Category Archives: Real estate

Michigan Court Relies on New York Trust Theory, Rules Loan Never Made it to Trust

A June 6 trial court decision in Michigan, Hendricks v. US Bank, has not gotten the attention it warrants because to the extent it has been noticed, it has been depicted as invalidating an effort to effect a note (the borrower IOU) transfer via MERS. While that was one of the grounds for a ruling favorable to the borrower, the court also considered and gave a thumbs’ up to what we call the New York trust theory. That has far more significance, as readers will see shortly (hat tip to Foreclosure Fraud for this sighting).

Treasury Waves Wet Noodle at Big Banks Over HAMP Mortgage Mod Abuses

This latest move by the Treasury Department to appear to Do Something about Big Bad Banks is so off the charts pathetic that I am straining to find an adequate description. It isn’t merely ineffectual; it looks instead like a deliberate thumbing of the nose at the financier-afflicted public, with the Treasury and the mortgage industrial complex elbowing each other in the ribs and laughing uncontrollably at how they’ve made their point, that the public be damned, while observing proper bureaucratic forms in the process.

Chinese Real Estate Bubble Finally Imploding?

The warnings of successful shorts like Jim Chanos, old Asia hands like Frank Verneroso, and economists like Victor Shih and Michael Pettis have failed to curb enthusiasm for the belief that the rise of China is inevitable and unstoppable. As someone who was deeply involved with Japan when it was seen as destined to replace the sclerotic US, I’ve learned to regard more or less straight line growth projections with considerable skepticism.

China has accomplished the impressive feat of bringing literally hundreds of millions out of poverty in a comparatively short time frame. It has also studied the Japanese playbook and managed to avoid some of its pitfalls (of course, it has the advantage of not being a military protectorate of the US), in particular refusing to liberalize its financial markets (some accounts of the Japanese bubble and burst give considerable weight to overly rapid deregulation and the growth of what was then called zaitech, or financial speculation). is also hostile to neoclassical economists.

China escaped much of the impact of the global financial crisis by ramping up investment even higher than its pre-crisis level. It now has investment approaching 50% of GDP, an unheard of level on a sustained basis. A big chunk of that is housing related (housing is an estimated 13.5% of GDP), and prices have long been considerably out of line with incomes, a telltale sign of a bubble. In Beijing, admittedly one of the hottest markets, an average priced new apartment was equal to 57 years of average worker savings (and if you tried to pay for it with a super-long dated mortgage, you’d be in hock even longer, since you would also need to cover the interest charges).

Another warning sign is inventory overhang; the Wall Street Journal reports tonight that Standard Chartered forecasts that level of unsold apartments in secondary cities will amounts to roughly 20 months of sales by year end (and that’s before considering that many of the apartments are being acquired as investments rather than for use).

The Journal story tonight provides evidence that the Chinese housing market is going into reverse

Embarrassingly Lame Federal/”50″ State Attorneys General Mortgage Negotiations Continue

I’m having trouble understanding why anyone is still treating the Federal/state attorney general mortgage “settlement” negotiations as anything other that a fiasco. The more news reports come out, the more the parties aligned against the banks look like fools.

The latest confirmation comes in an article by Shahien Nasiripour in the Huffington Post that a member of the Department of Justice briefed state attorneys general and reported that the biggest banks in the servicing business had resigned themselves to paying $20 billion:

The nation’s largest mortgage companies are operating on the assumption that they will have to pay as much as $20 billion to resolve claims of widespread foreclosure abuse, an amount four times what they had originally proposed, the top federal official overseeing the discussions told state officials Monday, according to people who participated in the conversation.

Associate U.S. Attorney General Tom Perrelli told a bipartisan group of state attorneys general during a conference call that he believes the banks have accepted the realization that a wide-ranging settlement to the months-long probes will cost them much more than the $5 billion offer they floated last month, according to officials with direct knowledge of the call. Perrelli said he’s basing his belief on his recent conversations with representatives of the five targeted firms: Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.

Sounds impressive, right? It’s not.

Goldman Uses Wall Street’s Favorite Reporter to Make Unpersuasive Defense Against Levin Report

Last night, the Wall Street Journal reported that Goldman was going on the offensive against the Levin report:

Goldman Sachs Group Inc., trying to counter a Senate subcommittee report that is fueling investigations and suspicion of the firm, plans to accuse the subcommittee of drastically overstating Goldman’s bets against the housing market in 2007….

The subcommittee’s 639-page report in April denounced Goldman as an unusually strong example of wrongdoing by financial firms during the crisis. According to the report, Goldman systematically sought to profit from a “big short” against the housing market and betrayed clients by putting the firm’s own interests ahead of theirs.

Goldman initially said it disagreed “with many of the conclusions of the report,” though the company added that it takes “seriously the issues explored by the subcommittee.”

Tonight, Andrew Ross Sorkin of the New York Times offers what appears to be a preview of the Goldman defense. If this is the sort of thing Goldman plans to provide, it is not terribly convincing.

Quelle Surprise! Banks are Concerned About Mortgage Slowdown

An old Yankee saying: “Fool me once, shame on thee. Fool me twice, shame on me.”

It seems not to have occurred to the banking industry that relying people to be fools on an ongoing, large scale basis is not a viable business model. Investors have come to realize a bit late in the game that private label securitizations were structured so as to be far too favorable to the originators and servicers: too little disclosure, too many abuses, too little accountability, combined with impediments to seeking redress in court. Borrowers feel every bit as stung between deteriorating housing markets, foreclosure malfeasance, and doubts over chain of title.

It isn’t simply that banks have been slow to ‘fess up and clean up; instead, they’ve kicked and screamed at every possible reform measure, from pro investor reforms such as a very good FDIC proposal that got watered down to nothingness and a weak 5% risk retention rule (which Dean Baker estimates will add all of 0.13% to the yield on a mortgage) to pretty much anything that would help borrowers. And that’s before we get to widespread evidence of incompetence (continuing stories of foreclosing on people who don’t have mortgages is the tip of the iceberg) and fraud.

It’s yet another sign of Banker Derangement Sydrome that the industry can think anyone outside of cash buyers in markets that have arguably bottomed would be keen about buying a house. But this American Banker reports reveals how they appear unable to recognize their role in creating this mess. They seem simply puzzled and a tad depressed that super low interest rates are producing only refis as opposed to home sales:

Larry Platt, Prominent Securitization Lawyer, Made False Statements About BofA Mortgage Transfers

I wanted to follow up on an important article by Abigail Field, in which she did some serious spade work on the mortgage securitizations. Among other things, its shows prominent securitization attorney Larry Platt, who accused judges who interfered with the imperial rights of banks to foreclose of engaging in an “assault on the legal system,” to be a liar. Funny how that type is eager to try to say everyone else is engaged in bad conduct.

Florida Homeowner Forecloses on Bank of America Branch

I suspect readers will get quite a bit of pleasure from this news story.

Bank of America tried to foreclose upon the home of a Florida couple who had paid cash for their house and therefore did not have a mortgage. The wronged pair not only got the suit dismissed, but the judge awarded them legal fees. After five months of Bank of America ignoring letters and calls to the bank about their failure to pay up, their lawyer foreclosed a BofA branch.

See the CBS video for more details:

Fortune Confirms Pervasive Defects in Bank of America Mortgage Documents

Do you remember the brouhaha over testimony by a senior executive in Countrywide’s mortgage servicing unit last year? It called into question whether mortgages had been conveyed properly to securitizations, which in turn would impair Bank of America’s ability to foreclose.

Let me refresh your memory. As we wrote last year:

Testimony in a New Jersey bankruptcy court case provides proof of the scenario we’ve depicted on this blog since September, namely, that subprime originators, starting sometime in the 2004-2005 timeframe, if not earlier, stopped conveying note (the borrower IOU) to mortgage securitization trust as stipulated in the pooling and servicing agreement….

As we indicated back in September, it appeared that Countrywide, and likely many other subprime orignators quit conveying the notes to the securitization trusts sometime in the 2004-2005 time frame. Yet bizarrely, they did not change the pooling and servicing agreements to reflect what appears to be a change in industry practice. Our evidence of this change was strictly anecdotal; this bankruptcy court filing, posted at StopForeclosureFraud provides the first bit of concrete proof. The key section:

As to the location of the note, Ms. DeMartini testified that to her knowledge, the original note never left the possession of Countrywide, and that the original note appears to have been transferred to Countrywide’s foreclosure unit, as evidenced by internal FedEx tracking numbers. She also confirmed that the new allonge had not been attached or otherwise affIXed to the note. She testified further that it was customary for Countrywide to maintain possession of
the original note and related loan documents.

Countrywide tried, in a thoroughly unconvincing manner, to retreat from the damaging testimony.

Abigail Field, an attorney who has regularly written on the mortgage mess at Daily Finance, published an article at Fortune that looks into whether DeMartini was simply being truthful and the notes were not conveyed correctly, which would mean Bank of America has a very big mess on its hands. Her conclusions are damning:

Banker Derangement Syndrome I: Lawyers Offer to Get Rid of Their Profession to Save the TARP Banks

We’ve decided to publicize the rapid rise of a dangerous ailment, Banker Derangement Syndrome, which has become so widespread that the media is publicizing examples on virtually a daily basis.

Banker Derangement Syndrome occurs when someone who might once have been sensible is acting as a mindless mouthpiecs of particularly rancid banking industry propaganda. Note that financial services industry employees by definition do not qualify; they are simply engaging in the time-honored industry practice known as “talking your book” when they say something that is patently ridiculous and self serving. No, Banker Derangement Syndrome occurs when an independent party say something so blatantly and embarrassingly wrong in support of the banking industry, whether to curry favor or via having taken an overdose of its Kool Aid, so as to do severe damage to their credibility. In other words, if the questionable behavior could be explained as an over-zealous effort to win points with our new financial overlords, it backfired big time.

Affordable Housing Groups Once Again Acting As Human Shields For Banksters

I’m not going to quote George Santayana tonight, as much as his famous saying verging on cliche fits. But will some people never learn?

Another useful cliche is that politics makes for odd bedfellows. But that notion is misapplied in a New York Times article tonight, which tries to convince readers that affordable housing advocates and mortgage financiers playing on the same team is a new development. Huh? Per the Times:

The weight of the mortgage crisis fell heavily on lower-income and minority communities…..That left consumer advocates and civil rights groups frequently at odds with bankers, mortgage lenders and their lobbyists during the debate over the financial regulation act last year, which aims to rein in the subprime mortgage excesses that inflated the housing bubble.

Now, as banking regulators are rewriting the rules for the mortgage market, unusual alliances have sprung up in opposition to tighter lending standards. Advocacy groups like the N.A.A.C.P. and the National Council of La Raza, a Latino civil rights organization, on the one hand, and the American Bankers Association on the other, are joining together to fight rules they say could make home loans less affordable for minority and working-class Americans…

VOICE Demands Immelt, GE, Bank of America, JP Morgan Address Foreclosure Crisis

Daniel Pennell, a systems expert who has testified before the Virginia House of Representatives on MERS, sent this video compilation from VOICE, a large interfaith group here in the state of Virginia that works for the betterment of local communities. He asks:

Although these stories are from Manassas, they could be from any of hundreds or thousands of communities across the United States. If you find it as disturbing and powerful as I did then please share it broadly.

Quelle Surprise! Consumer Confidence Falls on Oil Prices, Housing, Job Outlook

Is the latest consumer confidence release yet another example of elite disconnect? One of the things that has become striking is the degree to which the chattering classes in New York and Washington DC seem utterly unaware of what is happening in the rest of the country. New York City is doing reasonably well based on the heroic efforts by the officialdom to prop up the major capital markets firm; DC is recession immune and more recently awash in lobbying funds. The influences range from visual signals (I had a friend visiting from Boston remark how striking it was that there were so few shuttered storefronts here in NYC) to continued Administration cheerleading (a constant since the 2009 bank stress tests). And since major media stories about the economy are driven by sources in these two cities, it feeds into business reporting.

We Speak on BNN About the US Housing Market

This was the weirdest little booth at NASDAQ. The seat was at an off angle to the camera, and I couldn’t sit up straight without bumping my head against the glass behind me, which is curved. So I look a bit whopperjawed and uncomfortable at the top but I think it came out fine in the end.

Fed Investigating Goldman Over Possible HAMP Mortgage Mod Violations

The Financial Times discusses a curious development, namely, that the New York Fed is making an inquiry into allegations that Goldman’s mortgage servicing unit, Litton Loan Services, failed to comply with HAMP guidelines. Readers may recall that HAMP Is the half-baked Do Something About the Mortgage Crisis program designed to give homeowners “permanent” year payment reduction mods, which is a kick the can down the road strategy.

In HAMP, servicers routinely asked borrowers to send the same documentation multiple times and assured borrowers they were likely to get a mod, only to refuse them. The worst is that many homeowners wound up worse off since they were not told that when the reduced payment trial mod ended, they would be asked to fork over the foregone portion of the payments plus late fees, pronto. Servicers often encouraged borrowers to use the savings to pay down other debt, thus assuring the homeowner would be unable to catch up and would lose their home.

The reason the Fed inquiry is curious is not that there were abuses; they were rampan