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CitiMortgage to Launch Home Rental Program as Foreclosure Alternative
08/08/2012
CitiMortgage announced the launch of the Home Rental Program, a program designed to provide an alternative to foreclosure and allow eligible borrowers to stay in their homes.
The Home Rental Program will be managed by Carrington Capital Management, LLC and Carrington Mortgage Services, LLC. CitiMortgage and Carrington developed the program as a pilot.
Under the program, the eligible borrower transfers ownership of the property to a vehicle established by Carrington Capital and its joint venture partner, Oaktree Capital Management, L.P. A lease will then be established for the property at a manageable monthly payment.
Lease payments will be determined by local market rates but are expected to be lower than the borrower’s mortgage obligation. Carrington will work with borrowers to establish a length for each lease.
The program will be tested in six of the hardest-hit markets to evaluate its effectiveness: Arizona, California, Texas, Florida, Nevada, and Georgia. Carrington will contact homeowners who meet eligibility requirements.
In order to be eligible for the program, candidates must: Occupy the property; owe more than their home is worth; be delinquent for 120 days; and be unable or ineligible to receive an affordable loan modification while still having the resources to make monthly rent payments. In addition, candidates must have a loan in the pilot portfolio serviced by Carrington.
To implement the program, CitiMortgage has transferred the ownership of loans in its portfolio through the sale of $158 million in mortgages to the Carrington/Oaktree partnership.
“We’re looking forward to working on this important initiative with CitiMortgage and our partner, Oaktree Capital Management,†said Bruce Rose, founder and CEO of Carrington. “Offering alternatives for borrowers looking to stay in their homes and simultaneously relieving their distress is core to the operating principles of our firm and will help substantially in the overall housing market recovery.â€
http://www.dsnews.com/articles/citimortgage-to-launch-home-rental-program-as-foreclosure-alternative-2012-08-08
Investors tout 'condemnation' for housing fix
Eminent domain has never been used to seize mortgages of investors or institutions
6/11/2012 7:36:43 AM ET
NEW YORK — Here's a controversial but intriguing approach to the U.S. housing crisis: keep cash-strapped residents in their homes by condemning their mortgages.
A mortgage firm backed by a number of prominent West Coast financiers is pushing local politicians in California and a handful of other states hardest hit by the housing crisis to use eminent domain to restructure mortgages that borrowers owe more money on than their homes are actually worth.
San Francisco-based Mortgage Resolution Partners, in a presentation reviewed by Reuters, says condemning so-called underwater mortgages and taking them out of the hands of private lenders and bondholders is "the only practical way to modify mortgages on a large enough scale to solve the housing crisis."
Eminent domain is a well-tested power by local government to get a court order to take over a property it deems either blighted or needed for the public good.
Over the years, governments have used eminent domain authority to clear urban slums or seize land to build highways and bridges.
The power to do this is often controversial because landowners don't have much negotiating power. And in this case, potentially even more controversial since it has never been used to seize mortgages held by private investors or financial institutions.
Under the ambitious proposal, Mortgage Resolution Partners would work with local governments to find institutional investors willing to provide tens of billions of dollars to finance the condemnation process to avoid using taxpayer dollars to acquire millions of distressed mortgages.
A local government entity takes title to the loans and pays the original mortgage owner the fair value with the money provided by institutional investors.
Mortgage Resolution Partners works to restructure the loans, enabling stressed homeowners to reduce their monthly mortgage payments. The restructured loans could then be sold to hedge funds, pension funds and other institutional investors with the proceeds paying back the outside financiers.
Mortgage Resolution Partners, which up until now has tried to keep private its discussions with local politicians and the two investment banks it is working closely with, would collect a negotiated fee on every loan that is condemned and restructured.
The plan by Mortgage Resolution Partners to keep people in their homes by condemning underwater mortgages comes as many institutional investors are raising money for funds to acquire foreclosed single-family homes with an eye toward renting them out until housing prices recover.
Meanwhile, Mortgage Resolution Partners got caught up in a controversy earlier this year after Reuters reported that Phil Angelides, the former chairman of a Financial Crisis Inquiry Commission, was the executive chairman of Mortgage Resolution Partners. Angelides left the firm soon after, when some on Capitol Hill began raising questions about potential political influence by Mortgage Resolution Partners.
The firm's condemnation proposal, which is getting a receptive hearing from some public officials in San Bernardino County, Calif., could also prove controversial because eminent domain traditionally has been used by municipalities to take ownership of blighted properties and buildings -- not loans.
In a condemnation proceeding, the owner of a property is entitled to be compensated at fair market value, which often can be much less than the initial purchase price. That means banks or investors in mortgage-backed securities could face losses, if many underwater mortgages were condemned at a steep discount to their face value.
"We are intrigued," said Gregory Devereaux, chief executive of San Bernardino County, which is east of Los Angeles and has one of the highest unemployment rates in the state. "Our economy in this county can't be turned around until a large proportion of the mortgage crisis has been addressed."
Devereaux said the idea of using private money to condemn underwater mortgages was first brought to him by Mortgage Resolution Partners several months ago. He said if the county goes ahead with the idea, it isn't definite it will work with the firm to manage the program.
But Mortgage Resolution Partners would appear to be further along than any other firm in putting the pieces together to use private money to fund public condemnations of underwater mortgages.
Working with investment banks
The firm is working with investment banks Evercore Partners Inc and Westwood Capital to find institutional investors interested in providing the billions of dollars necessary to fund the condemnation process on a significant scale, according to the firm's marketing documents and people familiar with the matter. The investment banks are talking to big bond fund managers, hedge funds and insurers about providing the financing.
The documents also note that San Bernardino County and some of its municipalities are the closest to moving forward with the idea.
Mortgage Resolution Partners is also having discussions with politicians in at least one other California county and in Nevada and Florida, said people familiar with the situation.
"The private sector provides all the financing and all the risk with this program," said Steven Gluckstern, the firm's chairman and a former money manager and former owner of New York Islanders hockey team. "We have watched state (and) national government try to fix this and it hasn't worked."
Gluckstern acknowledges that using eminent domain for mortgages is untested but said the firm's lawyers believe the strategy would withstand a legal challenge from bondholders or banks. He also said he thinks most bondholders would not oppose eminent domain because the market prices for many mortgage-backed securities reflect the fact that millions of borrowers are underwater on those loans.
"The loss for many bondholders has already been baked into this," he said.
A person familiar with the matter, who was not authorized to speak publicly, said condemnation of underwater mortgage creates a "liquidity event" for many mortgage-backed securities that have been cobbled together largely from distressed home loans.
The problem of underwater mortgages may be the most lasting impact of the U.S. financial crisis. Recent estimates by real estate information firm CoreLogic found that roughly 22 percent of U.S. homeowners owe more on their mortgages than their homes are worth.
In San Bernardino County, an estimated 100,000 homeowners have mortgages that are underwater, according to county officials.
Two California municipalities in the county, Fontana and Ontario, have agreed to work with the county on that study. But a third community, Hesperia, voted on June 5, not to join the effort.
The use of eminent domain to help underwater homeowners has gotten some attention from the local press in San Bernardino County. But until now, Mortgage Resolution Partners behind-the-scenes role had not surfaced.
Devereaux said Mortgage Resolution Partners has not come up in the public discussions about the eminent domain proposal because no decision has been made to work with them.
But the lack of openness has concerned some in the local real estate community.
"In two months and four public meetings, the critical details of how this might work have been left out of the discussion," said Paul Herrera, government affairs director for Inland Valleys Association of Realtors.
Bankers & Tradesman
October 18, 2011
The Massachusetts Supreme Judicial Court ruled today that if an original foreclosure was faulty, people who buy foreclosed property might not own what they think they do.
The case, Bevilacqua vs. Rodriguez, involved a Haverhill property which had been owned by Pablo Rodriguez, who took a mortgage on it in 2005 through a lender named Finance America. The mortgage was assigned to the Mortgage Electronic Registration System (MERS), and the note was subsequently sold into a securitized trust.
In 2006, U.S. Bank, acting as trustee, foreclosed on the property. But the mortgage, which had been entered into the land records as assigned to MERS had never been transferred over to U.S. Bank. This transfer occurred only after the foreclosure sale had already been completed.
Last year, the SJC ruled in its influential Ibanez decision that such post-foreclosure transfers were illegal - banks must be assigned the mortgage prior to foreclosure in order to foreclose.
In 2006, U.S. Bank sold the property to Francis J. Bevilacqua, granting him a "quitclaim deed" affirming U.S. Bank no longer had an interest in the property. But, given the court's Ibanez ruling, in 2010 Bevilacqua elected to file a "try title" action in order to clear up any potential problems with the title.
A "try title" action is a legal method of clearing disputes over who owns a piece of property by forcing the parties with a claim on the land to appear in court and present evidence. If a party with such a claim fails to appear and defend it, or loses the case on the evidence, their claim is wiped out, making it easier for the current owner to sell.
Judge Keith Long of the Land Court, however, ruled that Bevilacqua didn't have the right to attempt to "try title." Since U.S. Bank's original foreclosure was illegal, they didn't have the right to sell the property to Bevilacqua in the first place, and he was not its legal owner.
The SJC today affirmed that decision, saying that the fact that U.S. Bank had granted a deed to Bevilacqua wasn't enough to establish his ownership.
"Recording may be necessary to place the world on notice of certain transactions. Recording is not sufficient in and of itself, however, to render an invalid document legally significant," said the court. "In light of its defective title, the intention of U.S. Bank to transfer the property to Bevilacqua is irrelevant and he cannot have become the owner of the property pursuant to the quitclaim deed."
The court does state that it might be possible for property owners in Bevilacqua's position to establish ownership by, in effect, re-foreclosing on the property.
Bevilacqua might argue that the record shows that U.S. Bank intended to transfer its interest in the property to him, and that therefore he is entitled to foreclose on the property under the terms of the original mortgage, just as U.S. Bank would have been.
However, the court says that a try title action isn't the proper legal proceeding in which to attempt such a maneuver. But they explictly leave the door open for Bevilacqua to make another attempt to establish his ownership.
See http://www.ma-appellatecourts.org/display_docket.php?dno=SJC-10880
SUPREME JUDICIAL COURT
for the Commonwealth
Case Docket
VINO,
e-mail me at robovector@yahoo.com
States, IRS to Join Probe of Home-Builder Pay Practices
By ROBBIE WHELAN
Seven states and the Internal Revenue Service plan to join the Department of Labor in a broad review of the hiring and pay practices of home builders and other companies the government says routinely misclassify workers as independent contractors, rather than employees.
Labor Secretary Hilda L. Solis, Internal Revenue Service Commissioner Douglas Shulman and top labor officials from seven states will agree Monday to coordinate enforcement efforts and share information about companies found to have violated labor laws, including denying workers minimum wages, overtime pay and benefits, according to an announcement Friday by the Labor Department.
Workers build a home in a Pulte development in Las Vegas in July.
The IRS is interested in the issue because employers don't pay payroll taxes on workers classified as independent contractors. A Government Accountability Office report from 2009 found that the misclassification of workers cost the federal government $2.72 billion in 2006. A Labor Department report in 2000 estimated that up to 30% of employers misclassify workers.
In August, the Labor Department sent letters to large home builders including Lennar Corp., KB Home, D.R. Horton Inc., Pulte Group Inc. and NVR Inc., seeking pay and employment records, according to people familiar with the matter and a copy of one of the letters reviewed by The Wall Street Journal. The letter also asked for names of all contractors hired in the past year. The letter didn't allege any specific violations of law.
A Pulte spokesman said the company received the letter, and was still reviewing it. The other builders declined to comment.
The Labor Department, in an emailed statement, said it was looking at industries in addition to home building, including hospitality, janitorial services, agriculture, day care, health care and restaurants.
"We are actively looking at those industries that employ the most vulnerable workers and that engage in business practices—such as misclassifying employees as independent contractors—that result in violations of minimum wage and overtime laws," a spokeswoman said.
Builder advocates say the probe represents another example of "regulatory intrusion" by the Obama administration and that the push for increased enforcement couldn't come at a worse time for the hobbled residential construction industry.
Home builders were on pace in July to sell 298,000 new homes in 2011, which would be the lowest level of new home sales ever recorded. During the housing boom, builders were selling more than 1.2 million homes per year. Few publicly traded builders are profitable, and most of them have laid off hundreds of workers.
"You've got an industry that's almost singularly responsible for keeping our economy in the doldrums. To pick this time to do these types of investigations, it's counterproductive to the health of the economy," said Jerry Howard, president of the National Association of Home Builders, a trade group.
The proper classification for a worker depends on factors including how much control or direction an employer wields over the workers. Employers aren't required to withhold income taxes or pay Social Security or Medicare taxes for independent contractors. Meanwhile, independent contractors aren't covered by many labor protections, including minimum wage and overtime laws, and unemployment or workers' compensation insurance.
Federal and state regulators say worker misclassification is particularly common in residential construction. Most large home builders in the U.S. typically don't keep many laborers on their books and do little actual home construction. Instead, they entrust much of the construction to carpenters, plumbers, roofers, electricians and others employed by contractors. This reduces the companies' costs and exposure to potential violations of labor laws.
Allegations of worker misclassification in the construction industry generally come in two forms: that builders misclassify laborers they hire directly as independent contractors, or they knowingly hire subcontractors who misclassify workers. The Labor Department's efforts focus at least in part on holding large builders accountable for classification violations by their subcontractors, according to person familiar with the matter.
The Labor Department is stepping up enforcement due in part to complaints from construction companies that keep laborers on their books as employees and say they can't compete against other companies that classify workers as independent contractors.
"In industries where there is competitive bidding, the honest contractors get nailed twice. Their rates of worker's comp premiums are higher because the other guys aren't paying, and they're losing jobs," said Carl Hammersburg, compliance chief for the Washington State Department of Labor and Industries, who attend Monday's meeting. "Now things are so cut-throat that every single job matters. If they lose a bid to someone who isn't paying worker's comp, isn't paying unemployment insurance, then they can go out of business."
The Laborer's International Union of North America has for several years protested Pulte's hiring practices and sought to unionize the builder's subcontractors.
One of the most high-profile disputes about worker misclassification is a continuing battle between the International Brotherhood of Teamsters and FedEx Corp. The union argues drivers for the company's FedEx Ground operation are illegally classified as independent contractors and thus ineligible to be organized, unlike drivers at rival United Parcel Service Inc. who belong to the union.
The misclassification issue has taken a higher profile in the past few years as cash-strapped states have focused on ways to capture more revenue and prevent employers from illegally failing to pay taxes on workers.
"In the last three or four years, the issue has taken off because of the economic downturn and the state budget crisis," said Cathy Ruckelshaus, legal co-director at the National Employment Law Project, a nonprofit, nonpartisan group that works on low-wage worker issues. "It's a huge revenue drain."
—Kris Maher and Melanie Trottman contributed to this article.
A Hail Mary
Monday, September 5, 2011
Obama’s Refi Plan May Not Work For Local Market
Glut Of Underwater Borrowers, Desire To Shorten Terms May Sink Nascent Strategy
By Colleen M. Sullivan
Banker & Tradesman Staff Writer
The Obama administration is floating a new backdoor stimulus plan, pushing Fannie Mae and Freddie Mac to allow more people to refinance at today’s low rates. But even mortgage brokers say the idea may fizzle.
It’s easy to see why the plan might appeal to the administration, according to Northeastern University economics professor Barry Bluestone. The two mortgage giants carry about $2.4 trillion in loans on their books at rates above 4.5 percent; if all the homeowners with such mortgages were to refinance into today’s 4 percent rates, collectively they could save upwards of $80 billion.
And the savings wouldn’t come at the expense of Uncle Sam’s balance sheet – instead, any hit would be to investors who own the mortgage-backed securities insured by Fannie and Freddie. When the loans were refinanced, investors would get their original money back – but they’d then have to go looking for new bonds to buy at today’s much lower interest rates.
“The thinking is, ‘It may not be the strongest stimulus we can imagine, but most of the strong stimuli we can’t get through Congress, so let’s see if we can’t find one that potentially has bipartisan support,’” explained Bluestone. “The only way it actually stimulates the economy is by leaving consumers with a little bit more money in their pockets, after they refinance.”
Saving Vs. Spending
But if the plan does not perform as strongly as hoped, it won’t be for lack of demand, mortgage brokers and industry professionals told Banker & Tradesman.
“I tell you, we’re swamped,” said Jonathan Asker, CEO of North Atlantic Appraisal in West Bridgewater. “The rates are so low right now, you’re starting to tap into the people who might have said last summer, ‘It doesn’t make sense to do this for three-quarters of a point,’ but who might be willing to refinance for a rate cut of 1 or 1.25 percent.”
But the problem for the feds is that many such borrowers are seizing the opportunity to get a loan with a shorter term, looking to pay more to pay down debt now rather than save a little over the longer term.
“What we’ve seen is a lot of people going from a 30- to a 20- or a 20- to a 15-year fixed rate loan,” said Craig Tashjian, vice president at Fairway Independent Mortgage in Needham. “People are trying to get rid of debt as opposed to add debt on.”
While potentially helpful for their own households, those kinds of refinancings wouldn’t have much effect on the broader economy, said Bluestone.
If consumers take the money they save on their mortgage and go out and spend it on other things they need, that creates demand. But if they sock away those savings, “it has virtually no effect whatsoever on the economy,” said Bluestone.
“People who are employed, people who are doing relatively well – they’re kind of pulling in their consumer horns, not going out and spending a lot of money,” he told Banker & Tradesman.
Good On Paper
And other homeowners – those scrimping to make their current payments, and who therefore might spend any refinancing savings on other things they need – are still finding it tough to get deals done.
“I find more of the people that are stuck are those who did 80-10-10 [loans], or 100 percent financing, and because they are now upside down, they can’t subordinate or get rid of their second mortgage,” said Jaclynn Sulfaro, president of the Massachusetts Mortgage Association and vice president of operations at Medford-based Constitution Financial Group. “That seems to me like more of an issue.”
Plus, Fannie and Freddie already have programs in place open to borrowers with good credit who have high loan-to-value ratios, she points out.
But even such programs can’t do much for those who are completely underwater – and their numbers have been on the increase as home values remain shaky and appraisals are pushed lower by distressed comparable sales figures, inexperienced appraisers and skittish lenders.
“I have a borrower right now who bought a house in 2009, for a little less than $300,000. When I tried to help him refinance last year, the appraisal came back in at about $270,000, so he couldn’t refinance,” said Geof McLaughlin, a broker at Mortgage Master in Walpole. “Now, there’s a dip [in the rates] again, so I looked, hoping that the values came back a little bit, and actually the appraisal came back even lower.”
“On paper it sounds good to bring everyone down to 4 percent,” said Tashjian. “But from a practical standpoint…the banks are doing their regular process in terms of underwriting, appraisals and all that. That hasn’t gone away. So I don’t know if it will have much impact.”
All of these problems are a drag on the housing market. According to Bluestone’s latest analysis “we’re now talking about a cycle that might last 12, 13, or more years [before prices return to 2005 levels]. That is a very long time for home prices to return, and that’s in Greater Boston, where they only fell 15 to 20 percent. All the glaciers will unfreeze before [prices] return in Florida.”
Banks in U.S. Overwhelmed by Mortgage Refinancing Boom After Slashing Jobs
Sep 2, 2011 11:08 AM ET
Mortgage rates near historic lows have sparked a refinancing boom that has U.S. lenders struggling to handle the surge.
“There’s just so much volume,” said Kristin Wilson, a senior loan officer in Bloomington, Minnesota, for Fairway Independent Mortgage Corp., who has seen clients seeking lower rates climb to about half of her business from 20 percent a month ago. “We can’t just ramp up by hiring inexperienced people because they don’t know what they’re doing.”
The lending logjam extends to the nation’s biggest banks, which fired thousands of mortgage workers after interest rates rose in November through February, chilling refinancing demand. Now, the time needed to close a loan has as much as doubled to 60 days, according to Wilson and other bankers, and lenders are holding some mortgage rates higher than they could be to slow the torrent of customers, data show.
Refinancing applications are up 83 percent from this year’s low in February, according to an index compiled by the Mortgage Bankers Association, a Washington-based trade group. After topping 5 percent that month, the average rate on 30-year fixed loans fell two weeks ago to 4.15 percent, the lowest in surveys dating back to 1971 by Freddie Mac, the second-largest U.S. mortgage-finance company.
Compounding the delays are stricter underwriting and disclosure requirements implemented in the past few years, which leave no room for shortcuts, said Stew Larsen, head of the mortgage unit at San Francisco-based Bank of the West. Wells Fargo & Co. (WFC), the largest U.S. home lender, is no longer hiring temporary staff and outsourcing firms when applications jump because of separate rule changes, according to Franklin Codel, head of national consumer lending at its mortgage unit.
Obstacle for Obama
“The industry has come a long way in terms of automation, but it’s still a people-driven industry,” Larsen said. “Mortgage insurers, appraisers and title companies, all those surrounding industries, they downsized as well.”
Lenders’ capacity to handle loan applications could be an obstacle for the Obama administration, which is weighing options for spurring a housing recovery, including steps to promote refinancing for underwater borrowers, or those who owe more than their property is worth. Almost 27 percent of single-family homeowners with mortgages have negative equity, according to Zillow Inc., a Seattle-based real estate data provider.
Mortgage Bonds Underperform
Refinancing can provide a boost to the economy by reducing monthly mortgage payments and putting more money in the hands of consumers. Banks can profit from making new loans at lower rates because the existing, more expensive mortgages are mostly held by investors in the form of bonds or by other lenders. The refinancing bank collects fees and other revenue.
The $5.3 trillion of mortgage securities with government- backed guarantees underperformed U.S. Treasuries last month by the most since 2008 on speculation that the government will ease refinancing rules. That could speed up repayment of the mortgage bonds and deprive investors of their higher yields.
Refinancing is a cyclical business tied to yields on Treasuries, and lenders sometimes don’t let their rates fall as low as possible to avoid being overwhelmed. Today’s mortgage rates could be lower, based on their recent relationship with yields demanded by investors buying mortgage-backed bonds.
Yield Spreads
The difference between the average rate on a 30-year fixed loan and Fannie Mae-guaranteed bonds widened last month to more than 100 basis points, or 1 percentage point, from an average of 60 basis points in the first half, according to data compiled by Bloomberg and Bankrate.com, a North Palm Beach, Florida-based financial-information provider. The gap, which never exceeded 75 basis points in the decade through 2007, shows that banks have increased their margins on average.
“With the consolidation of the mortgage-lending industry during the housing bust, there is a lack of capacity to meet a surge in refinancing,” Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said in an e-mail. “Mortgage lenders have been slow to lower primary lending rates, which is likely due in part to their lack of capacity.”
When the books close at Fairway Independent Mortgage, Wilson’s employer, August may turn out to have been the second- busiest month in the company’s 15-year history, said Dan Cutaia, president of capital markets and risk management. The Sun Prairie, Wisconsin-based lender operates in 47 states and originated $4 billion of mortgages last year.
Looming Test
The test for banks will come in a couple months when newly approved borrowers expected to close, Cutaia said.
“We took in all this volume,” he said. “Now we have to do the best we can to have them processed, underwritten and closed.”
A smooth process requires underwriters, title insurance companies and appraisers to work quickly. The turnaround time for an appraisal, usually five business days, now is as long as 14 days in some parts of the country and probably will get longer because of new valuation requirements that will take some getting used to, according to Betty Graham, senior vice president of operations at Frisco Lender Services LLC, a unit of Fairway in Fort Wayne, Indiana.
New York Condos
In New York City, managing agents at condominiums and cooperative apartment buildings are swamped by requests for information from appraisers, said Norman Calvo, president and chief executive officer of Universal Mortgage Inc. in Brooklyn.
Calvo said his refinancing work has tripled since June, and borrowers who took on new loans a few months ago are applying to lower their rates again.
“It was one of our greatest months in more than 10 years, and it keeps on coming,” Calvo said.
Mortgage companies, which kept their loan-servicing operations lean during the housing boom, similarly were unequipped to handle the avalanche of defaults in the four years since the crash, resulting in paperwork snafus that continue to delay foreclosures and the recovery of the property market.
One proposal to expand the administration’s refinancing program for homeowners hit by the decline in property values would remove the cap on negative equity and exempt participants from risk-based fees charged by Fannie Mae and Freddie Mac. The mortgage-finance companies would also be required to inform all of their borrowers that the program is available, according to legislation filed by U.S. Senators Barbara Boxer, a California Democrat, and Johnny Isakson, a Georgia Republican.
Bob Walters, chief economist for Detroit-based Quicken Loans Inc., the largest online lender, said mortgage companies in the past depended on independent brokers to field borrower applications. The number of brokers dwindled after the housing bubble burst, he said.
Slashing Jobs
“All of a sudden now we see a smaller universe of people handling the volume,” Walters said. “So what’s happening is when the volume hits, people hit capacity much quicker.”
Bank of America Corp. (BAC) said Aug. 31 that it plans to sell or shut its correspondent-mortgage unit, which buys loans from smaller companies, a move that may exacerbate the crunch. Earlier this year, the Charlotte, North Carolina-based bank joined lenders across the industry in cutting staff added during a refinancing boom that crested in October.
In April, Wells Fargo, based in San Francisco, said it aimed to cut 4,500 employees from its mortgage unit, and Bank of America, its biggest competitor, said it trimmed its mortgage workforce by 1,500 employees and 2,000 contractors.
Wells Fargo’s Codel said the bank shut a handful of refinancing offices it had opened around the country that employed as many as 300 back-office workers each. The company is now reaching out to staff it let go and holding job fairs in an effort to add employees within a few weeks.
Warning Customers
Mortgage-industry jobs fell to 239,100 on June 30 from 259,700 at year-end and more than 500,000 in 2003, according to Department of Labor data cited by Bank of America bond analysts and MortgageDaily.com, an industry-news website. MortgageDaily.com says the data are skewed by how individuals at some firms are counted, and puts net layoffs this year at more than 2,200, including those in lending and servicing divisions.
While Bank of the West held its mortgage staff steady earlier this year, it’s also being challenged by higher volumes, telling consumers a refinancing is likely to take 45 days, said Larsen, whose 137-year-old bank is owned by France’s BNP Paribas (BNP) SA. Its customers can usually close within 30 days.
Keeping rates higher than the bank might otherwise to ward off business is “certainly in the playbook, but that’s not something we’ve had to go with yet,” Larsen said. “Some lenders do that more than others.”
Managing Expectations
Wells Fargo has sometimes offered less competitive rates because “we look at it all around the country and there are times when we do that to control volume,” Codel said. The bank has stopped offering the option to lock in rates for 30 days, as a way to curb consumer expectations that loans will close that quickly. Longer rate locks, which it continues to provide, can cut down on applications because they carry higher rates, he said.
Both Wells Fargo and Bank of the West said they often extend rate locks if consumers can’t close on time because of processing delays.
Meeting Demand
Bank of America can cope with refinancing demand with its current staffing, partly by moving work among different departments, Terry Francisco, a Calabasas, California-based spokesman for the lender, said in an e-mail. Some local offices aren’t as inundated as call centers working with online applicants, he said.
“We seek to price competitively but not at a level that will cause volumes to spike and disrupt our ability to close loans within a customer’s requested closing date,” Francisco said.
Lenders’ decisions on pricing depend on several issues, including their ability to handle volume and their own costs to borrow money, said Doug Lebda, founder and chief executive officer of Charlotte, North Carolina-based Tree.com Inc. (TREE), which runs the LendingTree mortgage website.
“In a market that is very volatile, there are wide varieties of pricing,” Lebda said. “Now it’s more important than ever to comparison shop.”
To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net; Prashant Gopal in New York at pgopal2@bloomberg.net
To contact the editors responsible for this story: Kara Wetzel at kwetzel@bloomberg.net; Alan Goldstein at agoldstein5@bloomberg.net
Housing Fix: End the Government’s Subsidy ‘Ponzi Scheme,’ Says NYU Professor
video discussion....
http://finance.yahoo.com/blogs/daily-ticker/housing-fix-end-government-subsidy-ponzi-scheme-says-184750774.html
Aug 23, 2011
More bad news on the housing front today, as the housing market can't seem to find a bottom.
New-home sales fell in July by 0.7% to the lowest point since February, the Commerce Department said Tuesday. Sales for June were also revised downward to negative 2.9% from the previously reported decrease of 1%.
NYU finance professor Viral Acharya writes in his new book Guaranteed to Fail that the only way to fix the housing market is to end government subsidies like the mortgage interest tax deduction.
The less told story on such subsidies is what they have done to generate more demand and push up prices, he says. "One the one hand you are actually getting all your subsidies, but you are actually paying more for the property you would have liked to consume," says Acharya. "Therefore the real subsidy goes only [to those] at the very top. It is for people who are buying a second house. It is for people who are buying more land than they would otherwise."
Not only have government subsidies failed to really help everyday people, except to "prop up the housing market artificially," says Acharya, but the big question also remains: Who's paying for all these subsidies? "It's sort of a Ponzi scheme, because the current generation is reaping all its benefits, but we're basically scaling up our government debt in response, and someone else is going to pay for it down the road."
These big points on subsidies are never conveyed when they are sold to the American people, and all the more reason Acharya believes one day there will be political will in Congress to eventually eliminate such incentives. "Subsidies have been sold as something that actually help remove income inequality and helps us create an ownership society," says Acharya. "[But] if we convey the right message to the middle class and the poor that this has not in the end produced huge substantial benefits for them," then the subsidies will be much easier to remove.
But an end to subsidies is not a quick fix to the U.S. housing market. Pressures will still exist even without subsidies, because when the government fixed the bank problem, it really failed to address the underlying mortgage issue. That's really why the housing market continues to struggle, he says. "Just the way we recapitalized the financial sector, I think there was a very good case for recapitalizing the households," says Acharya.
Not a thing, I was outside, most people that said they felt it here on the C. of Cod were inside.
Massive housing re-fi program making waves, again
August 22, 2011, 5:31 PM
A housing program that includes a massive mortgage refinance proposal – and a backdoor stimulus to boost consumer spending – is generating debate again in Washington.
At least that’s the word from Jaret Seiberg, analyst at MF Global Inc. , in his report Monday. Seiberg said it could be a proposal announced by President Barack Obama as part of a post-Labor Day address about jobs and the economy.
“The administration is desperate for ways to revamp housing. The one idea that doesn’t go away is a mass refinancing program,” he said in a report.
(Some analysts believe that the Federal Housing Finance Agency, which oversees government-seized housing giants Fannie Mae and Freddie Mac, could implement such a program on its own without statutory authority).
The idea of such a program first emerged on a large scale in August 2010, but soon went back under the radar – until now.
With such an approach millions of mortgages backed by the U.S. government could be refinanced without the need for an analysis of a borrower’s credit quality because the principal is already backed by the government. Many homeowners who are unemployed, have poor credit or who owe significantly more than their homes are worth currently can’t refinance, but would be permitted to use such a program.
It could boost the economy by putting cash for spending into borrower hands. However, Seiberg insists that there are lots of problems here, adding that FHFA policymakers are seeking to reduce taxpayer costs and that such an approach could cost billions more for taxpayers. He added that it could also cause problems for the troubled mortgage-backed securities, or MBS, market.
“This could accelerate losses for [Fannie and Freddie] and could disrupt the MBS market…” Seiberg said in his report. “It requires FHFA to go along. That is an issue as FHFA has been very consistent in arguing that its top goal is to minimize losses to the enterprise. So any program that could boost losses is a negative. The administration is trying to overcome FHFA’s objections by arguing that the short-term additional costs are outweighed by longer-term savings.”
Seiberg also discussed a number of pieces of legislation that could become a focal point for debate in the months to come, even though he adds that the ideas have little chance of being approved because of GOP opposition over costs to taxpayers and MBS holders.
Rep. Gary Ackerman, D-N.Y., introduced the “Homestead Act 2” bill last week that would provide down-payment assistance in the form of a government matching subsidy of up to $20,000 to the first 2 million creditworthy borrowers. The subsidy would be in the form of a loan to the borrower, and 20% of it would be forgiven each year over five years. With the bill, 1 million borrowers who buy a home and turn it into a rental property would have their rental income tax-free. However, Seiberg seems skeptical “It’s a Democratic idea and it is hard to see how House GOP would pass it,” he said.
Read about the bill here.
A housing bill introduced by Sen. Barbara Boxer, Democrat of California, seeks to help underwater borrowers.
Another program Seiberg insists would have trouble with Republican support seeks to allow a part of a borrower’s rent to go towards a down-payment to buy the home.
Such a “rent to own” approach needs legislation and a funding source, Seiberg said.
– Ronald D. Orol
States Where No One Wants To Buy A New Home
Sunday, August 21, 2011
by Douglas A. McIntyre and Charles Stockdale
There is a strong indication that home builders have almost ceased activity in several states as demand for newly built homes has dwindled. The slowdown in new home permits is particularly stark when compared to the total number of existing homes in each state. 24/7 Wall St. examined the number of building permits to find the states where no one wants to buy a new home.
Building permits are among the carefully watched statistics issues by the real estate industry each month. Permits are needed in most jurisdictions before individuals or contractor can begin physical work. Therefore, they are a reasonable indicator of future home construction. The data on permits is issued by the Commerce Department.
Building permit activity has fallen in most months since the 2007 housing crash — one that continues today. In the first half of 2005, slightly over one million permits were issued. By contrast, the number was the just below 300,000 for the first six months of this year. The decline in new permits in some states is over 80% for the same period.
Building permits are not enough in and of themselves to demonstrate a slowdown. Their size in relation to the total existing homes is also an indication of the state of the housing market. Consider that in a large state like California, across all towns and cities, just over 20,000 permits were issued during the first six months of this year. The number of permits may seem like a lot for a weak housing market, but is negligible when compared to the 13.6 million existing homes in the state.
24/7 Wall St. looked at the total number of building permits issued by each state for the first half of the year. We then identified the states that had the lowest percentage of new housing permits as compared to the total number of housing units.
Surprisingly, our list of states where few permits have been issued recently is different from the typical list of the worst housing markets. California, Nevada and Florida are always on those lists because homes are vacant and home values continue to drop. But the three are not on this list. It may be that prices have dropped so low in these markets that home inventory has begun to move, even if only tentatively. Instead, markets where housing permits are very small in relation to total homes are markets in which builders have abandoned any hope of near-term sales.
The 24/7 Wall St. analysis is another look through the prism that is the collapsing residential real estate market. Most data the public sees is based on home prices, number of homes sold or foreclosures. Housing permits are a way to look ahead at what is likely to happen in the markets in the next year. Once a permit is issued, the builder has no obligation to begin or complete the construction. This additional risk has a compounding effect.
These are the states where no one wants to buy a new home:
1. Rhode Island
Building permits/total housing units: 0.07%
Decline in building permits (2005-2011): -70.81% (22nd largest)
Building permits 2011 YTD: 312
Total housing units: 463,388
Foreclosure filings increased 4% in Rhode Island from the first six months of 2010 to the first six months of 2011, according to RealtyTrac. Foreclosures dropped by 29% for that same period on the national level. Rhode Island home sales decreased 20% from one year ago in the second-quarter, according to the Rhode Island Association of Realtors. Additionally, median home prices have dropped 2%. These numbers indicate that Rhode Island's housing market is not recovering at the same pace as the majority of the country. For the first six months of this year, the state has issued a mere 312 building permits, the smallest number in the country.
2. West Virginia
Building permits/total housing units: 0.09%
Decline in building permits (2005-2011): -72.71% (17th largest)
Building permits 2011 YTD: 774
Total housing units: 881,917
West Virginia's decline in building permits has slowed to almost a crawl. In the first six months of 2005, the state issued almost 3,000 permits. For the first half of 2011, that amount decreased to 774. If every permit were to result in a new housing structure, those homes would represent less than 0.1% of the total housing units in the state. Despite all this, construction is one area that is benefiting the state. According to the organization, WorkForce West Virginia, 700 construction jobs were added in-state this past July — the largest amount of jobs added in the private sector.
3. Illinois
Building permits/total housing units: 0.09%
Decline in building permits (2005-2011): -84.18% (3rd largest)
Building permits 2011 YTD: 4,897
Total housing units: 5,296,715
Illinois has seen an almost 85% decrease in new housing permits since 2005. This is the third largest drop in the country. There are a number of initiatives being made across the state to improve the housing markets. In Chicago, for instance, Mayor Emanuel has made a number of changes to increase the speed with which building permits are issued. Additionally, a Ã?Â?Micro-Market Recovery Program has been introduced to slow the city's foreclosure rate.
4. Michigan
Building permits/total housing units: 0.09
Decline in building permits (2005-2011): -82.19% (7th largest)
Building permits 2011 YTD: 4,250
Total housing units: 4,532,233
Michigan is one of the states that has suffered the most from the recession. The state's unemployment rate peaked around 15% in 2010. It is now at 10.5%, which is still significantlyhigher than the national average of 9.2%. The state has a vacancy rate of just under 15%, which is one of the highest in the country. New building permits have also decreased by over 80% since 2005, also one of the highest rates in the country. The state may now be more focused on tearing down old buildings than building new ones.
5. Connecticut
Building permits/total housing units: 0.09%
Decline in building permits(2005-2011): -74.06% (14th largest)
Building permits 2011 YTD: 1,403
Total housing units: 1,487,891
Connecticut has had one of the greatest declines in the number of new building permits in the country. This trend saw a small turnaround in June — the first monthly year-over-year gain in 2011 in new construction, according to the Connecticut Department of Economic and Community Development. However, the Hartford Courant reports that for the first six months of the year, residential construction was down 30 percent compared with the same period in 2010. June was also the first increase in home construction in five years.
6. Ohio
Building permits/total housing units: 0.12%
Decline in building permits (2005-2011): -76.61% (12th largest)
Building permits 2011 YTD: 6,184
Total housing units: 5,127,508
Ohio has suffered, and continues to suffer, greatly from the housing crisis. Over 8,000 homes were foreclosed in July 2011, the ninth-largest amount in the country, according to real estate company RealtyTrac. With such a high foreclosure rate, currently at one in every 608 housing units, housing is already too inexpensive for people to want to build. Ohio has therefore had one of the greatest decreases in building permits in the country over the past six years. Median existing home sales are also down in many areas of the state, according to data from the National Association of Realtors. In Toledo, prices are down 17% from one year ago, the third largest rate in the country.
7. Massachusetts
Building permits/total housing units: 0.12%
Decline in building permits (2005-2011): 69.55% (24th smallest)
Building permits 2011 YTD: 3,402
Total housing units: 2,808,254
Despite having a healthy economy compared to much of the country, Massachusetts' housing market is beginning to face serious troubles. In June 2011, sales of single-family homes in the state decreased 23.5% from the year before, reaching the lowest level since 1991, according to the Warren Group, a New England real estate research firm. With so few home sales, it follows that not many new homes are being built. Year-to-date, building permits for 2011 are about one quarter of what they were in 2005.
8. New York
Building permits/total housing units: 0.14%
Decline in building permits (2005-2011): -61.85% (12th smallest)
Building permits 2011 YTD: 11,033
Total housing units: 8,108,103
New York State's housing market is among the largest in the country. As a result, the number of permits is minuscule when compared to the state's total housing units. Although new home sales decreased in the first half of 2011 from 2010, the number of permits actually increased slightly during that period, from 10,189 in 2010. This is significantly lower than 2005's 28,921 permits.
9. Maine
Building permits/total housing units: 0.14%
Decline in building permits (2005-2011): -77.09% (11th largest)
Building permits 2011 YTD: 1,000
Total housing units: 721,830
Maine has seen one of the largest decreases in building permits in the past six years. This is not surprising as home sales in general declined substantially. Home sales for June 2011 decreased 21.39% from June 2010, according to the Maine Association of Realtors. The state's median sales price also decreased 1.37% over this same period. According to numbers from the Census Bureau, Maine has the highest vacancy rate in the country, reaching 22.8% in 2010. However, this number also includes empty vacation houses.
10. Pennsylvania
Building permits/total housing units: 0.15%
Decline in building permits (2005-2011): -60.29% (11th smallest)
Building permits 2011 YTD: 8,136
Total housing units: 5,567,315
At the beginning of 2011, a number of new, restrictive building codes went into effect in Pennsylvania. This caused a rush among builders to secure permits, with housing permits increasing a massive 117.8% between November and December 2010, according to the Philadelphia Federal Reserve. The state's housing market has not been doing well since. Permits issued from January to June 2011 fell 16% compared to the same six-month period one year earlier. The national average for permits issued in the first six months of 2011 compared to the first six months of 2011 is a decrease of 6%.
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New York Congressman to Propose Down Payment Subsidy
08/17/2011
Rep. Gary Ackerman (D-New York) Tuesday announced his plan to propose a bill to reduce the housing glut, create jobs, and stimulate the economy.
Deriving inspiration from the success of the Homestead Act of 1862 – which offered 160 acres to Americans in order to promote Western settlement – Ackerman’s Homestead: Act 2 aims to achieve these goals with three targeted initiatives.
Addressing 3 million properties currently depressing the market, Ackerman proposes a subsidy of up to $20,000 for down payments on foreclosed homes bought by owner-occupants and a tax incentive for investors who purchase foreclosures for rental properties.
Available to the first 2 million eligible, single-family borrowers, the subsidy would function as a loan that would be forgiven in one-fifth increments over five years, provided the borrower stays in the home.
The second component of Ackerman’s bill would be a 10-year tax exemption on rental income for the first 1 million investors who purchase single-family homes to rent.
Ackerman believes this tax exemption would motivate investors to purchase properties that would otherwise remain vacant, continuing to depress neighborhoods and the overall housing market.
By absorbing some of the excess inventory on the housing market, Ackerman believes his Homestead: Act 2 would help reignite the traditional housing market, thus putting more than 1 million Americans back to work.
The third component of Ackerman’s bill addresses the cost of the first two components – the subsidy and the tax cut.
Ackerman aims to bring some of the estimated $1.2 trillion in offshore capital back within U.S. borders. He proposes reducing the corporate tax rate on these earnings to 10 percent.
If successful, this action would provide enough income to cover the cost of the home purchase subsidy and investor tax cut.
“Clearly, ‘Homestead: Act 2’ would help to eliminate quickly the overhang glut of the housing market, putting two million owners in homes and inspire the purchase of an additional one million homes by investors who will rent them out, and enjoy tax-free rental income for 10 years,” Ackerman said.
“This would clear the way for new housing starts, and put millions of Americans back to work. It would incentivize corporations to bring their cash cheaply back into the United States,” Ackerman added.
“In addition, the newly emancipated billions would further spur the economy,” he concluded. “Everybody wins.”
Ackerman plans to introduce the Homestead: Act 2 to Congress after its August recess.
S&P Downgrades U.S. Debt Rating — Press Release
Standard & Poor’s took the unprecedented step of downgrading the U.S. government’s “AAA” sovereign credit rating Friday in a move that could send shock waves through global. The following is a press release from Standard & Poor’s:
– We have lowered our long-term sovereign credit rating on the United States of America to ‘AA+’ from ‘AAA’ and affirmed the ‘A-1+’ short-term rating.
– We have also removed both the short- and long-term ratings from CreditWatch negative.
– The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.
– More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.
– Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.
– The outlook on the long-term rating is negative. We could lower the long-term rating to ‘AA’ within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case.
TORONTO (Standard & Poor’s) Aug. 5, 2011–Standard & Poor’s Ratings Services said today that it lowered its long-term sovereign credit rating on the United States of America to ‘AA+’ from ‘AAA’. Standard & Poor’s also said that the outlook on the long-term rating is negative. At the same time, Standard & Poor’s affirmed its ‘A-1+’ short-term rating on the U.S. In addition, Standard & Poor’s removed both ratings from CreditWatch, where they were placed on July 14, 2011, with negative implications.
The transfer and convertibility (T&C) assessment of the U.S.–our assessment of the likelihood of official interference in the ability of U.S.-based public- and private-sector issuers to secure foreign exchange for debt service–remains ‘AAA’.
We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.
Our lowering of the rating was prompted by our view on the rising public debt burden and our perception of greater policymaking uncertainty, consistent with our criteria (see “Sovereign Government Rating Methodology and Assumptions,” June 30, 2011, especially Paragraphs 36-41). Nevertheless, we view the U.S. federal government’s other economic, external, and monetary credit attributes, which form the basis for the sovereign rating, as broadly unchanged.
We have taken the ratings off CreditWatch because the Aug. 2 passage of the Budget Control Act Amendment of 2011 has removed any perceived immediate threat of payment default posed by delays to raising the government’s debt ceiling. In addition, we believe that the act provides sufficient clarity to allow us to evaluate the likely course of U.S. fiscal policy for the next few years.
The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently. Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending while delegating to the Select Committee decisions on more comprehensive measures. It appears that for now, new revenues have dropped down on the menu of policy options. In addition, the plan envisions only minor policy changes on Medicare and little change in other entitlements, the containment of which we and most other independent observers regard as key to long-term fiscal sustainability.
Our opinion is that elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden in a manner consistent with a ‘AAA’ rating and with ‘AAA’ rated sovereign peers (see Sovereign Government Rating Methodology and Assumptions,” June 30, 2011, especially Paragraphs 36-41). In our view, the difficulty in framing a consensus on fiscal policy weakens the government’s ability to manage public finances and diverts attention from the debate over how to achieve more balanced and dynamic economic growth in an era of fiscal stringency and private-sector deleveraging (ibid). A new political consensus might (or might not) emerge after the 2012 elections, but we believe that by then, the government debt burden will likely be higher, the needed medium-term fiscal adjustment potentially greater, and the inflection point on the U.S. population’s demographics and other age-related spending drivers closer at hand (see “Global Aging 2011: In The U.S., Going Gray Will Likely Cost Even More Green, Now,” June 21, 2011).
Standard & Poor’s takes no position on the mix of spending and revenue measures that Congress and the Administration might conclude is appropriate for putting the U.S.’s finances on a sustainable footing.
The act calls for as much as $2.4 trillion of reductions in expenditure growth over the 10 years through 2021. These cuts will be implemented in two steps: the $917 billion agreed to initially, followed by an additional $1.5 trillion that the newly formed Congressional Joint Select Committee on Deficit Reduction is supposed to recommend by November 2011. The act contains no measures to raise taxes or otherwise enhance revenues, though the committee could recommend them.
The act further provides that if Congress does not enact the committee’s recommendations, cuts of $1.2 trillion will be implemented over the same time period. The reductions would mainly affect outlays for civilian discretionary spending, defense, and Medicare. We understand that this fall-back mechanism is designed to encourage Congress to embrace a more balanced mix of expenditure savings, as the committee might recommend.
We note that in a letter to Congress on Aug. 1, 2011, the Congressional Budget Office (CBO) estimated total budgetary savings under the act to be at least $2.1 trillion over the next 10 years relative to its baseline assumptions. In updating our own fiscal projections, with certain modifications outlined below, we have relied on the CBO’s latest “Alternate Fiscal Scenario” of June 2011, updated to include the CBO assumptions contained in its Aug. 1 letter to Congress. In general, the CBO’s “Alternate Fiscal Scenario” assumes a continuation of recent Congressional action overriding existing law.
We view the act’s measures as a step toward fiscal consolidation. However, this is within the framework of a legislative mechanism that leaves open the details of what is finally agreed to until the end of 2011, and Congress and the Administration could modify any agreement in the future. Even assuming that at least $2.1 trillion of the spending reductions the act envisages are implemented, we maintain our view that the U.S. net general government debt burden (all levels of government combined, excluding liquid financial assets) will likely continue to grow. Under our revised base case fiscal scenario–which we consider to be consistent with a ‘AA+’ long-term rating and a negative outlook–we now project that net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 79% in 2015 and 85% by 2021. Even the projected 2015 ratio of sovereign indebtedness is high in relation to those of peer credits and, as noted, would continue to rise under the act’s revised policy settings.
Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.
Our revised upside scenario–which, other things being equal, we view as consistent with the outlook on the ‘AA+’ long-term rating being revised to stable–retains these same macroeconomic assumptions. In addition, it incorporates $950 billion of new revenues on the assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating. In this scenario, we project that the net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 77% in 2015 and to 78% by 2021.
Our revised downside scenario–which, other things being equal, we view as being consistent with a possible further downgrade to a ‘AA’ long-term rating–features less-favorable macroeconomic assumptions, as outlined below and also assumes that the second round of spending cuts (at least $1.2 trillion) that the act calls for does not occur. This scenario also assumes somewhat higher nominal interest rates for U.S. Treasuries. We still believe that the role of the U.S. dollar as the key reserve currency confers a government funding advantage, one that could change only slowly over time, and that Fed policy might lean toward continued loose monetary policy at a time of fiscal tightening. Nonetheless, it is possible that interest rates could rise if investors re-price relative risks. As a result, our alternate scenario factors in a 50 basis point (bp)-75 bp rise in 10-year bond yields relative to the base and upside cases from 2013 onwards. In this scenario, we project the net public debt burden would rise from 74% of GDP in 2011 to 90% in 2015 and to 101% by 2021.
Our revised scenarios also take into account the significant negative revisions to historical GDP data that the Bureau of Economic Analysis announced on July 29. From our perspective, the effect of these revisions underscores two related points when evaluating the likely debt trajectory of the U.S. government. First, the revisions show that the recent recession was deeper than previously assumed, so the GDP this year is lower than previously thought in both nominal and real terms. Consequently, the debt burden is slightly higher. Second, the revised data highlight the sub-par path of the current economic recovery when compared with rebounds following previous post-war recessions. We believe the sluggish pace of the current economic recovery could be consistent with the experiences of countries that have had financial crises in which the slow process of debt deleveraging in the private sector leads to a persistent drag on demand. As a result, our downside case scenario assumes relatively modest real trend GDP growth of 2.5% and inflation of near 1.5% annually going forward.
When comparing the U.S. to sovereigns with ‘AAA’ long-term ratings that we view as relevant peers–Canada, France, Germany, and the U.K.–we also observe, based on our base case scenarios for each, that the trajectory of the U.S.’s net public debt is diverging from the others. Including the U.S., we estimate that these five sovereigns will have net general government debt to GDP ratios this year ranging from 34% (Canada) to 80% (the U.K.), with the U.S. debt burden at 74%. By 2015, we project that their net public debt to GDP ratios will range between 30% (lowest, Canada) and 83% (highest, France), with the U.S. debt burden at 79%. However, in contrast with the U.S., we project that the net public debt burdens of these other sovereigns will begin to decline, either before or by 2015.
Standard & Poor’s transfer T&C assessment of the U.S. remains ‘AAA’. Our T&C assessment reflects our view of the likelihood of the sovereign restricting other public and private issuers’ access to foreign exchange needed to meet debt service. Although in our view the credit standing of the U.S. government has deteriorated modestly, we see little indication that official interference of this kind is entering onto the policy agenda of either Congress or the Administration. Consequently, we continue to view this risk as being highly remote.
The outlook on the long-term rating is negative. As our downside alternate fiscal scenario illustrates, a higher public debt trajectory than we currently assume could lead us to lower the long-term rating again. On the other hand, as our upside scenario highlights, if the recommendations of the Congressional Joint Select Committee on Deficit Reduction–independently or coupled with other initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high earners–lead to fiscal consolidation measures beyond the minimum mandated, and we believe they are likely to slow the deterioration of the government’s debt dynamics, the long-term rating could stabilize at ‘AA+’.
On Monday, we will issue separate releases concerning affected ratings in the funds, government-related entities, financial institutions, insurance, public finance, and structured finance sectors.
BofA Donates Then Demolishes Houses to Cut Glut
July 27, 2011, 10:43 am EDT
Bank of America Corp. (BAC), faced with a glut of foreclosed and abandoned houses it can’t sell, has a new tool to get rid of the most decrepit ones: a bulldozer.
The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co. (WFC), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Fannie Mae are conducting or considering their own programs.
Disposing of repossessed homes is one of the biggest headaches for lenders in the U.S., where 1,679,125 houses, or one in every 77, were in some stage of foreclosure as of June, according to research firm RealtyTrac Inc. of Irvine, California. The prospect of those properties flooding the market has depressed prices and driven off buyers concerned that housing values will keep dropping.
“There is way too much supply,” said Gus Frangos, president of the Cleveland-based Cuyahoga County Land Reutilization Corp., which works with lenders, government officials and homeowners to salvage vacant homes. “The best thing we can do to stabilize the market is to get the garbage off.”
BofA’s 40,000
Bank of America had 40,000 foreclosures in the first quarter, saddling the Charlotte, North Carolina-based lender with taxes and maintenance costs. The bank announced the Cleveland program last month, has committed as many as 100 properties in Detroit and 150 in Chicago, and may add as many as nine cities by the end of the year, said Rick Simon, a company spokesman.
The lender will pay as much as $7,500 for demolition or $3,500 in areas eligible to receive funds through the federal Neighborhood Stabilization Program. Uses for the land include development, open space and urban farming, according to the statement. Simon declined to say how many foreclosed properties Bank of America holds.
Ohio ranked among the top 10 states with the most foreclosure filings in June, according to RealtyTrac. The state has 71,617 foreclosed homes, Cuyahoga County 9,797 and Cleveland 6,778, RealtyTrac said.
The tear-downs are in varying states of disrepair, from uninhabitable to badly damaged. Simon said some are worth less than $10,000, and it would cost too much to make them livable.
Unwanted Homes
“No one needs these homes, no one is going to buy them,” said Christopher Thornberg, founding partner at the Los Angeles office of Beacon Economics LLC, a forecasting firm. “Bank of America is not going to be able to cover its losses, so it might as well give them away and get a little write-off and some nice public relations.”
Donating a house may create an income-tax deduction, said Robert Willens, an independent accounting analyst based in New York. A bank might deduct as much as the fair market value if a home wasn’t acquired with the explicit intent of knocking it down, he said.
Wells Fargo and Fannie Mae already started donating houses and demolition funds in Ohio. San Francisco-based Wells Fargo, the biggest U.S. home lender, gave 26 properties and $127,000 to the Cuyahoga land bank, said Russ Cross, Midwest regional servicing director for Wells Fargo Home Mortgage. Since 2009, Wells Fargo made more than 800 donations, the bank said.
Fannie Mae
Fannie Mae, the mortgage-finance company operating under U.S. conservatorship, made its first deal with the Cuyahoga land bank in 2009, and sells houses to the organization at a “very nominal value,” or about $1 and an additional $200 in closing costs, said P.J. McCarthy, who heads alternative disposition programs.
Fannie Mae sold 200 foreclosures to the Cuyahoga organization in 2010 and has similar programs in Detroit and Chicago. Cleveland is the only city where Washington-based Fannie Mae contributes $3,500 toward demolition, McCarthy said.
“It’s an economically justifiable transaction,” McCarthy said. “Holding on to a property that might sell for $1,000 or $2,000 or $5,000 for several hundred days is not in anybody’s best interest.”
JPMorgan, the second-biggest U.S. bank, has donated or sold at a discount almost 1,900 properties valued at more than $100 million in more than 37 states since late 2008, including 22 in Cleveland, said Jim O’Donnell, manager of community revitalization. The majority aren’t demolished, he said.
Nonprofit Role
Citigroup has been donating foreclosures since 2008 through the National Community Stabilization Trust, according to an e- mailed statement from Natalie Abatemarco, managing director for the bank’s office of homeownership preservation. The New York- based company, ranked third among U.S. lenders, is part of the Washington-based nonprofit trust’s pilot program that starts in late August to provide funds for purchases in distressed neighborhoods, and the money can be used toward demolition, Abatemarco said.
Demolishing all of Cleveland’s foreclosed and abandoned properties might cost $250 million, Frangos said. There are as many as 13,000, according to Case Western Reserve University in Cleveland and Neighborhood Progress Inc., a nonprofit organization working to counter the effects of foreclosures in six Cleveland areas, according to its website. The Cuyahoga County land bank owns about 899 properties and will demolish about 700 in the next six to seven months, Frangos said.
Blow Them Up
The oversupply of homes once prompted Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A), to quip in February 2010 that one solution was to “blow up a lot of houses -- a tactic similar to the destruction of autos that occurred with the ‘cash-for-clunkers’ program.’”
Still, the knockdowns aren’t likely to outpace foreclosures, said Rick Sharga, RealtyTrac’s senior vice president. Foreclosures may accelerate as banks clear a backlog caused by soft real estate markets and legal disputes over tactics used to seize homes.
“These sorts of programs will basically only be nibbling on the edges,” Sharga said.
To contact the reporter on this story: Lindsey Rupp in New York at Lrupp1@bloomberg.net
To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Rick Green in New York at rgreen18@bloomberg.net.
Appeals Court Clarifies MERS Role in Foreclosures
The ubiquitous Mortgage Electronic Registration Systems, nominal holder of millions of mortgages, does not have the right to foreclose on a mortgage in default or assign that right to anyone else if it does not hold the underlying promissory note, the Appellate Division, Second Department, ruled Friday. “This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation,” Justice John M. Leventhal wrote for a unanimous panel in Bank of New York v. Silverberg, 17464/08. “Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property.” The opinion noted that MERS is involved in about 60 percent of the mortgages originated in the United States.
From the ruling…
(Emphasis added by 4F)
Decided on June 7, 2011
SUPREME COURT OF THE STATE OF NEW YORK
APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT
ANITA R. FLORIO, J.P.
THOMAS A. DICKERSON
JOHN M. LEVENTHAL
ARIEL E. BELEN, JJ.
2010-00131
(Index No. 17464-08)
[*1]Bank of New York, etc., respondent,
v
Stephen Silverberg, et al., appellants, et al., defendants.
LEVENTHAL, J.This matter involves the enforcement of the rules that govern real property and whether such rules should be bent to accommodate a system that has taken on a life of its own. The issue presented on this appeal is whether a party has standing to commence a foreclosure action when that party’s assignor—in this case, Mortgage Electronic Registration Systems, Inc. (hereinafter MERS) —was listed in the underlying mortgage instruments as a nominee and mortgagee for the purpose of recording, but was never the actual holder or assignee of the underlying notes. We answer this question in the negative.
…
On appeal, the defendants argue that the plaintiff lacks standing to sue because it did not own the notes and mortgages at the time it commenced the foreclosure action. Specifically, the defendants contend that neither MERS nor Countrywide ever transferred or endorsed the notes described in the consolidation agreement to the plaintiff, as required by the Uniform Commercial Code. Moreover, the defendants assert that the mortgages were never properly assigned to the plaintiff because MERS, as nominee for Countrywide, did not have the authority to effectuate an assignment of the mortgages. The defendants further assert that the mortgages and notes were bifurcated, rendering the mortgages unenforceable and foreclosure impossible, and that because of such bifurcation, MERS never had an assignable interest in the notes. The defendants also contend [*3]that the Supreme Court erred in considering the corrected assignment of mortgage because it was not authenticated by someone with personal knowledge of how and when it was created, and was improperly submitted in opposition to the motion.
…
Here, the consolidation agreement purported to merge the two prior notes and mortgages into one loan obligation. Countrywide, as noted above, was not a party to the consolidation agreement. ” Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident’”
…
Therefore, assuming that the consolidation agreement transformed MERS into a mortgagee for the purpose of recording—even though it never loaned any money, never had a right to receive payment of the loan, and never had a right to foreclose on the property upon a default in payment—the consolidation agreement did not give MERS title to the note, nor does the record show that the note was physically delivered to MERS. Indeed, the consolidation agreement defines “Note Holder,” rather than the mortgagee, as the “Lender or anyone who succeeds to Lender’s right under the Agreement and who is entitled to receive the payments under the Agreement.” Hence, the plaintiff, which merely stepped into the shoes of MERS, its assignor, and gained only that to which its assignor was entitled (see Matter of International Ribbon Mills [Arjan Ribbons], 36 NY2d 121, 126; see also UCC 3-201 ["(t)ransfer of an instrument vests in the transferee such rights as the transferor has therein"]), did not acquire the power to foreclose by way of the corrected assignment.
…
In sum, because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the plaintiff. Consequently, the plaintiff failed to show that it had standing to foreclose. MERS purportedly holds approximately 60 million mortgage loans (see Michael Powell & Gretchen Morgenson, MERS? It May Have Swallowed Your Loan, New York Times, March 5, 2011), and is involved in the origination of approximately 60% of all mortgage loans in the United States (see Peterson at 1362; Kate Berry, Foreclosures Turn Up Heat on MERS, Am. [*6]Banker, July 10, 2007, at 1). This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation. Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property. Accordingly, the Supreme Court should have granted the defendants’ motion pursuant to CPLR 3211(a) (3) to dismiss the complaint insofar as asserted against them for lack of standing. Thus, the order is reversed, on the law, and the motion of the defendants Stephen Silverberg and Fredrica Silverberg pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them for lack of standing is granted.
FLORIO, J.P., DICKERSON, and BELEN, JJ., concur.
ORDERED that the order is reversed, on the law, with costs, and the motion of the defendants Stephen Silverberg and Fredrica Silverberg pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them for lack of standing is granted.
Full opinion below…
It is well worth the read…
http://4closurefraud.org/2011/06/13/kaboom-ny-appellate-division-bank-of-ny-v-silverberg-mers-does-not-have-the-right-to-foreclose-on-a-mortgage-in-default-or-assign-that-right-to-anyone-else/
Home Ownership Declining Despite Cheapest Prices in 40 Years
Apr 19, 2011
Victoria Pauli signed a one-year lease last week to stay in her rental home in Fair Oaks, California. She had considered buying in the area, where property prices have slumped 57 percent since a 2005 peak.
In the end, she decided it wasn’t worth it.
“I know people who have watched their home values get cut in half, and I know people who are losing their homes,” said Pauli, 31, who works as a property manager for a real estate company. “It’s part of the American dream to want to own your own home, and I used to feel that way, but now I tell myself: Be careful what you wish for.”
The most affordable real estate in a generation is failing to lure buyers as Americans like Pauli sour on the idea of home ownership. At the end of 2010, the fourth year of the housing collapse, the share of people who said a home was a safe investment dropped to 64 percent from 70 percent in the first quarter. The December figure was the lowest in a survey that goes back to 2003, when it was 83 percent.
“The magnitude of the housing crash caused permanent changes in the way some people view home ownership,” said Michael Lea, a finance professor at San Diego State University. “Even as the economy improves, there are some who will never buy a home because their confidence in real estate is gone.”
Worse Than Depression
Historically, homes have been a safer investment than equities. During 2008, the worst year of the housing crisis, the median U.S. home price declined 15 percent, compared with a more than 38 percent plunge in the Standard & Poor’s 500 Index.
Americans stay in their homes for a median of eight years, according to the National Association of Realtors in Chicago. Someone who bought a home in 2002 and sold in 2010 saw a 4.8 percent increase in value, based on the annualized median price measured by the group. The average annual gain in the past 20 years was 4.2 percent.
Falling prices have made real estate the best buy in at least four decades. Housing affordability reached a record in December, according to National Association of Realtors data that go back to 1970. The group bases its gauge on property prices, mortgage rates and the median U.S. income.
The median U.S. home price tumbled 32 percent from a 2006 peak to a nine-year low in February, data from the Realtors show. The retreat surpassed the 27 percent drop seen in the first five years of the Great Depression, according to Stan Humphries, chief economist of Zillow Inc., a Seattle-based real estate information company.
Not Risk-Free
“If we’ve learned anything from this mess, it’s that housing is not a risk-free investment,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York. “Everyone knows someone underwater in their mortgage or struggling to sell a home.”
About 11 million U.S. homes were worth less than their mortgages at the end of 2010, according to CoreLogic Inc., a Santa Ana, California-based real estate information company. An additional 2.4 million borrowers had less than five percent equity, meaning they’ll be underwater with even slight price declines, according to the March 8 report. The two categories add up to 28 percent of residences with mortgages.
Future Plans
The share of Americans who said they plan to purchase a home in the next six months tumbled 23 percent in March, according to the Conference Board research firm in New York. The National Association of Realtors probably will say tomorrow that existing-home sales were at a 5 million annual rate in March, up 2.5 percent after a 9.6 percent plunge in February, according to the median estimate of 74 economists surveyed by Bloomberg.
Work began on 549,000 houses at an annual pace in March, up 7.2 percent from the prior month, figures from the Commerce Department showed today in Washington. The gain failed to make up for ground lost in February, when starts fell to the lowest level in almost two years.
The drop in homebuyer confidence may be temporary. Home sales probably will rise 4.1 percent to 5.1 million in 2011, with the biggest increases in the second half of the year, the Mortgage Bankers Association said in an April 14 report. In 2012, sales may climb 5.9 percent to 5.4 million, the highest pace since 2007, the Washington-based trade group estimated.
A rebound in home sales depends on the availability of jobs, the mortgage association said. The unemployment rate probably will decline every quarter of this year and next, falling to 7.9 percent by 2012’s end, the trade group said. It was 8.8 percent last month, the lowest in two years.
Improving Employment
“We expect that purchase activity will pick up slowly as the improvement in the job market eventually leads to greater willingness to buy,” the mortgage bankers group said.
Borrowing costs are at historic lows. The average U.S. rate for a 30-year fixed mortgage was 4.69 percent last year, the lowest in annual data going back to 1972, according to mortgage financier Freddie Mac, based in McLean, Virginia. The rate in March was 4.84 percent, the company said.
By 2012’s fourth quarter, the average fixed rate may rise to 6 percent, according to the Mortgage Bankers Association.
“If you can jump through the hoops to get a mortgage, and there will be hoops, then this is an amazing time to purchase real estate,” said Robert Stein, a senior economist at First Trust Portfolios LP in Wheaton, Illinois, and the former head of the Treasury Department’s Office of Economic Policy. “There are going to be a lot of people kicking themselves a few years from now because they didn’t take advantage of the low prices and the low mortgage rates.”
Tighter Lending
Cheap financing hasn’t done enough to boost home sales in part because lenders are being more selective with applicants, according to Federal Reserve Chairman Ben Bernanke. Fed policy makers have described the housing market as “depressed” in statements following their last eight meetings.
“Although mortgage rates are low and house prices have reached more affordable levels, many potential homebuyers are still finding mortgages difficult to obtain and remain concerned about possible further declines in home values,” Bernanke said in Congressional testimony last month.
The share of banks reporting tighter mortgage standards in the first quarter rose to 16 percent, the highest since 1991, according to the Fed’s Senior Loan Officer Survey.
Federal regulators are proposing rules that may make lending even more stringent, including a requirement that banks and bond issuers keep a stake in home loans they securitize if the mortgage borrowers have imperfect credit and down payments of less than 20 percent. Borrowers who don’t meet the criteria would pay higher rates to compensate lenders for risk.
Fannie Phase-Out
As mortgage requirements rise, rates could follow as Congress and the Obama administration consider phasing out government-controlled Fannie Mae and Freddie Mac. The companies hold federal charters mandating they increase the availability of mortgages through securitization. In Fannie Mae’s case, that order goes back to the Great Depression, when it was created as part of President Franklin D. Roosevelt’s New Deal.
“There are a lot of unsettled policy issues on the table right now that, if they’re not handled right, could further set back the housing market,” said Richard DeKaser, an economist at Parthenon Group in Boston. “Fannie and Freddie have historically lowered interest rates, and eliminating them will increase the cost of home ownership.”
Lowest in Decade
The U.S. home ownership rate dropped to 66.5 percent in the fourth quarter, the lowest in more than a decade, according to the Census Department. The rate probably will retreat another percentage point by 2013, according to Meyer, of Bank of America Merrill Lynch, and Lea, the finance professor. That would put it back to a 1997 level.
“People will still aspire to own their own homes,” Lea said. “They’ll just be a lot more practical about it.”
Pauli, the California renter, said she has no such aspirations, at least for now. She pays $1,500 a month for her three-bedroom, single-family home with a two-car garage, granite kitchen countertops and stainless-steel appliances. Her neighbors who bought before the housing crash typically have mortgage payments of about $2,800 a month, Pauli said.
“I don’t see myself purchasing, even with all the great prices I see,” Pauli said. “Going to bed every night worrying about your home value doesn’t sound like a good time to me.”
lentinman, Merry Christmas....hope all is well with you.
Wishing everyone a Merry Christmas, be safe.
Gone Fishin'
By: Andrew Polsky
Tue, Nov 23, 2010
You are a shark. Not just any shark, a Great White. You live your life without fear because you, my friend, are the baddest creature in the sea. Your days are spent swimming with ease, the currents taking you where they may. The sea's bounty is your smorgasbord and you are on no one's menu.
One day, you're swimming along, when the pungent smell of tuna overwhelms your olfactories. "Wow" you think to yourself, "look at all this delicious food!" One tuna head. Two tuna heads. Three tuna heads. Just as your belly skin starts to tug, in the distance you see your favorite tasty fish slowly moseying along near the surface. Your instinct kicks in. You swim from the depths with the speed and precision of a Patriot missile. Bam, you take him out. But wait! Uh Oh...there's a problem. You can't get away, you're hooked! Next thing you know, some twerpy deckhand spears you through the face and the next day your fins are floating in a pot of soup in some dingy Taiji market.
Harsh as it may be, the reality is that over-confident and inexperienced investors, by and large, are the prey of institutional traders. Consider this: Global Investment Managers (pensions, hedge funds, mutual funds, insurance companies, sovereign wealth funds, etc) manage roughly $120 Trillion. That's with a capital T. To give you some context, the top 20 stock markets from around the world are valued at only $44.254 Trillion, and Global Debt (bonds) equal $82.2 Trillion. Obviously, institutional investors manage other assets (hard assets, real estate, private companies) because there is a still a bit of stock and bonds left over for the rest of us. What many people fail to consider is the strength of a select few who influence the markets, and how they bait investors into losing trades. Collusion is pervasive and many traders work together to achieve their agenda, and some of these traders have fewer scruples than you or I have.
I'm not writing this to dissuade you from participating in the markets, quite the opposite actually. There is a lot of money to be made by those who educate themselves and remain patient, waiting for the right time to engage. What I am advocating is to include in your decision making process something that cannot be quantified; how the market works and the goals of those whose expertise is baiting investors. If something seems too good to be true, it probably is, and if you think a price is too high, it also probably is. Nobody ever went broke selling early or sitting on the sidelines waiting for clarity. For those who have the experience and knowledge, the markets are much more than a casino, they are a hunting-ground where the strong live lavish lives, and the weak are forced to rely on social security.
There is a saying amongst poker players that says, "If you can't spot the sucker at the table, it's probably you." Remember that.
Home sales plunged after tax credit ended
November 11, 2010, 12:00 pm EST
Any possible housing market recovery hit a snag during the three months ended September 30, as a government tax credit for homebuyers wound down.
Home prices fell only slightly during the quarter, according to a report from the National Association of Realtors (NAR), but the number of homes sold plummeted more than 25%, compared with the previous quarter.
The fall-off in sales volume remains a troubling feature of the current housing market scene because there's rarely been a more attractive time to buy.
"Given the relationship between mortgage interest rates, home prices and median family income, the buying power in today's market is matching the highest levels we've seen dating all the way back to 1970," said NAR President Ron Phipps.
Many sales were undoubtedly happened in early 2010 as homebuyers accelerated their purchases to qualify for the tax credit, which shaved as much as $8,000 off their tax bills.
Contracts had to be signed by the end of April to qualify and the deals had to close by the end of September.
The national median price for a single-family home sold during the quarter was $177,900, down 0.2% from the same period a year ago and up 0.6% from the second quarter of 2010.
Single-family home prices rose 2.5% to $253,400 in the Northeast, the only region that showed price improvement. Midwest prices fell 3% to $145,600, prices dropped 1.9% in the South and 0.4% in the West region.
The metro area with the biggest gain was Burlington, Vt., where the median price of $286,300 was 17.6% higher than 12 months earlier. The biggest loser was Ocala, Fla., down 20% to $82,200.
San Jose, Calif., recorded the highest median price -- $628,700 -- during the quarter, just nosing out Honolulu at $628,100.
Youngstown, Ohio, the old steel town, had the lowest median sale price, at $60,400.
Condo prices fared worse than those of single-family houses. The national median fell 3.9% from 12 months earlier to $171,400.
Palm Bay, Fla., had the biggest year-over-year loss: down 32% to $73,000; Jacksonville. Fla., was off 31% to $63,200. Phoenix condo prices also plunged, down 26.6% to $73,300.
Condo prices in the New York metro area soared, up 34.5% to $400,000, the most, by far, of any city.
Big Banks Told Not To 'Fix' A Fraud
http://online.wsj.com/article/SB20001424052702304879604575582743893387762.html
By ROBBIE WHELAN
Ohio's attorney general threw a wrench into the banking industry's push to quickly restart foreclosures by fixing faulty paperwork, and pressed them to modify mortgage loans.
In two letters released Friday, Attorney General Richard Cordray criticized a number of banks and loan-servicing companies, including Wells Fargo & Co.; Ally Financial Inc.'s GMAC Mortgage; Bank of America Corp.; and J.P. Morgan Chase & Co. Mr. Cordray said the banks are trying to paper over fraud committed in foreclosures with temporary fixes that don't address underlying problems in the banks' practices.
"It is not acceptable for a party who believes they submitted false court documents to merely replace those documents. Wells Fargo and any other banks are not simply allowed a 'do-over,' " he wrote in the letter to Wells. The other letter was sent to Ohio judges, who were asked to notify Mr. Cordray when banks file substitute affidavits.
He demanded that the banks vacate any court order or motion that was based on improper paperwork. In an interview Friday, Mr. Cordray said the banks would "be well-served to work out a settlement with the borrowers to modify the loans and work out payments."
Mr. Cordray's letters come as several banks say they have reviewed their foreclosure procedures and are resuming evictions. But his insistence that they go beyond replacing affidavits by employees who have been labeled "robo-signers"—who didn't adequately review underlying foreclosure documentation—threatens to upend banks' efforts to resolve their foreclosure problems.
Mr. Cordray's strategy gives clues to the goals of a 50-state probe, which was announced two weeks ago. Led by Iowa Attorney General Tom Miller, the effort was joined by top law-enforcement officers from all 50 states in response to reports of widespread errors in foreclosure filings and allegations of robo-signing.
"The banks are committing fraud on the court, essentially perjury, and then saying 'Whoops! You caught me! Here's some different evidence and use that instead,' " Mr. Cordray said in an interview Friday. "I know a lot of judges are not going to take kindly to that."
Bank of America declined to comment. A Wells Fargo spokeswoman said Friday the company intends to cooperate with Mr. Cordray's inquiries and doesn't "believe that any of these instances led to foreclosures which should not have otherwise occurred." She added that Wells Fargo has "chosen to submit supplemental affidavits out of an abundance of caution."
Tom Kelly, a J.P. Morgan spokesman, said the company is still reviewing foreclosure documents for mistakes and hasn't refiled any new or replacement affidavits. Gina Proia, a spokeswoman for GMAC, said her company is "not proceeding with foreclosure sales in Ohio or any state using a defective affidavit."
The aims of the 50-state probe were initially unclear. Some attorneys general, however, made reference to a 2008 settlement in which Bank of America agreed to an $8.4 billion loan-modification program after its Countrywide Financial unit was probed for predatory lending practices.
Mr. Cordray declined to discuss the 50-state investigation or the conversations he has had with other attorneys general about the matter. Mr. Cordray, a Democrat, faces a Republican challenger for his office in Tuesday's general election.
Wells Fargo Chief Financial Officer Howard Atkins said in an Oct. 20 television interview that he was "confident with our policies and controls" related to foreclosures and that "the person at Wells who signs a foreclosure file is the same person as the person who reviews the file, and it is not always done that way in the industry."
But on Oct. 28, Wells announced it was resubmitting affidavits for 55,000 pending foreclosures, suggesting that some of the paperwork might be flawed. In March, a Wells Fargo employee named Xee Moua said in a sworn deposition in a Florida foreclosure case that she signed between 300 and 500 foreclosure documents a day, without reviewing the numbers on the loan files for accuracy.
Asked if she verified the appropriate information, she said, "That's not part of my job
OT: worth listening to IMO,
An hour with Jimmy Rogers
The Subprime Debacle: Act 2, Part 2
Thoughts from the Frontline Weekly Newsletter
http://www.frontlinethoughts.com/
The Subprime Debacle: Act 2, Part 2
by John Mauldin
October 23, 2010
Visit John's Home Page
In this issue:
The Subprime Debacle: Act 2, Part 2
They Knew What They Were Selling
Warning to Mr. Robert Rubin and Management
Popping Through
It's Time for Some Putback Payback
The Worst Deal of the Decade?
And Now to the World Series
At the end of last week's letter on the whole mortgage foreclosure mess, I wrote:
"All those subprime and Alt-A mortgages written in the middle of the last decade? They were packaged and sold in securities. They have had huge losses. But those securities had representations and warranties about what was in them. And guess what, the investment banks may have stretched credibility about those warranties. There is the real probability that the investment banks that sold them are going to have to buy them back. We are talking the potential for multiple hundreds of billions of dollars in losses that will have to be eaten by the large investment banks. We will get into details, but it could create the potential for some banks to have real problems."
Real problems indeed. Seems the Fed, PIMCO, and others are suing Countrywide over this very topic. We will go into detail later in this week's letter, covering the massive fraud involved in the sale of mortgage-backed securities. Frankly, this is scandalous. It is almost too much to contemplate, but I will make an effort.
But first, let me acknowledge the huge deluge of emails I got over last week's letter, the most I can ever remember. I thought about just making this week's letter a response to many of them, but decided I needed to go ahead and finish the topic at hand. Maybe another time. As a side note, I quoted a letter that came to me anonymously via David Kotok. I said if I found out who wrote it, I would give them credit. It was originally written by Gonzalo Liro, at www.gonzalolira.blogspot.com.
Many of you wrote to point out that his argument about the tracking of title was not correct, but others pointed out many other issues as well. This is one of the most complex problems we face, and I got a lot of good information from readers. It just makes me wish I had our new web site finished so you could avail yourselves of the wisdom among my readers. We are close, down to final changes. And now, on to today's letter.
They Knew What They Were Selling
It's hard to know where to start. There is just so much here. So let's begin with testimony from Mr. Richard Bowen, former senior vice-president and business chief underwriter with CitiMortgage Inc. This was given to the Financial Crisis Inquiry Commission Hearing on Subprime Lending andnd Securitization andnd Government Sponsored Enterprises. I am going to excerpt from his testimony, but you can read the whole thing (if you have a strong stomach) at http://fcic.gov/hearings/pdfs/2010-0407-Bowen.pdf. (Emphasis obviously mine.)
"The delegated flow channel purchased approximately $50 billion of prime mortgages annually. These mortgages were not underwriten by us before they were purchased. My Quality Assurance area was responsible for underwriting a small sample of the files post-purchase to ensure credit quality was maintained.
"These mortgages were sold to Fannie Mae, Freddie Mac [We will come back to this - JM] and other investors. Although we did not underwrite these mortgages, Citi did rep and warrant to the investors that the mortgages were underwritten to Citi credit guidelines.
"In mid-2006 I discovered that over 60% of these mortgages purchased and sold were defective. Because Citi had given reps and warrants to the investors that the mortgages were not defective, the investors could force Citi to repurchase many billions of dollars of these defective assets. This situation represented a large potential risk to the shareholders of Citigroup.
"I started issuing warnings in June of 2006 and attempted to get management to address these critical risk issues. These warnings continued through 2007 and went to all levels of the Consumer Lending Group.
"We continued to purchase and sell to investors even larger volumes of mortgages through 2007. And defective mortgages increased during 2007 to over 80% of production."
Mr. Bowen was no young kid. He had 35 years of experience. He was the guy they hired to pay attention to the risks, and they ignored him. How could a senior manager not get such an email and not notify his boss, if only to protect his own ass? They had to have known what they were selling all the way up and down the ladder. But the music was playing and Chuck Prince said to dance and rake in the profits (and bonuses!). More from his testimony:
"Beginning in 2006 I issued many warnings to management concerning these practices, and specifically objected to the purchase of many identified pools. I believed that these practices exposed Citi to substantial risk of loss.
Warning to Mr. Robert Rubin and Management
"On November 3, 2007, I sent an email to Mr. Robert Rubin and three other members of Corporate Management... In this email I outlined the business practices that I had witnessed and attempted to address. I specifically warned about the extreme risks that existed within the Consumer Lending Group. And I warned that there were 'resulting significant but possibly unrecognized financial losses existing within Citigroup.'"
And now taxpayers own 75% of Citi, and our losses to them are huge. They are going to get worse, as we will see.
Now let's turn to the testimony of Keith Johnson, who worked for various mortgage companies and in 2006 became the president and chief operating officer of Clayton Holdings, the largest residential loan due diligence and securitization surveillance company in the United States and Europe. This is testimony he gave before the Financial Crisis Inquiry Commission. Part of the testimony is by his associate Vicki Beal, senior vice-president of Clayton. The transcript is some 277 pages long, so let me summarize.
Investment banks would come to Clayton and give then roughly 10% of the mortgages that they intended to buy and put into a security. Clayton rated them on whether the documentation was what it was supposed to be, not as to whether they thought it was a good loan. Still, 46% of the loans did not have proper documentation (out of a pool of 9 million loans) and 28% had what was determined to be level 3 disqualifications that simply had no mitigating circumstances. Understand, these were loans that were already written, and there was no effort to check the facts, just the documentation.
And ultimately 11% of these loans (39% of the level 3's) were put back in by the investment bank. And what happened to the loans that were rejected? (This might require an adult beverage and a few expletives deleted.)
Popping Through
They were put back into another pool, where again only 10% of the loans were examined. Quoting from the testimony:
"MR. JOHNSON: I think it goes to the 'three strikes, you're out' rule.
"CHAIRMAN ANGELIDES: So this was a case of - okay, three strikes.
"MR. JOHNSON: I've heard that even used. Try it once, try it twice, try it three times, and if you can't get it out, then put -
"CHAIRMAN ANGELIDES: Well, the odds are pretty good if you are sampling 5 to 10 percent that you'll pop through. When you said the good, the bad, the ugly, the ugly will pop through."
Yes, you read that right. If a loan was rejected a second time, it went back into yet another pool for a third try. The odds of coming up three times, when only 5 or 10 percent are sampled? About 1 in a thousand. Popping through, indeed.
Clayton presented their data to the ratings agencies, investment banks, and others in the industry. They were frustrated that no one was really paying attention or taking heed of their warnings.
Here is what Shahien Nasiripour, the business reporter for the Huffington Post, wrote (his emphasis). For those interested, the entire article is worth reading. ( http://www.huffingtonpost.com/2010/09/25/wall-street-subprime-crisis_n_739294.html):
"Johnson told the crisis panel that he thought the firm's findings should have been disclosed to investors during this period. He added that he saw one European deal mention it, but nothing else.
"The firm's findings could have been 'material,' Johnson said, using a legal adjective that could determine cause or affect a judgment.
"It's unclear whether the firms ended up buying all of those loans, or whether Wall Street securitized them all and sold them off to investors.
"'Clayton generally does not know which or how many loans the client ultimately purchases,' Beal said. That likely will be the subject of litigation and investigations going forward.
"'This should have a phenomenal effect legally, both in terms of the ability of investors to force put-backs and to sue for fraud,' said Joshua Rosner, managing director at independent research consultancy Graham Fisher & Co.
"'Original buyers of these securities could sue for fraud; distressed investors, who buy assets on the cheap, could force issuers to take back the mortgages and swallow the losses.
"'I don't think people are really thinking about this,' Rosner said. 'This is not just errors and omissions - this appears to be fraud, especially if there is evidence to demonstrate that they went back and used the due diligence reports to justify paying lower prices for the loans, and did not inform the investors of that."
"Beal testified that Clayton's clients use the firm's reports to 'negotiate better prices on pools of loans they are considering for purchase,' among other uses.
"Nearly $1.7 trillion in securities backed by mortgages not guaranteed by the government were sold to investors during those 18 months, according to Inside Mortgage Finance. Wall Street banks sold much of that. At its peak, the amount of outstanding so-called non-agency mortgage securities reached $2.3 trillion in June 2007, according to data compiled by Bloomberg. Less than $1.4 trillion remain as investors refused to buy new issuance and the mortgages underpinning existing securities were either paid off or written off as losses, Bloomberg data show.
"The potential for liability on the part of the issuer 'probably does give an investor more grounds for a lawsuit than they would ordinarily have', Cecala said. 'Generally, to go after an issuer you really have to prove that they knowingly did something wrong. This certainly seems to lend credibility to that argument.'
"'This appears to be a massive fraud perpetrated on the investing public on a scale never before seen,' Rosner added."
It's Time for Some Putback Payback
Investment banks large and small originated a lot of subprime garbage in the 2005-2007 era. This week PIMCO, Black Rock, Freddie Mac, the New York Fed, and - what I think is key and no one has picked up on - Neuberger Berman Europe, Ltd., an investment manager to a managed-account client, came together and sued Countrywide for not putting back bad mortgages to its parent, Bank of America. This is the first of what will be a series of suits aimed at getting control of the portfolio and peeking into the mortgages. (Text of lawsuit at http://www.ritholtz.com/blog/2010/10/full-text-of-letter-to-bofa-from-ny-fed-maiden-lane-freddie-mac-pimco-western-asset-mgmt-neuberger-berman-kore-advisors/)
Basically, if buyers of 25% or more of a mortgage-backed security can come together, they have standing to sue the mortgage servicer to do its duty to the investors and make putbacks of bad mortgages, and if they fail to do so the plaintiffs can take control of the process and take the issuer to court directly (that's a very simplistic description but roughly accurate).
There are two key take-aways. First, note that a European entity is involved. Hundreds of billions of dollars of this junk was sold to European banks and funds. And these guys get together at conferences (sometimes they even invite me to speak). So Helmut will be talking to Lars who will talk to Jean Pierre and they will realize they all own some of this junk. They will be watching with very real interest to see how the big boys at PIMCO and Black Rock and the New York Fed fare in their efforts. And then you can count on them all piling on (more later on this).
Second, little noticed this week was the fact that The Litigation Daily wrote that Philippe Selendy of Quinn Emanuel Urquhart & Sullivan has been retained by the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, to investigate billions of dollars in potential claims against banks and other issuers of mortgage-backed securities.
Who? Not on your celebrity list? Just wait. He will soon be getting the best tables everywhere. He and his firm are the guys representing MBIA in all their cases against Countrywide and Merrill Lynch. And they are kicking ass. Slowly to be sure, but very steady. That means Fannie and Freddie are getting ready to get serious.
They were sold well over $227 billion of the subprime garbage issued in 2006 and 2007. And the bad stuff started before then. But they have one advantage that the guys at PIMCO, et al. don't have: they (or actually the FHFA) are a federal agency. That means they have subpoena power. The agency has sent 64 subpoenas to issuers of mortgage-backed securities, and although they have not said who they went to, they obviously include almost everyone and clearly all the big players. (They couldn't have ignored Goldman, could they? Naah. Too obvious.)
From American Lawyer.com (I know, this website is probably already on your favorites list, but for those souls who actually have a life I provide the text):
"Through those subpoenas, the agency could gain access to the loan files for the mortgages that backed the securities it bought and thus establish whether the mortgages were what the issuers represented them to be in securities contracts. According to the Journal, the difficulty of obtaining loan files has been a big obstacle for investors trying to force issuers to repurchase bonds.
"If the FHFA were to decide down the road to initiate litigation, it would still have to have the support of a percentage (usually 25 percent) of its fellow bondholders for each issue. But given what the agency and its Quinn lawyers will be able to see before bringing suit, it probably won't be too hard to get other investors on the bandwagon." ( http://www.quinnemanuel.com/media/183456/hurricane%20warnings%20fannie%20mae%20and%20freddie%20mac%20hire....pdf)
It is tough not to jump to the conclusion, but we need one more piece of the puzzle before we get there.
The Worst Deal of the Decade?
Arguably Bank of America had Merrill shoved down their throats, but no one can say that about the acquisition of Countrywide. And Countrywide could end up costing BAC $50 billion or more in losses. That may prove to be a serious candidate for worst deal of the decade. (Although WAMU is a leading candidate too!)
Let's look at a report by Branch Hill Capital, a hedge fund out of San Francisco. And before we start on it, let me point out they are short Bank of America. You can see the full PowerPoint at http://www.businessinsider.com/bank-of-america-mortgage-report-2010-10#-1.
(And let me say a big thanks to the author of the report, Manal Mehta, for all the background material he sent me and his help with this week's letter. It helped make it a lot better. Of course, any erroneous conclusions or outrageous statements are all mine.)
First, they point out that the potential size of Bank of America's (BAC) liabilities is $74 billion (with a B). And that is just for Countrywide. That does not include Merrill, which is also large. Against that they have set aside $3.9 billion. You can count on more suits than just the PIMCO, et al. mentioned above.
In the MBIA case, the judge has ruled that the suit can proceed even though BAC has denied responsibility. Although on appeal, this is high-stakes poker. Countrywide originated over $1.4 trillion of mortgages in 2005-2007. MBIA alleges that over 90% of the defaulted or delinquent loans in the Countrywide securitizations show material discrepancies. Care to take the under in the over/under bet on that?
Further to the case on BAC, Merrill was the largest originator of subprime CDOs during the housing boom, for another $120 billion, along with about $255 billion of residential mortgage-backed securities.
And then there are all those CDOs (collaterized debt obligations). Merrill did a lot of those that went sour. This deserves it own leter, but a gentleman named Wing Chau went from making $140k a year to $25 million in just a few years, putting together CDOs from Merrill, some of which were completely bankrupt in just six months.
Countrywide has already settled with the New York pension funds for $624 million, one of the largest securities fraud settlements in US history. And the line is growing longer.
Of course, BAC CEO Brian Moynihan denied this week that there is a problem. Let's look at Moynihan's statements at the last earnings call and compare them to what the judge in the case said earlier. Moynihan:
"... we execute repurchases on a loan by loan basis... And as we learn more, and again, our perspective on this - we're going to be quite diligent as I said in defending the interest of our shareholders. This really gets down to a loan-by-loan determination and we have, we believe, the resources to deploy against that kind of a review."
Back in June the judge on the case (a Judge Bransten) said (from the transcript):
"I think that it makes all the sense in the world that you can use a sample to prove the case because otherwise I can't imagine a jury listening to 386 thousand cases. Even if you have that available, nevertheless you are not going to present that to a jury or even to a judge. I'm patient but not that patient. So therefore it is going to be a sample in the end..."
OK, let me get this straight, Brian. Your company committed fraud, with robosignings and all the rest, and you won't man up and take responsibility? You and your lawyers want to thrash this out, case by case, fighting a trench-warfare, rear-guard action? Well I'm afraid that's not going to work out for you. There are so many examples of Countrywide outright fraud that it is going to be hard to convince a jury that BAC is not on the hook. Will it take years? Of course.
You can read the PowerPoint for details. Bottom line: BAC is probably liable for putbacks that could total over a hundred billion. And that is just BAC.
Think Citi. And any of the scores of mortgage originators and investment banks. There were a couple of trillion dollars in these securitizations issued. Plus how many hundred of billions of second-lien loans? And can we forget CDOs? And CDOs squared?
And let's not forget all those completely synthetic CDOs that were written at the height of the mania. Most of it AAA, of course. Frankly, anyone stupid enough to buy a synthetic CDO should lose their money, but that is not what the courts will base their decision on. It is all about representations and warranties. And maybe a little fraud.
I picked on BAC because that is the analysis I saw. But it could be any of dozens of banks. Look at this list from the Branch Hill PowerPoint.
jm102310image001
Could we see a hundred billion in losses to the major banks? In my opinion we will for sure, over time. $200 billion? Probably. $300 billion? Maybe. $400 billion? It depends on how organized the investors in the securities get and what gets settled out of court. Out of a few trillion dollars in securitizations? It's anybody's guess. I just made mine.
But let's not forget the $227 billion sold to Fannie and Freddie. Taxpayers are on the hook for $300-400 billion in losses. Those putbacks could save us a lot. Will this threaten the viability of some banks? Maybe. But most will survive. BAC made $3 billion last quarter. A steep yield curve (with the help of the Fed) can cure a lot of evils. But it will absorb the profits of a lot of banks for a long time.
And that of course, will come back to haunt the rest of us as banks have to raise more capital and get more conservative.
Anyone who owns stocks in banks with relatively large MBS exposure is not investing, they are gambling that the losses will not be more than management is telling them. There will be no bailouts (at least I hope not) this time around. Fool me once, shame on you; fool me twice, shame on me. There will be little sympathy for shareholders or bondholders this time, if it comes to that.
One more sad point. The FDIC (read taxpayers) is liable for some of this, as they took over some of these institutions. It just keeps on coming.
Final rant. If you were part of a group that knowingly created or sold flawed and fraudulent mortgage-backed securities to pensions and insurance companies and took home tens of millions in bonuses, up and down the management chain, maybe you should consider moving yourself and your money to a country that does not honor US extradition, because my guess is that, as all this comes out, you may have to hire some very expensive lawyers and get measured for pinstripes.
And the Mozilo agreement was a sham. Sigh. That would be the equivalent of fining me $10,000 and letting me keep my tanning bed. I don't have the space to go into the fraud at Countrywide, but their internal documents show they all knew what was going on.
Your tired but contented analyst,
John Mauldin
John@FrontLineThoughts.com
Copyright 2010 John Mauldin. All Rights Reserved
losses mount on loans made for commercial property
"With 139 closures nationwide so far this year, the pace of bank failures exceeds that of 2009, which was already a brisk year for shutdowns with a total of 140. By this time last year, regulators had closed 106 banks.
The pace has accelerated as banks' losses mount on loans made for commercial property and development. Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans. That has brought delinquent loan payments and defaults by commercial developers."
http://finance.yahoo.com/news/7-banks-closed-in-Fla-Ga-Ill-apf-1135619637.html?x=0&sec=topStories&pos=6&asset=&ccode=
here's a chart close to the one in the I-box
http://mysite.verizon.net/vzeqrguz/housingbubble/
Hearing held on paperwork-error case
Oct.3, I posted that The Massachusetts Supreme Judicial Court would hold a hearing on a case involving questionable documents (paperwork-error case) used during a foreclosure proceeding. The lenders are appealing the land court ruling.
link to original case from land court,
http://masscases.com/cases/land/2009/2009-08-384283-MEMO.html
"The Massachusetts Supreme Judicial Court plans to hear arguments next week on a paperwork-error case that has the potential to invalidate thousands of foreclosures dating as far back as 20 years. "
below is the link to the Supreme Judicial Court hearing, video/audio Oct. 7, 2010 (click on video below the date)
U.S. Bank National Association v. Ibanez
http://www.suffolk.edu/sjc/archive/2010/SJC_10694.html
Rep. Alan Grayson Explains the Foreclosure Fraud Crisis
Foreclosure Fraud is Contained !
Prudens Speculari
Mon, 04 Oct 2010
The mortgage mess that has become the USA simply keeps on. Almost 3 years into it and with no end in sight and yet the same taking head shills appear daily on the propaganda network to telling you everything is A-okay, the economy is recovering and a double dip is nonsense, and balance sheets are flush with cash.
Yup, sure it is. Just like they told you subprime was contained, housing had never declined, the economy was resilient and the selloff in the market was a temporary blip before we make new highs. So for a real look at what is going on, in particular with the mortgage market which so many of these shills point to as on the mend and recovering we turn to Yves over at the excellent blog Naked Capitalism which brought my attention to a a web site by the name of 4closurefraud. That site has a post entitled, you might wanna sit down for this, Psst. Hey you. Yea. You. I Got Just What You Need. Lender Processing Services DOCX Document Fabrication Price Sheet.
Yes you read that correctly a document fabrication price list.
In what is one of the clearer and more easy to digest explanations of what is transpiring, Here is what Yves at Naked Capitalism has to say on the subject:
A bombshell has dropped in mortgage land.
We’ve said for some time that document fabrication is widespread in foreclosures. The reason is that the note, which is the borrower IOU, is the critical instrument to establishing the right to foreclose in 45 states (in those states, the mortgage, which is the lien on the property, is a mere “accessory” to the note).
The pooling and servicing agreement, which governs the creation of mortgage backed securities, called for the note to be endorsed (wet ink signatures) through the full chain of title. That means that the originator had to sign the note over to an intermediary party (there were usually at least two), who’d then have to endorse it over to the next intermediary party, and the final intermediary would have to endorse it over to the trustee on behalf of a specified trust (the entity that holds all the notes). This had to be done by closing; there were limited exceptions up to 90 days out; after that, no tickie, no laundry.
Evidence is mounting that for cost reasons, starting in the 2004-2005 time frame, originators like Countrywide simply quit conveying the note. We are told this practice was widespread, probably endemic. The notes are apparently are still in originator warehouses. That means the trust does not have them (the legalese is it is not the real party of interest), therefore it is not in a position to foreclose on behalf of the RMBS investors. So various ruses have been used to finesse this rather large problem.
The foreclosing party often obtains the note from the originator at the time of foreclosure, but that isn’t kosher under the rules governing the mortgage backed security. First, it’s too late to assign the mortgage to the trust. Second. IRS rules forbid a REMIC (real estate mortgage investment trust) from accepting a non-performing asset, meaning a dud loan. And it’s also problematic to assign a note from the originator if it’s bankrupt (the bankruptcy trustee must approve, and from what we can discern, the note are being conveyed without approval, plus there is no employee of the bankrupt entity authorized to endorse the note properly, another wee problem)."
You can go to Naked Capitalism's site here and see the document price list for yourself. Needless to say here is Yves of Naked Capitalism had to say about the whole mess.
"So wake up and smell the coffee. The story that banks have been trying to sell has been that document problems like improper affidavits are mere technicalities. We’ve said from the get go that they were the tip of the iceberg of widespread document forgeries and fraud. This price sheet provides concrete proof that the practices we pointed to not only existed, but are a routine way of doing business in servicer and trustee land. LPS is the major platform used by all the large servicers; it oversees the work of foreclosure mills in every state.
And this means document forgeries and fraud are not just a servicer problem or a borrower problem but a mortgage industry and ultimately a policy problem. These dishonest practices are so widespread that they raise serious questions about the residential mortgage backed securities market, the major trustees (such as JP Morgan, US Bank, Bank of New York) who repeatedly provided affirmations as required by the pooling and servicing agreement that all the tasks necessary for the trust to own the securitization assets had been completed, and the inattention of the various government bodies (in particular Fannie and Freddie) that are major clients of LPS.
Amar Bhide, in a 1994 Harvard Business Review article, said the US capital markets were the deepest and most liquid in major part because they were recognized around the world as being the fairest and best policed. As remarkable as it may seem now, his statement was seem as an obvious truth back then. In a mere decade, we managed to allow a “free markets” ideology on steroids to gut investor and borrower protection. The result is a train wreck in US residential mortgage securities, the biggest asset class in the world. The problems are too widespread for the authorities to pretend they don’t exist, and there is no obvious way to put this Humpty Dumpty back together."
Yet through this whole mess not one individual has been arrested, let alone imprisoned. Don't worry CNBC will trot out the shills soon enough to tell you this mess is contained and is nothing to worry about. What a relief!
dickmilde, as I understand it, many of these foreclosures were rushed to auction and than sold to the "questionable" holder of the mortgage at penny's on the dollar. I think in some cases there may be more to the story.
I know of several situations in the area I am in where the owner(s) desperately need to be able to redo the mortgage (ARM) the servicer refuses to even attempt to work with them and refuses to reveal the actual mortgage holder (if they know?)
I understand that they probably should not have got the financing in the first place, but just dumping these properties back onto the market is only driving prices down further.
Why "would anyone" question the validity of these mortgages or the foreclosures!!!!
EXCERPT from the original ruling.........reads like an Abbot and Costello routine....
In relevant part, if taken as alleged, the facts in Ibanez and Larace are roughly parallel and can be summarized as follows. [Note 24]
Both Ibanez and Larace involved adjustable-rate, subprime loans for the purchase of residential property in Springfield. [Note 25] In both, the borrower signed a promissory note and gave an immediately-recorded mortgage to the original lender (Rose Mortgage in Ibanez, Option One Mortgage Corporation in Larace). In Ibanez, Rose endorsed the note and properly assigned the mortgage to Option One. [Note 26] In both Ibanez and Larace, Option One then executed an endorsement of the note in blank, making the note “payable to bearer” and “negotiated by transfer alone until specially endorsed.” G.L. c. 106, § 3-205(b). In both, Option One also executed an assignment of the mortgage in blank (i.e., without a specified assignee) (hereafter, the “blank mortgage assignments”). These blank mortgage assignments were never recorded and they were not legally recordable. G.L. c. 183, § 6C (for a mortgage or assignment of a mortgage to be recordable in Massachusetts, the mortgage or assignment must “contain or have endorsed upon it the residence and post office address of the mortgagee or assignee if said mortgagee or assignee is a natural person, or a business address, mail address or post office address of the mortgagee or assignee if the mortgagee or assignee is not a natural person”). Moreover, since the blank mortgage assignments failed to name an assignee, they were ineffective to transfer any interest in the mortgage. [Note 27] Flavin v. Morrissey, 327 Mass. 217 , 219 (1951); Macurda v. Fuller, 225 Mass. 341 , 344-345 (1916); A. Eno & W. Hovey, 28 Mass. Practice: Real Estate Law, § 4.50 at 109 (4th ed. 2004) (hereafter, “Eno & Hovey”) and cases cited therein.
The securitization process then began, with Option One becoming the “Originator” for Lehman Brothers in Ibanez and for Bank of America in Larace.
In Ibanez, Lehman Brothers (as “Sponsor” and “Seller”) purchased the loan from Option One (as the Originator). Lehman then sold it (with hundreds of other loans that originated from Option One and other sources) to its wholly-owned subsidiary, Structured Asset Securities Corporation (the “Depositor”). Structured Asset Securities Corporation subsequently sold the loans to the Structured Asset Securities Corporation Mortgage Loan Trust 2006-Z (with U.S. Bank as trustee) [Note 28] (the “Issuing Entity”), which the grouped them into a “pool” (the “Ibanez pool”) and issued ten classes of certificates (two senior and eight subordinate) with varying rates of return, ranked in order of their payout priority in the event of shortfalls. Lehman purchased the certificates (presumably as the underwriter of the offering) and sold them in an offering to qualified investors.
The loans in the Ibanez pool were administered by five “Servicers,” one of which was Option One (now acting in a different capacity than Originator). [Note 29] Option One is alleged to be the Servicer for the Ibanez loan. [Note 30] These Servicers were supervised by Aurora Loan Services LLC (a wholly-owned Lehman subsidiary) (the “Master Servicer”). The loan documents themselves were kept by “Custodians” — Deutsche Bank, Wells Fargo, or U.S. Bank. [Note 31]
Assuming that events proceeded in the way described, the Ibanez loan thus changed ownership at least four times prior to foreclosure — Rose Mortgage to Option One, Option One to Lehman Brothers, Lehman Brothers to Structured Asset Securities Corporation, and Structured Asset Securities Corporation to Structured Asset Securities Corporation Mortgage Loan Trust 2006-Z (with U.S. Bank as trustee) — without any of this appearing on the public record. Two of those entities (Lehman Brothers and its subsidiary Structured Asset Securities Corporation) are currently in bankruptcy and a third (Option One) has ceased operations. [Note 32] The Ibanez note, Rose’s endorsement of the note to Option One, Option One’s endorsement of the note in blank, Ibanez’s mortgage to Rose, Rose’s assignment of the mortgage to Option One, and Option One’s blank mortgage assignment were all placed into a “collateral file” and, presumably, were passed from hand to hand along the chain of entities just listed, ending with the Custodian. The note (endorsed in blank and thus “bearer paper”) was negotiable by whichever entity possessed it. Since the blank mortgage assignment was ineffective, the mortgage remained with Option One (as Originator).
In Larace, Bank of America (as “Seller”) purchased the loan from Option One (as Originator). Bank of America then sold it (with hundreds of other loans that originated from Option One and other sources) to its wholly-owned subsidiary Asset Backed Funding Corporation (the “Depositor”). Asset Backed Funding Corporation then sold the loans to the ABFC 2005-OPT1 Trust (with Wells Fargo as trustee) [Note 33] (the “Issuing Entity”), which grouped them into a “pool” (the “Larace pool”) and issued fourteen classes of certificates (two super-senior, three senior, and nine subordinate) with varying rates of return, ranked in order of their payout priority in the event of shortfalls. Bank of America Securities LLC (as “Underwriter”) purchased the certificates and sold them in an offering to the public. The loans in the Larace pool were administered by Option One as “Servicer” (again, as in Ibanez, acting in a different capacity than Originator).
Assuming that events proceeded in the way described, the Larace loan thus changed ownership at least three times — Option One to Bank of America, Bank of America to Asset Backed Funding Corporation, and Asset Backed Funding Corporation to ABFC 2005-OPT1 Trust (with Wells Fargo as trustee) — without any of this appearing on the public record. The Larace note to Option One, Option One’s endorsement of the note in blank, Larace’s mortgage to Option One, and Option One’s blank mortgage assignment were all placed into a “collateral file” and, presumably, were passed from hand to hand along the chain of entities just listed, ending with the Custodian. The note (endorsed in blank and thus “bearer paper”) was negotiable by whichever entity possessed it. Since the blank mortgage assignment was ineffective, the mortgage remained with Option One (as Originator).
As noted above, the plaintiffs sold certificates in offerings to investors and, in that connection, issued offering documents. These included the Ibanez Private Placement Memorandum and the Larace Prospectus Supplement. Both contained detailed descriptions of the characteristics of the subprime residential loans that the plaintiffs were acquiring, the “risk factors” involved with those loans, and the documentation that the trusts purportedly would receive to obtain and secure their interests in the loans and lessen those risks. The provisions regarding that documentation are substantially similar.
In Ibanez they stated the following:
The Mortgage Loans will be assigned by the Depositor [Structured Asset Securities Corporation] to the Trustee [U.S. Bank], together with all principal and interest received with respect to such Mortgage Loans on and after the Cut-off Date [December 1, 2006] (other than Scheduled Payments due on that date). . . . Each Mortgage Loan will be identified in a schedule appearing as an exhibit to the Trust Agreement which will specify with respect to each Mortgage Loan, among other things, the original principal balance and the Scheduled Principal Balance as of the close of business on the Cut-off Date, the Mortgage Rate, the Scheduled Payment, the maturity date, the related Servicer and the Custodian of the mortgage file, whether the Mortgage Loan is covered by a primary mortgage insurance policy and the applicable Prepayment Premium provisions, if any.
As to each Mortgage Loan, the following documents are generally required to be delivered to the applicable Custodian on behalf of the Trustee in accordance with the Trust Agreement: (1) the related original mortgage note endorsed without recourse to the Trustee or in blank, (2) the original mortgage with evidence of recording indicated thereon (or, if such original recorded mortgage has not yet been returned by the recording office, a copy thereof certified to be a true and complete copy of such mortgage sent for recording), (3) an original assignment of the mortgage to the Trustee or in blank in recordable form (except as described below), [Note 34] (4) the policies of title insurance issued with respect to each Mortgage Loan and (5) the originals of any assumption, modification, extension or guaranty agreements.
Each transfer of a Mortgage Loan from the Seller [Lehman Brothers Holdings, Inc.] to the Depositor [Structured Asset Securities Corporation] and from the Depositor to the Trustee will be intended to be a sale of that Mortgage Loan and will be reflected as such in the Sale and Assignment Agreement [Note 35] and the Trust Agreement, respectively. . . .
Ibanez Private Placement Memorandum at 119 (emphasis added). Moreover, the Memorandum further states that each Transferor of a mortgage loan (here, Option One) represented and warranted to Lehman “as direct purchaser or assignee” that “the assignment of mortgage [to Lehman] [was] in recordable form and acceptable for recording under the laws of the relevant applicable jurisdiction.” Id. at 120-121. Assignments in recordable form to each successive entity were thus required at every step in the securitization chain.
In Larace they stated the following:
On or about October 31, 2005 . . . the Depositor [Asset Backed Funding Corporation] will transfer to the Trust Fund all of its right, title and interest in and to each Mortgage Loan, the related mortgage notes, mortgages and other related documents (collectively, the “Related Documents”), including all scheduled payments with respect to each such Mortgage Loan due after the Cut-Off Date. . . .
The Pooling and Servicing Agreement will require that, within the time period specified therein, the Seller [Bank of America] will deliver or cause to be delivered to the Trustee on behalf of the Certificateholders (or a custodian, as the Trustee’s agent for such purpose) the mortgage notes endorsed in blank and the Related Documents. In lieu of delivery of original mortgages or mortgage notes, if such original is not available or lost, the Seller may deliver or cause to be delivered true and correct copies thereof, or, with respect to a lost mortgage note, a lost note affidavit executed by the Seller or the originator of such Mortgage Loan.
Unless otherwise required by Fitch or S&P, assignments of the Mortgage Loans to the Trustee (or its nominee) will not be recorded in any jurisdiction, but will be delivered to the Trustee in recordable form, so that they can be recorded in the event recordation is necessary in connection with the servicing of a Mortgage Loan. [Note 36]
Larace Supplemental Prospectus at S-54 (emphasis added). [Note 37]
Despite the requirement in both Ibanez and Larace for an assignment of the mortgage to the trusts in recordable form at the time the loans were transferred to the trusts, no such assignments were made. As the collateral files for both loans reveal, the only mortgage assignments executed prior to the foreclosure sales were the one from Rose Mortgage to Option One (in Ibanez) and the ineffective blank mortgage assignments by Option One (in both Ibanez and Larace). Thus, at the time the foreclosure sales were noticed and conducted, the notes (endorsed in blank without recourse and thus “bearer paper”) were held by the plaintiffs, but the mortgages securing those notes were both still held by Option One (as Originator).
At some point (the record does not indicate when) both the Ibanez and Larace loans became delinquent and a new entity (Fidelity National Foreclosure and Bankruptcy Solutions) (“Fidelity”) became involved. On April 10, 2007, purporting to act on behalf of Option One in Option One’s capacity as the Servicer of the loan, [Note 38] Fidelity sent an email with an attached pdf referral package [Note 39] to the plaintiffs’ counsel (the Ablitt law firm) with instructions to bring a foreclosure action against Mr. Ibanez and his property “in the name of U.S. Bank National Association, as Trustee for the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z.” Ibanez, Aff. of Walter Porr, Jr. at Exs. A-C (Jan. 30, 2009). On April 18, 2007, again purportedly on behalf of Option One in Option One’s capacity as the Servicer of the loan, [Note 40] Fidelity sent a similar email and pdf referral package to Ablitt with instructions to commence a foreclosure action against the Laraces and their property “in the name of the investor below: Wells Fargo Bank, N.A., as Trustee for ABFC 2005-OPT1 Trust, ABFC Asset-Backed Certificates, Series 2005-OPT1,” with the representation that the Larace mortgage was “currently held” by Wells Fargo. [Note 41] Larace, Aff. of Walter Porr, Jr. at Ex. A (Feb. 2, 2009).
The Ablitt firm then filed a Servicemembers’ Complaint against Mr. Ibanez, naming U.S. Bank as the plaintiff under the representation that U.S. Bank was “the owner (or assignee) and holder of a mortgage with a statutory power of sale given by Antonio Ibanez to Rose Mortgage, Inc.” Complaint to Foreclose Mortgage, Land Court 07 Misc. 345456 (Apr. 17, 2007). As noted above, this was incorrect. Option One was that holder. The Notice of Mortgagee’s Sale of Real Estate, published on June 14, 21, and 28, 2007 for a foreclosure sale on July 5, 2007, stated that U.S. Bank was the “present holder” of the Ibanez mortgage. As noted above, this was incorrect. Option One was that holder. The Ibanez sale was conducted in the name of U.S. Bank, U.S. Bank was the only bidder, and the “foreclosure deed” executed ten months later named U.S. Bank as the grantor pursuant to that sale. [Note 42] Massachusetts Foreclosure Deed By Corporation (May 7, 2008). There was no mention or suggestion in any of these documents that U.S. Bank was proceeding to foreclose the mortgage on behalf of anyone other than itself. An assignment of the Ibanez mortgage to U.S. Bank from American Home Mortgage Servicing, Inc. as the purported “successor in interest to Option One Mortgage Corporation” was not executed until September 2, 2008, fourteen months after the foreclosure sale and over three months after the recording of the foreclosure deed. [Note 43]
The Ablitt firm brought a Servicemembers’ Complaint against the Laraces, naming Wells Fargo as the plaintiff under the representation that Wells Fargo was “the owner (or assignee) and holder of a mortgage with a statutory power of sale given by Mark A. Larace and Tammy L. Larace to Option One Mortgage Corporation.” Complaint to Foreclose Mortgage, Land Court 07 Misc. 346369 (Apr. 27, 2007). As noted above, this was incorrect. Option One was the holder. The Notice of Mortgagee’s Sale of Real Estate, published on June 14, 21, and 28, 2007 for a foreclosure sale on July 5, 2007, stated that Wells Fargo was the “present holder” of the Larace mortgage. As noted above, this was incorrect. Option One was the holder. The Larace sale was conducted in Wells Fargo’s name, Wells Fargo was the only bidder, and the “foreclosure deed” executed ten months later named U.S. Bank as the grantor pursuant to that sale. [Note 44] Massachusetts Foreclosure Deed By Corporation (May 7, 2008). As in Ibanez, there was no mention or suggestion in any of these documents that Wells Fargo was proceeding to foreclose the mortgage on behalf of anyone other than itself. An assignment of the Larace mortgage to Wells Fargo from American Home Mortgage Servicing, Inc. as the purported “successor in interest to Option One Mortgage Corporation” was not executed until September 2, 2008, fourteen months after the foreclosure sale and over three months after the recording of the foreclosure deed. [Note 45]
And here is the ruling The Massachusetts Supreme Judicial Court plans to hear arguments on next week......the ruling was initially issued by:
The Commonwealth of Mass, Trial Court, Land Court Dept.
http://masscases.com/cases/land/2009/2009-08-384283-MEMO.html
This should prove to be interesting,
The Massachusetts Supreme Judicial Court plans to hear arguments next week on a paperwork-error case that has the potential to invalidate thousands of foreclosures dating as far back as 20 years.
AG Coakley: Stop Bay State foreclosures
October 03, 2010
Massachusetts Attorney General Martha Coakley is calling on Bank of America and other lenders to halt all Bay State foreclosures amid indications that the firms lacked proper paperwork to seize thousands of U.S. homes, according to the Boston Herald
“We are asking Bank of America and other major creditors to cease foreclosure proceedings for Massachusetts homeowners until they demonstrate that they have complied with Massachusetts law,” Coakley said yesterday.
The attorney general’s move followed word Friday that a Bank of America executive admitted in a Massachusetts deposition to signing thousands of documents in U.S. foreclosure cases without really looking at them.
The documents aimed to prove that Bank of America legally owned delinquent mortgages on thousands of homes that it planned to seize through foreclosure.
However, the Bank of America executive conceded in a deposition obtained by The Associated Press that because she signed 7,000 to 8,000 such documents per month, “I typically don't read them.”
That’s a stunning admission because banks can only seize homes when they clearly own the mortgages in question, something that is sometimes hard to prove because financial firms often trade mortgages like stocks. Failure to file proper paperwork every time a loan changes hands can make it unclear who owns a mortgage and thus has the right to foreclose.
Friday’s revelations prompted Bank of America to voluntarily halt all home seizures in 23 states that use so-called judicial-foreclosure proceedings. Mortgage giants GMAC and J.P. Morgan Chase have taken similar steps in recent days after evidence indicated they might not have properly checked paperwork, either.
However, the banks actions do not apply to Massachusetts because the Bay State does not use the judicial-foreclosure system.
So, Coakley yesterday called on the lenders to voluntarily extend their moratorium to the Bay State as well.
Paperwork flaws are calling into question the validity of tens of thousands of home seizures that banks have conducted during the U.S. foreclosure crisis.
The Massachusetts Supreme Judicial Court plans to hear arguments next week on a paperwork-error case that has the potential to invalidate thousands of foreclosures dating as far back as 20 years.
J.P. Morgan suspending some foreclosures: reports
Sept. 29, 2010, 4:50 p.m
SAN FRANCISCO (MarketWatch) -- J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 38.43, +0.02, +0.05%) will suspend certain mortgage foreclosures as it reviews documents in those cases, according to media reports late Wednesday. The suspension comes with the discovery that employees signed affidavits on some loan documents without verifying the files, The Associated Press reported, citing J.P. Morgan spokesman Tom Kelly. About 56,000 foreclosures are affected by the delay, Reuters reported.
U.S. Home Prices Fell 3.3% in July From Year Earlier
By Kathleen M. Howley
Sept. 22 (Bloomberg) -- U.S. home prices dropped 3.3 percent in July from a year earlier, the eighth consecutive decline, as foreclosed properties flooded the market.
Prices fell 0.5 percent from June, the Federal Housing Finance Agency in Washington said in a report today. Economists had projected prices to fall 0.2 percent from the previous month, based on the average of 15 estimates in a Bloomberg survey. The agency revised the previously reported May-to-June decline to 1.2 percent from 0.3 percent.
Foreclosures are boosting the supply of available properties and reducing prices, even as mortgage rates tumble to record lows. The time it would take to clear the market of homes for sale was 12.5 months in July, the highest in more than a decade of data, according to the National Association of Realtors. Banks seized a record 95,364 properties from delinquent borrowers in August, according to RealtyTrac Inc., an Irvine, California-based seller of housing data.
“We have a lot of homes for sale, and a lot of them are distressed properties,” said Thomas Lawler, founder and president of Lawler Housing and Economic Consulting in Leesburg, Virginia. “That is putting downward pressure on home prices.”
The biggest price loss was 1.6 percent in the region that includes Florida, Georgia, North Carolina and South Carolina, according to the report. The area that includes Arizona and Nevada posted the second-largest decline, at 1.5 percent.
Nationally, sales of existing homes in July plunged 27 percent to a 3.83 million annual pace, the lowest level on record, NAR said Aug. 24. July sales of new homes dropped to an annual pace of 276,000, the fewest since data began in 1963, the Commerce Department reported Aug. 25.
Falling Mortgage Rates
The average U.S. rate for a 30-year fixed loan fell to 4.32 percent this month, according to Freddie Mac. That’s the lowest in the McLean, Virginia-based company’s records dating to 1971. The rate probably will average 4.6 percent this year, down from 5 percent in 2009, according to Washington-based Fannie Mae, Freddie’s larger rival.
“The low interest rates aren’t giving housing a big enough boost because they’re not attractive to someone who doesn’t have a job or is concerned about keeping a job,” Lawler said.
The unemployment rate probably will average 9.6 percent this year, according to the median estimate of 59 economists in a Bloomberg survey. That would be the highest since the same rate in 1983, data from the Bureau of Labor Statistics show.
Today’s report from the FHFA is based on repeat sales data that compares prices of the same properties over time. The agency, which measures sales of homes with mortgages backed by Fannie Mae or Freddie Mac, doesn’t provide a specific price.
The median home price was $182,600 in July, as measured by NAR. The Chicago-based Realtors’ group is scheduled to issue its report on August sales and prices tomorrow.
asus: you may be able to piece these two reports together to find what you are looking for
pg. 26 of 39 has a chart that goes from 1950 to 1994
http://www.fdic.gov/bank/analytical/working/98-2.pdf
pg. 21 of this one has a chart that goes from 79 to 2007
http://www.gao.gov/new.items/d0878r.pdf
Bank Repossession of Homes Sets New Record in August
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?
Very well done db7....eom
Homebuyer tax credit: 950,000 must repay
September 9, 2010, 2:40 pm EDT
Nearly half of all Americans who claimed the first-time homebuyer tax credit on their 2009 tax returns will have to repay the government.
According to a report from the Inspector General for Tax Administration, released to the public Thursday, about 950,000 of the nearly 1.8 million Americans who claimed the tax credit on their 2009 tax returns will have to return the money.
The confusion comes because homebuyers were eligible for two different credits, depending on when their homes were purchased.
Those who bought properties during 2008 were to deduct, dollar for dollar, up to 10% of the home's purchase price or $7,500, whichever was less. The catch: The money was a no-interest loan that had to be repaid within 15 years.
Had they waited to buy until 2009, they could have gotten a much sweeter deal. Congress extended the credit and made it a refund rather than a loan.
Now, the IRS is developing a strategy for separating the 2009 taxpayers who are required to repay the credit from those who are not.
A review by the Inspector General earlier this year found that the IRS could not easily distinguish between home purchases made in 2008 and 2009. That heightened concerns that some claims could be erroneous or even fraudulent, that buyers could, for example, claim their purchase came later than it actually occurred.
Thursday's release reported that 73,000 claims, more than 4% of the 1.8 million homebuyers who received the credit, had incorrect purchase dates recorded by the IRS.
Some of the inaccuracies counted against the taxpayers, Nearly 60,000 were listed as purchasing in 2008 (meaning they had to repay the credit) or had no purchase dates at all, rather than their correct 2009 purchase dates, which would free them of the obligation to pay it back.
It is also taking a look at all those deceased taxpayers who received credits.
The inspector general reported that 1,326 single people listed as dead by the Social Security Administration claimed more than $10 million in credits. The IRS threw out 528 of those 1,326 claims, saving $4 million.
Patty; hadn't seen you posting much since June 7,
sent you a couple of e-mails on the Y and even made two phone calls to you....saw your post on VMC free for all, glad to see your ok