The Foreclosure Mess-a Follow-up
October 18, 2010
David Kotok
>
Wow, there were many, many emails in response to the recent piece entitled “Foreclosure Mess.” Here are some of those observations.
Some folks missed the opening disclaimer and attributed the piece to me; that was their error. I did not write it [BR: The original was from Gonzalo Lira's blog]. I only edited out the expletives. I do not believe that F this and F that add anything. MK wrote back: “The article’s issues needed the expletives. In this particular case they would have been in context and not extraneous. Next time leave them in. &%$)@%%$.” Readers who get to the end of today’s follow-up will be able to judge for themselves.
The piece had many technical and legal errors, although most professionals agreed with this overall theme. Barry Ritholtz summarized the legal side with a “lawyer’s hat” on: “The flaw in this piece is that courts have long been authorized to apply principles of equity, as opposed to law, to cases brought before it. This means that we do not want to create unjust enrichment for either wrongdoers or other bad outcomes. We have two bad actors here: The homeowner who is in default, and the banks/securitizes who failed to do the document creation and title management correctly. Most judges do not want to see, in civil cases, an absurd outcome. Rewarding the homeowner (free house!) or the lenders (No penalty for massive screw-ups!), a total victory would offend those principles. An example of a possible outcome in a full-blown litigation might be for the court to order the mortgage modified to the current equity value of the home, so that it punishes the lenders who failed to do their proper legal work on the documents, but does not give a home to a defaulted homeowner free. Courts of “equity” (meaning fairness, not ownership) apply these principles to avoid ridiculous outcomes.”
A senior bank executive with extensive mortgage experience also responded. WP wrote: “There are technical errors made by the writer, but much of it is accurate.”
JR replied: “David, how are you, my mother fwd this to me as I am in the business. Is it safe to assume that the bank foreclosures will be taken off the market, which would then decrease the amount of homes that are listed dramatically (over 70%) in some markets. The market has been saturated with foreclosure listings. Over the past 2 years, it has been very easy to get a foreclosure sale, where individuals were able to buy a home for 76 cents on the dollar, in essence bringing the values down on sales-cost comparisons (appraisals). What impact will we see to the market? I’m thinking that with the foreclosures no longer as easy to get as a McDonalds happy meal, the remaining properties that are listed will now sell at or above market value, because the “value foreclosure meal” will be no longer available to the buyer. What will this do to the short sale market, being that short sales were the bank alternative to foreclosure?”
Another lawyer weighed in. Mr. B wrote: “In this case, I must quibble. I believe that the mortgagor cannot go scot-free. While enforcing the mortgage is by far the more convenient route, the claimant standing in the shoes of the mortgagee/note owner could claim against the home “owner” for unjust enrichment outside the mortgage enforcement procedure. Evidence of the existence of the claim can be adduced from related documentation. The “home owner” could be required to prove the source of funds for buying the house…, which of course he could not. All very inconvenient, time consuming and expensive. But look on the bright side. It’s employment for lawyers.”
And another lawyer. Jay wrote: “Despite what your friend says, just because the chain of ownership of the note is broken does NOT mean a borrower is relieved of his debt. Observers have speculated for a long time about what would happen if a judge demanded that only the right owner could foreclose, and that particular chicken has come home to roost. It may take awhile, but sooner or later the banks will find the original note and the proper successor in interest will be found and the defaulting borrower will have to make a deal or be foreclosed out. Meanwhile, all the shenanigans are true and they will result in big delays and huge costs as lenders have to go back and do things right. Some homeowners who were improperly evicted will have claims and they will get some relief but they won’t get their houses back. This is indeed a mess and the lenders deserve everything they are getting – particularly Bank of America, which bought one of the worst offenders, Countrywide.
In addition, another lawyer named Howard said: “While it is true that some may take advantage of the mortgage mess, the process will always win. You do not make good law for the bad cases. You cannot have people lying and fraudulently fixing chain of title due to the inconvenience. I once had a mortgage foreclosure that XXXXXX handled. It took years, and at the end he had made a theoretical mistake and was forced to start over or seek judicial help in fixing the error. While the client was furious, the process was righteous.
Michael G. added to the debate: “We’re talking about estimates of $20bn or more in losses (from put-backs, etc.). I agree that you do not make good law from bad cases. And I know that shortcuts were taken when loans were securitized. I was not suggesting a solution, only the gravity of the problem. The halting of foreclosures is one more factor that will prevent the housing market from finding equilibrium and weigh on the health of American banks. Stagnant economic growth, a financial system under heavy stress, and plenty of landmines to side-step… but hey, at least NBER says that the recession ended!”
Kathy is a skilled observer of our system. She wrote “Suggesting the dissolution of civil society is fear mongering/hyperbole. I believe the US is in for a long uncertain meandering period as housing unravels, but I don’t think we’re going back to keeping cash and guns under the mattress.”
A senior partner in a major accounting firm liked the original piece. JB replied: “Whoever wrote it explained this situation as clearly as the Big Short explained the base mess. Please pass on my thanks for a job well done.”
CG chimed in from Hawaii: “The whole purpose of MBSs was for Wall Street to “Madoff the World.”
MS is a skilled lawyer and former judge. He wrote: “First paragraph starts off wrong. The note does not permit foreclosure. Suing on the note gives plaintiff a judgment. It is the mortgage which makes the property security for the note. No mortgage, no foreclosure. So I stopped reading.”
Highly tech-savvy businessperson GC wrote: “While it is popular to try and pin all the blame on Fannie and Freddie (and they certainly deserve as much opprobrium as we have energy left to give), in fact the ownership of MERS is a good indictment of all the players in the game. See this link: http://www.mersinc.org/about/shareholders.aspx . ”
Lastly, Elliot S. wrote and linked websites. He did this in response to John Mauldin who ran the original piece in his newsletter. “They are wrong with regards to the Note and chain of title. Actually, they couldn’t more wrong. The Note is just the IOU and gives the lender the right to collect any money lost. MERS has nothing to do with Notes only with mortgages. The mortgage is the controlling document that is used for the foreclosure and the ONLY document. The mortgage gets assigned from one lender to another and often the assignments didn’t get recorded and the last lender, who actually owned the mortgage, didn’t have the right to foreclosure. Therefore, they created MERS, which is a registration of the mortgage but not to a bank, but to MERS. MERS is the mortgage holder and the loans are assigned via registration number. Therefore, if XYZ sells a mortgage to ABC, MERS is notified that the lender’s MERS ID is changed from XYZ to ABC and there is no need for a recorded assignment and that alleviated a huge problem for unrecorded or lost assignment. The foreclosure is actually performed in the name of MERS. So I am not sure what the heck this guy is talking about. The issue with GMAC and other lenders has NOTHING to do with this. The issue is what they are calling “Robo-signers” which are individuals who signed affidavits stating that they had “personal knowledge” of the facts in a foreclosure case, when in fact they did not. http://www.forextv.com/forex-news-story/forex-why-did-the-mortgage-servicers-use-robo-signers Read this actual and in the paragraph that starts with Second, they will provide the support for my claims. Here are additional articles I searched for on the web. http://www.fiercefinance.com/story/robo-signer-wells-fargo-no-foreclosure-halt-yet/2010-10-14 and http://www.housingwire.com/2010/10/15/robo-signers-are-a-drop-in-the-bucket-to-mortgage-industrys-problems I hate people that have no idea what they are talking about and mislead people. They don’t even know what a Note and Mortgage are or what they are used for, holy cows. And MERS doesn’t slice or dice mortgages they are just a repository. Must of the slicing and dicing is done in CDOs, which if needed I will explain why. CDO unlike MBS or RBMS continually slice and dice the junior pieces or Mezz into new CDO whereby they take the more riskier debt make them look like AAA.”
I will stop and add just add a few personal observations. No writer mentioned the role of real estate taxes so we discussed this with NE, a highly skilled, community development real estate professional. He described how a well-informed tax-sale certificate buyer could jump ahead of the other lien holders and get a house on the cheap. In addition, an occupant could keep the tax payments current, delay the mortgage payment while the mess is in the courts, and remain in the house for quite a while. He noted how many mortgage servicers do not collect the real estate taxes and are therefore exposed.
Also, state law prevails on mortgages. That means 50 jurisdictions with 50 different sets of rules. The securities are mostly through NY trusts, noted Josh Rosner. The trust will determine how the securitizations are unwound, not the rules under which the foreclosures will occur. Many of our diverse legal opinions are coming to us because the lawyers involved are citing their own local jurisdictions.
We thank the many, many readers for their thoughtful comments. We do not normally pass on a piece and keep the writer anonymous. Had he written without rudeness and expletives the outcome might have been different. It is too bad he had to resort to abusive language. The original text, despite the technical errors, was provocative and captured the gist of the mess.
Many have asked about the identity of the original writer, LG sent this email: “David Kotok: A simple Google search would have revealed to you who wrote the following. I doubt he is need of you providing him 15 minutes of fame, but who knows…http://gonzalolira.blogspot.com/2010/10/second-leg-down-of-americas-death.html .” Thank you, LG.
BTW, there is an investment implication in our view. We believe the banking system will weather this mess and the weakness in the sector will evolve into a buying opportunity as a result. The new Fed policy of additional QE implies more liquidity to offset the economic weakness of the foreclosure mess and more subsidies for banks.
The nation’s top banks are worried that a possible sea-change in the make-up of state attorneys general after tonight’s mid-term elections could delay a settlement of the state AG’s wide-ranging investigation into so called “robo signing” of mortgage foreclosure documentation, FOX Business Network has learned.
Though the state probe spearheaded by Iowa AG Tom Miller is still in its initial phases, executives at the top banks say progress has recently been made in crafting a global settlement of charges that the banks denied mortgage holders who defaulted on their loans due process by hiring robo signers. The robo signers basically rubber stamped foreclosures without proper documentation.
But a volatile electorate, that may force many incumbents out of office tonight, has executives at the big banks worried that a deal will be delayed as a new crop of AGs comes into office. There are 35 state attorney general races being contested tonight, including key races in California, New York and Michigan where there are no clear front runners.
While Democrats hold a 30-20 edge among the state AGs, the composition is likely to change given recent polls showing Republicans looking to gain ground in state elections such as governorships. The Republicans gaining ground aren’t necessarily those who favor the big banks thanks to the Tea Party movement, which has supported candidates who don’t favor bank bailouts and special perks to the big financial firms.
One thing is sure: the new batch of AG will not immediately bend over to Wall Street's whims, knowing full well they will have signed their own career death sentence off the bat should they pursue that course, especially with every blog exposing their actions to the broader population for all to see.
eric seiger
Small Business <b>News</b>: The Keys To Business Success
It's no accident that we used the plural to describe the tools that make a business a success in the title for this end-of-the-week roundup. There may not be.
Weekly Health <b>News</b> — Oh She Glows
Well, it is a good thing I made energy bites for last night because we needed them to fuel our beer and chatting marathon on the couch! Last night = Sitting on the couch > Kinect I am a strong.
Taiwanese <b>News</b> Channel Animates Mel Gibson! | PerezHilton.com
It certainly took them long enough, but wow, was it worth the wait! This is their best yet!!!! Check out Taiwan´s animated take on the mess that is Mel Gibson´s life (above)! Your eyes...
eric seiger
The Foreclosure Mess-a Follow-up
October 18, 2010
David Kotok
>
Wow, there were many, many emails in response to the recent piece entitled “Foreclosure Mess.” Here are some of those observations.
Some folks missed the opening disclaimer and attributed the piece to me; that was their error. I did not write it [BR: The original was from Gonzalo Lira's blog]. I only edited out the expletives. I do not believe that F this and F that add anything. MK wrote back: “The article’s issues needed the expletives. In this particular case they would have been in context and not extraneous. Next time leave them in. &%$)@%%$.” Readers who get to the end of today’s follow-up will be able to judge for themselves.
The piece had many technical and legal errors, although most professionals agreed with this overall theme. Barry Ritholtz summarized the legal side with a “lawyer’s hat” on: “The flaw in this piece is that courts have long been authorized to apply principles of equity, as opposed to law, to cases brought before it. This means that we do not want to create unjust enrichment for either wrongdoers or other bad outcomes. We have two bad actors here: The homeowner who is in default, and the banks/securitizes who failed to do the document creation and title management correctly. Most judges do not want to see, in civil cases, an absurd outcome. Rewarding the homeowner (free house!) or the lenders (No penalty for massive screw-ups!), a total victory would offend those principles. An example of a possible outcome in a full-blown litigation might be for the court to order the mortgage modified to the current equity value of the home, so that it punishes the lenders who failed to do their proper legal work on the documents, but does not give a home to a defaulted homeowner free. Courts of “equity” (meaning fairness, not ownership) apply these principles to avoid ridiculous outcomes.”
A senior bank executive with extensive mortgage experience also responded. WP wrote: “There are technical errors made by the writer, but much of it is accurate.”
JR replied: “David, how are you, my mother fwd this to me as I am in the business. Is it safe to assume that the bank foreclosures will be taken off the market, which would then decrease the amount of homes that are listed dramatically (over 70%) in some markets. The market has been saturated with foreclosure listings. Over the past 2 years, it has been very easy to get a foreclosure sale, where individuals were able to buy a home for 76 cents on the dollar, in essence bringing the values down on sales-cost comparisons (appraisals). What impact will we see to the market? I’m thinking that with the foreclosures no longer as easy to get as a McDonalds happy meal, the remaining properties that are listed will now sell at or above market value, because the “value foreclosure meal” will be no longer available to the buyer. What will this do to the short sale market, being that short sales were the bank alternative to foreclosure?”
Another lawyer weighed in. Mr. B wrote: “In this case, I must quibble. I believe that the mortgagor cannot go scot-free. While enforcing the mortgage is by far the more convenient route, the claimant standing in the shoes of the mortgagee/note owner could claim against the home “owner” for unjust enrichment outside the mortgage enforcement procedure. Evidence of the existence of the claim can be adduced from related documentation. The “home owner” could be required to prove the source of funds for buying the house…, which of course he could not. All very inconvenient, time consuming and expensive. But look on the bright side. It’s employment for lawyers.”
And another lawyer. Jay wrote: “Despite what your friend says, just because the chain of ownership of the note is broken does NOT mean a borrower is relieved of his debt. Observers have speculated for a long time about what would happen if a judge demanded that only the right owner could foreclose, and that particular chicken has come home to roost. It may take awhile, but sooner or later the banks will find the original note and the proper successor in interest will be found and the defaulting borrower will have to make a deal or be foreclosed out. Meanwhile, all the shenanigans are true and they will result in big delays and huge costs as lenders have to go back and do things right. Some homeowners who were improperly evicted will have claims and they will get some relief but they won’t get their houses back. This is indeed a mess and the lenders deserve everything they are getting – particularly Bank of America, which bought one of the worst offenders, Countrywide.
In addition, another lawyer named Howard said: “While it is true that some may take advantage of the mortgage mess, the process will always win. You do not make good law for the bad cases. You cannot have people lying and fraudulently fixing chain of title due to the inconvenience. I once had a mortgage foreclosure that XXXXXX handled. It took years, and at the end he had made a theoretical mistake and was forced to start over or seek judicial help in fixing the error. While the client was furious, the process was righteous.
Michael G. added to the debate: “We’re talking about estimates of $20bn or more in losses (from put-backs, etc.). I agree that you do not make good law from bad cases. And I know that shortcuts were taken when loans were securitized. I was not suggesting a solution, only the gravity of the problem. The halting of foreclosures is one more factor that will prevent the housing market from finding equilibrium and weigh on the health of American banks. Stagnant economic growth, a financial system under heavy stress, and plenty of landmines to side-step… but hey, at least NBER says that the recession ended!”
Kathy is a skilled observer of our system. She wrote “Suggesting the dissolution of civil society is fear mongering/hyperbole. I believe the US is in for a long uncertain meandering period as housing unravels, but I don’t think we’re going back to keeping cash and guns under the mattress.”
A senior partner in a major accounting firm liked the original piece. JB replied: “Whoever wrote it explained this situation as clearly as the Big Short explained the base mess. Please pass on my thanks for a job well done.”
CG chimed in from Hawaii: “The whole purpose of MBSs was for Wall Street to “Madoff the World.”
MS is a skilled lawyer and former judge. He wrote: “First paragraph starts off wrong. The note does not permit foreclosure. Suing on the note gives plaintiff a judgment. It is the mortgage which makes the property security for the note. No mortgage, no foreclosure. So I stopped reading.”
Highly tech-savvy businessperson GC wrote: “While it is popular to try and pin all the blame on Fannie and Freddie (and they certainly deserve as much opprobrium as we have energy left to give), in fact the ownership of MERS is a good indictment of all the players in the game. See this link: http://www.mersinc.org/about/shareholders.aspx . ”
Lastly, Elliot S. wrote and linked websites. He did this in response to John Mauldin who ran the original piece in his newsletter. “They are wrong with regards to the Note and chain of title. Actually, they couldn’t more wrong. The Note is just the IOU and gives the lender the right to collect any money lost. MERS has nothing to do with Notes only with mortgages. The mortgage is the controlling document that is used for the foreclosure and the ONLY document. The mortgage gets assigned from one lender to another and often the assignments didn’t get recorded and the last lender, who actually owned the mortgage, didn’t have the right to foreclosure. Therefore, they created MERS, which is a registration of the mortgage but not to a bank, but to MERS. MERS is the mortgage holder and the loans are assigned via registration number. Therefore, if XYZ sells a mortgage to ABC, MERS is notified that the lender’s MERS ID is changed from XYZ to ABC and there is no need for a recorded assignment and that alleviated a huge problem for unrecorded or lost assignment. The foreclosure is actually performed in the name of MERS. So I am not sure what the heck this guy is talking about. The issue with GMAC and other lenders has NOTHING to do with this. The issue is what they are calling “Robo-signers” which are individuals who signed affidavits stating that they had “personal knowledge” of the facts in a foreclosure case, when in fact they did not. http://www.forextv.com/forex-news-story/forex-why-did-the-mortgage-servicers-use-robo-signers Read this actual and in the paragraph that starts with Second, they will provide the support for my claims. Here are additional articles I searched for on the web. http://www.fiercefinance.com/story/robo-signer-wells-fargo-no-foreclosure-halt-yet/2010-10-14 and http://www.housingwire.com/2010/10/15/robo-signers-are-a-drop-in-the-bucket-to-mortgage-industrys-problems I hate people that have no idea what they are talking about and mislead people. They don’t even know what a Note and Mortgage are or what they are used for, holy cows. And MERS doesn’t slice or dice mortgages they are just a repository. Must of the slicing and dicing is done in CDOs, which if needed I will explain why. CDO unlike MBS or RBMS continually slice and dice the junior pieces or Mezz into new CDO whereby they take the more riskier debt make them look like AAA.”
I will stop and add just add a few personal observations. No writer mentioned the role of real estate taxes so we discussed this with NE, a highly skilled, community development real estate professional. He described how a well-informed tax-sale certificate buyer could jump ahead of the other lien holders and get a house on the cheap. In addition, an occupant could keep the tax payments current, delay the mortgage payment while the mess is in the courts, and remain in the house for quite a while. He noted how many mortgage servicers do not collect the real estate taxes and are therefore exposed.
Also, state law prevails on mortgages. That means 50 jurisdictions with 50 different sets of rules. The securities are mostly through NY trusts, noted Josh Rosner. The trust will determine how the securitizations are unwound, not the rules under which the foreclosures will occur. Many of our diverse legal opinions are coming to us because the lawyers involved are citing their own local jurisdictions.
We thank the many, many readers for their thoughtful comments. We do not normally pass on a piece and keep the writer anonymous. Had he written without rudeness and expletives the outcome might have been different. It is too bad he had to resort to abusive language. The original text, despite the technical errors, was provocative and captured the gist of the mess.
Many have asked about the identity of the original writer, LG sent this email: “David Kotok: A simple Google search would have revealed to you who wrote the following. I doubt he is need of you providing him 15 minutes of fame, but who knows…http://gonzalolira.blogspot.com/2010/10/second-leg-down-of-americas-death.html .” Thank you, LG.
BTW, there is an investment implication in our view. We believe the banking system will weather this mess and the weakness in the sector will evolve into a buying opportunity as a result. The new Fed policy of additional QE implies more liquidity to offset the economic weakness of the foreclosure mess and more subsidies for banks.
The nation’s top banks are worried that a possible sea-change in the make-up of state attorneys general after tonight’s mid-term elections could delay a settlement of the state AG’s wide-ranging investigation into so called “robo signing” of mortgage foreclosure documentation, FOX Business Network has learned.
Though the state probe spearheaded by Iowa AG Tom Miller is still in its initial phases, executives at the top banks say progress has recently been made in crafting a global settlement of charges that the banks denied mortgage holders who defaulted on their loans due process by hiring robo signers. The robo signers basically rubber stamped foreclosures without proper documentation.
But a volatile electorate, that may force many incumbents out of office tonight, has executives at the big banks worried that a deal will be delayed as a new crop of AGs comes into office. There are 35 state attorney general races being contested tonight, including key races in California, New York and Michigan where there are no clear front runners.
While Democrats hold a 30-20 edge among the state AGs, the composition is likely to change given recent polls showing Republicans looking to gain ground in state elections such as governorships. The Republicans gaining ground aren’t necessarily those who favor the big banks thanks to the Tea Party movement, which has supported candidates who don’t favor bank bailouts and special perks to the big financial firms.
One thing is sure: the new batch of AG will not immediately bend over to Wall Street's whims, knowing full well they will have signed their own career death sentence off the bat should they pursue that course, especially with every blog exposing their actions to the broader population for all to see.
eric seiger
Small Business <b>News</b>: The Keys To Business Success
It's no accident that we used the plural to describe the tools that make a business a success in the title for this end-of-the-week roundup. There may not be.
Weekly Health <b>News</b> — Oh She Glows
Well, it is a good thing I made energy bites for last night because we needed them to fuel our beer and chatting marathon on the couch! Last night = Sitting on the couch > Kinect I am a strong.
Taiwanese <b>News</b> Channel Animates Mel Gibson! | PerezHilton.com
It certainly took them long enough, but wow, was it worth the wait! This is their best yet!!!! Check out Taiwan´s animated take on the mess that is Mel Gibson´s life (above)! Your eyes...
eric seiger
eric seiger
eric seiger
Small Business <b>News</b>: The Keys To Business Success
It's no accident that we used the plural to describe the tools that make a business a success in the title for this end-of-the-week roundup. There may not be.
Weekly Health <b>News</b> — Oh She Glows
Well, it is a good thing I made energy bites for last night because we needed them to fuel our beer and chatting marathon on the couch! Last night = Sitting on the couch > Kinect I am a strong.
Taiwanese <b>News</b> Channel Animates Mel Gibson! | PerezHilton.com
It certainly took them long enough, but wow, was it worth the wait! This is their best yet!!!! Check out Taiwan´s animated take on the mess that is Mel Gibson´s life (above)! Your eyes...
eric seiger
The Foreclosure Mess-a Follow-up
October 18, 2010
David Kotok
>
Wow, there were many, many emails in response to the recent piece entitled “Foreclosure Mess.” Here are some of those observations.
Some folks missed the opening disclaimer and attributed the piece to me; that was their error. I did not write it [BR: The original was from Gonzalo Lira's blog]. I only edited out the expletives. I do not believe that F this and F that add anything. MK wrote back: “The article’s issues needed the expletives. In this particular case they would have been in context and not extraneous. Next time leave them in. &%$)@%%$.” Readers who get to the end of today’s follow-up will be able to judge for themselves.
The piece had many technical and legal errors, although most professionals agreed with this overall theme. Barry Ritholtz summarized the legal side with a “lawyer’s hat” on: “The flaw in this piece is that courts have long been authorized to apply principles of equity, as opposed to law, to cases brought before it. This means that we do not want to create unjust enrichment for either wrongdoers or other bad outcomes. We have two bad actors here: The homeowner who is in default, and the banks/securitizes who failed to do the document creation and title management correctly. Most judges do not want to see, in civil cases, an absurd outcome. Rewarding the homeowner (free house!) or the lenders (No penalty for massive screw-ups!), a total victory would offend those principles. An example of a possible outcome in a full-blown litigation might be for the court to order the mortgage modified to the current equity value of the home, so that it punishes the lenders who failed to do their proper legal work on the documents, but does not give a home to a defaulted homeowner free. Courts of “equity” (meaning fairness, not ownership) apply these principles to avoid ridiculous outcomes.”
A senior bank executive with extensive mortgage experience also responded. WP wrote: “There are technical errors made by the writer, but much of it is accurate.”
JR replied: “David, how are you, my mother fwd this to me as I am in the business. Is it safe to assume that the bank foreclosures will be taken off the market, which would then decrease the amount of homes that are listed dramatically (over 70%) in some markets. The market has been saturated with foreclosure listings. Over the past 2 years, it has been very easy to get a foreclosure sale, where individuals were able to buy a home for 76 cents on the dollar, in essence bringing the values down on sales-cost comparisons (appraisals). What impact will we see to the market? I’m thinking that with the foreclosures no longer as easy to get as a McDonalds happy meal, the remaining properties that are listed will now sell at or above market value, because the “value foreclosure meal” will be no longer available to the buyer. What will this do to the short sale market, being that short sales were the bank alternative to foreclosure?”
Another lawyer weighed in. Mr. B wrote: “In this case, I must quibble. I believe that the mortgagor cannot go scot-free. While enforcing the mortgage is by far the more convenient route, the claimant standing in the shoes of the mortgagee/note owner could claim against the home “owner” for unjust enrichment outside the mortgage enforcement procedure. Evidence of the existence of the claim can be adduced from related documentation. The “home owner” could be required to prove the source of funds for buying the house…, which of course he could not. All very inconvenient, time consuming and expensive. But look on the bright side. It’s employment for lawyers.”
And another lawyer. Jay wrote: “Despite what your friend says, just because the chain of ownership of the note is broken does NOT mean a borrower is relieved of his debt. Observers have speculated for a long time about what would happen if a judge demanded that only the right owner could foreclose, and that particular chicken has come home to roost. It may take awhile, but sooner or later the banks will find the original note and the proper successor in interest will be found and the defaulting borrower will have to make a deal or be foreclosed out. Meanwhile, all the shenanigans are true and they will result in big delays and huge costs as lenders have to go back and do things right. Some homeowners who were improperly evicted will have claims and they will get some relief but they won’t get their houses back. This is indeed a mess and the lenders deserve everything they are getting – particularly Bank of America, which bought one of the worst offenders, Countrywide.
In addition, another lawyer named Howard said: “While it is true that some may take advantage of the mortgage mess, the process will always win. You do not make good law for the bad cases. You cannot have people lying and fraudulently fixing chain of title due to the inconvenience. I once had a mortgage foreclosure that XXXXXX handled. It took years, and at the end he had made a theoretical mistake and was forced to start over or seek judicial help in fixing the error. While the client was furious, the process was righteous.
Michael G. added to the debate: “We’re talking about estimates of $20bn or more in losses (from put-backs, etc.). I agree that you do not make good law from bad cases. And I know that shortcuts were taken when loans were securitized. I was not suggesting a solution, only the gravity of the problem. The halting of foreclosures is one more factor that will prevent the housing market from finding equilibrium and weigh on the health of American banks. Stagnant economic growth, a financial system under heavy stress, and plenty of landmines to side-step… but hey, at least NBER says that the recession ended!”
Kathy is a skilled observer of our system. She wrote “Suggesting the dissolution of civil society is fear mongering/hyperbole. I believe the US is in for a long uncertain meandering period as housing unravels, but I don’t think we’re going back to keeping cash and guns under the mattress.”
A senior partner in a major accounting firm liked the original piece. JB replied: “Whoever wrote it explained this situation as clearly as the Big Short explained the base mess. Please pass on my thanks for a job well done.”
CG chimed in from Hawaii: “The whole purpose of MBSs was for Wall Street to “Madoff the World.”
MS is a skilled lawyer and former judge. He wrote: “First paragraph starts off wrong. The note does not permit foreclosure. Suing on the note gives plaintiff a judgment. It is the mortgage which makes the property security for the note. No mortgage, no foreclosure. So I stopped reading.”
Highly tech-savvy businessperson GC wrote: “While it is popular to try and pin all the blame on Fannie and Freddie (and they certainly deserve as much opprobrium as we have energy left to give), in fact the ownership of MERS is a good indictment of all the players in the game. See this link: http://www.mersinc.org/about/shareholders.aspx . ”
Lastly, Elliot S. wrote and linked websites. He did this in response to John Mauldin who ran the original piece in his newsletter. “They are wrong with regards to the Note and chain of title. Actually, they couldn’t more wrong. The Note is just the IOU and gives the lender the right to collect any money lost. MERS has nothing to do with Notes only with mortgages. The mortgage is the controlling document that is used for the foreclosure and the ONLY document. The mortgage gets assigned from one lender to another and often the assignments didn’t get recorded and the last lender, who actually owned the mortgage, didn’t have the right to foreclosure. Therefore, they created MERS, which is a registration of the mortgage but not to a bank, but to MERS. MERS is the mortgage holder and the loans are assigned via registration number. Therefore, if XYZ sells a mortgage to ABC, MERS is notified that the lender’s MERS ID is changed from XYZ to ABC and there is no need for a recorded assignment and that alleviated a huge problem for unrecorded or lost assignment. The foreclosure is actually performed in the name of MERS. So I am not sure what the heck this guy is talking about. The issue with GMAC and other lenders has NOTHING to do with this. The issue is what they are calling “Robo-signers” which are individuals who signed affidavits stating that they had “personal knowledge” of the facts in a foreclosure case, when in fact they did not. http://www.forextv.com/forex-news-story/forex-why-did-the-mortgage-servicers-use-robo-signers Read this actual and in the paragraph that starts with Second, they will provide the support for my claims. Here are additional articles I searched for on the web. http://www.fiercefinance.com/story/robo-signer-wells-fargo-no-foreclosure-halt-yet/2010-10-14 and http://www.housingwire.com/2010/10/15/robo-signers-are-a-drop-in-the-bucket-to-mortgage-industrys-problems I hate people that have no idea what they are talking about and mislead people. They don’t even know what a Note and Mortgage are or what they are used for, holy cows. And MERS doesn’t slice or dice mortgages they are just a repository. Must of the slicing and dicing is done in CDOs, which if needed I will explain why. CDO unlike MBS or RBMS continually slice and dice the junior pieces or Mezz into new CDO whereby they take the more riskier debt make them look like AAA.”
I will stop and add just add a few personal observations. No writer mentioned the role of real estate taxes so we discussed this with NE, a highly skilled, community development real estate professional. He described how a well-informed tax-sale certificate buyer could jump ahead of the other lien holders and get a house on the cheap. In addition, an occupant could keep the tax payments current, delay the mortgage payment while the mess is in the courts, and remain in the house for quite a while. He noted how many mortgage servicers do not collect the real estate taxes and are therefore exposed.
Also, state law prevails on mortgages. That means 50 jurisdictions with 50 different sets of rules. The securities are mostly through NY trusts, noted Josh Rosner. The trust will determine how the securitizations are unwound, not the rules under which the foreclosures will occur. Many of our diverse legal opinions are coming to us because the lawyers involved are citing their own local jurisdictions.
We thank the many, many readers for their thoughtful comments. We do not normally pass on a piece and keep the writer anonymous. Had he written without rudeness and expletives the outcome might have been different. It is too bad he had to resort to abusive language. The original text, despite the technical errors, was provocative and captured the gist of the mess.
Many have asked about the identity of the original writer, LG sent this email: “David Kotok: A simple Google search would have revealed to you who wrote the following. I doubt he is need of you providing him 15 minutes of fame, but who knows…http://gonzalolira.blogspot.com/2010/10/second-leg-down-of-americas-death.html .” Thank you, LG.
BTW, there is an investment implication in our view. We believe the banking system will weather this mess and the weakness in the sector will evolve into a buying opportunity as a result. The new Fed policy of additional QE implies more liquidity to offset the economic weakness of the foreclosure mess and more subsidies for banks.
The nation’s top banks are worried that a possible sea-change in the make-up of state attorneys general after tonight’s mid-term elections could delay a settlement of the state AG’s wide-ranging investigation into so called “robo signing” of mortgage foreclosure documentation, FOX Business Network has learned.
Though the state probe spearheaded by Iowa AG Tom Miller is still in its initial phases, executives at the top banks say progress has recently been made in crafting a global settlement of charges that the banks denied mortgage holders who defaulted on their loans due process by hiring robo signers. The robo signers basically rubber stamped foreclosures without proper documentation.
But a volatile electorate, that may force many incumbents out of office tonight, has executives at the big banks worried that a deal will be delayed as a new crop of AGs comes into office. There are 35 state attorney general races being contested tonight, including key races in California, New York and Michigan where there are no clear front runners.
While Democrats hold a 30-20 edge among the state AGs, the composition is likely to change given recent polls showing Republicans looking to gain ground in state elections such as governorships. The Republicans gaining ground aren’t necessarily those who favor the big banks thanks to the Tea Party movement, which has supported candidates who don’t favor bank bailouts and special perks to the big financial firms.
One thing is sure: the new batch of AG will not immediately bend over to Wall Street's whims, knowing full well they will have signed their own career death sentence off the bat should they pursue that course, especially with every blog exposing their actions to the broader population for all to see.
eric seiger
eric seiger
Small Business <b>News</b>: The Keys To Business Success
It's no accident that we used the plural to describe the tools that make a business a success in the title for this end-of-the-week roundup. There may not be.
Weekly Health <b>News</b> — Oh She Glows
Well, it is a good thing I made energy bites for last night because we needed them to fuel our beer and chatting marathon on the couch! Last night = Sitting on the couch > Kinect I am a strong.
Taiwanese <b>News</b> Channel Animates Mel Gibson! | PerezHilton.com
It certainly took them long enough, but wow, was it worth the wait! This is their best yet!!!! Check out Taiwan´s animated take on the mess that is Mel Gibson´s life (above)! Your eyes...
eric seiger
eric seiger
Small Business <b>News</b>: The Keys To Business Success
It's no accident that we used the plural to describe the tools that make a business a success in the title for this end-of-the-week roundup. There may not be.
Weekly Health <b>News</b> — Oh She Glows
Well, it is a good thing I made energy bites for last night because we needed them to fuel our beer and chatting marathon on the couch! Last night = Sitting on the couch > Kinect I am a strong.
Taiwanese <b>News</b> Channel Animates Mel Gibson! | PerezHilton.com
It certainly took them long enough, but wow, was it worth the wait! This is their best yet!!!! Check out Taiwan´s animated take on the mess that is Mel Gibson´s life (above)! Your eyes...
eric seiger
Small Business <b>News</b>: The Keys To Business Success
It's no accident that we used the plural to describe the tools that make a business a success in the title for this end-of-the-week roundup. There may not be.
Weekly Health <b>News</b> — Oh She Glows
Well, it is a good thing I made energy bites for last night because we needed them to fuel our beer and chatting marathon on the couch! Last night = Sitting on the couch > Kinect I am a strong.
Taiwanese <b>News</b> Channel Animates Mel Gibson! | PerezHilton.com
It certainly took them long enough, but wow, was it worth the wait! This is their best yet!!!! Check out Taiwan´s animated take on the mess that is Mel Gibson´s life (above)! Your eyes...
eric seiger
Small Business <b>News</b>: The Keys To Business Success
It's no accident that we used the plural to describe the tools that make a business a success in the title for this end-of-the-week roundup. There may not be.
Weekly Health <b>News</b> — Oh She Glows
Well, it is a good thing I made energy bites for last night because we needed them to fuel our beer and chatting marathon on the couch! Last night = Sitting on the couch > Kinect I am a strong.
Taiwanese <b>News</b> Channel Animates Mel Gibson! | PerezHilton.com
It certainly took them long enough, but wow, was it worth the wait! This is their best yet!!!! Check out Taiwan´s animated take on the mess that is Mel Gibson´s life (above)! Your eyes...
eric seiger eric seiger
eric seiger
eric seiger
eric seiger
Small Business <b>News</b>: The Keys To Business Success
It's no accident that we used the plural to describe the tools that make a business a success in the title for this end-of-the-week roundup. There may not be.
Weekly Health <b>News</b> — Oh She Glows
Well, it is a good thing I made energy bites for last night because we needed them to fuel our beer and chatting marathon on the couch! Last night = Sitting on the couch > Kinect I am a strong.
Taiwanese <b>News</b> Channel Animates Mel Gibson! | PerezHilton.com
It certainly took them long enough, but wow, was it worth the wait! This is their best yet!!!! Check out Taiwan´s animated take on the mess that is Mel Gibson´s life (above)! Your eyes...
Foreclosure listings are something that you are going to want to look at if you are in the market to buy a home and want to get an incredibly low price. A foreclosure is bad news for the individual facing it but you can benefit from free foreclosure listings if you know how to. A foreclosure is what happens to someone when they can no longer afford to pay their mortgage. The bank then has to sell the house in order to get the money for the loan that they are owed from the original home owner.
The new buyer will make up for what the old owner was not able to pay. The large majority of foreclosed homes actually get sold at a public auction but some are listed privately by both banks and owners themselves before a full foreclosure occurs. The result is prices that are much lower than they would be under normal market conditions. It is an unfortunate circumstance that too many people face but there is no harm in benefiting since there is nothing that can be done about the situation once the property is actually in the stages of foreclosure with no going back for the original owner.
Free foreclosure listings get posted and include a whole slew of information that is potentially useful to you including the person of contact, the exact type of foreclosure the property is facing, and any other pertinent details for the property. These lists can be found both on the internet and also published on many websites too. Websites can prove to be most helpful because many of them also include details on how to actually purchase the foreclosed homes. There are a variety of steps that you must go through in order to purchase any of the free foreclosure listings that you happen to stumble on. Some of these include contacting the proper person to buy the home from whether it is the bank itself or the previous owner. They may also assist you in the process from beginning to end until the home is sold.
Pre-foreclosure listings are also something that you may consider when you decide to purchase a home. These properties have not yet fallen into foreclosure and may be facing the process. The owners are in default with their mortgage company due to non payment. If the current process continues these homeowners will be facing the foreclosure process and many people do not want this to happen or to undergo that long process. They will manage to sell their home to you and avoid a huge debt from the foreclosure while also getting a portion of the money that they have paid towards their home already. Everyone benefits under these circumstances.
You may not receive an answer to your inquiry right away especially in pre-foreclosure because they may possibly be looking into other options. Don't harass them or constantly call just to get a response because patience is key to successfully purchasing a home that is being foreclosed on.
eric seiger
Small Business <b>News</b>: The Keys To Business Success
It's no accident that we used the plural to describe the tools that make a business a success in the title for this end-of-the-week roundup. There may not be.
Weekly Health <b>News</b> — Oh She Glows
Well, it is a good thing I made energy bites for last night because we needed them to fuel our beer and chatting marathon on the couch! Last night = Sitting on the couch > Kinect I am a strong.
Taiwanese <b>News</b> Channel Animates Mel Gibson! | PerezHilton.com
It certainly took them long enough, but wow, was it worth the wait! This is their best yet!!!! Check out Taiwan´s animated take on the mess that is Mel Gibson´s life (above)! Your eyes...
eric seiger
Small Business <b>News</b>: The Keys To Business Success
It's no accident that we used the plural to describe the tools that make a business a success in the title for this end-of-the-week roundup. There may not be.
Weekly Health <b>News</b> — Oh She Glows
Well, it is a good thing I made energy bites for last night because we needed them to fuel our beer and chatting marathon on the couch! Last night = Sitting on the couch > Kinect I am a strong.
Taiwanese <b>News</b> Channel Animates Mel Gibson! | PerezHilton.com
It certainly took them long enough, but wow, was it worth the wait! This is their best yet!!!! Check out Taiwan´s animated take on the mess that is Mel Gibson´s life (above)! Your eyes...
eric seiger
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