Category Archives: Real estate

Foreclosure Fraud 101: A Step-By-Step Look at One of the Most Common Fixes for Securitization Fail

We’ve written from time to time that the train wreck in foreclosure-related procedures is the direct result of widespread, possibly pervasive failure to convey borrower IOUs (notes) to securitization trusts as stipulated in the governing documents (the pooling & servicing agreement). Because key actions had to be taken by dates long past, and the contracts that governed these deals are rigid, there isn’t a permissible way to get notes that weren’t conveyed properly to trusts on time there now. So the fix has been document fabrication and forgeries. We thought we’d provide a specific example for reader edification.

Not-So-Dumb Consumers Shun OCC’s Bogus Foreclosure Reviews

Consumers seem to have wised up to the fact that the Administration is not on their side, particularly as far as housing is concerned.

A Qualified Defense of DeMarco, the Administration’s Favorite Scapegoat for Its Failed Housing Policies (Updated)

There’s been an interesting contretemps over an article by Gretchen Morgenson over the weekend, “A Bailout by Another Name.” Morgenson made the hardly-controversial observation that writing down Fannie and Freddie first mortgages without wiping out any relate second is a back door bailout. Remember, this was one of our key objections to the bank-friendly mortgage settlement, that a requirement to write down firsts and only write down related seconds to a degree is a subsidy to banks when if you were to believe the PR, the settlement is supposed to redress past abuses.

Morgenson also defends DeMarco’s refusal to do principal mods on Fannie and Freddie loans, arguing that he is subject to a requirement to preserve taxpayer assets and that the studies on this have been inconclusive. She adds that the focus is again incorrectly on Fannie and Freddie and not the banks. HAMP mods on GSE paper appear to be roughly proportional to their market share of original lending (around 40% before the crisis) when given their much lower default/delinquency rates, you’d expect them to represent a smaller share than they do relative to mods of bank owned and private label securitized loans.

The fact that this article has gotten heated responses from Felix Salmon and Dean Baker appears to be more a function of tribalism of various sorts than about the policy issues at hand.

Victory in Oakland County Transfer Tax Case Paves Way for Other Michigan Suits Against Fannie and Freddie

A few counties have filed litigation against various securitization players (originators, servicers, MERS) for the underpayment of recording fees. Similarly, New York attorney general Eric Schneiderman filed a wide ranging suit against MERS and three banks that used it and settled it for $25 million (it included a mention of $2 billion in unpaid recording fees but we were skeptical of viability of his argument).

However, counties in Michigan have scored an important victory.

Bank of America Launches Test “Mortgage to Lease” Program – Should We Be Impressed?

The Wall Street Journal and New York Times have reports on a pilot program at Bank of America to allow homeowners who are likely to default a graceful exit. The Charlotte bank will allow 1000 borrowers in New York, Arizona, and Nevada to turn in the deeds to their houses in return for a one year lease with a two one year renewal options at or below market rates. The program will be only with borrowers invited by the bank, which will target homeowners who are at least two months behind on payments but can demonstrate that they can pay the rent. The Journal cites an example of a Phoenix home with a $250,000 mortgage with payments of $1600 a month. It estimates the rent as $900.

This is clearly a preferable alternative for homeowners to foreclosure. They escape the credit score damage, stress and indignity of the foreclosure process and save moving costs. They are also spared the difficulty of finding a landlord who will accept a tenant with a tarnished payment record. It isn’t clear how the program will handle the usual rental deposit. So what’s not to like?

Yet Another Reason to Hate the Mortgage Settlement: The Release is Botched

Do you remember the brouhaha before the mortgage settlement was announced about the release? Recall, sports fans, as we stressed often, that this was a cash for release deal. The only motivating factor for the banks was the scope of the release. The Administration and attorneys general kept claiming the release was narrow, even as both the messaging (unintentionally) and snippets of disclosure suggested otherwise.

Neil Barofsky, Matt Stoller, and Your Humble Blogger on Why the Mortgage Settlement Sucks

This Bloomberg interview gives a nice high-level overview of why the mortgage settlement is terrible. It’s particularly useful if you are looking for a few key issues to present to someone who has bought the Obama administration PR or is late to the topic.

Memo to Shaun Donovan: Your Nose is Getting So Long You Need to Get a Hacksaw

I know I owe readers some comments on the mortgage settlement, but that will have to wait a few days, since I need to pack to go to DC later this AM. But that will give me more time to digest the voluminous filings, and at least as important, the onslaught of spin.

For a good overview, read The Subprime Shakeout (hat tip Deontos), with one major caveat: he is far too positive about the servicing reforms. Servicers have not only never met these standards, they cannot meet these standards. The sorry history has been that servicers lose boatloads of money servicing highly delinquent portfolios, make a hash of it and cheat to recoup the losses.

But I couldn’t let this bit of propaganda go without comment. From the settlement FAQ:

The Legal Lie at the Heart of the $8.5 Billion Bank of America and Federal/State Mortgage Settlements

One in a while, you can discern a linchpin lie on which other important lies hinge. We can point to quite a few in America: the notion of a permanent war on terror, which somehow justifies vitiating not just the Constitution, but even the Magna Carta, or the idea of an imperial executive branch.

Now the apparently-to-be-filed-in-court-today Federal/state attorneys general mortgage settlement is less consequential than matters of life and limb. But it still show the lengths to which the officialdom is willing to go to vitiate the law in order to get its way.

Michael Olenick: Beware of Housing Market Cheerleading

By Michael Olenick, creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick or read his blog, Seeing Through Data

CalculatedRisk has issued another housing cheerleader article, noting the inventory decline, especially in his back-yard, Some more comments on Housing Inventory.

It’s a shorter than usual than piece so here’s a shorter than usual rebuttal.
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Latest Borrower Trap? Trial Mod Offers With No Permanent Mod Terms

We’ve been focusing on the bigger picture scams in mortgage land, and realized it might be helpful to also provide occasional examples of what is happening on the ground level.

Despite the fact that the Treasury-sponsored mortgage modification program known as HAMP has been roundly decried as a disaster. Not only were too few mods done but banks also lied about program features, including that many borrowers were assured foreclosure efforts were not moving ahead when they were, with the result that quite a few program participants wound up losing their homes.

Given the program’s sorry history, struggling borrowers have good reason to be wary. Lisa Epstein of Foreclosure Hamlet, points out a new wrinkle that she worries may be a harbinger of bad things to come, namely, that HAMP trial mod offers, which once described in some detail what the permanent mod would look like if the borrower made all the trial mod payments and was approved, have suddenly gone silent on the back end terms.

OCC Servicer Review Firm Also “Scrubs” Loan Files, Fabricates Documents

Reader Lisa N. pointed me to a troubling October 2010 press release by SolomonEdwardsGroup, a company that describes itself as a “national financial services consulting and staffing firm” about its remediation services for “significant loan documentation problems.” Alert readers will recognize that this is shortly after the robosiging scandal broke.

Here are the key parts of the press release:

SEG’s teams can also be rapidly deployed across the U.S., to help banks and servicers “scrub” files and determine which foreclosures may have been tainted by incorrect loan documentation and processing issues such as robo-signing….

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Yet Another Mortgage Scam: Homeowners Not Getting Cancelled Notes After Foreclosures, Hit by Later Claims

As we’ve discussed the “where’s the note?” problem of mortgage securitizations, some readers who are old enough to have sold a home more than once have said that while they’d gotten a cancelled mortgage note back on their first sale, on a more recent one, they hadn’t. They were concerned, and as this post will show, they are right to be.

Bank of America Wins Venue Appeal in $8.5 Billion Mortgage Settlement

This is a real shame. Bloomberg reports that Bank of American and Bank of New York have prevailed in their effort to have the $8.5 billion Bank of America mortgage settlement returned to state court in New York.

Abigail Field: Insider Says Promontory’s OCC Foreclosure Reviews for Wells are Frauds. Brought to You by HUD Sec. Donovan

By Abigail Caplovitz Field, a freelance writer and attorney who blogs at Reality Check

U.S. Housing Secretary Shaun Donovan has embarrassed himself yet again. This time, though, he’s gone in for total humiliation. See, he praised the bank-run Office of the Comptroller of the Currency’s (OCC) foreclosure reviews as an important part of the social justice delivered by the mortgage “settlement“. But thanks to an insider working on an OCC review, we know that process is a sham. Worse, the insider’s story shows that enforcement of the settlement is likely to be similar, which is to say, meaningless. Doesn’t matter how pretty the new servicing standards are if the bankers don’t have to follow them.

Let’s start with Donovan’s sales pitch for the OCC reviews: