies (2)

17Andy Tue Sep 14, 2010 03:25 pm PDT Report Abuse
The banks are making a push to grab those homes now that they tricked people into defaulting (that is what the recommended to do in order to modify loans). The banks are quickly running out of time to grab these homes. Homes are now up 4% year-over-year in the overall US.
In my county, the banks are really running out of time because homes are up 15% and people are making current on the payments again to keep the bank from getting the bargains.
Replies (3)

12A Yahoo! User Tue Sep 14, 2010 03:20 pm PDT Report Abuse
Tom-

Taxation without representation? Why don't you vote? In other words voting is the opportunity at gaining representation. There is no taxation without representation in the US unless you live in DC.
Replies (1)

31Tom Tue Sep 14, 2010 03:13 pm PDT Report Abuse
Looks like this blog is being deleted by the nazi machine. Of course they don't want you to know the truth.
Replies (2)

61Tom Tue Sep 14, 2010 03:12 pm PDT Report Abuse
Far too long the government agencies have run amok. Endless taxation and without representation...property tax, income tax, social security tax, on and on and on. It is time to stand up and put an end to our government run of tyranny. Remember something people, government governs ONLY by the consent of the people...time to quit giving them your consent. You have no need to answer to government anything, the most important protection provisions of the people, is the God given right to have society leave you alone. This includes any government agency.
Reply

40Louie Tue Sep 14, 2010 03:09 pm PDT Report Abuse
Don't worry, all the vacant homes will soon be bought when 100,000,000 Chinese emigrate to the US soon.
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Thursday, September 2, 2010

Fourteen Months From Now

My greatest triumph this year was saving a man named Bill Baldwin from foreclosure in Houston. A mortgage lender was attempting to foreclose over a $93,000 loan. Sadly Bill had lived in the house 45 years. For once it was good luck to live in Texas. Foreclosures go through court. I showed Bill how to raise the issue that the lender could not prove that it owned the loan with some excellent Ohio case law. The judge liked the argument and told the lender that they could not foreclose. Bill no longer had to make payments. This week Bill got the news that his lender was no longer paying his property taxes. I told him that it was a good sign that they had written off his loan. He now has a suit for title in court.

Sadly one cannot raise this legal argument in California yet. But what is more important is that we figuratively have "an out of control freight train" roaring down the track. When it crashes, the whole system is going to lock up under the weight of the massive number of "underwater homes." US District Courts, Bankruptcy Courts, and Superior Courts will not be able to handle the case loads. Counties will stop doing foreclosures. Lenders will face massive write downs and insolvency. This time the mega banks will not get a sympathetic ear from Washington, even if the Republicans win back congress. (Even the most politically conservative American has had enough of bail outs of Wall Street.)

Some mega banks will be gobbled up by real survivors like JP Morgan Chase. Some will go to foreign owners at bargain basement prices. Homeowners will be left with big and worthless mortgages on their homes and no foreclosure or other credible deterrent to force them to pay.

Please file this in your mind somewhere and watch what happens.

Wednesday, September 1, 2010

Banks Playing 'Foreclosure Roulette' With Delinquent Homeowners

Sunday, August 8, 2010

25% Of US Homes Have Negative Equity

http://www.dailyfinance.com/story/credit/real-estate-underwater-homeowners/19582685/

Tuesday, June 22, 2010

The Awful Failure Of The Obama Foreclosure Program

Mish's Global Economic Trend Analysis

Obama's Home Affordable "HAMP" Program a Failure; Another Huge Wave of Foreclosures Coming
Posted: 21 Jun 2010 11:49 AM PDT
Over a third of HAMP participants have exited the program and another batch is coming up. Those leaving the program will likely end up in foreclosure. Moreover, 4 million delinquent borrowers are not even eligible for the program.

Please consider Borrowers exit troubled Obama mortgage program.
The Obama administration's flagship effort to help people in danger of losing their homes is falling flat.

More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. That's more than the 27 percent who have managed to have their loan payments reduced to help them keep their homes.

Last month alone, 150,000 borrowers left the program -- bringing the total to 436,000 who have exited since it began in March 2009. A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

"The majority of these modifications aren't going to be successful," said Wayne Yamano, vice president of John Burns Real Estate Consulting, a research firm in Irvine, Calif. "Even after the permanent modification, you're still looking at a very high debt burden."
HAMP Performance Report Through May 2010

Here are a couple of charts from the Making Home Affordable Program Servicer Performance Report Through May 2010.

Hamp Trials Started

Permanent Modifications

Waterfall of HAMP-Eligible Borrowers
Not all 60-day delinquent loans are eligible for HAMP. Other characteristics may preclude borrower eligibility. Based on the estimates, of the 5.7 million borrowers who were 60 days delinquent in the 1st quarter of 2010, 1.7 million borrowers are eligible for HAMP. As this represents a point-in-time snapshot of the delinquency population and estimated HAMP eligibility, we expect that more borrowers will become eligible for HAMP from now through 2012.
Only 30% of the 5.7 million borrowers who are 60 days delinquent are eligible for the program. 4 million delinquent borrowers are stuck. Of those eligible for the program, only 346,000 have completed the trial and received a permanent modification.

Many of those receiving a permanent modification will slip back into default and head for foreclosure. Many of those who successfully keep their house would be better off if they lost it.

Looking at HAMP from every angle, it's safe to say the program was a failure and another huge wave of foreclosures is coming down the road.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Tuesday, February 23, 2010

A Friend's House Of 45 Years Is Saved

Jack Waldbewohner Yesterday a friend of 45 years saved his house from foreclosure,for now! With the help of a wonderful lawyer named David Whitten, we wrote a court brief for Bill Baldwin and gave him case strategy. After the hearing yesterday he thought that he had lost. When he told me that the foreclosure had been delayed 4 months and that he had a hearing in April where the lender had to prove note ownership, I shouted:" we won!"

Sunday, February 21, 2010

Blocking The Foreclosure Of A Man's Home Of 45 Years

Jack Waldbewohner Right now we are battling again to save a dear friend of 45 years from losing the home he has lived in since 1965. Thank God that Texas has judicial foreclosures where lenders have to go to court to make a foreclosure happen. We have a big court hearing tomorrow! I had to draft a suit to block the foreclosure. I did this with one hour's notice!

Thursday, February 18, 2010

A New Wave Of Foreclosures By The End Of 2010

MORTGAGES
New wave of foreclosures by end of 2010 is feared
About 4 million U.S. homeowners are 90 days or more delinquent on their loans or in foreclosure proceedings, Moody's Economy.com says. A federal loan modification program is helping a relative few.

Wells Fargo customer Malinda Lievers of Edgewood, Md., signs paperwork for a mortgage modification. Banks participating in the Home Affordable Modification Program have been slow to turn temporarily reduced mortgage payments into permanently reduced ones. (Rob Carr / Associated Press / January 12, 2010)
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Southern California home prices rise 8.6%
Number of modified mortgages jumps sharply

By Jim Puzzanghera and Don Lee
February 16, 2010 | 6:59 p.m.
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Reporting from Washington - Experts fear that a new wave of foreclosures will hit this year as prolonged unemployment makes it difficult for millions of homeowners to pay their mortgages -- and many of them aren't likely to get much help from a federal program aimed at keeping them in their houses.

Banks participating in the Home Affordable Modification Program, announced a year ago this week by President Obama, have been slow to turn temporarily reduced mortgage payments into permanent ones.

"The overarching sense is that the mortgage modification process has not worked that well," said Bert Ely, an independent banking consultant.

Obama administration officials acknowledge that the $75-billion program, which offers banks cash incentives to reduce payments, has had growing pains, and they said they were considering revisions to make it more effective.

Still, the program is expected to show continued progress when data from January are released Wednesday after a strong push by Treasury Department officials to get banks to make more of the modifications permanent.

For example, Bank of America Corp., the nation's largest servicer of mortgages, said Tuesday that it had increased the number of permanent mortgage modifications to 12,700 last month from 3,200 in December. BofA said an additional 13,700 permanent modifications were in their final stage.

But that's a drop in the bucket considering that BofA holds about 1 million mortgages that are at least 60 days delinquent. About 4 million homeowners nationwide are 90 days or more delinquent on their mortgages or in foreclosure proceedings, according to Moody's Economy.com, which analyzes data from credit reporting company Equifax Inc.

Trial modifications and other delays have kept many of those mortgages out of foreclosure, but by the end of this year, 2.4 million borrowers are expected to lose their homes, said Celia Chen, a housing economist at Economy.com.

That would be up from 2.1 million foreclosures and short sales last year and five times the annual numbers earlier in the decade.

It's unclear when those distressed properties would hit the market, but their large numbers are likely to push home prices back down this year, to a bottom in the fourth quarter, Chen said. And that would make things worse for the 25% of homeowners who already owe more on their mortgages than their houses are worth.

The biggest blows will be felt in California, Florida, Nevada and other states where home prices have dropped the most and the ranks of struggling homeowners have swelled.

As of December, 11.4% of California homeowners were 90 days or more late on their loans, according to First American CoreLogic, a Santa Ana real estate data firm. That compares with a delinquency rate of 8.4% nationwide.

Despite an increasing number of foreclosure-prevention efforts, lawmakers and community advocates say they haven't seen enough improvement.

"Outreach isn't happening," said Hyepin Im, president of Korean Churches for Community Development, a Los Angeles group that has sought to help hundreds of Asian American borrowers who are struggling to avert foreclosure.

At the outset, banks didn't screen borrowers before giving them trial modifications, she said. "Then at the end they don't give very clear answers why they're not getting permanent modifications. . . . There's very little transparency."

A report last week by Moody's Investors Service called the Obama administration modification program's effect "underwhelming." But administration officials said the program was on track to reduce payments for 3 million to 4 million homeowners through 2012.

As of Dec. 31, the program had helped get 787,231 home loans modified for three months and had helped make an additional 66,465 modifications permanent.

Officials noted that not all homeowners are eligible -- the program is only for owner-occupied homes, and excludes a variety of mortgages, including jumbo loans. And the administration continues to make changes, including a requirement added last month that homeowners document their income before a trial modification is granted.

But the program continues to draw criticism. Banks have complained they've had trouble getting homeowners to provide the necessary documents. Frustrated homeowners have complained of bureaucratic runarounds from their servicers. Federal watchdog agencies have criticized the program. And last month the chairman of the House Oversight and Government Reform Committee announced an investigation.

Tuesday, February 16, 2010

Lenders Try A Softer Approach To FOreclosures

Mortgage officials try exits softer than foreclosures

By Renae Merle

Washington Post Staff Writer
Thursday, February 11, 2010

Seeking alternatives to the nation's struggling foreclosure prevention efforts, federal and mortgage industry officials increasingly are looking for ways to get distressed borrowers to leave their homes voluntarily, without going through the expensive foreclosure process or a messy eviction.

Citigroup, for instance, plans to announce a pilot program on Thursday that would allow delinquent borrowers who don't qualify for or decline mortgage relief the opportunity to stay in their homes without making payments for up to six months before turning over the keys, in return for keeping the property in good condition. The bank estimates that up to 20,000 borrowers in Texas, Florida, Illinois, Michigan, New Jersey and Ohio could be eligible.

The program is just the latest amid a growing acknowledgment that foreclosure prevention efforts will fail to reach millions of borrowers over the next few years.

"This is a graceful way to move on with their lives instead of being foreclosed on and being evicted from their homes," said Sanjiv Das, chief executive of CitiMortgage.

The Citigroup plan attempts to address some common industry complaints, including borrowers who leave their homes in disarray after foreclosure, requiring lenders to spend thousands of dollars fixing up the property before putting it on the market. Also, homeowners who owe far more than their homes are worth increasingly are choosing to "strategically default," even though they can afford to pay their mortgage. The new program gives CitiMortgage more control over when distressed homes are put up for sale, bypassing clogged courthouses that have slowed the foreclosure process in many parts of the country.

By avoiding a glut of foreclosures that could hit the housing market within the next 16 to 18 months, the program -- if it is replicated throughout the industry -- could help prevent another dip in home prices, Das said.

It would be a more orderly process "than if all of the foreclosed properties came crashing at some point in the cycle," he said.

Other initiatives have also emerged for borrowers likely to lose their homes. Fannie Maeand Freddie Mac, the mortgage financing companies, developed programs allowing former homeowners to become renters after a foreclosure or other proceedings. As part of its federal foreclosure prevention program, known as Making Home Affordable, the Treasury Department announced late last year that lenders would be eligible for $1,000 in exchange for allowing borrowers to sell their home in a short sale. In such deals, the borrower sells the home for less than the outstanding mortgage, and the lender forgives the difference.

Moody's Economy.com has forecast that the number of short sales and transactions in which borrowers surrender their deed in lieu of foreclosure will increase more than 50 percent, to about 490,000, this year. That is just a fraction of the 1.9 million homeowners Moody's has forecast will lose their homes to foreclosure this year, up from 1.7 million last year.

But lenders have struggled to make many of these programs effective. The short sale is often lengthy and cumbersome for homeowners. In some cases, borrowers have second liens on the property, which can hang up the process. And lenders are sometimes suspicious of the potential for fraud if the home is sold cheap to a friend or family member of the borrower.

It's unclear how rental programs for former homeowners are working. Fannie Mae launched its "Deed for Lease" program in November, offering borrowers a 12-month lease in return for turning over the keys to their former home and maintaining the property. A company spokeswoman said that it was too early to judge the program's success, but that former homeowners who surrender their deed to avoid foreclosure -- numbering nearly 2,000 through the third quarter of last year -- would be eligible. Freddie Mac's year-old program targets former homeowners after their foreclosure, offering them a month-to-month lease. It has not released specific data on how many homeowners have chosen this option.

Citigroup's program goes further. It targets delinquent homeowners who do not qualify for mortgage relief. During the time the borrower is still in the home, they must continue to pay utilities, but in some cases, the bank may help cover some of the taxes, insurance or homeowner association fees. The borrower would also be eligible for transition counseling to help find a new home, and a minimum of $1,000 to help offset moving costs.

If there is significant demand for the program, Citigroup will expand it, Das said. "There might be complications that we haven't thought about," he said. "What happens if they don't turn over the keys after six months or they don't maintain their house like we would like them to maintain their house?"

Friday, February 12, 2010

Is Anoter Foreclosure Surge On The Way?

Foreclosures down in January, but surge on way?

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AP – FILE- In this July 11, 2008 file photo, a sign in front of the Fannie Mae headquarters in Washington …

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By ADRIAN SAINZ, AP Real Estate Writer – Thu Feb 11, 6:33 am ET

The number of U.S. households facing foreclosure in January increased 15 percent from the same month last year, and a surge in cash-strapped homeowners who've fallen behind on mortgages could be on the way.

More than 315,000 households received a foreclosure-related notice in January, RealtyTrac Inc. reported Thursday. That number is down nearly 10 percent from 349,000 in December, which saw the third highest total since the company began tracking foreclosure data in 2005.

In January, one in 409 homes were sent a filing, which includes default notices, scheduled foreclosure auctions and bank repossessions. Banks repossessed more than 87,000 homes last month, down 5 percent from December but still up 31 percent from January 2009.

January marked the 11th straight month with more than 300,000 properties receiving a foreclosure filing. The numbers could stay above that level as unemployed homeowners who have tried to keep up with their mortgages finally start missing monthly payments.

Mortgage financier Fannie Mae reported in late January that the rate of borrowers who have a conventional loan on a house and are seriously delinquent was 5.29 percent in November, more than doubling the rate of 2.13 percent in November 2008. Borrowers are considered seriously delinquent if they are past due by three months or more, or are in foreclosure.

"There's a lot of foreclosures in the pipeline, and the number is going to continue to get bigger," said Patrick Newport, an economist with IHS Global Insight.

Last month's foreclosure activity followed a pattern similar to that of a year ago, when a double-digit percentage increase in December was followed by a 10 percent drop in January.

The dip in January's numbers may be due to processing delays by lenders during the end-of-year holidays, said Rick Sharga, senior vice president of RealtyTrac, which is based in Irvine, Calif.

"I don't think it's an early sign of the coming of the end of the foreclosure crisis," Sharga said.

A record 2.8 million households were threatened with foreclosure last year, and the numbers are expected to rise to between 3 and 3.5 million homes this year, RealtyTrac said.

Slowing the foreclosure rate is a key step in the recovery of the real estate market and the overall economy. The foreclosure crisis forced the federal government and several states to come up with plans to prevent or delay the process to help delinquent borrowers.

Foreclosed homes are usually sold at steep discounts, so they often lower the value of surrounding properties. Cities lose property tax dollars from foreclosure homes that sit empty and from declining home values, straining local economies. Home prices have stabilized in some cities, but are still down 30 percent nationally from mid-2006.

Economic issues, such as unemployment or reduced income, are expected to be the main catalysts for foreclosures this year. Initially, subprime mortgages were mostly the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

Among states, Nevada posted the nation's highest foreclosure rate, followed by Arizona, California, Florida and Utah. Rounding out the top 10 were Idaho, Michigan, Illinois, Oregon and Georgia.

The metro area with the highest foreclosure rate in January was Las Vegas, with one in every 82 homes receiving a foreclosure filing. It was followed by Phoenix and the California cities of Modesto, Stockton, and Riverside-San Bernardino-Ontario.

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