Category: Real Estate

State AGs Rebel Against Obama Admin’s Attempt to Protect the Banks

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It’s interesting, first you have Republican state Attorneys General objecting to principal write downs as a part of any settlement, and now you have Democratic AGs saying that they are not willing to sign off on an agreement that increasingly looks like another sop to the big banks and mortgage servicers:

The proposed global settlement for mortgage servicer fraud and abuse, put forward by a working group representing all 50 state Attorneys General, received some high-profile dissent on Wednesday. Republican AGs in four states – Kenneth Cuccinelli of Virginia, Greg Abbott of Texas, Pam Bondi of Florida and Alan Wilson of South Carolina – objected to the term sheet that contains the proposed deal, which would reinforce that servicers follow the law, change some aspects of mortgage servicing and potentially create a quota of loan modifications and principal reductions which top servicers would have to meet. The settlement, the quartet said, “appears to reach well beyond the scope of our enforcement role, and, in some instances, far exceeds the scope of the misconduct which was the subject of our original investigation.” And they specifically reject principal write-downs as part of any deal, saying that it creates a moral hazard for borrowers who fail to pay their mortgages. Republican AGs in three other states – Oklahoma, Alabama and Nebraska – have raised their objections to the lead AG on the settlement, Tom Miller of Iowa, as well.

But Republican AGs are not the only ones with concerns about the settlement. Democrats in AG offices across the country find themselves uncomfortable with the deal, in particular the speed with which it is being ushered through the system and the lack of clarity over what claims they would have to relinquish under the deal. The opposition from both sides puts into jeopardy a quick resolution to the investigation, which is being pushed hard by the White House, possibly as a means to kickstart the ailing housing market.

You see,the AG taking point on this Democratic Iowa AG Tom Miller, appears to be a stalking horse for the Obama administration, which has bought big, into extend and pretend as a way to save the banks and the housing crisis, and you have Republicans who oppose anything that will help distressed homeowners, and you have Democrats who think that the fact that there has been no formal investigation, no subpoenas, and no specifics on what specific malfeasance that they would give a “get out of jail free” card to the banks.

The thing is, you need more than 35 of the AGs to sign off on this, and you need all of them from the large or hard-hit states (FL, CA, NV, NY, TX, AZ off the top of my head) for you to have a meaningful settlement here.

Yves Smith is right on her assessment of the settlement as it currently stands:

As we indicated, if this deal falls apart, or Obama merely comes up with a Potemkin program that fails to forestall state AG action, the public will be better served. The evidence is that enough judges still care about the rule of law that more and more bank abuses will come to light if the authorities leave matters to the courts.

I’m not worried about a, “Potemkin program that fails to forestall state AG action,” I’m worried about a, “Potemkin program that succeeds in forestalling state AG action,” because the issue is not paperwork problems.

The issue is that there is extensive, pervasive, and systemic fraud, and it is not just against the homeowners, but it is promulgated against the holders of the mortgage backed securities as well, who lose as the servicers rake in big fees during a foreclosure.

Should the Obama administration once again choose Wall Street over Main Street, and use supremacy claims like those favored by the thoroughly corrupt OCC to prevent investigations, we will all be worse off, and not just because Barack Obama and Eric “Place” Hold have made a mockery of the rule of law.

Without a thorough accounting of what has gone on, it will happen again … and again … and again … .

Put a Fork in it, MERs is Done

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Mortgage Electronic Registration Systems (MERS) has been under increasing pressures for its legal basis (it appears that they never registered loan transfers), it’s corporate structure (a few dozen employees, and tens of thousands of “Vice Presidents” who were actually employed its clients, so it functioned as principal and agent), and its shoddy record keeping.

Well, MERS is now done.

First, it instructed it clients not to foreclose in its name, then Essex County, MA and Guilford County NC both filed multimillion dollar lawsuits against the entity for illegally evading county recording fees, and now Freddie Mac has said that servicers of its loan portfolio will no longer be allowed to foreclose in MERS’s name.

So, the PTB have come to the conclusion that MERS is complete sh%$, both from a legal as well as a factual perspective.

Of course, they knew this 15 years ago, when MERS was founded, but now they realize that he courts are recognizing it as well.

One question though:  Why is no one going to jail?

Great Googly Moogly

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Understand that February is the shortest month of the year, and understand that new home sales are a lot more volatile than existing home sales, but the fact that sales fell almost 17% to an all time low, or at since records were first kept in 1963, 19,000 homes, giving an annual rate of just ¼ million home sales a year, is pretty stunning.

As the New York Times‘ Floyd Norris notes, this is not just the worst month ever, but it’s also the worst 12 month stretch ever.

We are not in recovery yet, and with the austerity crowd doing the best to trigger a double dip in order to appease the confidence fairy, and very little push back from the sane folks in public policy, it won’t get much better.

Economics Update

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Really just a few data points here, with housing starts falling sharply, 22%, in February, and we are seeing uptick on the producer price index.

The former is a mark of sanity, there are still too many homes, new, used, and foreclosures, out there, and if you are building houses without a buyer committed ahead of time, you are nuts in most parts of the country.

As to the PPI, it’s all volatility in commodities, so I would not worry right now, which is what the FOMC said yesterday in its statement as well.

Shoot Me. I’m Thinking that Ron Paul is Right

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The Federal Reserve’s Consumer Advisory Council just released a report saying that there have been no wrongful foreclosures by banks:

A months-long investigation into abusive mortgage practices by the Federal Reserve found no wrongful foreclosures, members of the Fed’s Consumer Advisory Council said Thursday.

During a public meeting attended by Fed chairman Ben Bernanke and other regulators, consumer advocates on the panel criticized federal bank regulators for narrowly defining what constitutes a “wrongful foreclosure.” At least one member of the panel voiced concerns that the public would not take the Fed’s findings of improper practices seriously, since the wide-ranging review did not find a single homeowner who was wrongfully foreclosed upon.

The Fed’s findings seem to support claims from the banking industry, which has admitted to sloppy practices but has maintained that the homeowners whose homes have been repossessed were substantially behind on their payments. The Fed’s report has not been released to the public.

This is crap.  Even if you argue that fraudulent statements to the court are not “wrongful foreclosure”, you have to note that banks have foreclosed on people who had mortgages with other people, and foreclosed on people who paid cash for their homes.

Well, with regard to the Federal Reserve, I used to take the middle ground, Alan Grayson’s position for audits and more transparency, while eschewing Ron Paul’s suggestion that we close down the Federal Reserve.

I thought that Paul was loony, and that it was a loony suggestion.

Now I’m beginning to think that the Federal Reserve is so thoroughly captured by the banks, and so thoroughly corrupt, that closing it down might be the only sane option.

Your Moment of Schadenfreude

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David Dayen notes that, “A Liberal Is a Villager Who’s Been Screwed By a Mortgage Servicer, and if this is the case, Washington Post hard core villager Dana Milbank has just discovered liberalism:

Behind the foreclosure crisis, big banks’ reign of error

By Dana Milbank
Sunday, March 6, 2011;

The problem in the nation’s housing market now isn’t subprime lending. It’s subpar lenders.

Last fall, my wife and I refinanced our mortgage with Citibank. Sixty days later, we received a “cancellation notice” from our homeowners insurance company “for non-payment of premium.”

Turns out Citibank, which had been collecting hundreds of dollars a month from us to pay the insurer, hadn’t made the payments. It was, I later learned, one of the usual tricks mortgage servicers use to squeeze more cash out of their customers. About a month later, I learned of another trick: Citibank informed us that it was increasing our monthly payment by nearly $300.

Along the way, a simple refi became a months-long odyssey: rates misquoted, interest charged on a phantom account, legal documents issued in wrong names, a mortgage officer who disappeared for days at a time (first it was his birthday, then his laptop was in the shop), a bounced check from Citibank’s own title company, and the freezing of our bank accounts.

For me, this amounts to no more than the hassle of arguing with Citibank to fix its “mistakes.” But consumer advocates tell me these are typical of the screw-ups by the big banks that service home mortgages. And these errors – accidental or otherwise – are driving large numbers of people into default and foreclosure when it otherwise would not have happened.

It’s a bad situation – and the new majority in the House is poised to make it even worse.

He got seriously boned by his bank, and now he realizes that it ain’t just a bunch of deadbeats who are trying to stiff the banks.

Unfortunately, he’s also singing the praises of HAMP, which was clearly constructed for the benefit of the banks at the expense of homeowners by Obama and His Evil Minions™, so he’s still that lovable clueless scamp we’ve always known.

Again, I Invoke Saroff’s Rule

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Here’s a Shocker, MERS is a Fraud

As I have said many times, “If a financial transaction is complex enough to require that a news organization use a cartoon to explain it, its purpose is to deceive.”

Well, Michael Powell and Gretchen Morgenson of the New York Times, cover it, and I think that this is the important take away:

Apparently with good reason. Alan M. White, a law professor at the Valparaiso University School of Law in Indiana, last year matched MERS’s ownership records against those in the public domain.

The results were not encouraging. “Fewer than 30 percent of the mortgages had an accurate record in MERS,” Mr. White says. “I kind of assumed that MERS at least kept an accurate list of current ownership. They don’t. MERS is going to make solving the foreclosure problem vastly more expensive.”

(emphasis mine)

Regardless of issues of law, on matters of basic fact MERS is completely unreliable, and the attempts by regulators to protect it are actually an assault on basic property rights, which depend on the rule of law, in the United States.

I’m not suggesting that anyone should go full Tyler Durden at “Library Street, in Reston, VA,” but I am suggesting that someone with a law go full avenging angel on their asses, with a good dose of RICO mixed in.

H/t Barry Ritholtz.

Mozilo Skates…

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The Department of Justice, no doubt looking forward rather than backward, had dropped its criminal investigation of former Countrywide CEO Angelo Mozilo:

Federal prosecutors have shelved a criminal investigation of Angelo R. Mozilo after determining that his actions in the mortgage meltdown — which led to $67.5-million settlement against him — did not amount to criminal wrongdoing.

As the former chairman of Countrywide Financial Corp., Mozilo helped fuel the boom in risky subprime loans that led to the crippling of the banking industry and the near-collapse of the financial system.

A federal grand jury in Los Angeles began probing Mozilo in 2008, and four months ago he agreed to pay a $22.5-million fine and to repay $45 million in what the government said were ill-gotten gains to former Countrywide shareholders. The payments settled a civil action by the Securities and Exchange Commission.

As Atrios notes, what this really means is that if you want to run a criminal enterprise, make sure that everyone has a piece of it, because, “If Everybody Is Guilty Then Nobody Is.”

Matt Taibbi is right, our society is now run by people who have declared criminals to be untouchable before the law.

If You Don’t Have the Law, or the Facts, and You Can’t Pound the Table, Because Someone is Slamming Your Face on It, Then

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Shred all relevant documents:

Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes or original loan documents.

The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost.

A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose.

Nope, nothing to hide here, it’s just too expensive to store boxes of documents.

What you are hearing right is not two 800 horsepower document shredders starting up.

Running the Numbers

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So, some of you might be wondering why we all went on an extended weekend down to Williamsburg, Virginia, despite the fact that it’s the off season, and so many of the attractions (see the aforementioned Busch Gardens post) are closed.

Well, about a month ago, we went to computer show, and picked up a new (used) laptop for my daughter, and my wife filled out an entry form, and we got a call for a timeshare (they call it a vacation share) in the area which included their giving us space in one of their vacation condos for 3 days.

We talked about it, and we decided that this would be a lot of fun, and listening to a sales pitch would be well worth it.

We declined their offers, which by the way got sweeter and sweeter as time went on, pleading poverty, which is only half true.

The other half is that I can do basic math in my head, I are a mechanical engineer after all, and their numbers were simply not that good.

Basically, the spaces were set up as townhouses, with two apartments, each being a 2 bedroom with a decent kitchen and living space, nice bedrooms, and a kickass master bathroom, it included a jacuzzi, a separate shower, and a toilet in its own separate room.

The basic offer was around 10 grand, with a down payment of 2-4K with a 6-8 year loan at 7 percent, and around a $500 a year maintenance fee.

All this for a complex that was about 5 miles away from the Colonial Williamsburg Historic Area.

They talk about this, and show how, for decent, and honestly not as good, hotel space, you would be spending $30K over the next 30 years for lodging, and then discuss how this is a prime location that could be swapped for other space.

Well, ignoring opportunity costs, the economic fact that dollars spent today are worth more than dollars spent later, let’s look at the numbers.

You get 2 weeks a year, either fixed (the cheap option I describe above), or floating, so you are paying for 2 weeks out of 52.

Let’s be charitable, and say that you are paying for 1⁄25of a year, or ½ a month.

This makes purchase price around $250,000.00 (10+K x 25) and the maintenance fee equivalent to about $1000.00 a month.

Note that this is all in the suburban areas of Williamsburg, where nice houses are well under the price that they asked (annualized) if you are more than 5 blocks from historical area/William and Mary College, and then you have a $1000/month rent maintenance fee.

When you consider the fact that the developer did this on what had been soybean fields at some point in the past 3 or so years, it’s certainly a good deal for them.

Obviously for certain people, those who are certain that they will hit the area year after year, and who might want to swap a week with someone in some other location, it might make sense, but for most of us, this is simply not a sensible financial or lifestyle decision.

As for me, I want to vacation in different places, or to visit with family, which makes it even less attractive to me.

Still, I don’t mind the 2 or so hours that I spent on the sales pitch, along with having to say “no” to the very earnest sales person, it was worth it for the rest of the weekend, which was a lot of fun.

Not Enough Bullets … No Consequences for the Rich Edition

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The New York Times has an article on real estate developers who repeatedly fail and default, but continue to attract other people’s money to their schemes:

Larry Gluck, the apartment building king whose company defaulted on loans in New York, San Francisco, Los Angeles and Washington, recently bought the Windermere Hotel in Manhattan and Tivoli Towers, a subsidized housing complex in Brooklyn.

Ian Bruce Eichner, who lost two major New York skyscrapers to foreclosure in the early 1990s and defaulted on a $760 million loan for a Las Vegas casino resort in 2008, is working on a plan to rescue One Madison Park, a troubled 50-story condominium project.

Even Harry Macklowe, whose $7 billion gamble on seven Midtown skyscrapers at the top of the market almost cost him his entire empire, is out looking for new deals.

Industry lore has it that New York is one of the toughest, most unforgiving real estate markets in the world. The costs are so high, the unions so ornery, the politicians so demanding and the rivalries so fierce, that one false move invites financial disaster.

But the truth is that there have been surprisingly few career fatalities among New York developers, even though they have lost billions of investor dollars on overpriced real estate and have littered the city with unfinished apartment buildings. While a homeowner who lost a house to foreclosure would find it difficult to borrow for years, developers who defaulted on enormous loans have still been able to attract money.

The reasons, experts say, are that there is still plenty of money floating around and that the market has a very short memory.

“You can always find an investor who’ll put up equity with a guy, unless he’s Attila the Hun,” said Daniel Alpert, managing partner at Westwood Capital, a real estate investment bank.

………

This is the very definition of moral hazard, and when someone does this repeatedly, it is not incompetence, it is fraud.

Time to end the bailouts and start prosecuting.

Just When You Thought that Mortgage Servicers Could Not Get Any More Evil…

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Now we have reports of them sending in crews to break into houses and change locks when they have not foreclosed on the property, in one case stealing electronics, wine, and beer, and in another, throwing out the ashes of the homeowner’s husband. (surprise, there is now a lawsuit)

It’s clear that something needs to be done about the criminal (breaking and entering and theft) activities of the mortgage services, but it appears that if you are the Federal Reserve, what needs to be done is to fight the rest of the government to protect the people who are breaking the law:

Top policymakers at the Federal Reserve are fighting efforts to rein in widely reported bank abuses, sparking an inter-agency feud with the FDIC and the Treasury Department. The Fed, along with the more bank-friendly Office of the Comptroller of the Currency, is resisting moves to craft rules cracking down on banks that charge illegal fees and carry out improper foreclosures. The FDIC supports such rules, according to an FDIC official involved in the dispute.

The new regulations would rein in debt collection, loan modification and foreclosure proceedings at bank divisions called “mortgage servicers.” Servicers have committed widespread fraud in the foreclosure process. While the recent robo-signing of fraudulent documents has received the most attention, consumer advocates have complained about improper fees and servicer mistakes that lead to foreclosure for years.

This is what happens when you put an organization that is chartered to protect and support banks in charge of regulating them.

Instead of reigning in excesses, they validate those excesses, so the Fed is attempting to throw away something like 300 years of established property law so that the banksters can take you house for no reason at all.

Things Get Interesting in New Jersey

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The chief justice of the New Jersey Supreme Court has set up a hearing on January 19 demanding that the mortgage servicers show cause as to why foreclosures should not be suspended state wide.

It appears that slack mortgage procedures and documentation have reached the notice of judicial authorities in the Garden State.

This is, as the Vice President is wont to say, a big f%$#ing deal.

Not only is there the prospect of an indeterminate foreclosure moratorium in a populous state with expensive real estate, but the judge has explicitly placed the burden of proof on the banksters.

As Harold Feld says, “Stay Tuned”.

Economics Update

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That may be a bottom, but it ain’t a recovery

It’s jobless Thursday, and initial claims fell by 3,000 to 420,000, and the 4-week moving average fell by 5,250 to 422,750, another 2+ year low, but continuing claims rose by 22,000 to 4.14 million, and emergency/extended claims rose by 324,537 to 4.83 million.

I would call that mixed. Fewer people losing their jobs, but people looking for work are not finding it.

In real estate news, home prices declined 1.9% in October, and by 3.93% year over year, so we are still not seeing any signs of recovery there.

The Cossacks Work for the Czar

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After spending trillions bailing out banks, and billions paying the banks to pretend not to foreclose on people under the HAMP program, it now turns out that the Treasury Department is refusing to cut loose any money for legal aid for people facing foreclosure:

Treasury Secretary Timothy Geithner has authorized big payouts to banks in an effort to encourage mortgage modifications, but is preventing borrowers in danger of losing their homes from accessing legal assistance under the Obama administration’s foreclosure relief plan — even when banks are wrongfully or fraudulently attempting evictions.

As of August, the administration’s foreclosure prevention program — which had paid a total of $231.5 million to banks — had paid nothing specifically for borrower’s legal fees, despite the urging of congressional Democrats who say legal funding is critical to easing the crisis.

Democrats from foreclosure-battered states are pushing new legislation that would overrule Geithner’s edict, but the legislation is doomed this session with apathy from leadership in both parties and a packed lame duck calendar.

It’s easy to blame Timothy “Eddie Haskell” Geithner for all of this, but the reality is that he is Barack Obama’s man, and he is where he is because Barack Obama wants him there, coddling bankers and defrauding homeowners.

Economics Update

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It’s jobless Thursday, and unemployment rose, but it remains below the 450,000 range that I have been harping on,with new claims rising by 26,000 to 436,000, the 4-week moving average falling by 5,750 to 431,000, continuing claims rising by 53,000 4.27 million, and extended benefits rising by 377,000 to 8,91 million.

Truth be told, since this is reporting from a short week because of the Thanksgiving holiday, I’m not sure if it means much.

In real estate, pending sales for existing homes jumped by 10% in October, which is surprisingly good news, though it may not translate in to quite so many closing, since mortgage rates are rising, which may complicate the life of your average home buyer.

I Was Wondering When This Would Happen

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The deed recorder for South Essex, Massachusetts asking for an investigation of MERS to see if they illegally evaded recording fees for mortgage assignments:

“It’s a basic issue of fairness. MERS says that if you are a member of their club, you can avoid fees on assignments of mortgages forever. Those are fees that everyone else pays,” [deed recorder John] O’Brien said. “I’ve never before heard of a private company that has attempted to unilaterally take over such a public function as property recordation. Imagine if someone tried to do this with drivers licenses.”

Silly man, don’t you know?  The banksters don’t have to obey the laws!

Here is hoping that he gets his investigation, and he nails those bastards to the wall.

H/t Atrios.