Category Archives: Real estate

Tom Deutsch of American Securitization Forum Finally Gets His Comeuppance: Pimco and Likely Other Investors Quit

Bloomberg reported a few weeks ago of a rift in the group that supposedly represents the mortgage securitization industry, the American Securitization Forum. We say “supposedly” because the interests of its two main types of members, the sell side, meaning the parties that put together deals, and the buy side, meaning investors, are now directly opposed.

That rift has now escalated to what looks like a fatal schism, as bond king Pimco has quit the ASF over the refusal of the ASF to send a letter voicing investors’ ~~objection to~~ concerns about the pending mortgage settlement. We are told by other investors that Pimco’s departure is likely to herald a wholesale exodus by investors who have long felt their views are not taken seriously by the ASF.

John O’Brien: Mortgage Settlement Fails to Address Banking Criminal Enterprise

Yves here. The release by San Francisco county assessor-recorder Phil Ting of a study of document irregularities in foreclosures has put a spotlight on the failure of Federal banking regulators and state officials to do anything beyond cursory examinations of servicers’ bad practices. If a country official with limited resources can show that there are widespread abuses, what is the excuse of state and Federal officials for their failure to understand the depth and severity of these problems?

As Dave Dayen has pointed out, it was two county registers of deeds, Jeff Thigpen in Guiford County, North Carolina, and John O’Brien of South Essex County, Massachusettes, who were the first to look at their own records to see how extensive the frauds were. O’Brien has called his office a “crime scene” and refused to register any more fraudulent deeds. He also performed a study of his own, and the results were released in June 2011. As Dayen reported, the study found widespread failures and apparent fraud, just like the later San Francisco exam:

Politico: Schneiderman Caved to Administration Pressure on Mortgage Settlement, Did Not Get Tighter Release for Abandoning Opposition

While this blog has repeatedly pointed out that Tom Miller, the Iowa attorney general and leader of attorneys general in the settlement negotiations, is not the most credible source, the flip side is that the description of the release in the Administration’s own ~~propaganda~~ website strongly suggests that the release of bank liability is broad, rather than narrow, as deal cheerleaders claimed.

If you take this section of an article at Politico, “HUD boss jumps into mortgage melee,” (hat tip reader Deontos) at face value, you can only draw damning conclusions about New York attorney general Eric Schneiderman’s role:

Will Expiration of Tax Break Render Much of Mortgage Settlement Moot?

Even though the mortgage settlement deal was without a doubt massively lawyered from the bank end, and should have received similar levels of scrutiny from the Federal and state officials, a major fly in the ointment may have been overlooked. The tax rule allowing a reduction in mortgage debt not to be counted as income expires at the end of this year. As the Seattle Times explains (hat tip Lisa Epstein):

Wolf Richter: Now a Housing Bubble in Germany

Germans are euphoric these days—compared to the dour mood that prevailed for nearly two decades when real wages declined in a stagnating economy with high unemployment. This new optimism is joyriding the powerful German export machine and appears to be impervious to the nightmarish scenarios playing out at the periphery of the Eurozone. And now, Germans have something else to be euphoric about: a housing bubble.

Neil Barofsky on Taxpayer Subsidies to the Mortgage Settlement

Neil Barofsky, former Special Inspector General of the TARP, weighs in on the mortgage settlement at Bloomberg. One intriguing little aspect of this deal is the degree to which the Administration, particularly HUD, is frustrated that its PR efforts are landing with a thud. I’ve been told of HUD efforts to push back against my post, “The Top Twelve Reasons Why You Should Hate the Mortgage Settlement,” as well as an important article by Shahien Nasiripour at the Financial Times on how the administration’s mortgage modification program HAMP would wind up providing taxpayer subsidies to the settlement.

The Bloomberg reporter Erik Schatzker mentions how HUD has disputed the Financial Times reporting and Barofsky explains why the FT got it right.

Quelle Surprise! Servicers Rip Off Investors as Well as Homeowners

We’ve been giving examples off and on about how servicers scam borrowers. Examples include impermissibly deducting fees before applying payments to interest and principal; force placed insurance, inflated prices on and excessive frequency of broker price opinions, and in altogether too many cases, treating payments that are on time as late. What many observers fail to appreciate is that these are tantamount to scamming investors. If a borrower goes into default, any bogus charges will be deducted from the sale of the house, and hence come out of investors’ hides.

Lisa Epstein of Foreclosure Hamlet is a mortgage document maven and has been looking extensively at investor reports and compared them to court documents and has found serious discrepancies.

More Foreclosure Mischief: Bankruptcy Hijackings

One of the common complaints from banks that the concerns raised by borrowers over robosigning are mere “paperwork” problems, that everyone who is foreclosed on deserved it, and no one was really hurt. That is patently false, as there have been an embarrassing number of instances where someone with no mortgage was foreclosed on, as well all too many cases of servicer-driven foreclosures. And that’s before we get to damage to property records.

Attorney Timothy Fong called our attention to a below the radar form of chicanery that is predictable when you have nonjudicial foreclosure with no significant oversight and agents who lack incentives to do a good job.

Michael Olenick: Shocking Economic Insight – Mass Foreclosures Will Drive Down Home Prices

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

“A lie told often enough becomes the truth.”
— Vladimir Lenin, adopted and reused by Joseph Goebbels

Every doctor knows the fastest way to stabilize a patient is to kill them, because there is nothing more stable than death. While that solution may be fast and inexpensive it’s also sub-optimal. Yet pundits repeatedly posit the fastest way to end the housing crisis is through mass foreclosures. In a strict sense they’re right, that will achieve stability, though so will other policies calibrated to cause less micro and macroeconomic damage .. and a lot less human suffering.

San Francisco Foreclosure Audit Elicits Predictable Responses from Securitization Mess Deniers

Given the existence of a large and still for the most part very well remunerated mortgage industrial complex, it is not surprising that a investigation done by a mere county that found errors in virtually all the loans in a small sample of foreclosures created a hue and cry.

While state attorney general Kamala Harris remarked that, “The allegations are deeply troubling and, sadly, no surprise to homeowners and law enforcement officials in California,” and Nancy Pelosi wrote to ask Eric Holder to take a look, the securitization problem deniers went to assault mode.

Quelle Surprise! Taxpayers Will Be Paying for Part of Mortgage Settlement

The whole purpose of a settlement is that a party pays damages to rid themselves of liability, and the amount they pay (and “pay” can include the cost of reforming their conduct) is less than what they expect to suffer if they were sued and lost the case (otherwise, it would make more sense for them to fight).

But in the topsy-turvy world of cream for the banks, crumbs for the rest of us, we have, in the words of Scott Simon, head of the mortgage business at bond fund manager Pimco, in an interview with MoneyNews, lots of victims paying for banks’ misdeeds:

Quelle Surprise! San Francisco Assessor Finds Pervasive Fraud in Foreclosure Exam (and Paul Jackson Defends His Meal Tickets Yet Again)

One of our big beefs about the pending mortgage settlement has been the failure of prosecutors and regulators to do anything remotely resembling serious investigations. You don’t settle on known, easy to prove abuses (particularly when you choose not to know their extent) and leave yourself with a grab bag of mainly more difficult to ferret out ones to consider going after later.

We’ve seen repeatedly that small scale investigations in the servicing and foreclosure arena have found widespread problems. So the latest report from San Francisco county should come as no surprise.

HUD’s Donovan Tells Remarkable Whoppers About Settlement to Mortgage Investors

If you are going to lie, it appears the Obama Administration believes there is nothing to be lost by telling a Big Lie.

New York Creates New Foreclosure Courts to Clear Backlog

Given the horrible history of special foreclosure courts in Florida, which as we recounted (see here and here for some past discussions) resulted in a bank-friendly travesty of justice, one has good reason to regard dedicated foreclosure courts with more than a modicum of concern.

The variant that is planned to be implemented in New York appears to be more fair-minded in intent than its Florida cousin. And while it appears unlikely to produce the sort of kangaroo court outcome that occurred there, it is not hard to see that this initiative is likely to fall well short of its objectives.

Quelle Surprise! Administration and State Attorneys General Lied, Mortgage Settlement Release Described as “Broad”

North Carolina has posted an executive summary of the foreclosure settlement (hat tip Abigail Field), and it is a a troubling document. The first aspect is the very fact that an executive summary, rather than actual text of an agreement, is what is being released. And it’s not being released for the worst of reasons: the deal has not been finalized. We explained in an earlier post why this is completely outside the pale, and we’ll turn the mike over to Frederick Leatherman for a recap: