OREGON REAL ESTATE ROUND TABLE

Tag: Freddie Mac

  • MERS Enters Self-Preservation Mode, Issues Press Release To “Clarify” Its Role In Foreclosure Fraud, by Tyler Durden, Zerohedge.com


    As more people realize that the fake title transfer aspect of foreclosure fraud is just the tip of the iceberg which runs, via MERS (Mortgage Electronic Registration Systems) conduits all the way to the core of the securitization system, and thus $10 trillion in first level debt (and who knows how much in 3rd and 4th level layering of debt on top of this: think CDO-squared and cubed), we expect an increasing number of denials from the enablers in the explosion of securitization over the past ten years. Such as MERS. Which is why it is not surprising that late last night, it was precisely MERS who not only acknowledged for the first time its involvement in this whole fiasco (by a press release and a “fact and rebuttal” session), but has made it all too clear just how deep the problem truly runs. We would like to highlight just how very alike is the defense prepared by the High Frequency Signing Lobby to that by the High Frequency Traders out there: it is all just technological advancement, and if you want to blame it on someone, blame it on Intel and their fast fast chips: “What we’re seeing now is that the foreclosure process itself was not designed to withstand the extraordinary volume of foreclosures that the mortgage industry and local governments must now handle.” Obviously the volume only exploded once failed systems such as MERS appeared on the scene: it is precisely in this aspect that MERS served as an enabling catalyst to let loose the wave of exponential re-re-securitization. It continues: “The MERS process of tracking mortgages and holding title provides clarity, transparency and efficiency to the housing finance system.” And here is where MERS basically puts the ball back in the corrupt legal system’s court: “We are committed to continually ensuring that everyone who has responsibilities in the mortgage and foreclosure process follows local and state laws, as well as our own training and rules.” Because why not blame the entire judicial system, when one could just acknowledge the burden of having failed at doing their own job properly… One thing is certain: someone is going down for this biggest snafu in the history of mortgages/securitization.

    Follows the full MERS press release:

    Statement by CEO of Mortgage Electronic Registration Systems (MERS) RESTON, Va.–(BUSINESS WIRE)–

    October 09, 2010

    Mortgage Electronic Registration Systems (MERS) Chief Executive Officer R.K. Arnold today issued the following statement regarding the organization and clarifying certain aspects of its operations:

    “MERS is one important component of the complex infrastructure of America’s housing finance system. Billions of dollars of mortgage money flow through the financial system every year. It takes many, often-unseen mechanical processes to properly get those funds into the hands of qualified homebuyers.

    Technology designed to reduce paperwork has a very positive effect on families and communities. They may not see it, but these things save money and time, creating reliability and stability in the system. That’s important to keep the mortgage funds flowing to the consumers who need it. [ZH: odd how almost identical this defense is to the one prepared by the HFT lobby. Perhaps, it should now be called High Frequency Signing and Trading?]

    With millions of Americans facing foreclosure, every element of the housing finance system is under tremendous strain. What we’re seeing now is that the foreclosure process itself was not designed to withstand the extraordinary volume of foreclosures that the mortgage industry and local governments must now handle.

    MERS helps the mortgage finance process work better. The MERS process of tracking mortgages and holding title provides clarity, transparency and efficiency to the housing finance system. We are committed to continually ensuring that everyone who has responsibilities in the mortgage and foreclosure process follows local and state laws, as well as our own training and rules.”

    Facts about MERS

    FACT: Courts have ruled in favor of MERS in many lawsuits, upholding MERS legal interest as the mortgagee and the right to foreclose.

    This legal right springs from two important facts:

    1) MERS holds legal title to a mortgage as an agent for the owner of the loan 2) MERS can become the holder of the promissory note when the owner of the loan chooses to make MERS the holder of the note with the right to enforce if the mortgage loan goes into default.

    MERS does not authorize anyone to represent it in a foreclosure unless both the mortgage and the note are in MERS possession. In some cases where courts have found against MERS, those cases have hinged on other procedural defects or improper presentation of MERS’s legal interests and rights. Citations can be found at the end of this document.*

    FACT: MERS does not create a defect in the mortgage or deed of trust

    Claims that MERS disrupts or creates a defect in the mortgage or deed of trust are not supported by fact or legal precedents. This is often used as a tactic by lawyers to delay or prevent the foreclosure. The mortgage lien is granted to MERS by the borrower and the seller and that is what makes MERS the mortgagee. The role of mortgagee is legal and binding and confers to MERS certain legal rights and responsibilities.

    FACT: The trail of ownership does not change because of MERS

    MERS does not remove, omit, or otherwise fail to report land ownership information from public records. Parties are put on notice that MERS is the mortgagee and notifications by third parties can be sent to MERS. Mortgages and deeds of trust still get recorded in the land records.

    The MERS System tracks the changes in servicing rights and beneficial ownership. No legal interests are transferred on the MERS System, including servicing and ownership. In fact, MERS is the only publicly available comprehensive source for note ownership.

    While this information is tracked through the MERS System, the paperwork still exists to prove actual legal transfers still occurred. No mortgage ownership documents have disappeared because loans were registered on the MERS System. These documents exist now as they have before MERS was created. The only pieces of paper that have been eliminated are assignments between servicing companies because such assignments become unnecessary when MERS holds the mortgage lien for the owner of the note.

    FACT: MERS did not cause mortgage securitization

    MERS was created as a means to keep better track of the mortgage servicing and beneficial rights as loans were getting bought and sold at a high rate during the late 1990s.

    At the height of the housing market, low interest rates prompted some homeowners to refinance once, twice, even three times in the space of months. Banks were originating loans at more than double their usual rate. Assignments – – the document that names the holder of the legal title to the lien — primarily between servicing companies, were piling up in county land record offices, awaiting recording. Many times the loans were getting refinanced before the assignments could get recorded on the old loan. The delay prevented lien releases from getting recorded in a timely manner, leaving clouds on title.

    MERS was created to provide clarity, transparency and efficiency by tracking the changes in servicing rights and beneficial ownership interests. It was not created to enable faster securitization. MERS is the only publicly available source of comprehensive information for the servicing and ownership of the more than 64 million loans registered on the system. The Mortgage Identification Number (MIN), created by MERS, is similar in function to a motor vehicle VIN, which keeps track of these loans. Without MERS the current mortgage crisis would be even worse.

    FACT: Lenders cannot “hide” behind MERS

    MERS is the only comprehensive, publicly available source of the servicing and ownership of more than 64 million loans in the United States. If a homeowner needs to identify the servicer or investor of their loan, and it is registered in MERS, they can be helped through the MERS website or via toll-free number at 888-679-6377.

    FACT: MERS fully complies with recording statutes

    The purpose of recording laws is to show that a lien exists, which protects the mortgagee and any bona fide purchasers. When MERS is the mortgagee, the mortgage or deed of trust is recorded, and all recording fees are paid.

    *NOTABLE LEGAL VICTORIES:

    a. IN RE Mortgage Electronic Registration Systems (MERS) Litigation, a multi- district litigation case in federal court in Arizona who issued a favorable opinion, stating that “The MERS System is not fraudulent, and MERS has not committed any fraud.”

    b. IN RE Tucker (9/20/2010) where a Missouri bankruptcy judge found that the language of the deed of trust clearly authorizes MERS to act on behalf of the lender in serving as the legal title holder.

    c. Mortgage Electronic Registration Systems, Inc. v. Bellistri, 2010 WL 2720802 (E.D. Mo. 2010), where the court held that Bellistri’s failure to provide notice to MERS violated MERS’ constitutional due process rights.

     


     

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  • Refinancing, Not Foreclosures, is the Issue; Richard Alford on Bill Dudley and QEII, The Institutional Risk Analyst Blog


    One good rule thumb in trying an understand what’s happening with the [global] economy is listen to what Mr. Geithner says, and know that’s not possibly right. So, last week when Mr. Geithner states there’s no currency wars, that pretty much means it’s raging full scale, and the Fed’s dropping the biggest bombs.

     

    Joe Costello
    archein21@googlegroups.com
     

    One of the deepest, most sincere human illusions is the faith that there is (or can be) “real money” as opposed to “unreliable” money that does not hold a certain value and purchasing power. I discovered long ago from reading the history of money that this kind of certitude has never been the case except for very brief periods. Money is man-made and therefore subject to all the myriad fluctuations and follies in human arrangements. Obviously, this upsets people, especially goldbugs. They need to get over it though I doubt they ever will. I suspect Chris (maybe Joe) would like to get back to the Gold Standard, though he is too practical to say so directly. That regressive choice would be our true road to serfdom. If gold is the only “real” money, then working people should be paid for their labors in real gold, not paper certificates. 

    William Greider
    “The Last Word on Funny Money”
    9/29/10

     

    In this issue of The Institutional Risk Analyst, we return to a subject which we have awaited for nearly three decades and which many of the inhabitants of Wall Street have only recently discovered, namely the imperfection of collateral liens on mortgages underlying asset backed securities or ABS. The failure on the part of the largest banks to perfect the liens on the home, office building or other real property that underlies a securitization is turning out to be not merely a legal headache — and it is — but also the operational catalyst for the next crisis in financials. But the foreclosure mess is not — repeat not — the crux of the biscuit, to paraphrase the late great composer Frank Zappa.

     

    We also feature a comment by our contributor Dick Alford on the recent speech by NY Fed President William Dudley regarding the resumption of quantitative easing or “QE.” Suffice to say that Dudley has adopted the happy face messaging seen in use by Fed Chairman Ben Bernanke and other members of the compliant Federal Open Market Committee in Washington. Yet as we shall be telling an audience later today at American Enterprise Institute, the best part of the financial crisis lies ahead.  Click here to download the slide deck, “Pictures of Deflation.”

     

    We noted in previous comments that the Fed’s zero interest rate policy or “ZIRP,” in conjunction with QE, is draining something on the order of $1 trillion annually in income from individual and corporate savers to subsidize the banking sector. The key thing to understand about the continuing crisis in the mortgage sector is that the process of foreclosing on homes is reducing assets of commercial banks by an amount that is far larger than the $1 trillion in total tangible capital of the U.S. banking industry.  Read that last sentence again.

     

    While the Fed has been attempting to refloat these same banks — and their bond holders — on a sea of cheap money, the central bank is ignoring the larger, structural problems in the real estate sector. Forget mere valuations losses on ABS and derivatives on same. The real surprise heading for Washington and Wall Street is when everyone realizes that the big risk facing the U.S. economy is not from the foreclosure crisis, but from the actions of the “Big Five” financial monopolies — Fannie Mae, Freddie Mac, Bank of America (BAC) (Q2 2010 Stress Rating “C”), Wells Fargo (WFC) (Q2 2010 Stress Rating “B”) and JP MorganChase (JPM) (Q2 2010 Stress Rating “C”) to prevent tens of millions of American homeowners from refinancing their performing mortgages.

     

    But first, let’s take a stroll down memory lane.

     

    A few years back, a young analyst from the FRBNY named Chris Whalen went to work at the London branch of Bear, Stearns & Co. During the morning we sold German bunds and the other debt issued by what are now the EU member nations.  In the afternoon we sold mortgage-backed securities. Terms like CMO and convexity were soon heard on the trading floor as we vigorously stuffed large quantities of these very early private label RMBS into every open orifice on the European continent, including a number of large Japanese banks and insurance companies. Thus was coined the term “yield to commission.”

     

    During this period, we stayed in touch with our colleagues at the Fed, particularly a courageous attorney named Walker Todd , who was then working at the FRBNY. We described in previous comments how members of the Fed’s Washington staff persecuted Todd and other Reserve Bank officials for having the temerity to object to some of the more ridiculous policy positions pursued during the tenure of Fed Chairmen Paul Volcker and Alan Greenspan (See “IndyMac, FDICIA and the Mirrors of Wall Street’, January 6, 2009”). There is an entire chapter devoted to the good works of Chairman Volcker and his protege, Gerald Corrigan, in the upcoming book, Inflated: How Money and Debt Built the American Dream.”  And we answer the question: Is Paul Volcker the father of “Too Big To Fail?”  Click here to see the new target page for inflated.

     

    The Fed’s Washington staff was particularly infuriated by Todd’s writings regarding the amendments to the Federal Reserve Act contained in the FDICIA legislation in 1991. The amendment pushed by then-Fed staff director Donald Kohn was adopted without vote during a late-night Senate conference committee session chaired by none other than Christopher Dodd (D-CT). In a very real sense, Dodd, Kohn and armies of Wall Street attorneys from the large banks who drafted the amendment are the authors of the great bank bailout of 2008.

     

    One of the topics we discussed at length with Todd in the mid-1980s was the way in which Wall Street firms underwriting of residential mortgage backed securities or “RMBS” failed to perfect the collateral lien of the securities against the home or other real estate. This was a serious legal problem, especially if you believe in property rights and due process of law. Yet because the value of the real estate that served as collateral was rising pretty much continuously during the past several decades (Hello — What’s wrong with this picture?), the issue of imperfect collateral liens in ABS received little attention from the Fed or other regulators. See our comment: “No True Sale: Interview with Joseph Mason’, March 3, 2008”

     

    Now let’s walk through the process of creating an RMBS to illustrate the problem facing many home owners, lenders and investors. We’ll use the actual example of IRA cofounder Christopher Whalen. Back in 1998, Chris and his wife bought a home in Westchester County NY. The primary mortgage was originated by and independent broker and placred with Roslyn Savings Bank, which retained the paper for its own portfolio. In 2001, Chris refinanced with the Bank of New York Mellon (BK) (Q2 2010 Sress Rating: “A”), which immediately sold the “Alt-A” loan to the firm formerly known as Lehman Brothers. But that was only the start of this mortgage’s journey.

     

    The loan was then resold by Lehman Brothers to a special purpose vehicle (SPV) and then sold again to a Delaware trust created to securitize the mortgage into an ABS. Lehman controlled the trust, but the vehicle was administered as though it were in fact separate. Servicing was provided by Aurora Loan Servicing, a wholly owned subsidiary of Lehman, which is now being liquidated. When the time came to sell bonds to investors, the trustee for the Delaware vehicle issuing the securities repeated the process performed thousands of times before and merely took the documentation describing the mortgages into a file folder and went on to the next deal.

     

    Here’s the problem. If you go down to the Courthouse in White Plains, New York, and pull up the title record for the property purchased a decade ago by the Whalens, the only indication of any encumbrance over the collateral that is supposed to back up the securitization sold to investors by Lehman Brothers is the original assignment to Roslyn Savings and later to the Bank of New York. There is no change in recordation of the collateral lien on the property to Lehman Brothers much less the SPV or the Delaware trust that acted as the securitization vehicle in the ABS.

     

    In the event of a default, it could be argued that Lehman Brothers never owned the loan and thus never had the power to assign ownership to the SPV or the Delaware trust. Indeed, in plain legal terms, Bank of New York (and now JPMorgan, the successor to the Bank of New York retail business), is the only party with legal standing to enforce the lien on the property. But as far as Bank of New York is concerned, the loan was sold to Lehman Brothers more than a decade ago.

     

    Now you are probably wondering why the good people at Lehman Brothers never bothered to send a paralegal to the New York State Courthouse in White Plains to record a change in the collateral lien — at least regarding the sale to Lehman Brothers. The cost of perfecting the lien on the hundreds or even thousands of loans in a typical ABS costs money, but in aggregate would have added less than half a point to the cost of the deal. But the investment bankers at Lehman Brothers took that half point as profit instead of doing their jobs. No doubt claims for fraud, RICO and other misdemeanors are possible against Lehman and other RMBS underwriters, as with the civil RICO lawsuit againstCitigroup (C) (Q2 2010 Stress Rating “C”) and Ally Financial (Q2 2010 Stress Rating “A+”).

     

    You can argue that the banks were greedy and stupid for failing to perform their legally required duties as securities dealers and fiduciaries. You can also argue rightly that many banks are doing stupid things in foreclosures as they are being overwhelmed by mortgage defaults. But these very real concerns miss the larger issue. The bigger point that members of the media and the other happy campers who are following the foreclosure mess need to understand is that a poorly managed documentation trail does not change the fact that the loans are bad.  Focusing on the foreclosure mess at the expense of paying attention to the larger, secular threat from the deflation of the mortgage sector could be a fatal choice for American consumers, banks and the nation as a whole.

     

    House Speaker Nancy “Red” Pelosi (D-CA) and all of the other politicians clamouring for inquiries of bad home foreclosures are simply playing to their ill-informed audience. Neither Pelosi, most members of Congress nor the vast majority of Americans understand that the real crime by the Big Five banks is not the failure to perfect the loan documents on a mortgage a decade ago, but the active steps being taken today to prevent millions of American households from exercising their contractual right to refinance their mortgages when interest rates fall.

     

    The focus by Washington on the very real mortgage foreclosure mishaps committed by many lenders is the functional equivalent of putting Al Capone away for tax evasion. The real, continuing act of racketeering and criminality being committed by the Big Five banks is the cartel behavior which prevents home refinancing for performing borrowers and also renders Fed monetary policy largely ineffective. Instead of suing American Express (AXP), the Department of Justice should be suing the Big Five for anti-trust violations, price fixing and criminal RICO. Until the blockade erected by Fannie Mae and Freddie Mac to prevent refinancing of performing mortgages is removed, Fed monetary policy will be stymied and no amount of QE will be effective in stabilizing much less re-inflating the U.S. economy.

     

    Why Does Bill Dudley Want More QE?
    By Richard Alford

    New York Federal Reserve Bank President William Dudley gave a very well received speech last week. It is easy to see why Wall Street applauded the speech. It promised further steps by the Fed to support asset prices. It is less clear why anyone outside Wall Street would applaud the speech, as it contained arguments that were disingenuous, logically inconsistent and possibly dangerous.

     

    Dudley addressed a number of questions, including: “How much would the Fed have to purchase to have a given impact on the level of long-term interest rates and economic activity? Dudley asserts that recent experience suggests: “that $500 billion of purchases would provide about as much stimulus as a reduction in the federal funds rate of between half a point and three quarters of a point.” This was the take-away money passage and was quoted frequently in the press.

     

    However, the full answer is neither as precise nor as certain. A little later in that discussion Dudley went on to say: “Suppose the Fed was indeed successful in reducing long-term interest rates further-what then? Some claim that lower rates would have no effect on economic activity-that the Fed would be ‘pushing on a string.’ This is too dark a view. Although the responsiveness of demand to reductions in interest rates is probably lower in a world in which balance sheet constraints are important, the responsiveness is not zero. I believe that it remains significant.”

     

    Dudley asked: “How much would the Fed have to purchase to have a given impact on the level of long-term interest rates and economic activity? And asserting without qualification that QE is stimulative (and stimulative is generally understood to imply increase economic activity) in the first statement, Dudley backtracks in the second statement even as he dismisses the opposing view with an unsupported assertion: “This is too dark a view.”

     

    After presenting a precise quantitative link between QE and long-term rates, the best Dudley can offer in regard to the link between changes in long-term rates and economic activity is: “I believe that it is significant”. In fairness to Dudley, it is the best any supporter of QE can do. Given the failure of QE to stimulate the Japanese economy, there is no evidence that QE will stimulate economic activity in the US today.

     

    We need to recognize that assertions regarding the effectiveness QE are just part of a belief system unsupported by data — the definition of most modern religions.  This is troubling enough, but Dudley goes on to sketch the mechanism by which he believes that QE would support economic activity:

     

    “Even in today’s challenging circumstances; lower long-term rates would support the economy through a number of channels. Lower long-term rates would support the value of assets, including houses and equities and household net worth. Lower long-term rates would make housing more affordable and support consumption by enabling households to refinance their mortgages at lower rates. This would increase the amount of income left over for other spending.”

     

    In short, Dudley supports QE partly because he believes that it would lead to a policy-based, higher asset-price, easier credit, consumption-driven boom much like but more widely based than either the NASDAQ technology stock or more recent real estate bubbles. This ought to be very troubling as it suggests that the Fed has not learned from past mistakes.  The Fed believed that the financial markets without serious oversight were efficient and robust enough to weather a prolonged period of a near zero real and then unusually low Fed funds rates, as well as a tidal wave of financial innovation. The Fed’s fundamentalist faith in efficient markets was misplaced, as shown when risks they had dismissed were realized. Currently, the markets is pricing-in the Fed ushering in QE2 with “shock and awe” after the next FOMC meeting. It appears that the Fed will expose the economy to risks it has cavalierly dismissed as “too dark” in pursuit of returns that it “believes” exist. The public deserves better. It deserves a good faith analysis and honest presentation of both the upside and downside risks attached to QE.

     

    Early in the speech, Dudley applauded the rise in the personal savings rate and deleveraging as necessary steps to restore sustainable growth. However, late in the speech he argues that QE will work because it will depress savings and encourage the re-leveraging of the economy. But how can we re-leverage the economy when, as discussed above, banks are shrinking because neither the Treasury or the Fed have the courage to immediately restructure these institutions?  Logical consistency ought to be a necessary component of policy and explanations of policy, but apparently not at the Fed.

     

    Dudley remains mute on a number of ancillary issues. For example, he does not mention the transference of more than three-quarters of a trillion dollars annually from savers to the banks due to low rates even though this decreases the amount of income available for consumption spending. He also remains mute on the blurring of the distinction between the Fed and Treasury. From the Fed financing the public ownership of AIG to the apparent willingness to commit to monetizing (though QE) of the fiscal deficit, the Fed has moved in the direction of allowing both the Executive and Legislative branches of government to avoid their responsibilities.

     

    It is October in an election year. One expects speeches such as this from candidates running for public office, but not from Fed officials.

     

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  • BofA Extends Freeze on Foreclosures to All 50 States, by Michael J. Moore, Lorraine Woellert and Dakin Campbell, Bloomberg.com


     

    DAVOS/SWITZERLAND - Brian T. Moynihan, Preside...
    Image via Wikipedia

     

    Bank of America Corp., the biggest U.S. lender, extended a freeze on foreclosures to all 50 states as concern spread among federal and local officials that homes are being seized based on false data.

    “We just want to clear the air,” Bank of America Chief Executive Officer Brian T. Moynihan said today in a speech to the National Press Club in Washington.

    Bank of America, JPMorgan Chase & Co. and Ally Financial Inc. already froze foreclosures in 23 states where courts supervise home seizures amid allegations that employees used unverified or false data to speed the process. Bank of America’s new policy extends its moratorium to the entire nation, and the announcement spurred more demands from public officials and community groups for other banks to follow suit.

    “All mortgage providers should follow the example of Bank of America and review their practices to ensure that they are not unfairly targeting homeowners in Nevada and across the nation,” Senate Majority Leader Harry Reid, a Democrat from Nevada, said today in a statement.

    PNC Financial Services Group Inc. halted sales of foreclosed homes for a month to review documents in its mortgage servicing procedures, according to an Oct. 4 memo the Pittsburgh-based bank sent to lawyers handling the lender’s foreclosures.

    Bank of America fell 13 cents, or 1 percent, to $13.18 at 4 p.m. in New York Stock Exchange composite trading. The shares have lost 12 percent this year.

    States Investigating

    “We will stop foreclosure sales until our assessment has been satisfactorily completed,” the Charlotte, North Carolina- based company said today in a statement. “Our ongoing assessment shows the basis for foreclosure decisions is accurate.”

    At least seven states are investigating claims that home lenders and loan servicers took shortcuts to speed foreclosures. Attorneys general in Ohio and Connecticut have said some of the practices used by banks to take away homes may amount to fraud. Acting Comptroller of the CurrencyJohn Walsh last week asked the nation’s seven biggest lenders to review foreclosures for defective documents, spokesman Bryan Hubbard said.

    “Bank of America has done the right thing by stopping foreclosures in all 50 states,” North Carolina Attorney General Roy Cooper said today in a statement. “Other banks that have questionable procedures should do the same while the investigation continues.”

    President Barack Obama’s administration didn’t pressure the bank to enact the freeze, Moynihan said.

    Record Foreclosures

    Lenders took possession of a record 95,364 homes in August and issued foreclosure filings to 338,836 homeowners, or one of every 381 U.S. households, according to RealtyTrac Inc., an Irvine, California-based data vendor.

    Wells Fargo spokeswoman Vickee Adams said the lender is still processing foreclosures and referred to a statement the bank put out earlier this week, saying “our affidavit procedures and daily auditing demonstrate that our foreclosure affidavits are accurate.”

    Thomas Kelly, a spokesman for New York-based JPMorgan, and Gina Proia, spokeswoman for Detroit-based Ally, declined to comment.

    “Bank of America has made the right choice given the circumstances of this scandal,” said Kevin Stein, associate director of the California Reinvestment Coalition in San Francisco. “The primary concern for all of these banks should be to figure out where they are handling foreclosures illegally before they erroneously and unfairly take another family’s home.”

    Lawmakers React

    In Washington, dozens of lawmakers in Congress have called for a freeze on foreclosures and are seeking investigations. House Oversight and Government Reform Committee ChairmanEdolphus Towns yesterday demanded a moratorium and asked New York State Attorney General Andrew Cuomo to investigate allegations of fraud. Towns, a New York Democrat, led hearings last year into Bank of America’s federal bailouts.

    “The implications of ignoring the foreclosure problems are far too great to be ignored,” Towns said in a statement. “Bank of America did the right thing today and I expect to see every other responsible banking institution follow their lead.”

    On Wednesday, two members of the House Financial Services Committee, Luis Gutierrez of Illinois and Dennis Moore of Kansas, asked the Special Inspector General of the Troubled Asset Relief Program to investigate foreclosure practices.

    ‘Unwarranted Foreclosures’

    “There is already enough evidence of unwarranted foreclosures and irregularities by lenders and servicers to warrant full investigations into the practices of these financial institutions,” the lawmakers wrote in a letter.

    A coalition of community organizer groups and labor unions, including the National People’s Action and the Service Employees International Union, called for a national freeze on foreclosures.

    “It is unconscionable that Wall Street banks continue to use a corrupt and fraudulent procedure to flood the housing market with illegal foreclosures that are throwing millions of American families out of their homes,” the groups said in a statement today. “It’s the latest example of a predatory industry.”

    To contact the reporters on this story:
Michael J. Moore in New York at
mmoore55@bloomberg.net;
Lorraine Woellert in Washington at
lwoellert@bloomberg.net;
Dakin Campbell in San Francisco at
dcampbell27@bloomberg.net.To contact the editors responsible for this story:
Alec D.B. McCabe in New York at
amccabe@bloomberg.net;
Rick Green in New York at
rgreen18@bloomberg.net.
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  • In foreclosure controversy, problems run deeper than flawed paperwork, by Brady Dennis and Ariana Eunjung Cha, Washingtonpost.com


    Sign of the times - Foreclosure
    Image via Wikipedia

    Millions of U.S. mortgages have been shuttled around the global financial system – sold and resold by firms – without the documents that traditionally prove who legally owns the loans.

    Now, as many of these loans have fallen into default and banks have sought to seize homes, judges around the country have increasingly ruled that lenders had no right to foreclose, because they lacked clear title.

    These fundamental concerns over ownership extend beyond those that surfaced over the past two weeks amid reports of fraudulent loan documents and corporate “robo-signers.”

    The court decisions, should they continue to spread, could call into doubt the ownership of mortgages throughout the country, raising urgent challenges for both the real estate market and the wider financial system.

    For struggling homeowners trying to avoid foreclosure, it could mean an opportunity to challenge the banks they argue have been unhelpful at best and deceptive at worst. But it also threatens to leave them in prolonged limbo, stuck in homes they still can’t afford and waiting for the foreclosure process to begin anew.

    For big banks, “there’s a possible nightmare scenario here that no foreclosure is valid,” said Nancy Bush, a banking analyst from NAB Research. If millions of foreclosures past and present were invalidated because of the way the hurried securitization process muddied the chain of ownership, banks could face lawsuits from homeowners and from investors who bought stakes in the mortgage securities – an expensive and potentially crippling proposition.

    For the fragile housing market, already clogged with foreclosure cases, it could mean gridlock and confusion for years. And there is concern in Washington that if the real estate market and financial institutions suffer harm, it could force the government to step in again. Attorney General Eric H. Holder Jr. said Wednesday he is looking into the allegations of improper foreclosures, and Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate banking committee, said he plans to hold hearings on the issue.

    At the core of the fights over the legal standing of banks in foreclosure cases is Mortgage Electronic Registration Systems, based in Reston.

    The company, known as MERS, was created more than a decade ago by the mortgage industry, including mortgage giants Fannie Mae and Freddie Mac, GMAC, and the Mortgage Bankers Association.

    MERS allowed big financial firms to trade mortgages at lightning speed while largely bypassing local property laws throughout the country that required new forms and filing fees each time a loan changed hands, lawyers say.

    The idea behind it was to build a centralized registry to track loans electronically as they were traded by big financial firms. Without this system, the business of creating massive securities made of thousands of mortgages would likely have never taken off. The company’s role caused few objections until millions of homes began to fall into foreclosure.

    In recent years, the company has faced numerous court challenges, including separate class-action lawsuits in California and Nevada – the epicenter of the foreclosure crisis. Lawyers in other states have also challenged the company’s legal standing in court.

     

    Kentucky lawyer Heather Boone McKeever has filed a state class-action suit and a federal civil racketeering class-action suit on behalf of homeowners facing foreclosure, alleging that MERS and financial firms that did business with it have tried to foreclose on homes without holding proper titles.

    “They have no legal standing and no right to foreclose,” McKeever said. “If you or I did this one time, we’d be in jail.”

    Judges in various states have also weighed in.

    In August, the Maine Supreme Court threw out a foreclosure case because “MERS did not have a stake in the proceedings and therefore had no standing to initiate the foreclosure action.”

    In May, a New York judge dismissed another case because the assignment of the loan by MERS to the bank HSBC was “defective,” he said. The plaintiff’s counsel seemed to be “operating in a parallel mortgage universe,” the judge wrote.

    Also in May, a California judge said MERS could not foreclose on a home, because it was merely a representative for Citibank and did not own the loan.

    On the other hand, Minnesota legislators passed a law stating that MERS explicitly has the right to bring foreclosure cases. And on its Web site and in e-mails, MERS cites numerous court decisions around the country that it says demonstrate the company’s right to act on behalf of lenders and to undertake foreclosures.

    “Assertions that somehow MERS creates a defect in the mortgage or deed of trust are not supported by the facts,” a company spokeswoman said.

    But that’s precisely what lawyers are arguing with more frequency throughout the country. If such an argument gains traction in the wake of recent foreclosure moratoriums, the consequences for banks could be enormous.

    “It’s an issue of the whole process of foreclosure having been so muddied by the [securitization] process,” said Bush, the banking analyst. “It is no longer a straightforward legalistic process, which is what foreclosures are supposed to be.”

    Janet Tavakoli, founder and president of Tavakoli Structured Finance, a Chicago-based consulting firm, said that for much of the past decade, when banks were creating mortgage-backed securities as fast as possible, there was little time to check all the documents and make sure the paperwork was in order.

    But now, when judges, lawyers and elected officials are demanding proper paperwork before foreclosures can proceed, the banks’ paperwork problems have been laid bare, she said.

    The result: “Banks are vulnerable to lawsuits from investors in the [securitization] trusts,” Tavakoli said.

    Referring to the federal government’s $700 billion Troubled Assets Relief Program for banks, she added, “This problem could cost the banks significantly more money, which could mean TARP II.”

    dennisb@washpost.com chaa@washpost.com

     

     

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  • U.S. Justice Dept. probing foreclosure processes, Yahoo.com


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    WASHINGTON (Reuters) – The U.S. Justice Department said on Wednesday it was probing reports the nation’s top mortgage lenders improperly evicted struggling borrowers from their homes as part of the devastating wave of foreclosures unleashed by the financial crisis.

    Amid mounting political outrage over the U.S. mortgage mess, key members of U.S. congressional banking committees joined calls for probes into the foreclosure activities of banks accused of tossing homeowners out without proper review.

    At least three banks have already halted eviction proceedings, and various lawmakers have called for an industry-wide moratorium on home repossessions until the problems are fixed. Attorney General Eric Holder said the Justice Department would look into media reports that loan servicers improperly have used “robo-signers” to push through thousands of foreclosure orders.

    Holder’s move, and the rising chorus of fury among lawmakers, comes ahead of November congressional elections and takes aim at one of the most visible signs of the U.S. economic crisis as hundreds of thousands of families have lost their homes as unemployment surged.

    The moves on foreclosures risk further slowing the U.S. economic recovery, leaving banks unsure whether they will ever claw back losses and the housing market overshadowed by a mounting inventory of homes still likely to face foreclosure in future.

    U.S. House of Representatives Speaker Nancy Pelosi and fellow Democrats wrote to Holder earlier this week asking the Justice Department to look into banks’ actions after receiving reports from thousands of homeowners about their foreclosure woes.

    On Wednesday, the lead Republican on the Senate Banking Committee, Senator Richard Shelby, called on federal regulators to review the foreclosure practices of JPMorgan Chase and Co (JPM.N), Bank of America Corp (BAC.N) and Ally Financial Inc, formerly known as GMAC, and said a congressional investigation should also be started.

    Two senior Democratic members of the House Financial Services Committee also said it was time to examine whether the banks broke the law based on their participation in the law that governed the Troubled Asset Relief Program, the $700 billion bailout of financial firm.

    “The American people helped out these companies and the least they deserve is a guarantee of due process and fairness,” Representatives Luis Gutierrez and Dennis Moore said.

    Banks are expected to take over a record 1.2 million homes this year, up from about 1 million last year, according to real estate data company RealtyTrac Inc.

    Federal and state officials have pushed to suspend foreclosures after reports that banks signed large numbers of foreclosure affidavits without conducting proper reviews.

    Banks and loan servicers, companies that collect monthly mortgage payments, reportedly have used “robo-signers” — middle-ranking executives who signed thousands of affidavits a month claiming they were knowledgeable of the cases.

    Separately on Wednesday, Wells Fargo & Co (WFC.N) agreed to pay eight states $24 million after allegations of deceptive marketing practices at its home loan unit. The firm said it would also alter its foreclosure prevention practices that could benefit struggling homeowners by more than $700 million.

    Wells Fargo Home Mortgage‘s chief financial officer, Franklin Codel, told Reuters that his unit did not cut corners to speed the foreclosure process. He said he was “confident that the paperwork is being properly produced.”

    STATES TAKE ACTION

    The issue on improper handling of foreclosures came to the fore last month when Ally Financial said officials had signed thousands of affidavits without having personal knowledge of borrowers’ situations.

    Ally suspended evictions and post-foreclosure proceedings in 23 states last month, followed by similar moves by JPMorgan Chase & Co and Bank of America.

    The foreclosure issue and the battered state of the U.S. housing market have weighed on the Obama administration ahead of the November congressional elections in which the Democrats already face the possibility of big losses.

    Any broader push to solve the foreclosure crisis, such as the wholesale forgiveness of principal debt of struggling homeowners, is unlikely to find support among lawmakers because of the cost and the potential for political backlash from any move seen as rewarding reckless behavior by banks or borrowers.

    The focus on bank procedures has thrown a new twist into the saga.

    North Carolina Attorney General Roy Cooper on Wednesday became the latest state official to ask lenders to suspend home repossessions as he probes foreclosure practices.

    Democratic Senator Robert Menendez earlier this week raised the idea of a national foreclosure moratorium.

    Ally Financial and its GMAC Mortgage unit also were targeted by Ohio’s attorney general, Richard Cordray, on Wednesday, who announced a lawsuit alleging fraud and violations of Ohio’s consumer law.

    Cordray also said he has sought meetings with Citibank (C.N), Bank of America, JPMorgan Chase and Wells Fargo to try to ascertain whether their foreclosure processes include any of the “mass” signing of official papers that are the subject of the suit against GMAC Mortgage.

    Gina Proia, a spokeswoman for Ally Financial, said there was nothing fraudulent or deceitful about GMAC Mortgage’s practices. She said the company will “vigorously defend” itself, and expects to be fully vindicated by the Ohio courts.

    GMAC Mortgage said in a statement it “believes there was nothing fraudulent or deceitful about its foreclosure practices. If procedural mistakes were made in the completion of certain legal documents, GMAC Mortgage reacted proactively to the issue and immediately undertook steps to remedy the situation.”

    (Writing by Corbett B. Daly and Andrew Quinn; Editing by Leslie Adler)

     

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  • New HUD program offers up to 24 months of mortgage assistance to unemployed, by CHRISTINE RICCIARDI, Housingwire.com


     

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    A new program run by the Department of Housing and Urban Development allows delinquent borrowers who are unemployed or suffering from a severe medical condition to receive assistance with mortgage payments for up to 24 months.

    The Emergency Homeowners Loan Program offers up to $50,000 to eligible borrowers at a 0% interest rate. HUD officials called it a true bridge loan because all deferred payments are forgivable provided the borrower lives in a home and remains current on payments for five consecutive years.

    But the program isn’t for everyone. Brian Sullivan, public affairs representative for HUD, said borrowers must have a consistent track record of making mortgage payments on time. A household’s yearly income also may not exceed 120% of the area median income and must have had its income reduced by at least 15% in two years due to sudden unemployment, underemployment or a medical condition.

    The property must be the borrower’s primary residence and at risk of foreclosure.

    “This is about families who were paying their mortgage, were current, were working, and then something happen,” Sullivan told HousingWire. “It’s for low- to middle-income, working families.”

    HUD announced plans for the program in August, after the agency was designated under Dodd-Frank to create an emergency homeowners assistance program with an allocated budget of $1 billion. Funding through the new program is only available in the 32 states and Puerto Rico that were not otherwise funded by the Hardest Hit Fund.

    Borrowers must meet with their local NeighborWorks division or state finance agencies with HUD approved standards to receive funding. NeighborWorks is a national nonprofit organization created by Congress to provide financial support, technical assistance and concealing services to homeowners.

    HUD hopes to begin accepting applications by the end of the year. HUD announced Tuesday how the $1 billion would be divided by state (chart below, in dollars):

    Write to Christine Ricciardi.

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  • Multi-Billion-Dollar Class Action Suits Filed Against Lender Processing Services for Illegal Fee Sharing, Document Fabrication; Prommis Solutions Also Targeted, Nakedcapitalism.com


    Welcome to our new readers from the FCIC.

    Lender Processing Services, a crucial player in the residential mortgage servicing arena, has been hit with two suits seeking national class action status (see here and here for the court filings). If the plaintiffs prevail, the disgorgement of fees by LPS could easily run into the billions of dollars (we have received a more precise estimate from plaintiffs’ counsel). To give a sense of proportion, LPS’s 2009 revenues were $2.4 billion and its net income that year was $276 million.

    These suits, one of which was filed late last week, the other Monday, appear to be the proximate cause for the sharp drop in LPS stock, which fell 5% on Friday and 8% Monday (trading was halted just prior to the close of the trading day).

    Those close to the foreclosure process have lodged many complaints against LPS. But the two suits we highlight here level the most serious and wideranging allegations thus far.

    By way of background, we’ve described issues with foreclosure mills and the flaws in the securitization process at some length in previous posts (see here and here for some recent posts which contain overview material). As evidence about problems with the foreclosure process have surfaced at more and more servicers, one of the common themes has been that a substantial portion of the foreclosure process was outsourced to various processing companies. Foreclosure defense attorneys have cited one firm, called Lender Processing Service (LPS) as one of the largest as well as more problematic firms in the outsourced foreclosure business. In addition, by 2008, LPS had purchased a company called DocX, the company responsible for the“document production” price sheet cited here earlier.

    LPS is effectively in three lines of business (which are organized in two divisions): Technology, Data, and Analytics; Loan Services, and Default Services. The suits focus on the practices of the Default Services operation, which contributed $1.137 billion, or 48% of total revenues. The allegations set forth in the suits involve its Default Services, which organizes and manages foreclosures (including property management and REO auctions) on behalf of servicers.

    But the rub in this line of business is that the servicers are technically not the clients. LPS acts a sort of general contractor, farming out various tasks to both internal staff as well as outside firms. But LPS’s business pitch to the servicing industry was that it would come in and use a technology platform and provide (if desired) a turnkey solution, FOR NO ADDITIONAL COST than what the servicers were already paying on foreclosures.

    How could that be? All of LPS’s revenues in Default Services come from the lawyers in the national network of foreclosure mills that LPS has developed over time. Note that these cases may be filed in state court or federal bankruptcy court, depending on the situation of the borrower. In a routine foreclosure, all legal actions will be filed in state court. If the borrower has filed for a Chapter 13 bankruptcy, the Federal bankruptcy court has jurisdiction. In theory, the bankruptcy filing stops the actions of all creditors until the borrower has worked out a payment plan with the court. But in these cases, LPS and its network firms are seeking to break the bankruptcy court time out and grab the borrower’s house (the legal procedure is “motion for relief of stay”).

    To illustrate the degree of control LPS exercises over its network: we have been told by an LPS insider that the software that LPS uses to coordinate with all law firms in its network, LPS Desktop, incorporates a scoring system called 3/3/30. When LPS sends a referral on a foreclosure, the referee is expected to respond in three minutes. When it accepts the referral, it is auto debited (ACH or credit card). In three days, it is expected to have filed the first motion required in pursing the case, and it is expected to have resolved the case in 30 days. Firms are graded according to their ability to meet these time parameters in a green/yellow/red system. Firms that get a red grade are given a certain amount of time to improve their results or they are kicked out of the network.

    The cases describe the many fees between LPS and the network law firms. The terms of standard agreements provide for the payment of $150 at the time of referral (the first 3 in the 3/3/30 standard above). Network firms allegedly pay other fees as various milestones are reached, and these are couched as fees for technology, administrative review, document execution, and other legitimate-sounding services. We’ve also been told separately by LPS insiders that LPS and network law firms split the fee for the motion for relief of stay in bankruptcy court, as well as the fee on a small filing called a proof of claim.

    What, pray tell, is wrong with this business model? The two suits attack LPS’s very foundations. One case was filed late last week in Federal bankruptcy court in Mississippi and the other in state court in Kentucky. Both make similar allegations, but the Federal case is broader in some respects (it includes a company called Prommis Solutions a firm backed by Great Hill Partners, that like LPS, provides services to foreclosure mills, including one named in this case as defendant along with LPS).

    The Kentucky case includes on the RMBS trust issue that we have discussed in this blog. First, it contends that the mortgage assignment attempted by the the local law firm to allow the trust foreclose was a void under New York law, which governs the trust. Hence the foreclosure was invalid. Second, it claims that the defendants (the local law firm and LPS) fabricated documents. Third, the plaintiffs claim that the defendants (LPS and the local law firm) conspired together to practice systemic fraud upon the court and engage fee sharing arrangements, which is tantamount to the unauthorized practice of law (It is illegal for a law firm to split fees with a non-lawyer or to pay a non-lawyer for a referral; it’s considered to be the unauthorized practice of law). And this leads to some very serious conclusions. Per the Kentucky case:

    This attempt by the Trust to take Stacy’s real property is most analogous to stealing since this Trust cannot provide any legal evidence of ownership of the promissory note in accordance with the requirements of New York law which governs and controls the actions of the Trust and the Trustee acting on behalf of the trust.

    But the real meat in these cases are the class action claims, and they are real doozies. Both allege undisclosed contractual arrangements for impermissible legal fee splittings, which are camouflaged as various types of fees we described earlier. The suits describe the considerable lengths that LPS has gone to to keep these illegal kickbacks secret, including requiring that all attorneys who join the network keep the arrangement confidential. as well as using dubious “trade secret” claims to forestall their disclosure in discovery.

    As bad as this fact pattern is, it has even more serious implications for the bankruptcy court filing in Mississippi. In a bankruptcy case, any attorney pleading before the court must disclose every disbursement pursuant to a case, no matter how minor. Yet the payment of fees to LPS have never been disclosed to a single bankruptcy judge in the US, since LPS requires they be kept confidential. LPS and its network lawyers are thus engaged in a massive, ongoing fraud on all bankruptcy courts in the US.

    The Prommis Solutions/Great Hill charges are included only in the Mississippi case. Prommis is broadly in the same business as LPS’s Default Services unit (”leading provider of technology-enabled processing services for the default resolution sector of the residential mortgage industry”). And Prommis and its investor Great HIll, like LPS, are not a law firms, which means their participation in foreclosure-related legal fees constitutes illegal fee sharing. Prommis filed a registration statement (it planned to go public) this past June. Consider this section from its “Risk Factors” discussion (boldface theirs):

    Regulation of the legal profession may constrain the operations of our business, and could impair our ability to provide services to our customers and adversely affect our revenue and results of operations.

    Each state has adopted laws, regulations and codes of ethics that grant attorneys licensed by the state the exclusive right to practice law. The practice of law other than by a licensed attorney is referred to as the unauthorized practice of law. What constitutes or defines the boundaries of the “practice of law,” however, is not necessarily clearly established, varies from state to state and depends on authorities such as state law, bar associations, ethics committees and constitutional law formulated by the U.S. Supreme Court. Many states define the practice of law to include the giving of advice and opinions regarding another person’s legal rights, the preparation of legal documents or the preparation of court documents for another person. In addition, all states and the American Bar Association prohibit attorneys from sharing fees for legal services with non-attorneys.

    The common remedy for illegal fee sharing is disgorgement. Remember the magnitude of this business: it accounts for nearly half of LPS’s revenues. LPS is a pretty levered operation, with a debt to equity ratio of over 3:1. It isn’t hard to see that success in either of these cases would be a fatal blow to LPS. Similarly, if the allegations are proven true it could have ramifications for all servicers who do business with Fannie and Freddie since they are not supposed to be involved in referring work to a vendor who pays a kickback for a referral.

  • Mortgage investor group wants loans ensnared in robo-signing snafu repurchased, by JASON PHILYAW, Housingwire.com


    The Association of Mortgage Investors wants trustees of residential mortgage-backed securities “to hold servicers accountable for negligence in maintaining the assets of trusts.”

    The Washington firm, which advocates on behalf of institutional and private MBS investors, said in a press release that the recently uncovered robo-signing debacle – first reported by HousingWire two weeks ago – “undermines the integrity and the operational framework of the housing finance and mortgage system as it exists today.”

    Most of the nation’s largest mortgage lenders, includingBank of America, Ally Financial, formerly GMAC Mortgage, and JPMorgan Chase, have suspended foreclosures to amend faulty affidavits that may have been signed without looking at the documents or a notary present.

    The AMI wants bond trustees to investigate the process and assure investors that mortgages bundled and sold into MBS are repurchased by the loan originators, who failed in their “fiduciary responsibilities [to] protect millions of American pensioners and retirees.”

    “The capacity constraints at our nation’s largest servicers continue to be an issue of great concern to investors,” said Chris Katopis, executive director of the AMI. “We urgeAlly, JPMorgan Chase, and all other servicers to invest the time and resources necessary to improve their operational infrastructure and to avoid situations where efficient mortgage servicing and collection practices are compromised.”

    He said the may snafus may cause inaccurate legal filings for the mortgages and underlying properties in the MBS pools.

    “The unfortunate and little-known consequence of these operational breakdowns is the destruction of capital needed to sustain fixed-income investors reliant upon cash flow from pensions and retirement accounts,” Katopis said.

    Write to Jason Philyaw.

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  • Inside Lending Newsletter From Geoffrey Boyd, Prime Lending


    Ben Bernanke (lower-right), Chairman of the Fe...
    Image via Wikipedia

    INFO THAT HITS US WHERE WE LIVE  Last week’s housing market data centered on Standard & Poor’s S&P/Case-Shiller Home Price Index. This showed home prices UP in July for the fourth month in a row, but the pace of their gain had slowed from prior months. With the expiration of the government’s home buyer tax incentives, some observers wonder if the S&P/Case-Shiller will keep moving up. The composite 20-city index, a broad measure of U.S. home prices, showed a 3.2% increase year over year, the sixth month in a row it posted an annual gain.

    Nonetheless, home price gains did slow in the waning days of the tax credits. In July, only 12 of the 20 cities surveyed showed price gains, compared to 17 cities reporting rising prices in June. Analysts pointed out that these results underscore the fact that the spring/early summer months are the best for home sales. Most experts feel the next few months should give us a better idea of the true strength of the housing market.

    >> Review of Last Week

    A BIT OF A BREATHER… Investors on Wall Street took a rest last week from bidding stock prices up the way they had earlier in the month. Performance of the major market indexes was uninspiring, though slippages were all less than a half a percent. But performance for the month was impressive. The broad-based S&P 500 index, favored by professional investors, shot up 8.8% for September, its best monthly gain since April 2009 and its best September reading in over 70 years.

    Perhaps investors took the week off because they remain cautious about the near-term economic recovery. Consumers seem to agree, as the week began with a surprise drop in September’s Consumer Confidence Index, which hit a seven-month low, falling far short of consensus expectations. The ISM Manufacturing Index also slid a bit from August to September, missing estimates, but remaining in expansion territory.

    Upside economic data included better than forecast weekly initial jobless claims, although 453,000 is still not a good number. Continuing claims dropped by 83,000 for the week, but that number remains well above 4 million. Personal income and spending (PCE) for August were up better than expected and Core PCE was up just 0.1%, so inflation is still in check.

    For the week, the Dow ended down 0.3%, to 10829.68; the S&P 500 was down 0.2%, to 1146.24; and the Nasdaq was off 0.4%, to 2370.75.

    The bond market ended the week with investor interest helping prices in some areas. One was the FNMA 30-year 4.0% bond we watch, which ended UP 10 basis points for the week, closing at $102.27. According to Freddie Mac‘s weekly survey, national average mortgage rates for fixed-rate mortgages dropped a tad, remaining at historically low levels.

    >> This Week’s Forecast

    WHERE WE’RE GOING WITH HOMES AND JOBS… The week begins with August Pending Home Sales, which count signed contracts and therefore tell us what will be happening with closings a few months out. Unfortunately, the consensus expects the August reading to be down a bit from July. But September ISM Services is expected to show the non-manufacturing sector still indicating expansion, with a reading just over 50.

    The week ends with the September Employment Report and the forecast is for no increase in payrolls overall, although 70,000 jobs are expected to be added to the private sector. However, population growth outpaces this rate of job creation, so unemployment is predicted to tick up to 9.7%.

    >> The Week’s Economic Indicator Calendar

    Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

    Economic Calendar for the Week of October 4 – October 8

    Date Time (ET) Release For Consensus Prior Impact
    M
    Oct 4    		 10:00 Pending Home Sales Aug 1.0% 5.2% Moderate
    Tu
    Oct 5    		 10:00 ISM Services Sep 51.8 51.5 Moderate
    W
    Oct 6    		 10:30 Crude Inventories 10/2 NA –0.475M Moderate
    Th
    Oct 7    		 08:30 Initial Unemployment Claims 10/2 455K 453K Moderate
    Th
    Oct 7    		 08:30 Continuing Unemployment Claims 9/25 4.450M 4.457M Moderate
    F
    Oct 8    		 08:30 Average Workweek Sep 34.2 34.2 HIGH
    F
    Oct 8    		 08:30 Hourly Earnings Sep 0.1% 0.3% HIGH
    F
    Oct 8    		 08:30 Nonfarm Payrolls Sep 0K –54K HIGH
    F
    Oct 8    		 08:30 Nonfarm Private Payrolls Sep 70K 67K HIGH
    F
    Oct 8    		 08:30 Unemployment Rate Sep 9.7% 9.6% HIGH

    >> Federal Reserve Watch

    Forecasting Federal Reserve policy changes in coming months  There’s been a lot of talk about the Fed’s readiness to provide a second round of quantitative easing (QE-2) if needed. This has led economists to believe that the Fed Funds Rate will remain at its rock bottom levels for quite some time. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

    Current Fed Funds Rate: 0%–0.25%

    After FOMC meeting on: Consensus
    Nov 3 0%–0.25%
    Dec 14 0%–0.25%
    Jan 26 0%–0.25%

    Probability of change from current policy:

    After FOMC meeting on: Consensus
    Nov 3 <1%
    Dec 14 <1%
    Jan 26 <1%
    Geoffrey Boyd
    Area Manager/Mortgage Consultant
    10135 SE Sunnyside Road, Suite 120
    Clackamas, OR 97015
    Phone: 503.462.0413
    Fax: 877.874.4649
    Mobile: 503.819.2462
    Main: 503.786.7092
    Related Articles

  • Inside Lending Newsletter From Geoffrey Boyd, Prime Lending


    Ben Bernanke (lower-right), Chairman of the Fe...
    Image via Wikipedia

    INFO THAT HITS US WHERE WE LIVE  Last week’s housing market data centered on Standard & Poor’s S&P/Case-Shiller Home Price Index. This showed home prices UP in July for the fourth month in a row, but the pace of their gain had slowed from prior months. With the expiration of the government’s home buyer tax incentives, some observers wonder if the S&P/Case-Shiller will keep moving up. The composite 20-city index, a broad measure of U.S. home prices, showed a 3.2% increase year over year, the sixth month in a row it posted an annual gain.

    Nonetheless, home price gains did slow in the waning days of the tax credits. In July, only 12 of the 20 cities surveyed showed price gains, compared to 17 cities reporting rising prices in June. Analysts pointed out that these results underscore the fact that the spring/early summer months are the best for home sales. Most experts feel the next few months should give us a better idea of the true strength of the housing market.

    >> Review of Last Week

    A BIT OF A BREATHER… Investors on Wall Street took a rest last week from bidding stock prices up the way they had earlier in the month. Performance of the major market indexes was uninspiring, though slippages were all less than a half a percent. But performance for the month was impressive. The broad-based S&P 500 index, favored by professional investors, shot up 8.8% for September, its best monthly gain since April 2009 and its best September reading in over 70 years.

    Perhaps investors took the week off because they remain cautious about the near-term economic recovery. Consumers seem to agree, as the week began with a surprise drop in September’s Consumer Confidence Index, which hit a seven-month low, falling far short of consensus expectations. The ISM Manufacturing Index also slid a bit from August to September, missing estimates, but remaining in expansion territory.

    Upside economic data included better than forecast weekly initial jobless claims, although 453,000 is still not a good number. Continuing claims dropped by 83,000 for the week, but that number remains well above 4 million. Personal income and spending (PCE) for August were up better than expected and Core PCE was up just 0.1%, so inflation is still in check.

    For the week, the Dow ended down 0.3%, to 10829.68; the S&P 500 was down 0.2%, to 1146.24; and the Nasdaq was off 0.4%, to 2370.75.

    The bond market ended the week with investor interest helping prices in some areas. One was the FNMA 30-year 4.0% bond we watch, which ended UP 10 basis points for the week, closing at $102.27. According to Freddie Mac‘s weekly survey, national average mortgage rates for fixed-rate mortgages dropped a tad, remaining at historically low levels.

    >> This Week’s Forecast

    WHERE WE’RE GOING WITH HOMES AND JOBS… The week begins with August Pending Home Sales, which count signed contracts and therefore tell us what will be happening with closings a few months out. Unfortunately, the consensus expects the August reading to be down a bit from July. But September ISM Services is expected to show the non-manufacturing sector still indicating expansion, with a reading just over 50.

    The week ends with the September Employment Report and the forecast is for no increase in payrolls overall, although 70,000 jobs are expected to be added to the private sector. However, population growth outpaces this rate of job creation, so unemployment is predicted to tick up to 9.7%.

    >> The Week’s Economic Indicator Calendar

    Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

    Economic Calendar for the Week of October 4 – October 8

    Date Time (ET) Release For Consensus Prior Impact
    M
    Oct 4    		 10:00 Pending Home Sales Aug 1.0% 5.2% Moderate
    Tu
    Oct 5    		 10:00 ISM Services Sep 51.8 51.5 Moderate
    W
    Oct 6    		 10:30 Crude Inventories 10/2 NA –0.475M Moderate
    Th
    Oct 7    		 08:30 Initial Unemployment Claims 10/2 455K 453K Moderate
    Th
    Oct 7    		 08:30 Continuing Unemployment Claims 9/25 4.450M 4.457M Moderate
    F
    Oct 8    		 08:30 Average Workweek Sep 34.2 34.2 HIGH
    F
    Oct 8    		 08:30 Hourly Earnings Sep 0.1% 0.3% HIGH
    F
    Oct 8    		 08:30 Nonfarm Payrolls Sep 0K –54K HIGH
    F
    Oct 8    		 08:30 Nonfarm Private Payrolls Sep 70K 67K HIGH
    F
    Oct 8    		 08:30 Unemployment Rate Sep 9.7% 9.6% HIGH

    >> Federal Reserve Watch

    Forecasting Federal Reserve policy changes in coming months  There’s been a lot of talk about the Fed’s readiness to provide a second round of quantitative easing (QE-2) if needed. This has led economists to believe that the Fed Funds Rate will remain at its rock bottom levels for quite some time. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

    Current Fed Funds Rate: 0%–0.25%

    After FOMC meeting on: Consensus
    Nov 3 0%–0.25%
    Dec 14 0%–0.25%
    Jan 26 0%–0.25%

    Probability of change from current policy:

    After FOMC meeting on: Consensus
    Nov 3 <1%
    Dec 14 <1%
    Jan 26 <1%
    Geoffrey Boyd
    Area Manager/Mortgage Consultant
    10135 SE Sunnyside Road, Suite 120
    Clackamas, OR 97015
    Phone: 503.462.0413
    Fax: 877.874.4649
    Mobile: 503.819.2462
    Main: 503.786.7092
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  • Let’s Use Fannie And Freddie To Bail Ourselves Out By Refinancing Everyone’s Mortgage — Says Glenn Hubbard, by Daniel Gross, Yahoo!


    Glenn Hubbard, Harvard-trained economist, former Bush administration official, dean of the Columbia Business School, is a mild-mannered, buttoned-down guy. But his proposal to bolster the housing market and provide some stimulus to America’s long-suffering homeowners is a bit radical.

    In a recent New York Times op-ed article, Hubbard and Columbia Business senior vice dean Chris Mayer urged a simple solution: Fannie Mae and Freddie Mac, the government-controlled housing giants, should just refinance homowners at today’s low interest rates.

    Hubbard joined Aaron and me to discuss this proposal, as well as other prescriptions he lays out for reforming America’s housing finance

    system in his new book, Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity, co-authored with Peter Navarro.

    Hubbard noted that the government and the Federal Reserve have already made significant efforts to shore up housing. “The Fed’s purchase of mortgage-backed securities really helped the housing market a lot,” by helping to narrow the spread between Treasuries and mortgages, Hubbard said. But falling house prices have made it difficult for people with under water mortgages to take advantage of lower rates. “Even with low interest rates, it’s hard to see a lot of refinancings because loan to value ratios are high,” he says.

    A Sensible, Low-Cost Solution

    His suggestion is that Fannie and Freddie could simply refinance existing mortgages at lower rates, at no additional cost to taxpayers. With Fannie Mae and Freddie Mac under U.S. conservatorship, the taxpayers already guarantee most mortgages through them. Hubbard believes this refi boom would ultimately save taxpayers money, since borrowers would be more likely to stay current on new mortgages with lower interest rates.

    “More to the point for stimulus, this would be the equivalent of a $50 billion to $60 billion per year long-term tax cut for middle-income families, with no cost to the Treasury,” he says. “It seems pretty sensible.”

    A bonus: this plan wouldn’t require passing legislation through a gridlocked Congress.

    Of course, there are obstacles. Even at today’s much lower volumes, the home-lending system is having difficulty processing mortgage documents efficiently. Many critics are calling for Fannie and Freddie to reduce their scope of activities, not to increase them. And then there’s the question of moral hazard: Wouldn’t this just be another example of taxpayers bailing out borrowers who made what turned out to be poor decisions?

    Not so much, says Hubbard. Many of the borrowers who now have loan-to-value (LTV) ratios that preclude them from refinancing are in the situation not because they borrowed so much to buy a home, but because the property supporting the mortgage has declined in value by 30 percent. “The whole thrust is to keep people in their homes and provide a tax cut that they would have gotten if their LTVs weren’t so high,” said Hubbard.

    More Housing Solutions

    In Seeds of Destruction, Hubbard and co-author Peter Navarro offer some other provocative thoughts on how to reform housing finance and avoid another debacle. Among the suggestions:

    • Both homeowners and lenders should be required to have some “skin in the game” on mortgages.
    • Prohibitions or restrictions on funky lending practices such as interest-only and adjustable-rate products, especially if they’re going to be securitized.
    • Greater disclosure on the information that goes into creating credit ratings for mortgage-backed products.

    Perhaps most controversially, Hubbard calls for a rethinking of the home mortgage deduction, which allows homeowners to deduct interest on loans up to $1 million from their taxable income. The home mortgage deduction is an inefficient and expensive means of subsidizing housing and benefits higher-income Americans disproportionately.

    “I’m not saying repeal it this afternoon, but we should take a hard look at our subsidies for housing and ask if they really make sense,” he tells Aaron and me in the accompanying clip.

    If there’s a need to subsidize homeownership for lower and middle-income Americans, policy should focus subsdies on those sectors, Hubbard says. “But the very expensive subsidy system we have now really helped get us in trouble.”

  • Wells Fargo Curtailing Short Sale Extensions, by Kate Berry, Americanbanker.com


    In a move that will expedite some foreclosures, Wells Fargo & Co. has stopped granting extensions for certain distressed homeowners to complete short sales.

    The change last month preceded recent revelations of faulty documentation at two major mortgage servicers — JPMorgan Chase & Co. and Ally Financial Inc. — that suspended thousands of foreclosure actions to review their processes. Wells said it does not have the same problems as those servicers.

    The company said it changed its policy on short sales at the behest of investors for whom it services mortgages, including the government-sponsored enterprises.

    Early last month, Fannie Mae told its servicers to stop unnecessarily delaying foreclosures. The GSE said it would hold servicers responsible for unexplained delays to foreclosures with fines and on-site reviews.

    In a memo e-mailed to short sale vendors last month and obtained by American Banker, Wells said it will no longer postpone foreclosure sales for those who do not close short sales by the date in their approval letter from the company. Only extension letters dated Sept. 14 or earlier would be honored, Wells said.

    Mary Berg, a spokeswoman for Wells, confirmed that the memo was genuine. But she said it had “caused confusion,” and stressed that Wells still grants extensions on loans in its own portfolio (including those it acquired with Wachovia Corp.) and in cases where investors allow it. For those two categories, Berg said, Wells allows one foreclosure postponement, provided these conditions are met: a short sale has been approved by Wells, by junior lienholders and by mortgage insurers; the buyer has proof of funds or approved financing; and the short sale can close within 30 days of the scheduled foreclosure sale.

    Berg would not say how often Wells’ investors allow extensions.

    The new policy on short sales was put in place “over the past couple of months … in response to various investor changes,” Berg said. Those investors “would include the GSEs, HUD and those investing in private-label” mortgage-backed securities.

    In a short sale, a home is sold for less than the amount owed on the mortgage and the lender accepts a discounted payoff. The transactions are often less costly to the lender than seizing and liquidating the home.

    “As long as there is a short sale possibility, the loss will always be less,” said Rayman Mathoda, the president and chief executive of AssetPlan USA, a Long Beach, Calif., provider of short sale training and education. “Basically foreclosure sales should be delayed for any responsible homeowner that has a real buyer available.”

    Wells’ decision also follows efforts by the Obama administration to encourage short sales for borrowers who do not qualify for loan modifications.

    “It makes no business sense why they are doing this, since it’s wrong for the borrowers and for the government,” said Eli Tene, the CEO of IShortSale Inc., a Woodland Hills, Calif., firm that advises distressed borrowers.

    But experts on short sales said that in recent months servicers have been reluctant to approve the transactions out of concern that they will fall through, further prolonging the process.

    “There is also a growing issue with the new buyer and financing issues, either losing their jobs ahead of closing or the new lender not being ready to close, which then gives rise to the buyer running out of patience and walking,” said Jim Satterwhite, executive vice president and chief operating officer of Infusion Technologies LLC, a Jacksonville, Fla., provider of short sale services.

    Satterwhite said many servicers have reached the point where they know which borrowers do not qualify for a modification and are moving those borrowers through to foreclosure to deal with the backlog of inventory. “A lot of servicers are just falling in line with Fannie,” he said.

    Moreover, the expectation that housing prices will fall further is forcing servicers — and the GSEs — to push for a quicker resolution through foreclosure, since short sales can involve further delays. “Values are dropping faster and that also means the losses on short sales are going up,” Satterwhite said.

    Of course, the recent reports of “robo-signing” at Ally Financial’s GMAC Mortgage and at JPMorgan Chase could gum up the foreclosure works again. For example, on Friday, Connecticut Attorney General Richard Blumenthal asked state courts to freeze all home foreclosures for 60 days to “stop a foreclosure steamroller based on defective documents.” The day before, Acting Comptroller of the Currency John Walsh said he had told seven major servicers, including Wells, to review their foreclosure processes.

    Another Wells spokeswoman, Vickee J. Adams, said the company’s “policies, procedures and practices satisfy us that the affidavits we sign are accurate.”

  • Conforming Jumbo Loan Limits Extended, Thetruthaboutmortgage.com


    The conforming jumbo loan limits, which allow homeowners in certain areas of the country to get government-backed loans of up to $729,750, have been extended for another year, according to the Mortgage Bankers Association.

    Last night, H.R. 3081 passed the Senate and House – it contains provisions that extend the existing loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (including FHA loans and reverse mortgage products, or HECMs) through September 30, 2011.

    Additionally, it provides $20 billion in loan commitment authority for FHA’s General and Special Risk Insurance Fund.

    “Extending the existing limits is essential to helping borrowers continue to have access to affordable long-term, fixed-rate mortgage credit in today’s struggling economy,” said Robert E. Story, Jr., Chairman of the Mortgage Bankers Association, in a release.

    “The current limits have been a key component of keeping the mortgage market functioning, helping keep mortgage interest rates low for consumers who want to purchase a home or refinance an existing mortgage.

    Without such an extension, larger loans would have fall into the jumbo loan category, resulting in interest rates a percentage point or more higher than conforming loans.

    The traditional conforming loan limit is currently set at $417,000 for one-unit residential mortgages.

    Conforming jumbo loan amounts ($417,001 to $729,750) price at a slight premium to conforming loan amounts, but well below jumbo loans amounts.

  • Mortgage Refinance: Proposed Home Refinance Bill Could Allow Almost Everyone to Refinance, by Rosemary Rugnetta, Freerateupdate.com


    (FreeRateUpdate.com) – Although the current low mortgage interest rates have helped numerous homeowners torefinance into better terms, many have not be able to take advantage of these deals. Tighter lending guidelines have left many homeowners with no where to turn for help. In an effort to help save homeownership for many Americans, Representative Dennis Cardoza of California has proposed a home refinance bill that could allow almost everyone to refinance.

    H.R. 6218 is called The Housing Opportunity and Mortgage Equity Act of 2010 (HOME). It is designed to offer refinances directly to homeowners who need help. As other foreclosure prevention programs have failed to prevent further defaults, this bill can possibly reduce foreclosures drastically and reward those who have continued to make their monthly mortgage payments even through economic struggles. With reduced mortgage payments, consumers will have more available cash to spend each month thus stimulating a dragging economy. In addition, this type of refinance can help eliminate strategic defaults and loan modifications.

    Following are some of the details of the bill:

    -A qualified mortgage is one that is current or in default as long as it is the borrower’s primary residence and is owned or guaranteed by Fannie Mae or Freddie Mac, This residence can be a single family dwelling, one to four family dwelling, condominium or a share in a cooperative ownership housing association.

    -Any penalties for prepayment or refinancing and penalties due to default or delinquency would be waived or forgiven.

    -The term of the new refinance could be no longer than 40 years.

    -The servicer cannot charge the borrower any fees for refinancing.

    -Fees for title insurance coverage will be reasonable in comparison with fees for the same coverage available. Any fees associated with the refinance would be rolled into the mortgage.

    -The enterprise (Fannie Mae and Freddie Mac) will pay the servicer a fee not to exceed $1,000 for each qualified mortgage that is refinanced.

    -There will be no appraisal required.

    -In order to pay for this, the old mortgages will be paid off when refinanced. The new refinances will be funded by selling new mortgage securities.

    Although lenders believe that they will lose too much money if this bill is adopted, it can probably be the best solution given to date to halt the endless foreclosure issue. It will be interesting to see how this bill develops, what will be added and what will be taken away or even if it will pass. According to Congressman Cardoza’s website, there are about 30 million mortgages guaranteed by Fannie Mae and Freddie Mac. The savings from this program could be tremendous and have been estimated by Morgan Stanley and JP Morgan Chase to be an annual reduction of approximately $50 billion in mortgage payments. While the success of the available current programs is still questionable, this proposed bill which allows almost everyone to refinance could be the answer to accelerating the economy.

  • Chase Halts Foreclosures In Process, by Thetruthaboutmortgage.com


    JP Morgan Chase has halted foreclosures until a review of its document-filing process is completed, according to the WSJ.

    The New York City-based bank said the move affects roughly 56,000 home loans in some stage of the foreclosure process.

    Chase spokesman Tom Kelly announced that there were cases where employees may have signed affidavits about loan documents on the basis of file reviews done by other personnel.

    As a result, the bank and mortgage lender must now re-examine documents tied to loans already in foreclosure to verify if they “meet the standard of personal knowledge or review” where required.

    Back in May, law firm Ice Legal LP dropped Chase document-signer Beth Ann Cottrell after it became known that she signed off on roughly 18,000 foreclosure affidavits and other documents each month without actually reviewing the files.

    And last week, GMAC Mortgage told brokers and agents to immediately stop evictions, cash-for-keys transactions, and lockouts in 23 states after the company warned it could need to take corrective action in connection with some foreclosures.

    Sign of the times…a year ago it was all about foreclosure moratoriums to help borrowers in need, and now it’s all about lenders making sure they don’t get into hot water over their suspect loss mitigation activities.

  • Housing Finance Needs U.S. Backstop, Executives Tell Lawmakers, by Lorraine Woellert, Bloomberg.com


    Congress must preserve some form of U.S. guarantee on mortgages to attract private capital to the housing-finance system and stabilize a market recovering from the credit crisis, industry executives told lawmakers.

    Private capital must play a bigger role in housing finance as policy makers replace the current system, which is dependent on guarantees from government-backed Fannie Mae andFreddie Mac, the executives said today in testimony prepared for a House Financial Services Committee hearing. U.S. support will still be needed to keep loans flowing to borrowers and preserve products such as 30-year, fixed-rate mortgages, they said.

    Without a government backstop, there wouldn’t be enough private capital to support the $8 trillion in home loans that are funded by investors, said Michael Farrell, chief executive officer ofAnnaly Capital Management Inc., a New York real estate investment trust that owns or manages $90 billion of mortgage-backed securities.

    The House panel called Farrell and other housing-industry executives to testify as they seek ways to overhaul a finance system that collapsed in 2008 amid losses on securities linked to subprime mortgages. Some economists and lawmakers have urged that any new system rely solely on private capital and be priced to reflect the risks.

    “Recommendations to completely privatize miss the necessity of a government backstop to ensure consistent functioning of mortgage-backed securities markets under all economic conditions,” said Michael Heid, co-president of home mortgages for Wells Fargo & Co.

    Fannie, Freddie

    Fannie Mae and Freddie Mac, which own or guarantee more than half of the $11 trillion U.S. mortgage market, relied on an implied government guarantee to pool and sell mortgage-backed securities, which generated cash that could be channeled back into additional loans. The federal government seized the two companies amid soaring losses in September 2008 and promised to stand by the debt.

    Since then, Washington-based Fannie Mae and Freddie Mac, based in McLean, Virginia, have survived on a promise of unlimited aid from the U.S. Treasury Department. The companies lost $166 billion on their guarantees of single-family mortgages from the end of 2007 and the second quarter of this year and have drawn almost $150 billion so far. Treasury Secretary Timothy F. Geithner has promised to deliver a plan for overhauling the housing-finance system in January.

    One challenge for policy makers is how to keep money flowing into the system without the kind of open-ended commitment that left taxpayers responsible for catastrophic losses at the government-sponsored enterprises.

    “The GSEs clearly did not operate with enough capital to buffer the risks they assumed,” Christopher Papagianis, managing director of non-profit research group Economics21, told lawmakers. “Policy makers should recognize that bailouts in the housing sector are inevitable if the key institutions in the space do not hold sufficient capital,” said Papagianis, an adviser to former President George W. Bush.

    To contact the reporter on this story: Lorraine Woellert in Washington atlwoellert@bloomberg.net;

    To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net.

  • Loan Modifications Are Getting Better, thetruthaboutmortgage.com


    It appears as if more recently completed loan modifications are performing better than their predecessors, according to the latest Mortgage Metrics Report from the OCC.

    More than 90 percent of loan modifications implemented during the second quarter of 2010 reduced borrowers’ monthly principal and interest payments, while 56 percent reduced payments by more than 20 percent.

    And that focus on sustainable and affordable monthly mortgage payments resulted in lower post-modification delinquency rates (much lower than that 75 percent re-default rate we we’re worried about).

    Six months after modification, roughly 32 percent of the modifications made in 2009 were seriously delinquent or in somewhere in the foreclosure process, compared with more than 45 percent of loan mods made in 2008.

    And the performance of modifications made this year suggests the trend is continuing.

    At three months after modification, just 11 percent of the 2010 modifications were seriously delinquent, compared with 20 percent of modifications made last year and 32 percent of 2008 modifications.

    HAMP Modifications Outperforming Other Loan Mods

    Nearly all modifications made under the Making Home Affordable program (HAMP) reduced borrower principal and interest payments, and 78.9 percent reduced monthly payments by 20 percent or more

    HAMP modifications made during the quarter reduced monthly mortgage payments by an average of $608, while other loan mods reduced payments by just $307 on average.

    As a result, HAMP modifications implemented through the first quarter of 2010 had fewer re-default rates than other modifications implemented during the same period.

    At six months after modification, 10.8 percent of HAMP modifications made in the fourth quarter of 2009 were 60 or more days delinquent, compared with 22.4 percent of other modifications made during that quarter.

    Similarly, 10.5 percent of HAMP modifications made in the first quarter of 2010 were 60 or more days delinquent three months after modification, compared with 11.6 percent of other modifications.

    So perhaps HAMP ain’t so bad after all…and maybe loan modifications actually do work.

  • Multnomahforeclosures.com: Updated Notice of Default Lists and Books for the Week of September 24th, 2010


    Multnomahforeclosures.com was updated today with the largest list of Notice Defaults to date. With Notice of Default records dating back nearly 2 years. Multnomahforeclosures.com idocuments the fall of the great real estate bust of the 21st century.

    All listings are in PDF and Excel Spread Sheet format.

    Multnomah County Foreclosures
    http://multnomahforeclosures.com

  • JPMorgan Based Foreclosures on Faulty Documents, Lawyers Claim, by Lorraine Woellert and Dakin Campbell, Bloomberg.com


    JPMorgan Chase & Co. faces a legal challenge next month that could cast doubt on thousands of foreclosures after a mortgage executive at the bank said she didn’t verify documents used to justify home seizures.

    Lawyers for a Palm Beach County, Florida, homeowner asked a judge to throw out a foreclosure as a penalty for misleading the court, according to attorney Tom Ice of Ice Legal PA. They’re citing a May 17 deposition in which the JPMorgan executive said she signed thousands of affidavits and documents supporting the New York-based bank’s claims without personally checking loan records. The court is scheduled to hear arguments Oct. 19.

    The Chase Home Finance operation supervisor, Beth Ann Cottrell, said in May she was among eight managers who together sign about 18,000 documents a month, according to a transcriptof her sworn deposition provided by Ice. Asked how they were prepared, she said she relied on other people at the firm.

    “My review is more or less signing the document unless it’s questionable,” she said. That means, “somebody has a question and brings it to me and says, ‘Beth, can you take a look at this?’”

    Inaccurate statements by banks in foreclosure documents may give borrowers who have lost their homes a legal basis to challenge the seizures, derailing resales and casting doubts on property titles. A Florida court sanctioned Ally Financial Inc.’s GMAC Mortgage unit for faulty affidavits in 2006, and the firm suspended evictions in 23 states this month after finding employees still signing affidavits without checking the data.

    Titles in Doubt

    JPMorgan spokesman Tom Kelly declined requests for comment. Cottrell didn’t return phone calls to her office requesting comment. A lawyer representing her at the deposition, Joseph Mancilla of the Florida Default Law Group PL, didn’t return calls. Cottrell isn’t named as a defendant.

    Cottrell signed the affidavit at issue in the case, dated June 2009, while at her previous employer, an outside servicing firm working for JPMorgan, according to court documents. When signing documents there for the JPMorgan unit, she used the title “assistant secretary and vice president” of Chase Home Finance, according to the transcript. She became a JPMorgan employee about three months after signing the affidavit. Document signers sometimes endorse affidavits on behalf of other firms as a way to streamline the foreclosure process, said Dustin Zacks, an attorney at Ice’s firm.

    JPMorgan was the third-largest U.S. servicer of home mortgages as of June 30, with $1.35 trillion or almost 13 percent of the market, according to industry newsletter Inside Mortgage Finance. Ally is the fifth-biggest mortgage servicer, with $349.1 billion. The other three in the top five are Bank of America Corp., Wells Fargo & Co., and Citigroup Inc.

    Foreclosures Averted

    Servicers perform billing and collections on home loans. When borrowers default, the firms handle the foreclosure process. Affidavits lay the legal foundation for a foreclosure by attesting that the borrower is delinquent and that the lender is entitled to seize the home. Details of the JPMorgan case were reported earlier last week by the Financial Times.

    Lawyers in Florida and New York, among other states, have halted foreclosures and evictions by showing affidavits were faulty. Attorneys general in Texas, Iowa and Illinois have started investigations into mortgage practices at GMAC Mortgage following last week’s revelations. California has ordered the company to prove its foreclosures are legal or halt them.

    If the documents are shown to be false after a home has already been resold by a bank, that casts doubt on who is the rightful owner, said O. Max Gardner III, an attorney at law firmGardner & Gardner PLLC in Shelby, North Carolina, who has represented homeowners in fighting foreclosures and has cases pending against JPMorgan.

    Title Insurers

    “I’m sure a lot of title insurance companies are concerned about the potential liability right now,” as borrowers challenge how banks made statements, he said. “The judges could absolutely hold the bank and attorneys in contempt.”

    U.S. home seizures reached a record for the third time in five months in August as lenders completed the foreclosure process for thousands of delinquent owners, according to RealtyTrac Inc.

    Ice, the founding partner of his foreclosure-defense law firm in Royal Palm Beach, Florida, said some lenders are accepting voluntary dismissal of their cases.

    During the deposition, Cottrell said a staff of in-house specialists scrutinize loan documents and prepare affidavits, the transcript shows. If they have difficulties or questions, they come to her. She signs in a notary’s presence, she said.

    ‘No Knowledge’

    During questioning by Ice lawyer Zacks, Cottrell said she had worked at Chase Home Finance for about eight months, according to the transcript.

    “As to everything in the affidavit, did you have personal knowledge?” Zacks asked.

    “My own personal knowledge, no,” Cottrell answered.

    “You stated ‘That plaintiff is entitled to enforce the note and mortgage,’” Zacks said. “Again, did you have personal knowledge of that?”

    “No knowledge,” she answered.

    Florida Attorney General William McCollum is investigating three law firms that represent loan servicers in foreclosures, and are alleged to have submitted fraudulent documents to the courts, according to an Aug. 10 statement. The firms handled about 80 percent of foreclosure cases in the state, according to a letter from U.S. Representative Alan Grayson, a Florida Democrat.

    Judges overseeing foreclosures in the wake of the housing crisis are growing skeptical of banks, said Christopher L. Peterson, a professor at the University of Utah’s S.J. Quinney College of Law. A surge in proceedings has helped expose a variety of paperwork lapses, he said in an interview.

    “Early in the process the judges were very cavalier and they just took the financiers’ word,” Peterson said. “Now there are enough disputes out there about ownership of loans that the judges are starting to feel like they need to hold the financial institutions to the basic rules of evidence.”

    To contact the reporters on this story: Lorraine Woellert in Washington atlwoellert@bloomberg.net; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

    To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net.

  • Fannie mae to provide mortgage payment forbearance for certain military homeowners, Thetruthaboutmortgage.com


    Government mortgage financier Fannie Mae announced today new measures to help those serving in the military avoid foreclosure.

    The company said it will provide mortgage payment forbearance for up to six months where the death or injury of a service member on active duty leads to a hardship for military families with a mortgage obligation.

    Fannie has also created a hotline, 877-MIL-4566, available to all service members looking to receive guidance about their mortgage options and subsequent assistance.

    “The men and women of our Armed Forces have shown extraordinary commitment to our country while facing unique challenges as a result of their service,” said Jeff Hayward, Senior Vice President of Fannie Mae’s National Servicing Organization, in a release.

    “No family impacted by a death or injury in the line of duty should have to face the additional burden of foreclosure as a result of the hardship. We want to do all that we can to provide support to these families at a time of need as we honor their sacrifices and service to our country.”

    Service members or surviving spouses who may be eligible for the special forbearance should contact their bank or mortgage lender.

    Any forbearance will be granted under Fannie Mae’s “Unique Hardships” guidelines with Fannie Mae’s approval.

    Under forbearance, the bank or lender may reduce or suspend the borrower’s monthly mortgage payments for the specified period.

    Credit bureau reporting will also be suspended during the forbearance period to minimize any negative credit scoring impact.