Weekend Open Thread (2010-10-01)

Here is your open thread for the weekend beginning Friday October 1st, 2010. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

62 comments:

  1. 1
    David S says:

    I’m not going to get into links and sources on this but ‘the news’ is saying banks are halting their foreclosure process for tens of thousands of homes. Stated reasons vary.

    Will this action result in smoothing of the curve? I believe that is the intent.

    Ok, here is a link:

    http://blogs.wsj.com/developments/2010/09/30/realtytrac-chase-and-gmac-could-prolong-housing-recovery/

  2. 2

    RE: David S @ 1

    Pure and Simple “Price Fixing” in My Book, David

    And if you think it was just an administrative error that kept home prices from collapsing even more quickly [as they should have]; I’ve got a bridge I can sell you.

  3. 3

    The New Microsoft Luxury “Bravern Condos” in Bellevue are Being Converted to Apartments

    With price collapses too.

    Read my blog [article comments] in The Seattle Times this morning, it explains it all.

    Article in part:

    http://seattletimes.nwsource.com/html/businesstechnology/2013042355_bravern01.html

  4. 4
    redmondjp says:

    Hey, I’m sure some of you knew that federal stimulus dollars are being used to replace windows at the now-closed Coldwater Ridge visitors center at Mount St. Helens, but did you also know that they are building a brand-new ampitheater? http://tdn.com/news/local/article_8e748768-ccfa-11df-8aa0-001cc4c03286.html

    Here’s my favorite part of the article: “The amphitheater was part of the original plans for the visitor center. It was scrapped for lack of funds first in the 1990s and again in 2000.”

    So – let me get this straight here – we DIDN’T have the funds 20 years ago to build this. Ten years ago, same story. But now, in the midst of this economic downturn and record deficits (that have even exceeded Ross Perot’s wildest predictions), we suddenly do? And will the parks service have the operating funds to maintain this site, or is it doomed to suffer the same fate as other now-closed attractions that we can’t afford to run or maintain?

    I really enjoy the visitors centers up there and that entire area, but one must wonder just how beneficial this kind of spending is. Good for the construction workers until it is finished, and then what?

  5. 5
    deejayoh says:

    By softwarengineer @ 3:

    The New Microsoft Luxury “Bravern Condos” in Bellevue are Being Converted to Apartments

    With price collapses too.

    Read my blog [article comments] in The Seattle Times this morning, it explains it all.

    Article in part:

    http://seattletimes.nwsource.com/html/businesstechnology/2013042355_bravern01.html

    the news about the Bravern conversion to apartments is 6 months old
    http://seattlecondosandlofts.com/2010/04/bravern-converts-one-tower-to-apartments
    the story about the sale of the OFFICE buildings that you linked actually seems quite positive to me – based on what they got per square foot.

  6. 6
    David S says:

    RE: redmondjp @ 4 – Hey now, my kids are young but they know a volcano when they stand on one. This is because of the visitor information center up there in Mt. Rainier National Park. We do utilize the resources up there. Money spent on the project can be infused with local economies and that is a good thing. The project funding would need to be closely watched though to make sure none of it is misappropriated.

  7. 7

    RE: deejayoh @ 5
    How Much Did the Office Buildings Cost to Build?

    The article never said, so your guess is as good as mine. Just quoting about average SF costs may be a moot point, what’s the actuals for this “luxury facillity”?

    IMO, a 5 month old article on luxury condo price collapse means it’s even worse now. Look at Olive.

  8. 8
    deejayoh says:

    By softwarengineer @ 7:

    RE: deejayoh @ 5
    How Much Did the Office Buildings Cost to Build?

    The article never said, so your guess is as good as mine. Just quoting about average SF costs may be a moot point, what’s the actuals for this “luxury facillity”?

    IMO, a 5 month old article on luxury condo price collapse means it’s even worse now. Look at Olive.

    You linked the article – has all the info you need

    “The price amounts to nearly $547 a square foot…. …Whether the price is a record or near-record, it’s a very healthy number.”

    Previous record for bellevue was $460 in 2005, according to this article
    http://www.seattlepi.com/business/217928_civica29.html

    So, again – i would say it is a pretty positive sign for commercial real estate. I sincerely doubt they lost money on it.

  9. 9
    WestSideBilly says:

    RE: redmondjp @ 4 – I don’t have any issues with the amphitheater at JRO, which is gets heavy traffic. But the windows at Coldwater don’t make any sense. The building doesn’t make any sense, it gets snowed in at roughly the same time as JRO. Tear it down, recycle the building materials, and restore the views…

  10. 10
    Scotsman says:

    Well, well. The Russians got through years and years of communism with vodka. It looks like CA, and perhaps eventually the rest of the country, will get through GDII with Mary Jane:

    http://stopthedrugwar.org/chronicle/2010/oct/01/california_governor_signs_mariju

    Interesting that it took a financial crisis and lack of funds to force the change.

  11. 11
    Blurtman says:

    RE: Scotsman @ 10 – Far out, man. California – pot and stem cells. Groovy!

  12. 12
    Scotsman says:

    Green Campaign backfires- badly. This is pretty much over the top- lots of discussion:

    http://hotair.com/archives/2010/10/01/video-the-dumbest-most-self-defeating-ad-campaign-ever/

  13. 13
  14. 14
  15. 15
    Herman says:

    I just had the anniversary of the 13th year that I have owned my Seattle home. For 13 years I have tracked every expense and benefit that I would not have as a renter, and I calculate my return on the investment of owning my home. Each year I estimate its current value based on market comps and subtract 10% for costs if I were to sell it.

    My annual gain over 13 years has been…. drum roll….

    2.31%

    Average inflation over the same period…. drum roll….

    2.44%

    There you have it. I have to say, the sewer repair this year didn’t do me any favors. But hey, that’s all part of home ownership.

    By the way, if I just used the “meathead” method of measuring home appreciation by comparing buy/sale prices but neglecting to track my expenses I would be up 4.9% per year. This method is how the RE industry tracks appreciation – by tracking selling prices, but ignoring upkeep, cost of financing, cost of sale, etc.

    This phony measurement helps RE advocates imply that home ownership outperforms inflation and is a good investment, when in fact it does not and is not.

  16. 16
  17. 17
    David Losh says:

    RE: Herman @ 15

    You have accurately portrayed the home owner myth. The houses I have owned are the worst house on the block, and stay the worst house on the block. I have never figured the appreciation of the property, only the inflation of the dollars I am paying the mortgage with.

    You are at about the 15 year mark. If you haven’t refinanced, your mortgage will start paying more to principal rather than interest. By using inflated dollars you should be able to pay down your principal quickly, and have a more liquid asset.

  18. 18
    wreckingbull says:

    RE: Ira Sacharoff @ 16 – I used to eat there all the time during my lunch break, back in the early 90’s when I think they just had that one location off Fairview. As soon as they went franchise, their food went south, in my opinion. I am pretty sure they turned to a model where they brewed up all the stuff in big vats in a central kitchen, then transported to all the locations to be reheated. Rapid growth can be a curse.

  19. 19

    By Scotsman @ 13:

    Shoreline Bank- RIP.

    http://www.calculatedriskblog.com/

    History repeats itself. In the 80s it was Shoreline Savings and Loan.

  20. 20
    Blurtman says:

    RE: calvis @ 14 – I would bet that some of these are in the Crossings in Sammamish. This development has been troubled from the get-go – bad timing mostly but their pricing strategy is also a bit out of whack with the times. Homes were starting in the low $800’s but then lowered to starting in the low $700’s. Most of the lots are still sitting undeveloped. Several buyers are underwater already.

    Down the street is a William Buchan development that has just started up after sitting idle for a couple of years. 4,000 sq. ft. homes are now being built that are around $1 million.

    I can’t wait for Morty Buchan to get in the game.

    Perhaps the Buchan business model is in dire need of updating?

  21. 21
    Macro Investor says:

    By Scotsman @ 12:

    Green Campaign backfires- badly. This is pretty much over the top- lots of discussion:

    http://hotair.com/archives/2010/10/01/video-the-dumbest-most-self-defeating-ad-campaign-ever/

    It was supposed to be funny… but YUK.

    Really a waste of time anyway. When energy prices are low no amount of educating or cajoling will stop people from wasting it. When prices are high suddenly everyone’s a prius driver.

  22. 22
    TheHulk says:

    RE: Herman @ 15

    Kudos to you for keeping track of this. What is more surprising for me is – in spite of the fact that you purchased more than 10 years ago (most of which were bubble years), you barely managed to beat inflation. This would mean under normal circumstances most people would “lose” money. Not that making money should be the reason people buy a house in the first place.

    For a little more perspective, do you mind putting a few more ballpark figures?

    stuff like –
    House size – XX sq ft
    Monthly mortgage (including taxes) – 1500 per month
    Utilities – X per month
    Average annual maintenance cost – Z per month etc.

    Thanks!

  23. 23
    What's my name says:

    RE: Herman @ 15

    Thank you for your analysis. I assume you keep your property in good repair, so it is nice to know that housing is not overexpensive relative to 1997.

  24. 24
    Herman says:

    RE: TheHulk @ 22 – Here are some stats:

    1,000 sq ft house
    Built 1920
    $145,000 original sales price
    $270,000 estimated current sales price
    $1,050/mo. mortgage
    $1,100/mo. estimated rental value

    My upkeep and remodels seem to average out to $5,000 per year. I think that’s mch higher than normal because its an old house whose previous owner was elderly and didn’t keep it up properly. I think it’s going to improve in the coming years now that the systems have been upgraded. I don’t include utilities because I would have to pay them as a renter so I do not treat it as a homeowner’s expense.

    A few notable factoids:

    – Initial mortgage rate was 7 3/8%. Wow, those were the days.

    – Year 5 was the first year the investment broke even. (If I had sold it)

    – Year 8 was the first year that the cost to rent it was higher than the mortgage, thanks to rising rents and a mortgage refi. Prior to that it would have been cheaper to rent this house from someone else rather than carry my mortgage on it.

    – The house was one of my worst performing investments 1997-2001. From 2001-2006 it was middle-of-the-pack (~5%). Then for a short time, 2006-2007 the return on this house was (~7%) and as the stock market crashed it became my best investment. Over the past 3 years, price declines absolutely crushed that return and now it’s back to one of my worst investments. Even my savings bonds are higher.

    On the other hand, I enjoy living here.

  25. 25
    Dirty_Renter says:

    Herman – my bet is that you are a good investor. You seem to deal in truth.

  26. 26
    Basho says:

    “You linked the article – has all the info you need

    “The price amounts to nearly $547 a square foot…. …Whether the price is a record or near-record, it’s a very healthy number.”

    Previous record for bellevue was $460 in 2005, according to this article
    http://www.seattlepi.com/business/217928_civica29.html

    So, again – i would say it is a pretty positive sign for commercial real estate. I sincerely doubt they lost money on it.”

    The healthy price is likely due to the value of the lease, which has probably increased since the recession began, not the value of the building. Don’t follow? The office space is leased until 2028. Say the 750,000 square feet is leased at $40 per square foot per year over the 18 year life of the lease (this is for illustrative purposes only). To get the present value of the lease (disregarding building operating costs) we only need to use an annuity formula (you can look it up if you want). The only three inputs in the annuity formula are the payment amount ($30,000,000), number of payments (18), and interest rate. Microsoft just issued three year notes at only 25 basis points over the Treasuries so I’ll just use the 10 year Treasury + 25 basis points in selecting interest rates. At the beginning of 2008 10 year Treasuries yielded 3.91%. Most recently, 10 year Treasuries yielded 2.53%. So the applicable interest rates to use in the annuity formula would be 4.16% in 2008 and 2.78% most recently.

    The present value of the lease in 2008 would be approximately $375,000,000 before operating costs. Yesterday that same lease would be worth approximately $420,000,000 before operating costs, an increase in value of $45,000,000 (12%) from 2008. That’s a $60 per square foot increase in value just due to falling interest rates.

    Building operating costs reduce the value of the lease, but investors are also paying for the expected value of the building in 2028, when they will have the right to lease it at market rates.

  27. 27
    Macro Investor says:

    RE: Basho @ 26

    “The healthy price is likely due to the value of the lease, which has probably increased since the recession began, not the value of the building.”

    Very nice analysis. It would be interesting to know how current rental rates compare over time. I’m guessing Microsoft drives a hard bargain. They do a lot of their own building and they wouldn’t rent space like that unless it was cheaper than the construction cost. Especially when there is such a glut of office space nearby.

  28. 28
    Pegasus says:

    Kary(clueless in Seattle) never got it. Perhaps the rest of the PNW will when they read this from Ellen Brown:

    “What About the Non-judicial Foreclosure States?

    Foreclosures have been suspended by JPMorgan, GMAC and BOA in 23 states, but what about the rest? The others are non-judicial foreclosure states, which means they allow foreclosure through a power of sale clause in a deed of trust without going to court. The presumption is that if the lender doesn’t have to prove his standing to sue before a judge, he can proceed. State laws in non-judicial states allow the sale of a property to satisfy a foreclosure as long as the trustee follows the regulations concerning notice. That would seem to violate Constitutional due process, but the United States Constitution has held that due process protections apply only when the government is involved in the taking of property. When a deed of trust and promissory note are executed between two private parties (homeowners and lenders), there is no automatic due process protection. The homeowners agreed to it in writing; case closed.

    But here’s the catch: what if the lender signing the original documents is not the party foreclosing on the property? Then it becomes a question of fact whether the foreclosing party has authority to proceed, and that makes it a judicial issue a question of fact for the courts. If the foreclosing party can show a clear chain of title an assignment or progression of assignments from the original lender to himself he is home free. But courts have increasingly been holding that MERS breaks the chain of title. Foreclosure expert Neil Garfield argues that even in non-judicial foreclosure states, that means the investors have to go to court to prove their case. And when they do, they will run up against the brick wall of MERS. He concludes:

    “There will be a head-slapping moment when title carriers, attorneys, judges and administrative agencies and clerks suddenly realize that the monster created on Wall Street has its equivalent in the public records of counties across the nation. I doubt if more than 6-7% of all the foreclosures in the past 10 years have resulted in clear title delivered to anyone. And the only corrective instrument can come from the original owner. That homeowner is sitting in the catbird seat and doesn’t know it. Millions of people who THINK they have lost their homes still own them and if anyone wants a signature from those people to clear title, they are going to be required to pay dearly, which is at it should be. Eventually the purse gets returned to the victim from whom it was snatched.”

    To Subsidize or Nationalize?

    Where does that leave JPMorgan, GMAC, Bank of America, and the other major lenders? Investors have massive claims against these banks, and so do homeowners. A major title insurance company has already said it will not insure title to properties foreclosed upon by GMAC until further notice. Moody’s has placed the servicer ratings of GMAC and JPMorgan Chase on review for possible downgrade, and the Treasury is asking regulators for an investigation.”

    http://www.rense.com/general92/shock.htm

  29. 29
    Macro Investor says:

    RE: Pegasus @ 28

    Every single underwater homeowner should consider stop paying immediately. If they try to foreclose he should sue to force them to prove they are the legal note holder. At the very least the courts will be backed up with this for years, and they can live rent free the whole time.

    Stick it to those banks.

    PS – don’t refinance or sign a workout, which gives up your no recourse loan protections.

  30. 30
    Pegasus says:

    Massachusetts Attorney General Calls For Foreclosure Halt.

    Massachusetts Attorney General Martha Coakley called on Bank of America and other major creditors to delay all foreclosure proceedings and pledged to begin her own investigation in light of recent revelations that they may not have complied with the law.

    Bank of America announced Friday it was delaying foreclosures in 23 states, not including Massachusetts, as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents.

    “Our office has been extremely active in holding major banks and Wall Street firms accountable during this foreclosure crisis. We are concerned about the revelations that Bank of America and other major lenders have failed to properly review foreclosure documentation,” Coakley said yesterday in a statement. “Our office is now investigating this apparent failure of major creditors to follow state foreclosure law to ensure that Massachusetts homeowners are properly protected. In light of these revelations, we are asking Bank of America and other major creditors to cease foreclosure proceedings for Massachusetts homeowners until they can demonstrate that they have complied with Massachusetts law.”

    http://www.bostonherald.com/business/real_estate/view.bg?articleid=1286048

  31. 31

    RE: Pegasus @ 28 – You’re the one that is clueless Pegasus. I’m familiar with virtually everything in that piece (including the needless reference to Due Process), but the author of that piece is not familiar with RCW 61.24.050, which provides: “When delivered to the purchaser, the trustee’s deed shall convey all of the right, title, and interest in the real and personal property sold at the trustee’s sale which the grantor had or had the power to convey at the time of the execution of the deed of trust, and such as the grantor may have thereafter acquired. If the trustee accepts a bid, then the trustee’s sale is final as of the date and time of such acceptance if the trustee’s deed is recorded within fifteen days thereafter. After a trustee’s sale, no person shall have any right, by statute or otherwise, to redeem the property sold at the trustee’s sale.”

    I would also cite you to RCW 61.24.127, which deals with how the rights of the borrower are terminated by the foreclosure sale, including the right to assert claims of fraud or the lender having complied with the foreclosure laws. (In fact, I’ve written about this particular statute and became involved in getting it amended after a very bad court case interpreting it.)

    http://apps.leg.wa.gov/rcw/default.aspx?cite=61.24.127

    About the only scenario I see where it would be possible to contest the foreclosure would be if the wrong entity foreclosed and the proper entity was the one contesting it, and that would assume that the proper entity wasn’t given any notice of the foreclosure. Typically in such situations though, assuming the entity wasn’t a total scam, the parties would merely fight over the proceeds.

    Quit playing lawyer. You don’t understand a lot of things, and the law is way over your head.

  32. 32

    RE: Kary L. Krismer @ 31 – Here’s the piece where I wrote about the foreclosure statute ruling:

    http://blog.seattlepi.com/realestate/archives/153842.asp

  33. 33
    Blurtman says:

    There has been some interesting and enlightening discussion on who owns the mortgage servicing companies and what benefit they derive from this arragnement.

    “The majority of which are subsidiaries to investment banks. Goldman bought Litton Loan Service, one of the most egregious servicers on the planet in 2007. Someone high up on this food chain targets specific tranches and servicers go to work doing what they do best – mortgage servicing fraud or fabricating bogus defaults where none exist. Yes, even those in that 65-86 percent who pay their mortgage on time can fall victim to mortgage servicing fraud. It is these fabricated defaults that have been feeding CDS casinos. Every servicer to ABX reference entities has been charged and investigated for mortgage servicing fraud. Here’s federal servicing fraud actions on three of them:
    EMC Mortgage Corp. – http://www.ftc.gov/opa/2008/09/emc.shtm
    Select Portfolio Servicing – http://www.ftc.gov/fairbanks
    Ocwen Federal Bank – http://files.ots.treas.gov/93606.pdf
    This scheme only works when you have complicit servicers doing the dirty work. Without their free flowing servicing data, Goldman and other investment bank proprietary trading desks would not have known where and when to go short and they could not have gamed the system so well. There are no firewalls between trading desk and subsidiary servicers. What we are really looking at here is the biggest insider trading scheme of all time.
    Janet Tavakoli offers more commentary on WSJ piece today:
    http://www.tavakolistructuredfinance.com/wsj28.html
    In it she includes this link – http://www.tavakolistructuredfinance.com/AIGGS.pdf
    which lets you peer into Goldman’s CDOs. Knowing the asset name and issuer you can easily look up who the servicers are on Edgarest. Then you can check out the servicer’s rap sheet and believe me, they all have long rap sheets with plenty of ‘no admission of guilt’ cost of doing business settlements . . . while the band plays on. The real tragedy is that all too many of those common Americans who pay on time have lost their homes to this well oiled proprietary trading scheme.”

  34. 34
    karl says:

    Interesting,

    What do you think the impact would be on forclosures past if the supreme court ammends/clarifies the law? The news is full of local stories claiming improper forclosures. I would not be suprised if they are suspended here also.

    The list of problems to watch for as a home buyer keeps growing.

    watch for properties with a “notice of noncompliance” tacked to the parcel number. DDES in king and pierce county both are aggressively hunting down non-permitted structures and additions. Another sucker punch for struggling home owners

  35. 35
    Pegasus says:

    RE: Kary L. Krismer @ 31 – Blah blah blah. Thanks once again for YOUR opinion but if no one is identifying the proper owner of the mortgage then the whole foreclosure is based upon false information and the homeowner certainly can stop his foreclosure by going to court if he so desires. If you bother to educate yourself about the facts of what is really happening in these foreclosures instead of trying to blow smoke up everyone’s a$$ here you will find that many foreclosures are occurring without the proper owner being identified. Why do you think they are stopping all of these foreclosures in so many states, Buffoon? I will be willing to bet that the State of Washington suspends foreclosures also even though I am sure you see no need. Why? Because it is the right thing to do and a fraud is being perpetrated whether in the court or upon the homeowner. Why are the title companies backing away? How long will the trustees run run-judicial foreclosures when they have reason to believe that their documents are falsified about who the owner is?

  36. 36

    RE: Pegasus @ 35 – Blah, blah, blah is what my cats here too. The reason? They’re too stupid to understand. Again, you need to quit pretending your a lawyer, because this is way over your head (and you’re relying on reading things written by people where the topic is also over their head). It’s the blind leading the blind.

  37. 37
    Pegasus says:

    RE: Kary L. Krismer @ 36 – Geez Kary I posted an article about foreclosure and the author happens to be a practicing attorney and a lot smarter than you and suddenly I am practicing law. Quite a leap there Kary. Her article pertained to all states and not specifically to Washington State. I do understand how Washington State’s non-judicial foreclosures are supposed to clean up the title and prevent recourse and redemption and I am not even an attorney. Go figure! The real question still is if we know or have a very strong reason to believe the documents are false(which we now do) do we continue to foreclose, the public be darned? As to your interpretations of the law they are usually twisted and incomplete. We saw that in the past week or so where you took bits and pieces by memory and made a buffoon out of yourself…again. But hey..you are an attorney.

  38. 38

    RE: Pegasus @ 37 – You think that attorney is a lot smarter than me when she quotes someone saying they think you 6-7% of the foreclosures gave clear title? At best she’s very gullible. Even in judicial states that’s very unlikely.

    My PREDICTION is this will turn out to be a lot of nothing. I’ve seen situations before where motion mills try to file motions with no supporting declaration or clearly insufficient declarations (e.g. from the attorney), and someone finally calls them on it. Attorneys doing so seldom use the term fraudulent. The lenders’ attorneys fix the mess after some delay. For the borrower client it buys them a couple more months in their house when they have no other defense to being thrown out. If this type of tactic was being used by a bank, you’d call it frivolous rather than fraudulent. Personally I consider it neither.

    As to the assignment of documents issue, since the borrower owes someone, that’s really a matter between creditor entities, again absent a complete scam entity. I don’t even think a bankruptcy trustee could take advantage of these types of situations, and they can take advantage of many errors that the original borrower cannot. Simply put, you don’t easily get from a situation where you owe someone a lot of money to one where you don’t owe them money just due to document errors (excluding things like TILA violations, usury penalties, etc.).

    Really time for you to give up on legal issues when all you can do is link to things you don’t understand. So we now have three topics you should stay away from: Risk, insurance and legal issues. I wonder how many more we’ll have by the end of this week? Or an even bigger question would be whether we find a topic you know anything about?

  39. 39

    RE: Kary L. Krismer @ 38
    Kary
    You didn’t just make a prediction, did you?

  40. 40

    RE: Ira Sacharoff @ 39 – Yep, since issues like this have been floating around bankruptcy courts for years, I don’t really think it will suddenly become a major issue because members of the press suddenly become aware of it.

  41. 41
    Scotsman says:

    RE: Kary L. Krismer @ 40

    ” I don’t really think it will suddenly become a major issue because members of the press suddenly become aware of it.”

    You mean like a bubble in housing prices? I don’t know, Kary, I’m not an attorney. But it seems to me we have a growing problem here, maybe not so much in WA but certainly in other states. Otherwise we wouldn’t have state AGs shutting down the foreclosure process entirely. It may well turn out that the cover-up or delays become the real issue, who knows. Just remember there are 49 (or 56 according to Obama) other states whose collective economies will certainly have an effect on ours. I think the thing to do is adjust your exit plan and sit back and wait. We don’t have enough info yet to draw any clear conclusions.

  42. 42

    RE: Scotsman @ 41 – LOL, no I just meant creditors being forced to prove that they are the real party in interest when they judicially foreclose. If it did become a significant issue, the law would probably be changed ASAP.

    We used to be able to go after creditors where they didn’t actually transfer the note as part of the assignment. As I recall, changes to the UCC changed that, or at least made it the result in a lot fewer situations. One way or another we’re not going to end up with a situation where homeowners suddenly own free and clear of their mortgage.

  43. 43
    Pegasus says:

    RE: Ira Sacharoff @ 39 – Ira I will predict that Kary will be wrong once again. This is not going away. It is finally gaining momentum. Judges don’t like being exposed for kicking voters out of their homes with fabricated documents. Public title companies don’t like having their ratings of risk downgraded over this. I saw one attorney in Florida that studied the foreclosures and he concluded 3/4 of the cases had bad documentation. Wonder what it is here? Kary….what is your prediction about Washington State halting or asking the perps to halt non-judicial foreclosures over this? Maybe Tim could have a poll over that?

    http://dandelionsalad.wordpress.com/2010/08/18/homeowners-rebellion-could-62-million-homes-be-foreclosure-proof/

    Rico suit
    http://stopforeclosurefraud.com/2010/07/27/class-action-filed-figueroa-v-law-offices-of-david-j-stern-p-a-and-merscorp-inc/

    http://4closurefraud.org/2010/10/03/super-sewer-service-i-feel-bad-for-all-the-people-who-lost-their-homes-and-were-obviously-not-served/

  44. 44
    Blurtman says:

    So a slightly different angle to the foreclosure fraud – Goldman Sachs and other investment banks own mortgage service providers. Goldman Sachs has created and sold CDO’s composed of tranches of mortgages, which were all incorrectly rated by Moody’s and S&P. Goldman sells the CDO’s to investors, including CDO’s that were designed to fail. Goldman’s then takes out insurance (CDS) on the CDO’s, since they know how terrible they are. Of course they don’t tell their customers. Goldman has already copped a plea to the rare SEC civil fraud suit regarding these criminal practices.

    But how does owning a mortgage service provider allow one to further this fraud? Well, you immediately have inside information regarding which mortgages and mortgage backed securities are at risk, so you immediately know which to short (or take out insurance on.) But worse, you can play the CDS and CDO market like a violin. Want the value of your CDS to increase? Tell your mortgage service provider to turn up the rate of foreclosures. Want the opposite to happen? Tell the mortgage service provider to slow down.

    The USA has had a recent Treasury Secretary who worked at a criminal investment bank, and who engineered the bailout of his former employer when their criminal endeavors backfired.

    The USA justice system is a fraud. US capitalism is a fraud. Our Attorney General, Holder, is a former corporate lawyer stooge who is extraordinarily negligent in enforcing the law .

    Where are the cops?

  45. 45
    Scotsman says:

    RE: Kary L. Krismer @ 42

    “we’re not going to end up with a situation where homeowners suddenly own free and clear of their mortgage”

    Agreed. But that’s not the real issue in terms of impact. The real problems will come with unwinding the deals that are in MBS and other packaged “investments.” That will hit the banks and the Fed. The second issue is title insurance. Several companies have already said they won’t write new policies on paper where certain banks are involved. If that becomes widespread it will be much harder to buy/sell a house unless you want to go into the deal naked. And who will finance for you if that’s the case?

    The first effect is going to be a further slowing of the number of buying/selling transactions, a freeze in the markets that locks up capital in unproductive capacities. That will hurt banks, builders, retirees, etc. It also adds a great deal of uncertainty to an economy that is already overwhelmed by political, tax, and interest rate concerns.

    Free house? Unlikely. A major new wrench thrown into an already damaged machine? Oh yes.

    KD has a new post on the fraud element:

    http://market-ticker.org/cgi-ticker/akcs-www?post=168121

  46. 46
    Sniglet says:

    Unfortunately, I doubt very much that these foreclosure moratoriums are going to help in the real-estate recovery. In fact, they will likely prolong (and deepend) the downturn.

    The best medicine for recovering from a credit bubble is to wipe out the non-performing debt and have a clearing of assets to new (and more realistic) market levels.

    The only things these moratoriums accomplish is to delay this cleansing process, which will drag out the recession even further. Moratoriums certainly don’t force lenders to write off the debts owed them or bestow clear titles to the delinquent debtors.

    I am not saying that there shouldn’t be moratoriums. From what I hear, there are many banks that simply have to stop proceeding with foreclosures until they clean up their own internal processes. Nevertheless, regardless of the necessity for foreclosure moratoriums, they will only serve to make things worse.

  47. 47
    Herman says:

    RE: Blurtman @ 44 – I agree. But I think the problem that even the elected do-gooders face, is how to crack down on fraud and misbehavior without destroying the economy in the process. Got any ideas?

  48. 48
    karl says:

    I agree, in that the biggest problem (Near term) will be title insurance. However, I also believe that some of the forclosures will be found “unlawful”. in that the paperwork was false or incomplete. We do have judicial foreclosures in this state ,but limited. If a property is classified as a farm the lender is required to go the judicial route…and with that comes the “right of redemption” . I tried to get some information locally on “redemption bonds” (protects the buyer from redemption) but since these types of foreclosures are rare, I think you would have to shop out of state. The foreclosure type should be disclosed on form 17.

    As a buyer it just means there are more snags to watch for. Bad enough already..

  49. 49
    Pegasus says:

    Couple more RICO lawsuits out there over the foreclosure documentation fiasco. Remember Kary says there is no fraud going on and this all much to do about nothing. He doubts anything will ever come of it. He should know because….well just because. It appears there many others that disagree with him and they happen to also be attorneys. Maybe Kary should call them and set them straight?

    RICO lawsuit
    http://www.how2fightforeclosure.com/2010/08/class-action-rico-suit-against-mers-alleges-tens-of-thousands-of-new-york-foreclosure-frauds-orchestrated-by-%E2%80%9Cforeclosure-mill%E2%80%9D-attorney-steven-baum-banks/

    Another RICO lawsuit..that is at least three….
    http://mattweidnerlaw.com/blog/wp-content/uploads/2010/10/RICOClassActionComplaint.pdf

    Kary thought that this guy was just doing his job. Kary did NOT know that this guy was the cause of the GMAC foreclosures being halted and the title company stopping titles on GMAC foreclosures.
    http://mattweidnerlaw.com/blog/wp-content/uploads/2010/10/StephanProtectiveOrder.pdf

  50. 50
    Newtoarea says:

    Even if this paperwork fiasco does slow down or stop some foreclosures, it won’t raise the value of the housing, won’t get anyone from out of being upside down. Each and every case would take a lawyer to fight for the borrower. How are they going to pay for those lawyers if they can’t afford to pay for their house? Are we going to start see stupid lawyer commercials that promise a free and clear house (oh maybe they will take a 1/3? just like the ambulance chasing ones?)

  51. 51
    David S says:

    According to the Times, http://seattletimes.nwsource.com/html/businesstechnology/2013052256_buchan02.html
    the market is a pukin’ Buchans.

  52. 52
    Blurtman says:

    RE: Herman @ 47 – Sweden utilized a different bailout scheme, where incompetent or criminal bank management was terminated, and the banks truly nationalized, but Obama rejected that strategy. Both Democrats and Republicans are corrupt and part of the problem. Just look at the contributions that Rahm Emanuel received from the Magnetar hedge fund who did what Goldman Sachs was sued for by the SEC but in a much bigger way.

    If I accept your premise, than do we allow crime to continue unabated and our wealth to be transferred to a criminal oligarchy for fear that they will blow up the economy if we stop them?

    What would our founding fathers have done?

  53. 53
    Pegasus says:

    Yo Kary….This guy appears to be practicing law at least by your silly feeble definition and he does not have your permission! He actually posted a legal document and he is discussing it on his blog and making you look plenty stoopid for your mindless comments and rants this weekend. Oh my!

    MERS/MBS/Foreclosure Goes RICO

    “REMICS were newly invented in 1987 as a tax avoidance measure by Investment Banks. To file as a REMIC, and in order to avoid one hundred percent (100%) taxation by the IRS and the Kentucky Revenue Cabinet, an MBS REMIC could not engage in any prohibited action. The “Trustee” can not own the assets of the REMIC. A REMIC Trustee could never claim it owned a mortgage loan. Hence, it can never be the owner of a mortgage loan.

    57. Additionally, and important to the issues presented with this particular action, is the fact that in order to keep its tax status and to fund the “Trust” and legally collect money from investors, who bought into the REMIC, the “Trustee” or the more properly named, Custodian of the REMIC, had to have possession of ALL the original blue ink Promissory Notes and original allonges and assignments of the Notes, showing a complete paper chain of title.

    58. Most importantly for this action, the “Trustee”/Custodian MUST have the mortgages recorded in the investors name as the beneficiaries of a MBS in the year the MBS “closed.” Every mortgage in the MBS should have been publicly recorded in the Kentucky County where the property was located with a mortgage in the name similar to “2006 ABC REMIC Trust on behalf of the beneficiaries of the 2006 ABC REMIC Trust.” The mortgages in the referenced example would all have had to been publicly recorded in the year 2006.

    59. As previously pointed out, the ¡°Trusts¡± were never set up or registered as Trusts. The Promissory Notes were never obtained and the mortgages never obtained or recorded.

    60. The “Trust” engaged in a plethora of “prohibited activities” and sold the investors certificates and Bonds with phantom mortgage backed assets. There are now nationwide, numerous Class actions filed by the beneficiaries (the owners/investors) of the “Trusts” against the entities who sold the investments as REMICS based on a bogus prospectus.

    61. In the above scenario, even if the attorney for the servicer who is foreclosing on behalf of the Trustee (who is in turn acting for the securitized trust) produces a copy of a note, or even an alleged original, the mortgage loan was not conveyed into the trust under the requirements of the prospectus for the trust or the REMIC requirements of the IRS.

    62. As applied to the Class Members in this action, the end result would be that the required MBS asset, or any part thereof (mortgage note or security interest), would not have been legally transferred to the trust to allow the trust to ever even be considered a “holder” of a mortgage loan. Neither the “Trust” or the Servicer would ever be entitled to bring a foreclosure or declaratory action. The Trust will never have standing or be a real party in interest. They will never be the proper party to appear before the Court.

    63. The transfer of mortgage loans into the trust after the “cut off date” (in the example 2006), destroys the trust’s REMIC tax exempt status, and these “Trusts” (and potentially the financial entities who created them) would owe millions of dollars to the IRS and the Kentucky Revenue Cabinet as the income would be taxed at of one hundred percent (100%).”

    “MBS/Trustees and their lawyers discovered in the foreclosure process that the Note and Mortgage Assignments would never be located because they never existed. They also discovered that states did not allow blank Assignments or Assignments with retroactive effective dates. To solve the problem of the missing and non-existent Assignments, the MBS/Trustees, their attorneys and their Servicing Agents, decided to fabricate Assignments from thin air and then quietly record the fabricated Assignments.”

    “The Assignments of the Mortgage were signed and notarized many years after the actual date of the loan and the date listed with the SEC and IRS as the “Closing” of the REMIC. In every one of these cases, the MBS Trust has been operating illegally as a tax exempt REMIC. The federal government is in turn, owed billions of dollars in income tax from these entities. The individual states of the union has causes of action on behalf of their citizens for the unpaid state tax.

    Yep. And the really bad news is that as soon as these things happened the loss of tax exemption is not only immediate, it’s irrevocable.

    As previously set out, often the MERS held the Mortgage as “nominee” for a lender who was out of business and/or liquidated in bankruptcy. There could be no party legally able to Assign the Mortgage on behalf of the dissolved lender. The only party who could authorize the Mortgage Assignment for a bankrupt lender would be the Bankruptcy Trustee. In these cases where a MERS mortgage has been assigned on behalf of a bankrupt entity, a criminal violation of the bankruptcy code had occurred.”

    http://market-ticker.org/akcs-www?post=168144

  54. 54
    pfft says:

    By Blurtman @ 52:

    RE: Herman @ 47 – Sweden utilized a different bailout scheme, where incompetent or criminal bank management was terminated, and the banks truly nationalized, but Obama rejected that strategy. Both Democrats and Republicans are corrupt and part of the problem. Just look at the contributions that Rahm Emanuel received from the Magnetar hedge fund who did what Goldman Sachs was sued for by the SEC but in a much bigger way.

    If I accept your premise, than do we allow crime to continue unabated and our wealth to be transferred to a criminal oligarchy for fear that they will blow up the economy if we stop them?

    What would our founding fathers have done?

    bush initiated TARP not obama. obama only bailed out C, BOA and wells if I remember correctly.

    I agree that obama could have handled things differently though. on the other hand when obama did make changes he was accused of running the companies and favoritism by republicans. guess you can’t win?

  55. 55

    RE: karl @ 48 – Farm properties tend to use real estate contracts, which have statutory forfeiture procedures very similar to deeds of trust. They don’t tend to use mortgages and go the judicial route.

  56. 56

    RE: Pegasus @ 49 – First, as you should know, you can sue anyone for anything. It’s the end result that counts.

    As to the third link, the creditor submitted an amended declaration, but the court found that deficient because it failed to state the street address and information about the demand made on the borrower. So the court was willing to let the creditor correct the original declaration (which apparently wasn’t even signed in the presence of a notary), but the creditor didn’t comply with everything required.

    Also as to the third link, that PDF is an image, and I apparently can’t convert it to text, but I’m not seeing the word “fraud” or even “perjury” there anywhere. Instead the court deals with it as a lack of back faith.

    Finally, as I posted in another thread, in a local case the person admitted to just checking the dates and relying on others to check the accuracy, and the borrower’s case was dismissed. That was from Washington state. This is not as big of a deal as you make it out to be, and you only think it is because you don’t understand the issues.

    http://seattletimes.nwsource.com/html/businesstechnology/2013066598_apuswellsfargoforeclosures.html

    That my friend, is a final result. Someone sued, as was their right, and the court didn’t give them the relief they sought.

  57. 57

    RE: Pegasus @ 53 – I don’t have time to review every nutcase link you find (especially when the website is down), but the comment at the end of that one that the actions are a criminal violation of the bankruptcy code are way off base, calling into question everything else written.

  58. 58
    Pegasus says:

    RE: Kary L. Krismer @ 56 – The third link is to a court doc in Maine where Stephan(the guy you linked here and said “Someone signing these type of documents doesn’t have to cull through corporate records, verify payments, etc. Computers produce records, they do a brief review, and send them off”) is found by the judge to have submitted documents in “bad faith”. Stephan’s depositions are the primary reason GMAC’s foreclosures are halted. Doesn’t sound like he doing things properly does it? I gave you link 3 to show how idiotic your statement was about Stephan and how you always just spout out without thinking and doing your homework. Now you are trying to twist it even further. For that I am going to award you the badge you have earned by your posts this weekend:
    http://stephanpastis.files.wordpress.com/2010/08/stoopid-badge2.jpg

  59. 59

    RE: Pegasus @ 58 – What are you, 12 years old? That would explain a lot (incredible immaturity, lack of eduction, lack of understanding of the world, etc).

    Did I ever say this wasn’t going to be an issue? No. I said it wasn’t “fraud” as you were claiming, and that in the end it wouldn’t be a big deal. That the banks will start complying with the proper procedures and then move on. Nothing you have posted since then shows otherwise, but worse than that is the fact that nothing you have posted shows you have even the slightest understanding of the issues involved.

    What I have posted since then proves that at least one court thinks you are wrong. The bank admitted what they were doing was as you described, and the borrower’s case was still dismissed. We will need more court rulings to sort this out, but so far the rulings that have been presented here (the one I linked and your “third link”) show I am correct.

  60. 60

    RE: Pegasus @ 53 – This link is working now. I think I insulted nutcases by saying I couldn’t review every nutcase link you find. This one the author of the site apparently doesn’t even know what he’s reading because he refers to it as a “document.”

  61. 61
    Blurtman says:

    RE: pfft @ 54 – AIG and therefore all of the investment banks including ones in Europe. But when Obama was asked why not the Swedish model, he said someting like “We have a lot of banks..” which is bs, as there are only a handful of investment banks and TBF’s.

    Further, while Bush the war criminal did initiate TARP in the last months of his reign, Obama continued the practice, and the same cover-up, excuse me, “not looking back” collusion, appointing the asleep at the switch Tim Geithner as Treasury Secretary, nominating the didn’t see it coming Ben Bernake to continue as Fed chairman, and selecting former hedge fund employee Larry Summers as his advisor. And of course Rahm Emanuel, who was the benficiary of moneys by his buddies at the Magnetar hedge fund, who performed a much larger fraud than that for which Goldman Sachs was sued by the SEC.

  62. 62
    One Eyed Man says:

    RE: Blurtman @ 61

    Get used to it Blurtman. As Chris Rock said, “There is no sex in the Champagne Room”. ;-)

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