A Simple Solution to the Foreclosure Paperwork Mess

This foreclosure documentation mess still seems to be getting a lot of attention. Pundits on television, opinion writers in print, and even the Attorneys General of nearly every state are all riled up about it.

Everyone seems to want to “stick it to the man” and make the banks pay for making false claims about having all the right paperwork and following all the right procedures.

I get that there are legal processes in place for a reason, and I agree that it’s not okay for the banks to just ignore the law when it happens to inconvenience them, but here’s something that’s been bugging me about all this outrage.

How is what the banks are doing today any different from what they did throughout the years that the housing bubble was inflating?

Many of the people who are losing “their” homes today are the same people who were only able to get loans that allowed them to overpay for those homes in the first place thanks to the exact same sloppy procedures at the banks. They were more than happy to take advantage of lousy (or often a complete lack of) documentation when it got them into a home, but when the same set of rules are applied to kick them back out, suddenly they are crying foul.

Obviously not everyone fits my description of the typical foreclosure crisis “victim.” Those who are losing homes on which they never missed a payment or that they own outright clearly have every reason to be outraged at the banks. However, people who stopped paying their mortgage and are hoping to take advantage of some technicality to get “their” home back are only kidding themselves.

Here’s my proposed solution to the whole mess. Forget foreclosure freezes. Forget endless reviews of millions of documents. Here’s my 3-point plan:

  • Free legal counsel for anyone who is current on their mortgage but has been truly wrongfully foreclosed.
  • Every time a bank is found by the courts to have initiated any degree of foreclosure proceedings on someone who was not behind on their mortgage, a $10 million fee is levied against the bank.
  • Fees collected pay for the legal representation of future legitimate claimants against the bank.

The basic idea is to make it easy for people who have actually been victimized (not just the victims of documentation technicalities) to obtain appropriate recourse against the banks, and to make it really hurt when the bank actually screws up. This provides a strong incentive for the banks to get things right and a just outcome for the times that they get it wrong.

What do you think? Would something like this be reasonable, or have I yet again displayed my ignorance of complex legal and economic issues?

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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.

61 comments:

  1. 1
    Vellebue Renter says:

    I have to disagree with one of your ideas:
    “…Free legal council for anyone who is current on their mortgage but has been truly wrongfully foreclosed…”

    This just adds more red-tape to the process because that in itself is a process to determine who has been “wrongfully foreclosed” and who has not. And many people who dont deserve it will come forward and try to claim the “free legal council”.

    I do think that there should be a specialty type of ‘Foreclosure court’ kind of like there is Traffic Court, Bankruptcy Court, Small Claims, etc…

  2. 2

    I really doubt there are many cases of someone having not missed a payment and being foreclosed. There probably are more where a loan modification agreement was involved, and something got mixed up in processing it.

    On the bank’s side, debtor attorneys probably should be a bit concerned that the courts will start enforcing CR 11, which provides in part: “The signature of a party or of an attorney constitutes a certificate by the party or attorney that the party or attorney has read the pleading, motion, or legal memorandum, and that to the best of the party’s or attorney’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: . . .(3) it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; . . . .” If you know your client is delinquent on their payments and just raise the holder of the note issue without any information indicating that the plaintiff is not the holder of the note, I would think the debtor’s attorney would have some exposure there. Unfortunately, judges tend to be very unwilling to find CR 11 liability, and that results in a lot of wasted court time.

  3. 3
    Pegasus says:

    It sounds like your are condoning the fabrication, forging, etc that has occurred on the basis that laws only apply to the little people and the downtrodden. Crooks get a free pass. Just like they did in the IPO scandal, the analyst scandal, the oil manipulation scandal, the subprime scandal, global economic meltdown, municipal bond scandal, derivative scandal, the HFT scandal, etc, etc. By the way its the same crooks doing this.. now you appear to want to let them off in fraud-closure again? Let us not forget who created this entire nightmare(Hint…it wasn’t Mom and Pop). So you are saying let’s just forget about all criminal behavior on the part of the banksters because the people deserve to be foreclosed and any means fraudulent or not justifies the end in forcing these losers out on to the street?

  4. 4
    Pegasus says:

    My previous comment was directed at the Tim.

  5. 5
    Brandon Adams says:

    Matt Taibbi has an interesting article on this topic in this month’s Rolling Stone.

    He only gets first-hand experience with one judge in one courtroom, but the anecdotes aren’t really the meat of this story. The problem, as described by Taibbi, is that the banks are the loan servicers, and if unable to service the loan then they must compensate the loan holder (the people who bought the AAA rated securities) out of their own pockets. Unless, of course, the bank forecloses on the house.

    These incentives have led the banks to pressure the government to streamline the process, so that they can move these liabilities off of their books ASAP. In the new foreclosure environment judges try to get through 25 cases per hour, and when in that kind of rush they’re far more likely to approve foreclosures that they shouldn’t.

    You can read the article at http://www.rollingstone.com/politics/news/17390/232611?RS_show_page=0

    I think you’d need to add at least one more thing to your plan – very strong penalties for negligence by the officials that approve foreclosures.

  6. 6
    ray pepper says:

    “The basic idea is to make it easy for people who have actually been victimized”

    Tim, it is of my opinion WE HAVE ALL BEEN VICTIMIZED by Wall Street.

    http://vimeo.com/3261363

    We should not be left holding the bag for what was perpetrated on us. Yes, I know strategic default is bad but as most already know I support it when its in the best financial interest for a specific family or individual. The fact is home prices are NOT coming back for a very VERY long time and the sooner families place this lead weight around their necks behind them, the sooner they can move on. Families have been destroyed and I simply have no sympathy for the banks. Tell me it costs me more when my neighbors bail down the road. I don’t care!

    Each and every week I see people buying their homes back at Trustee Sale just illustrates to me the next big business that will no doubt rear its ugly head across America and will be on 60 Minutes and Dateline..It will be something like this:

    Stop paying on your Mtg!
    Set up an LLC with partners.
    Let them Foreclose!
    Save your money for 2-3 years while we assist in delaying the Trustee Sales Date.
    With a 4000 Mtg you can save over 100k!
    Buy your home back for 1/2 price and we will charge you 8% and 4 points if you place 40% down, 7% and 3 points for 50% down, etc..
    Don’t even move a box from your home!!

    This is what I see happening in the near future on a wide scale UNLESS the FED ACTS……People will only remain stupid for so long and when they bought in the last 5 years they had no clue they would be forced to stay in their home at least 2 decades.

    They are all coming back. Banks get your paperwork in order!

  7. 7

    RE: Pegasus @ 4 – Thank you for clarifying! ;-)

    I think what The Tim might be getting at is a variation of something I noticed practicing law. Debtors and creditors sink to their own level. If you have an unethical debtor chances are they were also dealing with creditors who were unethical, because they couldn’t do business with others.

    Look at what he’s talking about. Say in 2007 you didn’t quite have the qualifications to get a loan. Where would you go? WAMU? Countrywide?

  8. 8
    Leah says:

    I think you have a great idea going. People who are in foreclosure, for the most part, have been fiscally irresponsible. For years people have been buying a home outside of their means, using their home as an atm machine for the last 20 years or accepting a loan with terms they do not understand, among other things. Someone once told my father he was crazy in not using his property as a credit card. This attitude was common practice and has lead to a nationwide housing crisis. The banks, as you said, are just one more screwed up part of the problem. I think the general public is missing the lesson of our current economic crisis. Consumers need to educate themselves. We all grew up hearing ‘read everything before you sign it’. I wonder how many people did this. Not the majority I am sure. Live within your means. When did it become acceptable to live with hundreds of thousands of dollars in debt without doing everything in your power to pay down that loan?

    I hate banks. I am a small business owner. The complete lack of ethics in this industry has been a fact for decades. Why is everyone surprised that the banks are leaving behind sloppy paper trails. Where are the individuals left owing these loans keeping their copy of the paperwork?

    The bottom line is, consumers are the real problem. As for fining the banks, go for it! They deserve everything that hits them. I would be out of business if I behaved the way this industry has. But as a consumer and someone in the market for a home, I say, educacte yourself, find a professional that you trust, double check their work and advise, save your money, have an emergancy fund and live within your means. If you do this I very much doubt you will be facing a foreclosure.

  9. 9

    RE: Kary L. Krismer @ 2

    Exactly Kary

    Make your payments on time and there’s probably no problem. Up until recently, with the bubble balloon payments on principles a good percentage of the buyers simply couldn’t afford coming due, most buyers didn’t have payment problems….now it’s very common.

    I just don’t feel sorry for banks or buyers that gave jumbo loans or took on jumbo loans; it’s not the rest of our faults either; albeit the federal debt to rescue it puts it unfairly on those who did make their payments, most of the rest of us.

  10. 10
    masaba says:

    I agree with Pegasus and Ray.

    I don’t think that we should sweep this under the rug. Sure, there are debtors out there who were willing to be led around by the nose; but in the end, it is the ‘trained professionals’ who clearly cast all ethical constraints to the wind who need to be punished.

    Ray’s quote is perfect in summing up my feelings on why we must do this: “WE HAVE ALL BEEN VICTIMIZED by Wall Street.” I honestly don’t have a ton of empathy for the debtors in these situations, but nevertheless, I want the bankers who instigated this to pay the piper for their unethical, immoral conduct.

  11. 11
    One Eyed Man says:

    These are the two reasons your idea probably doesn’t change things.

    1. All the Promissory Notes already have a clause that says the loser will pay the winner’s attorney fees. There is a caveat to that. Generally the judge determines how much of the attorney fees to award to the winner but its not always the total amount that was billed to the client (if the judge deems the amount “unreasonable), so even if you win, there’s some risk to the client that they don’t recoup all the attorney fees.

    2. You never know if the borrower is entitled to free attorney fees until after the suit is over. Does the borrower have to come out of pocket for potentially tens of thousands of dollars in fees until the case is resolved? That’s basically the same thing we have right now. The attorney’s want to get paid either upfront, or at the end of each month and aren’t willing to wait until the lawsuit is over to see if the client wins. If the client gave the attorney bad facts, the attorney would be at risk of never getting paid.

    The only thing you’re plan adds is a 10 mil penalty if the bank forecloses on someone who was current. My educated guess is that almost never happens. When it does, it’s probably most often because there was an error in the legal description that wasn’t caught by the title company and the deed of trust was on the wrong property to begin with.

  12. 12
    hinten says:

    The issue is not about deadbeats getting foreclosed on. Only the dumb are arguing that the banks have nor right to foreclose on individuals that are not paying. Clearly, they should.
    The problem is not with foreclosed homes but the problem is with homes that you and I think we own. The impact of this disaster will be felt on homes with mortgages that are paid for and up-to-date.
    The banks have colluded to circumvent the federal and state process of recording and transacting deeds by introducing a commercial entity, MERS, that handles the recording and transactions. Your and my mortgages are more than likely handled by this company. Since they screwed up paperwork for foreclosed homes, regular mortgages are now at risk as well since no one is sure whether all transactiosn were recorded correctly.

    Do you know for sure who has your deed and if everything was recorded correctly?

    http://en.wikipedia.org/wiki/MERSCORP

  13. 13
    hinten says:

    In case you are interested to know if your mortgage has been handled by MERS go here and find out:
    https://www.mers-servicerid.org/sis/

  14. 14

    RE: hinten @ 13 – I don’t think MERS does any servicing, and if there’s an issue with payments not being properly reflected, that would be with the servicer. If MERS does do servicing, the recording issue wouldn’t have anything to do with reflecting payments.

    The funny thing about MERS is that while people complain about it, it actually is a much better system than recording with the county auditor. That is an extremely cumbersome system, and again, it has nothing at all to do with the rights of the owner of the property. They owe the money to the bank even without any recording at any point in time.

    BTW, you can also determine if MERS is involved by simply looking at your deed of trust.

  15. 15
    PJDJ036 says:

    You are going to need at least one other point.
    #4 Pass a federal law usurping the foreclosure laws of each state.

    What good are all those wet ink document laws anyway.
    Let’s face it, this would make it easier for the banks to continue their control.

  16. 16
    hinten says:

    RE: Kary L. Krismer @ 14

    My point is that if the paperwork is lost or missing pieces, the mortgage has been sold and resold multiple times, it is likely that MERS might have wrong information as well.

    Ownership of you and my home is held in a commercial, privately owned database.

    I don’t disagree that the current public system might seem cumbersome but there is a reason. Ownership and ownership of real estate is a bedrock of our society. Once you introduce any amount of uncertainty into the system it harms the whole system and the concept of real estate ownership.

    There is a reason why real estate transactions are complicated and have multiple levels of safeguards.

  17. 17
    Lurker says:

    By Brandon Adams @ 5:

    Matt Taibbi has an interesting article on this topic in this month’s Rolling Stone.

    He only gets first-hand experience with one judge in one courtroom, but the anecdotes aren’t really the meat of this story. The problem, as described by Taibbi, is that the banks are the loan servicers, and if unable to service the loan then they must compensate the loan holder (the people who bought the AAA rated securities) out of their own pockets. Unless, of course, the bank forecloses on the house.

    These incentives have led the banks to pressure the government to streamline the process, so that they can move these liabilities off of their books ASAP. In the new foreclosure environment judges try to get through 25 cases per hour, and when in that kind of rush they’re far more likely to approve foreclosures that they shouldn’t.

    You can read the article at http://www.rollingstone.com/politics/news/17390/232611?RS_show_page=0

    I think you’d need to add at least one more thing to your plan â�� very strong penalties for negligence by the officials that approve foreclosures.

    That article was one of the most depressing things I’ve read in a long time…..

  18. 18

    RE: hinten @ 16 – I don’t see why it would be any more likely that MERS would have wrong information than the county, but again, the county information being right isn’t really relevant between the debtor and the party owning the loan. If the documentation regarding ownership isn’t right–that’s another matter.

    The county system is a grantor/grantee system, where the reference in the assignment is often only some names and a prior recording number–the legal description is omitted. When you have a single entity that does thousands of transactions a year, that doesn’t really work well, even with computers.

    In contrast, as I understand their system, Mers is more like a Torrens system of recording, where everything pertaining to a particular deed of trust would be indexed under that deed of trust.

  19. 19
    Scotsman says:

    If we just enforced the laws already on the books 99% of this would eventually clean itself up. Add an understanding that there will be no bailouts for anyone, ever, and the issue will never reappear.

  20. 20
    harryberlin says:

    “Each and every week I see people buying their homes back at Trustee Sale”

    Pure B. S.

  21. 21

    As Kary alluded to, I think a lot of the issue here is not that people who simply stopped paying their mortgage ought to get their house back after it was foreclosed on, simply because the paperwork is fabricated.
    There’s been a whole lot of ” the left hand doesn’t know what the right hand is doing” on the part of the lenders, where someone’s circumstances have changed, they contact the bank, and get approved for a loan modification, but the department at the lender who does this doesn’t let the department at the lender who does the foreclosure know, and the place gets foreclosed on, despite the homeowner’s best efforts to do the right thing and communicate.
    A lot of people don’t have the background or experience to know how to budget, and when a bank tells them they are approved for a loan, they assume that the bank knows what they’re talking about. Maybe these people shouldn’t have been buying homes in the first places, but fergawdsakes, lenders for a long time had a reputation of being rather stingy lending their money out. If an “expert” assures me that I’ll be able to make the payments, I’m going to believe them. There was widespread abuse by loan originators, who fudged documents, or convinced people that they’d be better off with a subprime loan even though they’d qualify for a traditional 30 year fixed. Sure, some of these buyers knew or should have known what was going on. But to simply say that it’s okay that the lenders are doing things sloppily at best, fraudulently at worst because that’s the way they’ve done it for years? Not OK.

  22. 22
    Dirty_Renter says:

    Tim – your engineering training has helped you immensely when separating the wheat and chaff of an issue, be it economics or finance or banking. You’ve separated the people who have been abused by the foreclosure mess from the Trumpette deadbeats who want a free house by any means possible. It has been many decades since doing the coursework…but I think it was engineers who advanced the field of finance with mathematics; giving us Modern Portfolio Theory and the risk measure of ‘beta’.

    Ray – no matter how often you say it, your claim of being a victim rings hallow.

  23. 23

    RE: Ira Sacharoff @ 21 – I’ve alluded to a lot in the past. You hit on a few of them.

    1. I had a client in a mortgage modification where the trustee almost accidentally foreclosed the week prior to the sale. I had been told by several people in the trustee’s office that the sale had been continued. But for my persistence to get an actual date of the continuance, the mistake almost certainly would not have been caught. I sort of doubt that the average consumer would know to get the date.

    2. As to the quality of loan, I really doubt even 10% of loan originators knew the risk they were putting people at by getting 80/20 loans. But some of what you’re describing is just greed on the part of the originator–doing something to get increased fees as opposed to doing something to get a lower payment.

  24. 24
    Cheap South says:

    RE: Leah @ 8

    As Ira stated, the banks have all the experts. For some reason, if I walked in a bank and asked for a $500K business loan 4 years ago, they would have asked me for a business plan and my first born. If I got up, and walked to the guy in the next cubicle and asked for the same $500K but for a home loan….well, you know where I am going.

  25. 25
    doug says:

    Good luck getting fines like that passed on the banks, Tim. We give money TO the banks, not the other way around.

    I’ve been reading quite a bit about banks asking homeowners to miss a couple payments in order to get a mortgage modification, then putting them into foreclosure. Just another way they can get earnest homeowners put into foreclosure.

    Why is it that the greatest boosters of law and responsibility are so willing to forgive the banks? I don’t think the banks should have to suffer financial repercussions out of spite. I think the banks should have to suffer financial repercussions because if they don’t, they will do the exact same thing again! What did banks do when given money risk-free by the taxpayers? Leverage it up to the hilt, of course.

    The Taibbi article should be required reading.

    …”in America, it’s far more shameful to owe money than it is to steal it.”

  26. 26
    doug says:

    Also, these two statements are diametrically opposed:

    “Forget endless reviews of millions of documents.”

    “Free legal council for anyone who is current on their mortgage but has been truly wrongfully foreclosed.”

    Who determines this? Would this not necessitate the review of millions of documents?

  27. 27

    By doug @ 25:

    I’ve been reading quite a bit about banks asking homeowners to miss a couple payments in order to get a mortgage modification, then putting them into foreclosure. Just another way they can get earnest homeowners put into foreclosure.

    Why would a bank do that? More likely it would be some financial adviser trying to pigeon-hole a debtor into a space they don’t belong so that they can help them with a modification. Or possibly a debtor hearing a limitation as being advice to take action to avoid the limitation. Or simply the debtor misunderstanding or changing their recollection of events to suit their needs later. What is least likely of all those possibilities is that a bank would take action to make a default by the debtor more likely, especially in this market.

  28. 28
    Specuation v Investment says:

    I’ve been watching this board for some time now and really enjoy your work Tim — Thank you! Great forum and awesome data!

    I must say this issue drove me to sign up and comment. It is absolutely fascinating to me that we live in a country where money and power (banks – investment banking) could create a PURPOSEFUL fraudulant system (CDO – Mortgage Backed Securities) whereas the average consumer (tax payer) iwould ultimately lose. The system then falls apart and the government (tax payers) steps in to save the money and power (here’s the kicker) AT THEIR OWN EXPENSE (tax payers). Now we are debating (among tax payers) the merits of the money and power efforts to collect debt based on the original fraudulant system. Wow!
    Nothing is more dangerous than ignornace — read read read and read a bit more. I might suggest that everyone make The Big Short, House of Cards, Chain of Blame — just to name a few — must reads.

    I don’t discredit the responsibilty laying at the table of the borrower — but as a long time real estate investor and owner of numerous single family, multi-family and commercial holdings — its ironic that the very people who stand to lose the most are defending the antagonist.

  29. 29
    David Losh says:

    Tim,
    You don’t understand the issue here from beginning to end. Any one who gave a bank a dime should be entitled to that home because they were swindled. We have all been swindled, we all pay, it is a global economic scheme that is seeing our tax dollars oozing into the “emerging markets” with the same easy credit scams we have here in the United States. We are exporting the American way of doing business.

    You’re telling people they were stupid for believing in the American Dream.

    The banks to you can do no wrong, it’s these stupid, ignorant, moronic people that bought these houses out of personal greed. Banks are the innocent bystanders who just didn’t understand. Banks just couldn’t grasp that all of these stupid moronic greedy people were fleecing them. (sarcasm)

    I have a better plan; let’s shut down the banks and forgive all debt.

  30. 30
    doug says:

    “What is least likely of all those possibilities is that a bank would take action to make a default by the debtor more likely, especially in this market.”

    I would agree, if the banks were acting logically. How often are banks foreclosing on houses instead of approving perfectly good short-sales, and losing huge sums of money in the process? The banks are either stubborn, vindictive, or in complete denial.

    Another issues with the initial piece:

    “How is what the banks are doing today any different from what they did throughout the years that the housing bubble was inflating?”

    The difference is people actually know about it. I’m sure the percentage of people who knew that their mortgages were being carved up into securities and sold off was in the single digits. Many of these banks knew these mortgages were destined to fail. I’m not going to cry when someone asks them to produce proof of ownership to foreclose.

    I just thank my lucky stars I didn’t get caught up in this mess… Yes, some of these homeowners were speculators, flippers, or irresponsible, but many of them thought (and were told by it was common knowledge) this was the only way they would ever own a home. Literally every first-time homeowner I know in my age-group (20’s-early 30’s) is deep underwater, and that’s a GOLLY shame.

  31. 31
    EconE says:

    “You can’t cheat an honest man”

    -W.C. Fields

  32. 32
    David Losh says:

    RE: doug @ 30RE: EconE @ 31

    This is the best phrase that describes what has happened, “Literally every first-time homeowner I know in my age-group (20’s-early 30’s) is deep underwater.”

    Decent hard working people who were doing what they thought was right, and continue to do what they think is right are losing equity, down payments, credit, and opportunities.

    Tonight there was a report about people who can’t move to find a better job. They can’t sell the family home. We gleefully talk about home prices declining to 2005 levels, well what if you bought in 2005? what if there is another 10% price decline?

    What about the millions of responsible people who are saving for retirement, or are getting ready to retire? How about those super low interest rates to refi an under water asset being used for savings accounts? How about the pension funds that are losing equity daily?

    The list goes on, and on of people who thought they were doing something good, but they got swindled, we all got swindled.

    Honest people, honest hard working, savers, with families were cheated, are being cheated, and will continue to be cheated until banks are made to give the money back.

    Banks are the crooks here. Banks willfully, methodically, and without remorse stole money by creating a false sense of global economy in order to push up Real Estate prices. Banks lent more than the value of the asset. The buyer, the borrower, is unimportant. Banks have the right of foreclosure, that’s the recourse.

    Banks know the value of real estate better than I do, and much better than Tim does, and yet they lent more than actual value. That’s the problem. The borrower is the man in the middle of a securities fraud.

    Banks know value. It’s the banks job to know value. Kary may not know value, Kary may claim no one knows value, but it’s the banks business to know value. That’s a banks job. The banks job, the reason we trust them with our money, is that they make safe, and secure investment decisions.

    Don’t even get me started on the number of investors who have lost everything. For all the nickles and dimes today’s foreclosure vultures are scooping up we have have billions of dollars of investment funds that are now laundered into insured securities.

  33. 33
    Chris says:

    Interesting post Tim. I think the main problem pointed out by the experts is technicalities can be used by banks against consumers but not the other way around. I understand that with securitized mortgages the trusts have a financial incentive to foreclose rather than work out a solution. Some might not see being short on a mortgage payment as a technicality but in the olden days when banks were local everyone benefited by working out a solution short of foreclosure.

  34. 34
    ChrisM says:

    The Tim, I’m astounded you didn’t have another condition — putting Glass-Steagall back in to place so we don’t have a repeat of this disaster.

    I’d also like to see some federal law passed that says, in the event of FDIC takeover of a bank, the entire board of directors is barred from ever serving on a board again.

  35. 35

    By doug @ 30:

    I would agree, if the banks were acting logically. How often are banks foreclosing on houses instead of approving perfectly good short-sales, and losing huge sums of money in the process? The banks are either stubborn, vindictive, or in complete denial. .

    You left out stupid, old-fashioned, incompetent, and a few other things. If you put all those things together I think it’s closer to the truth than the bank wanting the debtor in default/foreclosure.

  36. 36
    EconE says:

    RE: David Losh @ 32

    You HELOC’d your house to the gills.

    Hundreds of thousands of dollars David.

    And now YOU want to blame the banks?

    Bull$hit.

  37. 37

    By David Losh @ 32:

    Banks know value. It’s the banks job to know value. Kary may not know value, Kary may claim no one knows value, but it’s the banks business to know value. That’s a banks job.

    I think you’re confusing predictions with value. It’s relatively easy to value real estate in most cases if you can get inside. Unfortunately in the short sale scenario the banks often take far too long to do that, and for the banks that don’t take too long, they’re harmed by the ones that do because that group scares away many of the potential buyers. So determining value may be the banks’ job, but far too many of them don’t do it well.

  38. 38

    By David Losh @ 32:

    Banks know value. It’s the banks job to know value. Kary may not know value, Kary may claim no one knows value, but it’s the banks business to know value. That’s a banks job.

    I think you’re confusing predictions with value. It’s relatively easy to value real estate in most cases if you can get inside. Unfortunately in the short sale scenario the banks often take far too long to do that, and for the banks that don’t take too long, they’re harmed by the ones that do because that group scares away many of the potential buyers. So determining value may be the banks’ job, but far too many of them don’t do it well.

  39. 39
    Steve says:

    The incomes were fraud. Give the people their money back.

  40. 40
    David Losh says:

    RE: EconE @ 36

    What if I sat on my equity? Then what? Would I just watch it slip away? What if I sold and waited for what? A cheaper price?

    Why wouldn’t I just wait for cheaper money?

    The difference is that I know the game, understand the game, and I have the banks money.

    What about the millions, and millions, and millions of people who where just going along and trying to do what they thought was right? What about those people?

    Let’s see, those people don’t count because you are so smart, you are that god like figure who knows so much so those morons should just pay up, becuase you say so?

    I don’t think so.

    Me, I have an ability to pay or walk away, I have choices that most people don’t.

  41. 41
    David Losh says:

    RE: Kary L. Krismer @ 38

    Banks know to the penney, knew to the penney, when they approved the loans, in a short sale, or foreclosure. Banks know the value of each and every property. There are hundreds and thousands of people employed with computers stationed around the world to know what the value of Real Estate is. There is a computer model to tell them what the value of a stone patio is as opposed to grass.

    Banks lent far in excess of value of a property so they could increase the sales price of securities.

  42. 42
    David Losh says:

    RE: Chris @ 33

    I would be, and am real curious about how a foreclosure is better for the securities market. I’m thinking that if the bank retains the asset, or buys the asset back at auction that they can continue holding the asset as security.

    Are the Mortgage backed Securities, or asset backed securities more valuable than the Real Estate?

  43. 43
    EconE says:

    By David Losh @ 40:

    RE: EconE @ 36

    What if I sat on my equity? Then what? Would I just watch it slip away? What if I sold and waited for what? A cheaper price? .

    So what you are saying is that you were the target market for the “Release Your Equity” advertisements I saw all over in 2005-2007?

    The difference is that I know the game, understand the game, and I have the banks money.

    If you want to play games with the bank, it’s up to you. Your loan, your call.

    What about the millions, and millions, and millions of people who where just going along and trying to do what they thought was right? What about those people?

    Case by case IMO.

    Let’s see, those people don’t count because you are so smart, you are that god like figure who knows so much so those morons should just pay up, becuase you say so?

    I don’t think so.

    The choice is up to them. But, saying “The bank made me borrow and spend all that money…it’s their fault!” is rather disingenuous.

    Me, I have an ability to pay or walk away, I have choices that most people don’t.

    Sounds like you’re calling all the shots now. If it doesn’t work out, who are you going to blame?

  44. 44
    David Losh says:

    RE: EconE @ 43

    People bought and lost equity. People are buying today and losing equity.

    So what’s your advice? Should every body rent? Since 2005 should every body rent? Should Real Estate buying and selling stop because we have to bail out the banks?

    So the banks are the innocent poor little victims of these greedy people who took out loans? Isn’t that the banks business?

    Should my life, and livelihood stop while banks run a scam?

    Contribute here. Let me in on that secret of life because to me I meet good people every day who are hurt. You seem fine with that. I’m not fine with that.

  45. 45
    EconE says:

    RE: David Losh @ 44

    I didn’t call the banks victims. I have no love for the banks. I didn’t say that I’m fine with people hurting. I know people who aren’t paying their mortgage yet they’re still living the high life. Eating out, going on vacations, pay per view boxing, having more kids and on and on and on. But it’s all the banks fault and gosh darnit…who is the bank (or me) to tell them to live a little more frugally.

    They haven’t learned any lesson from this. They’d be the first in line to borrow more money if they could.

    Perhaps they need a good dose of reality? A 12 step program? Debt Detox?

  46. 46
    Herman says:

    How about this. All mortgages are written off to zero. Everyone gets to take full possession and ownership of the homes or residences that they currently occupy. All renters are converted to tenants-in-common with partial ownership of their dwelling.

    People who are living in giant houses with huge mortgages are declared awesome risk-taker winners and are probably also fat. People who have paid off their homes or are living in tiny apartments that they can afford are declared lame un-American losers who should emigrate to Asia to live with the rest of those economy-killing savers.

    Next the federal government nationalizes the banking system over the course of 2 years. As of the start of year 2, people may begin to buy and sell their properties and may take Federally administered mortgages to do so. Prior to year 2, people must remain in their existing dwellings or swap them on a 1-for-1 barter exchange where any difference in value is made up by a combination of carbon credits and Taco Bell coupons.

    Bold solutions, people.

  47. 47
    David Losh says:

    RE: EconE @ 45

    I’ll agree with Ray on one point that you don’t see the scope of the problem until you, you are the one to tell good decent hard working people that they got screwed.

    It used to drive my wife nuts when I would tell people not to buy something they shouldn’t. I heard all the rational. I spoke, gave classes, wrote, talked to as many people as I could about the importance of caution, and buying right, don’t get carried away.

    Then after it became apparent something was very wrong telling people they couldn’t sell, then it was don’t sell short, or to just get rid of your property. Get rid of it you’re losing equity every day.

    I’m not a very popular guy in the Real Estate business, but it is my business.

    What have you done? Where’s your secret to success in the world of Real Estate? Hunker down, hold on, wait? BS.

    Most people are just trying to do the right thing. Most people are honest people who were swindled by an extremely elaborate set data, research, and projections that were deliberately misleading.

  48. 48
    doug says:

    Sounds like you’re calling all the shots now. If it doesn’t work out, who are you going to blame?

    By EconE @ 31:

    “You can’t cheat an honest man”

    -W.C. Fields

    You can’t boil this situation down to a pithy quote. The banks’ entire job was figuring out how to cheat honest people. Including PENSIONS for god’s sake.

    And honestly, no one I knew took out equity on their home. Again every homeowner I know in their 20’s and 30’s just wanted a place to live, and the pride of ownership that is the American Dream.

    Again, you’re willing to forgive criminal activityon the part of the banks, but not irresponsible activity on the part of private citizens. I don’t beleive it’s ALL the banks faults, but attittudes like yours are somewhat bewildering. Personal responsibility above all else!!! Unless you’re rich and powerful, of course. Responsibility is for the little people.

    I felt like something was wrong. I felt it made more sense to rent forever than pay half a mil to live in any kind of decent home in Seattle. I’m still not able to forgive the banks for growing rich and fat while dozens of my friends are in economic pain. And most people aren’t walking away, they’re paying their underwater mortgage.

    http://www.google.com/hostednews/ap/article/ALeqM5iQlD2O62AW1_AlTGJ92QYwduLTMQ?docId=e2d5758bdb51421aadc65dbdc8719f80

    The more people untangle what the banks were ACTUALLY doing, the more it is apparent it is actual, criminal, widespread fraud. Expect lots more like this in the years to come.

  49. 49
    Chris says:

    RE: David Losh @ 42

    David – here’s an article on the process:
    http://www.rollingstone.com/politics/news/17390/232611

    Section from page 6.
    In many cases, banks like JP Morgan are merely the servicers of all these home loans, charged with collecting your money every month and paying every penny of it into the trust, which is the real owner of your mortgage. If you pay less than the whole amount, JP Morgan is now obligated to pay the trust the remainder out of its own pocket. When you fall behind, your bank falls behind, too. The only way it gets off the hook is if the house is foreclosed on and sold.

    Link to page 6 of the article:
    http://www.rollingstone.com/politics/news/17390/232611?RS_show_page=6

  50. 50
    David Losh says:

    RE: Herman @ 46

    The bold solution is to homogenize interest rates on all debt. Banks should work out pay off solutions. Banks should take responsibility for the loans they made and work out ways to collect and clear balance sheets.

    Banks should work in a professional manner.

    Our government should open up all the books of all banks to ensure that banks are making best efforts to work with consumers of loan products.

    People in Asia are barred by over priced housing units by economy. It has nothing to do with savings, they have no path to wealth because of other financial modeling.

  51. 51
    doug says:

    RE: EconE @ 45

    Well, now we have a more troubling subject. I would argue that the core issue is that middle-age wages haven’t climbed in the past 30 years (since Reaganomics) while costs have exploded.

    Eventually, we’ll see that we need a robust middle class to sustain our economy, right? They’re truly the engine of the economy. We now see what happens when the middle class stops spending (as they HAVE learned their lessons, by and large, and aren’t living off debt). Who is doing to fill that spending gap? The rich? Hasn’t worked in the last 30 years. But I’m sure we’ll go ahead and try it again.

    There are quite a few costs that are unsustainable, as a direct result of the diminished middle class, and regressive money policy of the last 30 years. Medical costs are unsustainable. College costs are unsustainable. Each of these industries are going to suffer a crash in some way. All while our infrastructure crumbles. This country’s economy is in a sorrier state than most people know. And it’s largely due to the bubble-inflating and wealth-hoarding of the banks.

    Banks have exactly one useful function: to facilitate the flow of money. They have crashed our economy, and now don’t even fulfill their useful function anymore. What do we get as a result? Tepid financial reform and a rush to blame the poor for the problem.

  52. 52

    RE: Chris @ 49 – There’s so much ignorance in that article it’s impossible to get through, and would take forever to comment on. I’m pretty sure even the portion you quoted is incorrect. Servicers are not required to make up shortages. There are situations where the lender originating the loan would have to step up, but that’s because they’re the originator, not the servicer.

    One part I will comment on, was the part about “of course” the dismissal was without prejudice. The author thinks that is shocking, when it really just means that he doesn’t have a clue what is going on.

  53. 53

    “Next the federal government nationalizes the banking system over the course of 2 years. As of the start of year 2, people may begin to buy and sell their properties and may take Federally administered mortgages to do so. Prior to year 2, people must remain in their existing dwellings or swap them on a 1-for-1 barter exchange where any difference in value is made up by a combination of carbon credits and Taco Bell coupons.”

    Let me get this straight. are we going to nationalize Taco Bell, or is Taco Bell going to be bailing out the government?
    Looking forward to my favorite meal there, Tacos al Carbon Credit.

  54. 54

    RE: doug @ 51 – I would agree with a lot of that, but perhaps not the last paragraph. Wages have not kept up. Tuition has skyrocketed, which means many graduate saddled with a ton of debt (or parents losing equity saved for retirement), which inhibits what they can do in the future. And then there’s the health care mess.

    I really wonder how much of the economy, going back to say the beginning of Clinton, was based on consumer borrowing. You had loose credit card standards, and still do even after some changes. You had the house as an ATM syndrome. Some people were literally mortgaging their future with irresponsible behavior, and others were profiting off of it. But it wasn’t just the banks profiting. The benefits were widespread, to say those assembling automobiles for Ford, GM and Honda.

    Regardless of what the economy does going forward, a future crisis I do fear is a retirement crisis, where large numbers of the baby boom generation simply can’t afford to retire, and at some point can’t afford to live either.

  55. 55

    RE: Ira Sacharoff @ 53 – Hopefully no one will see Claim Jumper as too big to fail.

  56. 56
    hinten says:

    http://www.reuters.com/article/idUSTRE6AA4AU20101116?type=smallBusinessNews

    “In the worst-case scenario, the panel said banks may be unable to prove that they own the mortgage loans they claim to own, legal challenges could call into question the validity of 33 million mortgage loans — many of which were then securitized and sold to investors — and banks could face billions of dollars in unexpected losses.”

    But you keep doing that thing to the chicken that the chicken doesn’t enjoy: It’s the buyers fault. Just wait until you find out that there is something wrong with the paperwork of your home eventhough you have a regular loan, are not behind, and thinks it’s the stupid buyer’s fault.

  57. 57
    Herman says:

    By Ira Sacharoff @ 53:

    Let me get this straight. are we going to nationalize Taco Bell, or is Taco Bell going to be bailing out the government?

    The former, though Taco Bell is better run and serves better burritos.

    The point is, let’s be obvious about who we’re picking as the winners and losers. Drop the phony pretense of allowing winners and losers to emerge based on their own capitalist merits. The system is rigged, let’s just be open about it.

    By stipulating that the new form of housing currency will be Taco Bell coupons, we leave no doubt that our government has selected Taco Bell as the winner of the fast-food wars and they will share in the spoils of the housing bubble.

    Since the coupons are a form of currency, they must be guaranteed by the government in order to be trusted. If Taco Bell were to fail, the coupons would be worthless. Thus, there will be an implicit guarantee of Taco Bell’s solvency, as there was with FNMA. Taco Bell shareholders will be able to extract the profit until the chain becomes overextended. Plan accordingly.

  58. 58
    Chris says:

    RE: Kary L. Krismer @ 52
    Would you agree with the central idea of the article that the average citizen would not be able to dismiss without prejudice and keep coming back with forged documents? If you signed a promissory note and I was the beneficiary but assigned the note to another person and went to court to enforce it repeatedly with forged documents, how many dismissals would I get as a private citizen?

  59. 59
    Pankaj says:

    A minor nit for Tim: when you said “free legal council”, you really meant “free legal counSEL”.

    This has been your weekly grammar nazi post.

  60. 60

    RE: Chris @ 58 – If that was an idea expressed, no I don’t agree with it. If the note itself was forged, and you proved that, then you would get a dismissal with prejudice. But if the party loses simply because they fail to prove their ownership of the note, it would be without prejudice, especially where the debtor cannot deny that they owe money on the note.

  61. 61
    The Tim says:

    RE: Pankaj @ 59 – Thanks for the catch. Fixed.

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