It would seem the $#!@ has really hit the fan lately with the sloppy documentation (or sometimes complete lack of documentation) banks have been keeping as they package, re-package, and transfer the ownership of various mortgages between each other.
I’m not going to go into the details of the mess that has finally come to the national media’s attention over the last few weeks since you can read excellent coverage on the subject from any number of other sources. As usual, I recommend Calculated Risk as a great starting point. However, there is one local angle on this story that has come up in the last few days that are worth mentioning on these pages.
On Wednesday, Attorney General Rob McKenna sent a letter to most mortgage trustee companies in our state (they’re the ones that process most foreclosures), basically requesting that they double-check to make sure they’re following the law.
Our office has been investigating lenders, mortgage servicers and local trustees. We have discovered that problems related to foreclosure processing are not limited to the national banks and mortgage services. In Washington, we have found evidence that foreclosure trustees appear to be ignoring laws specific to our state and may be regularly using some of the same questionable practices used by national banks…
Your role as foreclosure trustee is to ensure that each foreclosure you conduct is completed in good faith and in full compliance with the law. Because Washington State law allows foreclosure without court oversight, you are the party most responsible for ensuring that foreclosures are done properly. Consequently, I ask you to suspend all foreclosures in which you have not yet confirmed that all foreclosure-related documents were lawfuly signed, that the chain of ownership is clear and has been revealed to you in full, and that state consumer protection requirements have been followed.
Of course, the trustee companies are going to claim (and are already claiming) that they already are following the law.
Tor Hagen, a spokesman for Northwest Trustee Services, said his firm had no comment on its business practices or those of the mortgage servicers it contracts with.
Karen Gibbon, a trustee who handles several hundred foreclosures a year, said she hadn’t seen evidence of “robo-signing” in her practice.
What else would you expect them to say? “Oh whoops, sorry. We were totally making junk up, but now that you asked nicely, we’ll make sure we actually do this right.” Yeah right.
So what’s the end game? The way I see it, There are really only two possible outcomes that will result from this whole mess.
- Banks are saddled with a load of extra costs in processing foreclosures.
- Politicians come up with yet another bailout of some sort for the banks.
Given the current political climate against any further bailouts, option #2 does not seem very likely, at least not until after the election. Of course Congress already tried to slip one version of that plan through (receiving bipartisan support), so who knows, really. Option #1 seems like the most likely scenario to me, which means even more time will be added to a foreclosure process that already averages a year or more in most parts of the country (full article). Many foreclosures that have already been processed may even need to be completely “re-done” by the banks.
End result: banks lose more money, non-paying home borrowers get a little more time to live rent-free, and eventual bottom in the housing market is pushed even further out.
One thing that most likely will not happen is for the many hundreds of thousands of people who could not afford to pay their mortgages to somehow get to keep (or get back) “their” homes. If you’re not paying the debt you took out to buy an overpriced home, you will eventually lose that home. It’s just a matter of how long it will take, and how much it will cost the bank to properly repossess the home.
Pegasus is on the right track.
The foreclosure gate is nothing other than an attempt to cover up the massive mortgage fraud that occured. That is why the rush to foreclose in massive numbers.
This systemic failure is from predatory lending. I’ve just posted a detailed blog regarding the massive mortgage fraud that has led to the foreclosures.
This is more than “people losing their homes”,
This is more than “the state of the real estate market”,
This is about the entire global economy.
http://bit.ly/aCE7DX
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RE: David Losh @ 70 – Ding DONG David!!! Ringing bell here.
I am not claiming to be smart. I explained a scenario without any extra fuss and BS that you like to extend for a page or two. And it works for people. Thats that. Nothing smart about it, just playing the system as it lays, is what people should do.
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RE: mukoh @ 102 –
Let’s see, you owe on a second mortgage, but go to the lender and say, Hey, here’s half what I owe you.
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RE: Julie Lyda @ 101 -
The more pertinent question is…
Are you enjoying your new swimming pool?
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By ray pepper @ 83:
Is your prey the homeowner who pulled $300K in equity out of the house, got 3 years of free rent, and then got an additional $4K for relocation expenses before trashing the house and sending the keys back? Or is your prey the bank who gave the homeowner the money in hopes it would make a tidy profit and be immune from the fallout of the risky loans it made?
So you made some bad investments along the way? You learned from them and refined your business plan to suit. What else is there?
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RE: EconE @ 104 –
Here’s the real pool problem: What is going to happen when investors of the MBS’s find out that the same mortgage was fraudulently resold in multiple pools? There’s the next explosive headline.
Add on to that the banks being sued to buy back bad loans. Here’s an example:
“Bank of America (BofA) has been accused of fraud by Ambac Assurance Corporation in relation to $16.7 billion worth of mortgage-backed securities.
According to Ambac, the Countrywide department within BofA did not adhere to underwriting rules or provide accurate data on the quality of the loans offered as part of the deal.
In the complaint, the firm alleged that 97 per cent of 6,533 loans did not conform to underwriting guidelines.
Ambac claimed that out of the $16.7 billion worth of securities, $2 billion either defaulted or were written off leaving the company to pay an estimated $466 million on claims. ”
http://www.bobsguide.com/guide/news/2010/Oct/4/BofA_accused_of_fraud_over_mortgage-backed_securities_.html
As for my pool – we love it. Hope you didn’t look at the photo on zillow, as google earth has a much better shot.
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RE: Julie Lyda @ 106 –
Great web site, but what does that mean to your Real Estate sales business?
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Good question David. Right now I’m more worried about the state of our national and global economy.
The funny thing is, there will always be a “real estate market”. Good or bad. You just have to adjust to the market conditions. People are still selling and buying.
Even with the mess we are in, I truly believe the drop in home values (in the long term) is a good thing as homes were (and still are in certain areas) over valued. How can you argue about making homes more affordable?
I think we may be headed for a full blown collapse of the big banking system. I’m not a financial guru, but why would that be a bad thing?
Link to my blog: Predatory Lending is The Cause of Systemic Mortgage Defaults and Foreclosures: http://bit.ly/aCE7DX
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RE: David Losh @ 103 – I explained a scenario that can happen post foreclosure.
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RE: mukoh @ 109 –
You also made the statement you only have a deficiency in a judicial foreclosure. Well if that’s the case you might as well declare bankruptcy. Either way you would want an attorney.
Making random statements, the way that you do, gives people the wrong idea that some how what you are saying is smart, and it’s not.
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RE: Julie Lyda @ 108 –
There are a couple of things there that I question. The first is you have the graph of straight line appreciation that shows pricing in Snohomish county at about $302K. If you believe we are in a banking collapse then that graph doesn’t mean anything. The graph will be showing false inflation, which it does. It’s showing a credit inflation.
The second thing is that predatory lending is just a term. All lending is predatory. Lending breaches the gap to a future value. In a declining market, or in a market of housing units that are losing value, like new construction, those loans are collecting money for no value.
If the market was still going up would these loans be predatory, or the smart thing to do?
How do you work this into a presentation? My license has been dormant for about a year because I really don’t see a business plan in what is going on.
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RE: Julie Lyda @ 108 –
I’ve got to agree with you on a couple of points, and your comments were refreshing to read:
1. I don’t see house prices dropping as a bad thing at all. They’ve been way out of reach by all measures, and making them more affordable is a good thing.
2. I don’t see the collapse of the big banking system a bad thing either. Too big to fail is precisely why they should fail.
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RE: David Losh @ 100 –
David, your posts offer nothing of value but bitter views of life and people. You should be old enough to realize that world does not own you a good living.
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RE: David Losh @ 111 –
I guess I disagree with you. I don’t see all loans as predatory. A typical 30 year mortgage at a decent interest rate doesn’t seem out of line to me. But a loan with payments below the monthly interest fees, at over market rates, with prepayment penalties that cause the balance to go up rather than down – well I see no need for any consumer to have that type of loan in any type of market conditions.
As with my average home price graph – all the line shows is the trend line, which of course could change at any time. How do I show that in a presentation? I say – “This is the trend line and we are on a cliff and we could drop off at any moment.” It is showing past pricing trend – not future pricing trend. It is to point out the fact that the “bubble was wiped out of the market”, I also say “this is not an indicator of average home prices” – “this is chart showing the average price of homes that “are selling”.
I don’t understand what you mean that if the big banks fail the chart doesn’t mean anything.
I’ve come to the belief that life is just a ponzi scheme.
Even though I appear to me in the minority – I am all for a (temporary) nation wide foreclosure moratorium (as I’ve stated long ago here) until there can be a systematic logical process to foreclosures. I disagree that this would hurt the market. I’m not buying into NAR’s position and MSM’s position what a disaster that would be. We already have a disaster going on and the rush to foreclosure is making it worse.
I’m all for Columbia University’s plan. It’s a great read and there is a link to it on my blog post.
Also, why can’t we just sort the foreclosures like this?
A. Vacant/Abandoned – Foreclose
B. Owner wants to stay – Auto refi “start over”
C. Walk aways – Deed in Lieu (no foreclosure needed)
This may be too simple and I’m not an attorney so I may be unaware of any consequences of the Deed in Lieu. Maybe Kary could expand on that.
I think it’s time for the banks to start using that Tarp money to keep people in their homes instead of paying their big bonuses.
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RE: Julie Lyda @ 114 –
It’s interesting that you would have a web site based on this point of view. It makes absolute sense.
Your’s is the first Real Estate web site that promotes this way of thinking about the market place, and it is refreshing. People should respond to it.
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Thank you David. I feel strongly about my opinions, so strongly that I have also shared them with our State Attorney General. But I’m just the little guy.
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RE: 2kt @ 113 –
Sorry, I had to look up the word bitter. We make a good living. It’s kind of a stupid thing, but our business is a booming. As a matter of fact this is the first time in my forty year career of providing home services in Seattle that I can double, and triple my business easily. There is no shortage of labor, and every one needs to improve the property they live in.
I am angry. Bitter kind of implies nothing can be done. You can make a choice today.
You can continue to work your job for some major corporation, put money in your 401(k), and wait to die, or you can take constructive steps to improve the lives of others.
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RE: Julie Lyda @ 116 –
Your site is laid out very well, with a compelling argument. If I credit you, and give you the link, can I copy some of your web stuff?
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RE: David Losh @ 118 –
By all means David, use anything you like. It’s all about getting the message out. It’s all about educating everyone about what is really going on.
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RE: David Losh @ 110 – YOUR Statement made no sense. In order for a first lien holder to have a deficiency that they can come after in MOST (there are exceptions, such as personally guaranteed loans), foreclosures they have to go to judicial foreclosure in order to have a judgement that they can pursue. That is what I was referring to earier in discussion on first lien holders having rights to pursue the borrower.
Dave you are out of your league here. Stick to what you know.
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RE: mukoh @ 120 – Except that a second that is foreclosed out by a first can pursue. I recall there may be a bit of that scenario in the discussion, at least implicitly.
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RE: mukoh @ 120 –
You’re in my area of expertise. People should be very careful, and get legal advice.
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RE: David Losh @ 122 – Can you tell me how many notes you bought and foreclosed on? Just curious.
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RE: mukoh @ 123 –
That’s not my business, but you pointed out that no one does that any more when I suggested that’s what people do.
I’ve been involved in a couple of hundred.
My company prepares properties for sale and has for over forty years.
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RE: mukoh @ 49 –
This comment is an urban legend, an old wives tale. It’s tossed around at cocktail parties, and was probably started by some junior bank executive.
You need to be very careful before you contact the junior lien holder with an offer, it doesn’t usually go smoothly. You offer $10K on $135K, which is less than 10%, BTW, and you open a can of worms. Where did you get $10K? If you have $10K do you have $20K? Are you in the drug business? Does the IRS know that you have $10K?
I cleaned this up a little bit, nothing personal, it’s just business.
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RE: David Losh @ 125 – When Jr is placed in a position after foreclosure having the only recourse is to pursue a judgement/collection and/or banco case which wipes them a 100%. You go ask them which one they would rather take. Old wives tale? You have been out of the game for entirely too long.
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RE: mukoh @ 126 –
Who would take? The lender? Sure, they would take whatever they can get because it would be free money to them.
Getting a judgment after a foreclosure? What assets are you pursuing? Bank accounts, garnishments. stocks, bonds 401(k)?
If you are a bank, you’re going to take the right off, unless there are tangible assets, if there are, then they banko anyway. So why would they pay the lender?
The alternative, because you are implying you are the investor in a second position Note, would be you, collecting, getting a judgment, and that is very, very messy. I don’t buffalo easy, and no one else should.
Investors in second position liens are usually urologists, veterinarians, or people in the medical supply business, located in Everett, or some other out of the way place. These guys get sold these Notes like they have an interest in Real Property until they meet some one exactly like me.
No one is going to pay some urologist after a foreclosure. Take me to court, sue me, come after me, so what, who are you? What are you going to do to me? It’s a foreclosure. If you’re going to allow your property to be personally forclosed then you might as well explore bankruptcy.
That is where the 10% rule comes in. If I remember correctly that’s a Chapter 11, and most lenders in a negotiation wouldn’t accept less than 10%, if they could accept anything.
As soon as you approach your lender, after a forelcosure, your file goes to some management type who will want to close the file. For $135K it’s worth it to look at assets, credit, garnishment, and figure out a number. They give you a number, they will never accept a number from you, that is less than 50%. After a foreclosure we are in an area of pure fantasy so it’s hard to say.
It’s just not a good idea to approach your lender, on a dead file, after foreclosure, and say Hey! Let’s make a deal.
Preforeclosure you may want to make all kinds of deals, and that’s when negotiations may be fruitful.
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RE: David Losh @ 127 – Dave, thanks for using a page to explain what can be racked into a paragraph. Next time just figure out to talk about something that you know, not something you thought of.
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RE: mukoh @ 128 –
You probably mean like the Hanson family who did use to create these hard money secondary Notes.
You made a dangerous statement. It needed to be corrected.
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