About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

28 comments:

  1. 1
    blurtman says:

    Note in this latest discussion on Naked capitlaism, indications that the promissory note was not conveyed to the MBS. This is even worse than the mortgage not having been assigned. In the latter case, we have basically an unsecured loan. In the former, no loan re-payment promise at all.

    Also note that the Pooling and Servicing Agreement (PSA) is very rigid and cannot be back remedied.

    It has already been established that in several cases, the mortgage has not been assigned to the mortgage backed security (MBS), introducing the possibility that the MBS is not backed by collateral. Now it is being suggested that the payment stream itself is fictitious, let alone being unsecured.

    ” But securitizations are particularly inflexible agreements. From the abstract of a 2010 paper by Anna Gelpern and Adam Levitin:

    Modification-proof contracts boost commitment and can help overcome information problems. But when such rigid contracts are ubiquitous, they can function as social suicide pacts, compelling enforcement despite significant externalities. At the heart of the current financial crisis is a contract designed to be hyperrigid: the pooling and servicing agreement (“PSA”), which governs residential mortgage securitization. The PSA combines formal, structural, and functional barriers to its own modification with restrictions on the modification of underlying mortgage loans. Such layered rigidities fuel foreclosures, with spillover effects for homeowners, communities, financial institutions, financial markets, and the macroeconomy.

    So given that the PSAs can’t be renegotiated, the securitization industry needs to find a way to argue that everything is hunky dory, despite the ever rising volume of lower court cases in which banks have had trouble foreclosing because borrower’s counsel challenges them to show that they are holders of the note (meaning not merely that they have possession, but that the securitization trust they represent is the owner).”

    See: http://www.nakedcapitalism.com/2011/01/so-what-else-has-the-american-securitization-forum-said-that-is-wrong.html

    The plot thickens. Oh what tangled webs are weaved, when fraudsters are found to have deceived. Is Eric Holder back from his sabbatical yet?

  2. 2

    By blurtman @ 1:

    Note in this latest discussion on Naked capitlaism, indications that the promissory note was not conveyed to the MBS. This is even worse than the mortgage not having been assigned. In the latter case, we have basically an unsecured loan. In the former, no loan re-payment promise at all.

    Transferring the note goes to perfection of the transfer. You don’t end up with an unsecured debt where you transfer the security but not the note. You end up with the holder having an unperfected security interest that is subject to attack by different entities (e.g. bankruptcy trustees), which cannot be cured by a later transfer of the note once certain events occur. In contrast, an attack by the original debtor can be cured by a later transfer of the note.

  3. 3
  4. 4

    RE: blurtman @ 1 – Here’s one of the leading Ninth Circuit cases on assignment of security without taking possession of the note. http://openjurist.org/550/f2d/1228 Pay particular attention to paragraph 15 in the main opinion.

    Note, however, that I think the UCC has changed since this decision and it may be possible now to perfect in other ways than possession.

  5. 5
    WestSideBilly says:

    By CrankyPanky @ 3:

    This is a good one
    http://www.heraldnet.com/article/20110110/NEWS01/701109969/1122

    Early April Fool’s joke?

  6. 6

    RE: WestSideBilly @ 5 – Back in the day a Woodway address was worth about 20% on value, if not more. I’m not sure that would carry over to condos though. In any case the article indicates the project would take years to complete, so they aren’t really looking at today’s market, or even 2013’s market.

  7. 7

    RE: CrankyPanky @ 3

    Over-building by Our Brainless County Executives on Freeway Accesses that are Already Clogged

    Was mentioned in the article, I’m surprised there hasn’t been more pitchforks and torches in neighborhoods in the Seattle Metro area over this rash incompetence. If the bad economy ever causes 2006 surge rush hour traffic again making our suburb access/egress a complete joke, the current new development politicians will clearly be to blame.

    LOL, one blogger said Everett’s Silver Firs has a new access road to help. I have one simple question: how many older homes were destroyed under the mandatory bulldozer, assuming this alleged freeway access road was built, so over growth could continue? Another good question: How much did Snohomish County pay for the leveled homes they destroyed, in the name of brainless growth?

  8. 8
    TJ_98370 says:

    Mass. High Court Ruling Means Foreclosure Mess Just Got Much Worse
    .
    http://finance.yahoo.com/tech-ticker/article/535795/Mass.-High-Court-Ruling-Means-Foreclosure-Mess-Just-Got-Much-Worse
    .
    The Massachusetts Supreme Court has ruled against U.S. Bancorp and Wells Fargo in a case that could have serious implications for the already depressed U.S. housing market.
    .
    The high court found that the banks wrongfully sold two foreclosed homes by failing to show the proper paperwork at the time of the sale indicating they actually owned those homes and had the right to a) foreclose on those properties and b) sell the homes to new owners.
    .
    If this decision is echoed in other states, the foreclosure mess is going to get a whole lot messier…………

  9. 9

    RE: TJ_98370 @ 8 – We’ve been discussing that decision elsewhere, but that article is a good example of why you shouldn’t rely on news reports of court decisions. There’s no analysis of anything there, or any indication that the author understands any of the issues.

  10. 10
    blurtman says:

    RE: Kary L. Krismer @ 9 – I have foreclosed on your home and actually sold it just minutes ago. I think you better vacate. No I haven’t been assigned the mortgage by your bank, why do you ask?

  11. 11
    blurtman says:

    RE: Kary L. Krismer @ 2 – Sorry I had not been clearer. I posed the possibility that not only had the mortgage not been transferred, but also the promissory note as well. A total box of nothing then. In any even, certainly less than the buyer had expected to buy, and likely less than the seller represented.

  12. 12

    By blurtman @ 10:

    RE: Kary L. Krismer @ 9 – I have foreclosed on your home and actually sold it just minutes ago. I think you better vacate. No I haven’t been assigned the mortgage by your bank, why do you ask?

    That would only be analogous if you had actually bought the loan from my bank, but the assignment paperwork had not been completed, and if I had been in default.

  13. 13

    By blurtman @ 11:

    RE: Kary L. Krismer @ 2 – Sorry I had not been clearer. I posed the possibility that not only had the mortgage not been transferred, but also the promissory note as well. A total box of nothing then. In any even, certainly less than the buyer had expected to buy, and likely less than the seller represented.

    But the question is still whether the situation can be fixed.

    Using a car analogy, if I sold you a car, but the title was never transferred for some reason, would you be able to transfer the title when the error was discovered? In some situations the answer would be yes, in others no. But if the dispute was just between you and me, and no third parties (e.g. my creditors or bankruptcy trustee) the answer would almost certainly be yes, especially if you had possession of the car all along.

    As to this issue I understand there are some IRS rules that may come into play, but I really doubt those prevent the transfer (as opposed to creating a tax liability where none would have existed if it had been done timely). I’m not familiar with those rules, however.

  14. 14
    Pegasus says:

    RE: Kary L. Krismer @ 13 – Don’t worry about whether or not that you know the rules or laws because as we move forward in ratifying criminal behavior with a wink and nod these too will become blurred by baloney interpretations if they stand in the way.

  15. 15

    RE: Pegasus @ 14 – Well I do agree with OEM on whether or not the government would step in to change the rules if that became necessary.

    But as to the IRS, violating their rules doesn’t usually affect anything besides the taxes. Thus, for example, if you have some sort of an estate tax inspired trust, and you don’t follow all the procedures to get the estate tax treatment you wanted, you still have the trust to deal with (undo) after they make that determination.

  16. 16
    Pegasus says:

    Judges Berate Bank Lawyers in Foreclosures

    “With judges looking ever more critically at home foreclosures, they are reaching beyond the bankers to heap some of their most scorching criticism on the lawyers.

    In numerous opinions, judges have accused lawyers of processing shoddy or even fabricated paperwork in foreclosure actions when representing the banks.

    Judge Arthur M. Schack of New York State Supreme Court in Brooklyn has taken aim at an upstate lawyer, Steven J. Baum, referring to one filing as “incredible, outrageous, ludicrous and disingenuous.”

    But New York judges are also trying to take the lead in fixing the mortgage mess by leaning on the lawyers. In November, a judge ordered Mr. Baum’s firm to pay nearly $20,000 in fines and costs related to papers that he said contained numerous “falsities.” The judge, Scott Fairgrieve of Nassau County District Court, wrote that “swearing to false statements reflects poorly on the profession as a whole.”

    More broadly, the courts in New York State, along with Florida, have begun requiring that lawyers in foreclosure cases vouch for the accuracy of the documents they present, which prompted a protest from the New York bar. The requirement, which is being considered by courts in other states, could open lawyers to disciplinary actions that could harm or even end careers.

    Stephen Gillers, an expert in legal ethics at New York University, agreed with Judge Fairgrieve that the involvement of lawyers in questionable transactions could damage the overall reputation of the legal profession, “which does not fare well in public opinion” throughout history.

    “When the consequence of a lawyer plying his trade is the loss of someone’s home, and it turns out there are documents being given to the courts that have no basis in reality, the profession gets a very big black eye,” Professor Gillers said.”

    http://www.nytimes.com/2011/01/11/business/11lawyers.html?_r=1&partner=rss&emc=rss

  17. 17

    RE: Pegasus @ 16 – You could see that in the local case I cited to earlier. But judges berating lawyers is hardly an uncommon occurrence.

  18. 18
    Blurtman says:

    RE: Kary L. Krismer @ 13 – Interesting to see how this turns out. Educational at the least. Some contend that if the terms of the PSA were not adhered to, breach of contract could be the result. If I were an investor, I would see what or what was not done. More work for the lawyers! Ka-ching!

  19. 19
    Pegasus says:

    By Kary L. Krismer @ 17:

    RE: Pegasus @ 16 – You could see that in the local case I cited to earlier. But judges berating lawyers is hardly an uncommon occurrence.

    Maybe there is a valid reason……….

  20. 20
    Haybaler says:

    RE: Pegasus @ 16

    I’m beginning to think along the lines of the final paragraph….

    “The real problem is that there are thousands and thousands of people who are unrepresented by lawyers,” Mr. Younger said.

  21. 21
    mukoh says:

    RE: softwarengineer @ 7 – Which houses did Sno Co destroy? You sure you know what you are talking about?

  22. 22

    By Pegasus @ 19:

    By Kary L. Krismer @ 17:

    RE: Pegasus @ 16 – You could see that in the local case I cited to earlier. But judges berating lawyers is hardly an uncommon occurrence.

    Maybe there is a valid reason……….

    Often there is. The quality of lawyers varies greatly, and the number of shortcuts some start to take is incredible. As I mentioned, some would try to get relief without any declaration at all.

  23. 23
    mukoh says:

    RE: Kary L. Krismer @ 6 – Woodway is probably one of the pricier zip codes north of seattle not taking into account orcas.
    Not that the hype is not warranted, two friends live there.

    That industrial site going away is going to be really good to see.

  24. 24

    By Haybaler @ 20:

    RE: Pegasus @ 16

    I’m beginning to think along the lines of the final paragraph….

    �The real problem is that there are thousands and thousands of people who are unrepresented by lawyers,� Mr. Younger said.

    In general it’s better for people to have legal advice, but they can of course end up at attorneys who send them the wrong direction.

  25. 25

    By mukoh @ 23:

    RE: Kary L. Krismer @ 6 – Woodway is probably one of the pricier zip codes north of seattle not taking into account orcas. Not that the hype is not warranted, two friends live there.

    That’s what I was trying to reference. You could have two very similar houses, blocks apart, and the one with the Woodway address would be worth a lot more than the one with the Edmonds address. They also though have some upper end homes that you wouldn’t necessarily find a comp for close by outside of Woodway.

  26. 26
    Scotsman says:

    Brutal, but funny- scoring Obama and the democratic congress on the first two years of his administration. Epic fail:

    http://www.youtube.com/watch?v=6iaRCq9eXKw&feature=player_embedded

  27. 27
    Blurtman says:

    My understanding of foreclosure gate – in some cases, unclear how extensive, it appears that mortgages have not been properly assigned to the mortgage backed securities. It also appears that the terms of the Pooling and Service Agreement (PSA) have not been executed in some cases. It appears that the promisory note can be endorsed in blank as it is the bearer who owns it. It appears that mortgages at least in some states cannot be assigned in blank. It appears that the promissory note has been and can be separated form the underlying mortgage. it appears that if the terms of the PSA had not been adhered to, breach of contract can be asserted.

    This is an unfolding story. Mortgage backes securities are supposed to be backed by mortgages and are supposed to be asset backed securities. If a homeowner defaults on a mortgage that has been pooled into an MBS, the trustee can foreclose (assuming correct assignment to the MBS), and the recovered monies returned to the MBS. It appears that if the trustee cannot foreclose, than the loss to the MBS is that much greater, and the value of the MBS in that case must be less.

    It remains to be seen if investors in MBS’ will demand that these securities be audited. It remains to be seen if investors will sue for breach of contract. It remains to be seen if the value of MBS’ will be downward adjusted to reflect the increased risk, However, already we are hearing rumblings from pension funds. It remains to be seen what value if any this type of business adds to the economy and to society in general. Stay tuned.

  28. 28

    RE: Blurtman @ 27 – That was a pretty good post. On the pension funds thing I think a lot of that is just their trying to deflect having made bad decisions. Sort of like how California sued after it bought more electrical futures at the top of the market than what they could even use! They sued the people they bought them from on the open market.

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