Take a look at the comments which show up here regarding the self inflicted wounds of the US financial sector, and housing sector: http://disqus.com/telegraph-36d487f3-f39d-482d-8f39-cc6bdc2d044f/
Plus, take a look at what Ireland is doing with banks that frankly have atomized, or vaporized, balance sheets.
The most recent part is this: Concerning Spain. Here’s a few points I noticed on the following website. The article also gives an update on Ireland now that the butchers bill has finally arrived.The base as well as worst case scenarios. Grim reading for Ireland but the 20 billion euros cash held for future pensions is insurance. To give you a scale of how big that fund is for Ireland (pop 4.5 million) it would be the similar to the US (66 times bigger) having 1.320 trillion euros in a wealth fund for future pensions. Ireland is not Greece and will not run out of money. Nor will Ireland return to the markets before early 2011. By the end of Feb 2011 the NAMA process is scheduled to be completed, purging bad debt from the banking system. Incidentally, jobless figures fell in August by just over 5,000 in Ireland. We shall see if this continues. http://notayesmanseconomics.wordpress.com/ From the article: ‘I have written previous articles on here about Spain and some misrepresentation in her fiscal statistics. The debate on Spanish statistics has moved on this morning as according to the Financial Times an email has been doing the rounds suggesting that Spanish GDP has been overstated by some 14.2%.’ It further stated ‘In the FT this: ‘We’ve contacted the INE to discuss.While we’re still waiting to speak to their economists — since they too were on austerity strike on Wednesday…’ Rumour or does it remind you of a country brought to my attention by your previous posts regarding Vanity Fair? Spain are already using their social fund for consumption according to a previous AEP article. If true, the implications are IMHO a potential game changer for the Eurozone. I am not alone. Apparently some months ago it was discussed and options examined at the highest level. A plan B. http://www.telegraph.co.uk/news/worldnews/europe/7837874/Germany-and-France-examine-two-tier-euro.html
The second most recent part is this: Not at all. Things have progressed since that posting. There will be no new lending for Anglo Irish. Instead Anglo Irish will be split into two between a bank holding the deposits and a separate unit to run down and manage those loans not passed to NAMA. This will allow the Anglo Irish liability to be quantified and ‘bounded’ with greater precision for Irish taxpayers. Many people in Ireland and no doubt abroad feel the actions of the previous management led by the now bankrupted Sean Fitzpatrick to have tarnished the Anglo Irish brand. So the bank in time will cease. On moral hazard for banker’s, former Anglo Irish Bank chairman Sean FitzPatrick now has an income of €188 per month, according to documents filed in the High Court as part of his bankruptcy proceedings. Furthermore the Garda is still investigating various dealings concerning Anglo Irish and the actions of Directors but that case is according to a Garda representative a ’slow burner’. We will see if criminal proceedings will be brought. It would appear many months before this investigation will be completed.
The second oldest part is this: Assets passed to NAMA are discounted when they are transfered from the banks. So 25 billion euros transfered to NAMA has already been discounted in two batches, written off as bad debt at 55% and 62% I believe in the various Irish Banks company accounts, a large proportion of which is Anglo Irish. The remaining batches projected for NAMA transfer, 19 billion Euros in total value is scheduled to be completed by February.The discount applied for the outstanding 19 billion euros NAMA loans to be transferred will be determined at a later date. Note loan assets acquired by NAMA are from all the Irish Banks not just Anglo Irish.Taoiseach Brian Cowen said today it should take no more than 15 years to wind down Anglo’s bad bank. Then it will cease. Brian Lenihan, Finance Minister declined to disclose the cost of the plan, estimates of which have been assessed by the National Treasury Management Agency.It has been reported The Financial Regulator at the Central Bank would determine the capital required by both the savings or funding bank and the asset recovery bank, and these figures will be known by October.So by February, perhaps sooner it appears markets should have a clearer projected total cost as they are demanding.As for my confidence in bank stress tests worldwide, many are clearly little more than stress free PR exercises. Perhaps the sarcasm in my comment did not come across clearly enough. Sorry for any misunderstanding. I’m a little tired and like many in Ireland, more than a little angry about what has transpired.
The oldest part is this: Think of 3 institutions in the future involvement for Anglo Irish Bank.Firstly NAMA, the National Asset Management Agency. They purchase loans, including those considered toxic, from the Irish banks, including Anglo Irish at a discount. The last batch for example averaged a 62% discount. Ireland is I believe over half way through the projected process (NAMA has a projected limit) to clear up Ireland’s banking system. This discount is written off in Anglo’s balance sheet as a bad debt, hence the record loss just announced for Anglo Irish. NAMA who purchase these loans, can recover the full loan amount from the lender(s) if its possible. NAMA also have oversight and can run these assets themselves if needed. Hotels are a prime example. Whether the State will break even or make a profit or loss, time will tell. Paying 38 cents on the euro for the last batch does allow some leeway. These loans are further backed by assets. For example, around 25% of the last batch consisted of property (shops, hotels, etc) around London I believe. Indeed many of the loans purchased by NAMA are outside Ireland. Obviously not worthless despite what rating agencies might say.Second , Anglo Irish new ‘Bad Bank’. This will run down the existing poorer performing loans at the bank. Possibly, I imagine including those prior to any sale to NAMA. The reason, avoiding incurring a bad debt crystalized immediately for the Bad Bank. This process might be a slower asset recovery process but will save Anglo Irish the discount to the State and bad write-off from its balance sheet. Again backed by assets.Third, the better performing loans & assets. The projected future of Anglo Irish ‘Good’ bank. The balance sheet shrunk to about 20% of its current size in initial reports.The whole process will in time (the next year or so I would imagine) ensure better ‘mark to market’ valuations in Ireland’s banking system as assets are accurately reflected.Tell how many other countries will be implementing fair value accounting , FASB 157 to the same degree? Or are many assets in banks valued at the original valuations from years ago? No doubt the various bank stress tests address this problem.According to Eurostat in Quarter 1 2010, Ireland’s GDP rose 2.7%. Yes this is undoubtably a bad time for the Irish State and its banking system. However the problems are being addressed. In the next year or so, Ireland might indeed surprise many.
Do you like a good crime novel – a corporate crime novel? If so The Monster: How a gang of predatory lenders and Wall Street bankers fleeced America – and spawned a global crisis by Michael W. Hudson is for you. Unfortunately it’s not a fictional novel but the history of the mortgage crisis that may yet bring down the US and world economy.
This book is not directly about the foreclosure crisis but about the seeds of that crisis – deceptive and fraudulent mortgages that left desperate people worse off than before and without a chance of meeting the obligations of the contracts they had signed.
The seeds were initially planted over 30 years ago in the form of deregulation of the financial industry. The seeds sprouted in the late 80s and blossomed into the S&L crisis. Little if anything was learned and the deregulation continued – still more seeds were planted. By the early and mid 90’s the players that had escaped the S&L crisis and even some who didn’t were back at it writing predatory sub prime loans. The deception and outright fraud was becoming even more prevalent easily circumventing the few new consumer protections. At about the same time mortgage backed securities were a hot commodity. The Wall Street investment banks had stayed clear but a familiar name in the most recent crisis, Lehman Brothers, saw an opportunity it couldn’t pass up. As the money to be made in subprime mortgages increased so did the deception and fraud as well as involvement by more and more Wall Street banks.
Like any good crime novel this story has a cast of villains and victims. Of course this is not a novel so the people are real. One of the main characters is Roland Arnall who grew a small Orange County S&L into the mortgage giant Ameriquest. The way it grew was to place sales and profit above all else. There was nothing an Ameriquest salesman would not do to close a loan.
At the downtown L.A. branch, some of Glover’s coworkers had a flair for creative documentation. They used scissors, tape, Wite-Out and a photocopier to fabricate W-2s, the tax forms that indicate how much a wage earner makes each year. It was easy: Paste the name of a low-earning borrower onto a W-2 belonging to a higher-earning borrower and, like magic, a bad loan prospect suddenly looked much better. Workers in the branch equipped the office’s break room with all the tools they needed to manufacture and manipulate official documents. They dubbed it the “Art Department.”
…………
What if a customer insisted he wanted a fixed-rate loan, but you could make more money by selling him an adjustable-rate one? No problem. Many Ameriquest salespeople learned to position a few fixed-rate loan documents at the top of the stack of paperwork to be signed by the borrower. They buried the real documents—the ones indicating the loan had an adjustable rate that would rocket upward in two or three years—near the bottom of the pile. Then, after the borrower had flipped from signature line to signature line, scribbling his consent across the entire stack, and gone home, it was easy enough to peel the fixed-rate documents off the top and throw them in the trash.
There was lots of money to be made so neither the investment banks that were packaging the loans or the investors buying them questioned the loans themselves. But the continued growth depended on a continued influx of new loans and rising home values – it was in effect a Ponzi scheme. When the housing bubble deflated in 2007 the Ponzi scheme collapsed.
I recommend The Monster: You can pretend it is fiction and have an enjoyable read or you can learn about how greed driven fraud and deception resulted in the worst economic crisis since the great depression. While Wall Street and the bankers are still quick to blame those who don’t make their mortgage payments you will who the real victims are.
Note:
I received a review copy of this book from the publisher.
Cross posted at Newshoggers
Nevada Voters Complain Of Problems At Polls - Las Vegas <b>News</b> Story <b>...</b>
LAS VEGAS -- Some voters in Boulder City complained on Monday that their ballot had been cast before they went to the polls, raising questions about Clark County's electronic voting machines. Tuesday, October 26, 2010.
Fantasy Football <b>News</b> Roundup, Week 8: Does Jon Kitna Have Value <b>...</b>
Checking in on the fantasy news of the day for Week 8.
Sad <b>news</b> for the New York baseball world
You probably didn't know Bill Shannon, but if you did, you would have liked him a lot. Bill died tragically on Tuesday morning, the victim of a fire in his New Jersey home. He was 69. Bill was the senior...
bench craft company complaints
bench craft company complaints
Nevada Voters Complain Of Problems At Polls - Las Vegas <b>News</b> Story <b>...</b>
LAS VEGAS -- Some voters in Boulder City complained on Monday that their ballot had been cast before they went to the polls, raising questions about Clark County's electronic voting machines. Tuesday, October 26, 2010.
Fantasy Football <b>News</b> Roundup, Week 8: Does Jon Kitna Have Value <b>...</b>
Checking in on the fantasy news of the day for Week 8.
Sad <b>news</b> for the New York baseball world
You probably didn't know Bill Shannon, but if you did, you would have liked him a lot. Bill died tragically on Tuesday morning, the victim of a fire in his New Jersey home. He was 69. Bill was the senior...
bench craft company complaints bench craft company complaints
Take a look at the comments which show up here regarding the self inflicted wounds of the US financial sector, and housing sector: http://disqus.com/telegraph-36d487f3-f39d-482d-8f39-cc6bdc2d044f/
Plus, take a look at what Ireland is doing with banks that frankly have atomized, or vaporized, balance sheets.
The most recent part is this: Concerning Spain. Here’s a few points I noticed on the following website. The article also gives an update on Ireland now that the butchers bill has finally arrived.The base as well as worst case scenarios. Grim reading for Ireland but the 20 billion euros cash held for future pensions is insurance. To give you a scale of how big that fund is for Ireland (pop 4.5 million) it would be the similar to the US (66 times bigger) having 1.320 trillion euros in a wealth fund for future pensions. Ireland is not Greece and will not run out of money. Nor will Ireland return to the markets before early 2011. By the end of Feb 2011 the NAMA process is scheduled to be completed, purging bad debt from the banking system. Incidentally, jobless figures fell in August by just over 5,000 in Ireland. We shall see if this continues. http://notayesmanseconomics.wordpress.com/ From the article: ‘I have written previous articles on here about Spain and some misrepresentation in her fiscal statistics. The debate on Spanish statistics has moved on this morning as according to the Financial Times an email has been doing the rounds suggesting that Spanish GDP has been overstated by some 14.2%.’ It further stated ‘In the FT this: ‘We’ve contacted the INE to discuss.While we’re still waiting to speak to their economists — since they too were on austerity strike on Wednesday…’ Rumour or does it remind you of a country brought to my attention by your previous posts regarding Vanity Fair? Spain are already using their social fund for consumption according to a previous AEP article. If true, the implications are IMHO a potential game changer for the Eurozone. I am not alone. Apparently some months ago it was discussed and options examined at the highest level. A plan B. http://www.telegraph.co.uk/news/worldnews/europe/7837874/Germany-and-France-examine-two-tier-euro.html
The second most recent part is this: Not at all. Things have progressed since that posting. There will be no new lending for Anglo Irish. Instead Anglo Irish will be split into two between a bank holding the deposits and a separate unit to run down and manage those loans not passed to NAMA. This will allow the Anglo Irish liability to be quantified and ‘bounded’ with greater precision for Irish taxpayers. Many people in Ireland and no doubt abroad feel the actions of the previous management led by the now bankrupted Sean Fitzpatrick to have tarnished the Anglo Irish brand. So the bank in time will cease. On moral hazard for banker’s, former Anglo Irish Bank chairman Sean FitzPatrick now has an income of €188 per month, according to documents filed in the High Court as part of his bankruptcy proceedings. Furthermore the Garda is still investigating various dealings concerning Anglo Irish and the actions of Directors but that case is according to a Garda representative a ’slow burner’. We will see if criminal proceedings will be brought. It would appear many months before this investigation will be completed.
The second oldest part is this: Assets passed to NAMA are discounted when they are transfered from the banks. So 25 billion euros transfered to NAMA has already been discounted in two batches, written off as bad debt at 55% and 62% I believe in the various Irish Banks company accounts, a large proportion of which is Anglo Irish. The remaining batches projected for NAMA transfer, 19 billion Euros in total value is scheduled to be completed by February.The discount applied for the outstanding 19 billion euros NAMA loans to be transferred will be determined at a later date. Note loan assets acquired by NAMA are from all the Irish Banks not just Anglo Irish.Taoiseach Brian Cowen said today it should take no more than 15 years to wind down Anglo’s bad bank. Then it will cease. Brian Lenihan, Finance Minister declined to disclose the cost of the plan, estimates of which have been assessed by the National Treasury Management Agency.It has been reported The Financial Regulator at the Central Bank would determine the capital required by both the savings or funding bank and the asset recovery bank, and these figures will be known by October.So by February, perhaps sooner it appears markets should have a clearer projected total cost as they are demanding.As for my confidence in bank stress tests worldwide, many are clearly little more than stress free PR exercises. Perhaps the sarcasm in my comment did not come across clearly enough. Sorry for any misunderstanding. I’m a little tired and like many in Ireland, more than a little angry about what has transpired.
The oldest part is this: Think of 3 institutions in the future involvement for Anglo Irish Bank.Firstly NAMA, the National Asset Management Agency. They purchase loans, including those considered toxic, from the Irish banks, including Anglo Irish at a discount. The last batch for example averaged a 62% discount. Ireland is I believe over half way through the projected process (NAMA has a projected limit) to clear up Ireland’s banking system. This discount is written off in Anglo’s balance sheet as a bad debt, hence the record loss just announced for Anglo Irish. NAMA who purchase these loans, can recover the full loan amount from the lender(s) if its possible. NAMA also have oversight and can run these assets themselves if needed. Hotels are a prime example. Whether the State will break even or make a profit or loss, time will tell. Paying 38 cents on the euro for the last batch does allow some leeway. These loans are further backed by assets. For example, around 25% of the last batch consisted of property (shops, hotels, etc) around London I believe. Indeed many of the loans purchased by NAMA are outside Ireland. Obviously not worthless despite what rating agencies might say.Second , Anglo Irish new ‘Bad Bank’. This will run down the existing poorer performing loans at the bank. Possibly, I imagine including those prior to any sale to NAMA. The reason, avoiding incurring a bad debt crystalized immediately for the Bad Bank. This process might be a slower asset recovery process but will save Anglo Irish the discount to the State and bad write-off from its balance sheet. Again backed by assets.Third, the better performing loans & assets. The projected future of Anglo Irish ‘Good’ bank. The balance sheet shrunk to about 20% of its current size in initial reports.The whole process will in time (the next year or so I would imagine) ensure better ‘mark to market’ valuations in Ireland’s banking system as assets are accurately reflected.Tell how many other countries will be implementing fair value accounting , FASB 157 to the same degree? Or are many assets in banks valued at the original valuations from years ago? No doubt the various bank stress tests address this problem.According to Eurostat in Quarter 1 2010, Ireland’s GDP rose 2.7%. Yes this is undoubtably a bad time for the Irish State and its banking system. However the problems are being addressed. In the next year or so, Ireland might indeed surprise many.
Do you like a good crime novel – a corporate crime novel? If so The Monster: How a gang of predatory lenders and Wall Street bankers fleeced America – and spawned a global crisis by Michael W. Hudson is for you. Unfortunately it’s not a fictional novel but the history of the mortgage crisis that may yet bring down the US and world economy.
This book is not directly about the foreclosure crisis but about the seeds of that crisis – deceptive and fraudulent mortgages that left desperate people worse off than before and without a chance of meeting the obligations of the contracts they had signed.
The seeds were initially planted over 30 years ago in the form of deregulation of the financial industry. The seeds sprouted in the late 80s and blossomed into the S&L crisis. Little if anything was learned and the deregulation continued – still more seeds were planted. By the early and mid 90’s the players that had escaped the S&L crisis and even some who didn’t were back at it writing predatory sub prime loans. The deception and outright fraud was becoming even more prevalent easily circumventing the few new consumer protections. At about the same time mortgage backed securities were a hot commodity. The Wall Street investment banks had stayed clear but a familiar name in the most recent crisis, Lehman Brothers, saw an opportunity it couldn’t pass up. As the money to be made in subprime mortgages increased so did the deception and fraud as well as involvement by more and more Wall Street banks.
Like any good crime novel this story has a cast of villains and victims. Of course this is not a novel so the people are real. One of the main characters is Roland Arnall who grew a small Orange County S&L into the mortgage giant Ameriquest. The way it grew was to place sales and profit above all else. There was nothing an Ameriquest salesman would not do to close a loan.
At the downtown L.A. branch, some of Glover’s coworkers had a flair for creative documentation. They used scissors, tape, Wite-Out and a photocopier to fabricate W-2s, the tax forms that indicate how much a wage earner makes each year. It was easy: Paste the name of a low-earning borrower onto a W-2 belonging to a higher-earning borrower and, like magic, a bad loan prospect suddenly looked much better. Workers in the branch equipped the office’s break room with all the tools they needed to manufacture and manipulate official documents. They dubbed it the “Art Department.”
…………
What if a customer insisted he wanted a fixed-rate loan, but you could make more money by selling him an adjustable-rate one? No problem. Many Ameriquest salespeople learned to position a few fixed-rate loan documents at the top of the stack of paperwork to be signed by the borrower. They buried the real documents—the ones indicating the loan had an adjustable rate that would rocket upward in two or three years—near the bottom of the pile. Then, after the borrower had flipped from signature line to signature line, scribbling his consent across the entire stack, and gone home, it was easy enough to peel the fixed-rate documents off the top and throw them in the trash.
There was lots of money to be made so neither the investment banks that were packaging the loans or the investors buying them questioned the loans themselves. But the continued growth depended on a continued influx of new loans and rising home values – it was in effect a Ponzi scheme. When the housing bubble deflated in 2007 the Ponzi scheme collapsed.
I recommend The Monster: You can pretend it is fiction and have an enjoyable read or you can learn about how greed driven fraud and deception resulted in the worst economic crisis since the great depression. While Wall Street and the bankers are still quick to blame those who don’t make their mortgage payments you will who the real victims are.
Note:
I received a review copy of this book from the publisher.
Cross posted at Newshoggers
bench craft company complaints
Nevada Voters Complain Of Problems At Polls - Las Vegas <b>News</b> Story <b>...</b>
LAS VEGAS -- Some voters in Boulder City complained on Monday that their ballot had been cast before they went to the polls, raising questions about Clark County's electronic voting machines. Tuesday, October 26, 2010.
Fantasy Football <b>News</b> Roundup, Week 8: Does Jon Kitna Have Value <b>...</b>
Checking in on the fantasy news of the day for Week 8.
Sad <b>news</b> for the New York baseball world
You probably didn't know Bill Shannon, but if you did, you would have liked him a lot. Bill died tragically on Tuesday morning, the victim of a fire in his New Jersey home. He was 69. Bill was the senior...
bench craft company complaints bench craft company complaints
Nevada Voters Complain Of Problems At Polls - Las Vegas <b>News</b> Story <b>...</b>
LAS VEGAS -- Some voters in Boulder City complained on Monday that their ballot had been cast before they went to the polls, raising questions about Clark County's electronic voting machines. Tuesday, October 26, 2010.
Fantasy Football <b>News</b> Roundup, Week 8: Does Jon Kitna Have Value <b>...</b>
Checking in on the fantasy news of the day for Week 8.
Sad <b>news</b> for the New York baseball world
You probably didn't know Bill Shannon, but if you did, you would have liked him a lot. Bill died tragically on Tuesday morning, the victim of a fire in his New Jersey home. He was 69. Bill was the senior...
bench craft company complaints bench craft company complaints
Nevada Voters Complain Of Problems At Polls - Las Vegas <b>News</b> Story <b>...</b>
LAS VEGAS -- Some voters in Boulder City complained on Monday that their ballot had been cast before they went to the polls, raising questions about Clark County's electronic voting machines. Tuesday, October 26, 2010.
Fantasy Football <b>News</b> Roundup, Week 8: Does Jon Kitna Have Value <b>...</b>
Checking in on the fantasy news of the day for Week 8.
Sad <b>news</b> for the New York baseball world
You probably didn't know Bill Shannon, but if you did, you would have liked him a lot. Bill died tragically on Tuesday morning, the victim of a fire in his New Jersey home. He was 69. Bill was the senior...
bench craft company complaints bench craft company complaints
Barry Ritholtz Says:
October 15th, 2010 at 12:02 pm
And no, this is not about keeping deadbeats in their homes.
VennData Says:
October 15th, 2010 at 12:14 pm
“…Had we performed GM-like prepackaged bankruptcies…” while – slightly – speculative and can surely be argued …has one unarguably powerful benefit: future bond investors will not expect to be bailed out. And that, as the list of pluses and minuses are drawn, trumps them all.
chartist Says:
October 15th, 2010 at 12:20 pm
I just saw a lawyer on CNBC bringing up one situation where fraud occurred: People got mortgages on the pretense that it was for their primary residence, hence getting a lower mortgage rate. But, it was obvious they were for investing or othewise not for their primary residence and hence should have been given a higher rate….and the buyers of those loans were not told this and therefore overpaid for the mortgages….Now that’s fraud and a big problem for somebody.
hammerandtong2001 Says:
October 15th, 2010 at 12:22 pm
Hold your horses…
I thought this whole mess was just some book-keeping technicality mumbo jumbo…
(har, har…)
Said this the other day: I’m happy to pay my mortgage on the first of the month to somebody (anybody!) — that is — if you can PROVE that I owe you the money. Until then, it’s escrowed.
.
dead hobo Says:
October 15th, 2010 at 12:25 pm
Barry Ritholtz Says:
October 15th, 2010 at 12:02 pm
And no, this is not about keeping deadbeats in their homes.
reply:
————-
Not even just a few? Mean bastard. These people aren’t deadbeats. They’re payment impaired.
Otherwise, best story to data anywhere on the problem.
DL Says:
October 15th, 2010 at 12:28 pm
“Had we performed GM-like prepackaged bankruptcies, these issues would not exist”.
. . . . . . . . . . . . . . . . . . . . . .
So, throwing taxpayer money, and bondholder money at the UAW is a good thing?
DM RTA Says:
October 15th, 2010 at 12:28 pm
We do not know exactly how many structured products contain errors of Notes or Assignments, but a rough estimate is “More than a few.”
I feel like this is a dumb question but how are the securitized issues receiving the expected cash flow if there are mistakes that amount to more than a few? If the assignments are not in place properly then how do the various servicers know where to send the monthly principle and interest payments? And wouldn’t errors be showing up with the MBS holders?
Mr.Sparkle Says:
October 15th, 2010 at 12:31 pm
@chartist – Everyone likes to trot out their favorite anecdotes to make their case.
Maybe we’re just all too fixated on examining this issue through the “rule of law” lens. Perhaps we should be looking at this as an “unintended stimulus package.”
It seems that this is only going to be really resolved on a case-by-case basis that will take years to sort out. And considering the different set of legal standards in each state, this probably makes some sense. So in the meantime, there should be a bonanza for lawyers and “allied tradespeople” extracting fees from the banks and servicers. Call it a trickle-down stimulus even, since we all know where the TARP money went.
When uncovered in these cases, fraud should be punished severely. Let the DAs wanting to make names for themselves roll the little fish robosigners/filers on the bigger fish in the banks. Someone borrowed and falsified the intent? That’s probably not only fraud against the bank but it wouldn’t surprise me if there were some property tax fraud thrown in the mix. Bust them too. Punish them all. I suspect that the truly innocent parties in this whole fiasco are few and far between.
HEHEHE Says:
October 15th, 2010 at 12:34 pm
“These are problems of the banks own making, and we should make sure that the costs of these do not fall to the taxpayers.”
Good luck with that;)
deanscamaro Says:
October 15th, 2010 at 12:43 pm
I was wondering when you would put out a post such as this! Back long ago, in the clouds of time, I remember when you had a post or two about the problem of losing sight of ownership on mortgages as these securitization packages were sliced and diced and sold off to the highest bidder.
What comes around, goes around. Speed kills! Where were/are we to turn to stop things like this from happening…….the banksters???……our congressmen who were/are being paid off by the banksters???
Bend over, please, while you receive our latest delivery.
Mutant_Dog Says:
October 15th, 2010 at 12:48 pm
@DM RTA, good question. IF the legality of any assignment to the MBS is in question, the cash-flow stream paid as a result of that assignment should be under review as well. Off-the-cuff, I’d say that, now the foreclosed parties have much more stringent legal representation, and discovery, in their current predicament, than is routine to a mortgage-payer. IOW, the MBS world has just now become aware, itself, of the potential problems in this regard.
cwf Says:
October 15th, 2010 at 1:11 pm
To those few who have argued here, “the system is not perfect”, and that errors will happen when such a large number of loans/foreclosures are processed (the same argument several pro-bank analysts on CNBC have used), I ask this question:
Does US Law treat differently
a) A corp that does 1,000,000 transactions with 1,000 of them breaking the law (perjury, false docs, forgery, fraudulent representations, etc.)
vs
b) A corp that does 1,001 transactions with 1,000 of them breaking the law?
If so, banks should find out what the tolerable (by US Law) ratio of criminal transactions vs. proper transactions is, and try to maintain a level of criminal transactions just under that ratio. Easy money.
Arequipa01 Says:
October 15th, 2010 at 1:13 pm
Speaking of solutions:
Howzabout a lil thing we like ta cawl “adverse possession”
Hit it boys:
http://www.expertlaw.com/library/real_estate/adverse_possession.html
alnval Says:
October 15th, 2010 at 1:14 pm
“At the current stage, we really do not know how extensive the problems are.” (BR)
IMO regardless of the extent of the problems associated with errors in the foreclosure process and how resolving them will impact the resolution of the current crisis, if the Amherst report is to be believed, we’re still looking at the possibility of 20 percent of the 55 million existing mortgages going into default.
It seems to me that these two problems cannot be separated. Any resolution of the mortgage crisis is going to have to consider both issues. Having mechanisms in place to resolve both will be essential. Given the potential magnitude of the default problem some deference should probably be given to stopping the forest fire before it consumes the fire house and the local water supply. That may mean that the government will be forced to install a moratorium on any court action designed to resolve questions of ownership until the impact of a 20 percent foreclosure rate on the national economy can be brought under control.
I continue to fear, however, that our culture of self-serving denial will continue to prevent us is from accurately scoping this problem so we can get on with fixing it. What iceberg?
Arequipa01 Says:
October 15th, 2010 at 1:17 pm
This is for all the deadbeats and you know who you are (Kenny L- I’m lookin at chu!):
Blues Comin’ Home Baby (Melvin Taylor- Chicago based axe swinger)
http://www.youtube.com/watch?v=Qpv7uPJgeSQ
obsvr-1 Says:
October 15th, 2010 at 1:21 pm
@Speaking of solutions:
Howzabout a lil thing we like ta cawl “adverse possession”
Hit it boys:
http://www.expertlaw.com/library/real_estate/adverse_possession.html
— Reply
Nice try, the statue of limitations varies by state, but it takes anywhere from 10 – 30 years to make an adverse possession claim – this is a dog that won’t hunt.
pintelho Says:
October 15th, 2010 at 1:22 pm
Maybe some previous astute commenter has already raised this concern..
Does anyone know how much of this affects the three stooges…you know Fannie, Freddie, and Ginnie?
That makes this a tax payer issue as well…
Bastardos!
S Brennan Says:
October 15th, 2010 at 1:31 pm
Yes, the elites have decided, once again, as it always has been and will forevermore be…
Patricians: “It’s the Plebeians, it they would just fight and die in our imperial wars, pay for our tax cuts and shut up. I mean it’s not like we keep everything of theirs. We let them benefit a little from their labor don’t we…don’t we?”
Plebs: “We who are about to be crushed in your wars and brought to destitution in Patrician financial schemes salute you!”
Details here:
http://www.msnbc.msn.com/id/39674290/ns/business-real_estate/
Mark E Hoffer Says:
October 15th, 2010 at 1:34 pm
“… Under normal circumstances, the reckless illegality we have seen from banks would have caused the US Attorney to become involved in the investigations. Instead, the nation’s chief law enforcement officer has a conflict of interest…”
” Under normal circumstances ” ? Really ? Like, When?
Long Story Short, AG “Bag” Holder, like the Line of AGs before him, Is a walking ‘Conflict of Interest’.
Sorry, but that ain’t what that ‘Office’ does..
Friday links: bullet bonds Abnormal Returns Says:
October 15th, 2010 at 1:42 pm
Congress won’t let the too-big-to-fail banks to get torpedoed by foreclosure-gate. (NetNet also Big Picture)
Pocket QQ Says:
October 15th, 2010 at 2:03 pm
The Impact of Error From Securitization
What impacts (if any?) does this have on all RE transactions past and present? Are forged documents in refi and sales? Are people being economically impacted because nobody can figure out who owns what?
bman Says:
October 15th, 2010 at 2:06 pm
I am getting rather bored with homeowners referred to as deadbeats. How about we think up something creative, Pioneers for homeowners, Vultures or some similar carrion creatures for bankers.
The pontificating drolls who go on about “well if the homeowner had just respected his usurious mortgage agreement,” while the whole economy went to hell as a result of the same bankers running a gambling based con game on the rest of the world, are quite repulsive, and in the process shine a light on their level of ignorance, or their conflicts of interests.
mbelardes Says:
October 15th, 2010 at 2:18 pm
I’m tearing through analyst opinions and they are not paying any respect to the legal implications of this in their belief that this isn’t a big deal.
Due process of law in the deprivation of real property is a big deal. Fraudulent Affidavits to the court to begin the foreclosure of a property is a big deal.
IF this was as widespread as I bet it is, the banks are going to get ripped from the bully pulpit to the balance sheet.
obsvr-1 Says:
October 15th, 2010 at 2:22 pm
Why should the SEC settle a civil case and not go for jail time for one of the most corrupt CEO’s behind this mess ? !!!
Public May Be Deprived of Seeing Angelo Mozilo Tried in the ‘Flesh’
http://nymag.com/daily/intel/2010/10/public_will_probably_be_depriv.html
Freestate Says:
October 15th, 2010 at 2:31 pm
Does anyone know what the potential impact on title insurance companies is? Do they get stuck holding the bag here?
Jonke Says:
October 15th, 2010 at 2:32 pm
Even the Swedes figured out 18 years ago that you shall not bail out banks or keep the toxic assetts in the mis-managed banks. Let the fundamental law be valid even in banking: too little equity = company gone from your ownership. Governements shall not own banks in a long term perspective, they shall create strong regulators that have the authority to ask tough questions and enforce regulation indpendent of how much money a bank or a banking organisation has donated or if a politician has worked their earlier. The bailed out bank shall be placed under public ownership in a special banking vehicle that seperates the good parts from the bad and does IPO’s on the good parts, place the bad parts in a toxic fund that is given minimum 5 years to dispose the assetts in an optimal way, both from a return perspective and market disruption perspective. The banking vehicle should be run by professionals and not politicains or left over managers from the failed banks.
It is many times better to let the property then evict on of the few who wants to live their and a bank is not suited for that but a toxic assett fund would be able to do that.
The American bank solution is a typical example that validates Barry’s statement that politics in the US today is not left-right it is individual vs corporation.
sahillyard Says:
October 15th, 2010 at 2:32 pm
The Fed owns a good portion of the mortgage backed securities. Will they force the underwriters to take them back? This could get more interesting. Anybody know how well Maiden Lane is doing?
AGORACOM Says:
October 15th, 2010 at 2:39 pm
I’ll second the motion that this is one of the best, clear articles on the subject.
Further, I repeat from my post yesterday that the Feds do not have a “waive to wand”. This bank cluster f*$k is beyond their reach. As Barry stated:
“This is going to be challenging to resolve, as the parties involved are sophisticated investors who will seek to enforce their warranties and contracts via the courts.”
Barry forgot to add in the fact that these parties are “highly motivated” (i.e. very pissed off) at being taken by the Wall Street machine and are salivating to take them for everything they have. On the one hand, you have investors like that little town in Norway that are all but broke thanks to buying these non-performing assets.
On the other hand, you have ARM homeowners that lost everything thanks to mortgage brokers selling Wall Street crack. To be clear, I have little sympathy for the NINJA homeowners – but that is not the point. They are a pissed off group and now they have some leverage.
The banks dodged the first bullet, they won’t dodge this one.
What is still up for debate is whether the costs will be fall to taxpayers. In my opinion, US taxpayers ultimately gave TARP a pass the first time (though they did put up a strong fight) based on fears of economic catastrophe. They won’t do it again.
Regards,
George … The Greek …. From Canada
Michael Says:
October 15th, 2010 at 2:40 pm
Barry,
I like the tone of this piece…. more a focus on the facts, less on emotion. Plus as I stated before in a comment, I tend to believe INCOMPETENCE is at the root of most, but not all, problems; rather than outright devious/fraudulent behavior.
On a high level, I think one can argue that our society has become too complex for the skill level of the average employee to handle, e.g. the skill level of the people putting together mortgages and now foreclosing on them. It may surprise you to learn that half the people are below average! :)
Regards,
Michael
Effective Demand Says:
October 15th, 2010 at 2:53 pm
“Banks are sitting on millions of foreclosed properties. ”
I’d love to see you prove that assertion.. you can’t because it isn’t true!
There are many homes in the foreclosure process, the number of homes foreclosed on is a much smaller number. If the float is a million at any one point in time i’d be absolutely shocked, it certainly isn’t 2 million (millionS).
As for title insurance, the banks will either become self insuring or indemnify the title insurers for that specific flaw in title like BofA just did with a title insurer. It’s a minor issue that can be easily addressed.
I think you are at the point of extreme, zero hedge level exaggeration on point #6 which makes me suspicious of all your other points.
Mannwich Says:
October 15th, 2010 at 2:54 pm
@Effective Demand: It’s not true? You can’t prove that either. Go to places like FL, Cali, NV and AZ and there’s likely more than a million there alone.
chartist Says:
October 15th, 2010 at 2:55 pm
Somewhere there’s a sniper with a dwindling 401K who just read Matt Taibibi in Rolling stone, practicing his nail a banker from North Jersey shot…… We’re headed for revolution…..Who will be the victim of the shot hear round Wall Street?
DeDude Says:
October 15th, 2010 at 2:59 pm
“These people aren’t deadbeats. They’re payment impaired”
- or sick, or unemployed, or making a (nothing personal) business decision, or…..
until you actually talk with the individual parties involved it is not going to be possible to judge them – not that lack of specific knowledge would hold back most people. Nothing creates such a good warm feeling as condemning others as being bad immoral deadbeat people.
Effective Demand Says:
October 15th, 2010 at 3:15 pm
Mannwich,
I’ve been through this in California with many misinformed people. You look at the number of foreclosures taken in (its public record) vs the absorption rate and you can get the basic float.
There are a large number of homes in THE FORECLOSURE PROCESS but the number of homes FORECLOSED ON and held in inventory is relatively small.
Here is the data I have put together from public reports from Dataquick (the gold standard for RE data in CA):
http://effectivedemand.blogspot.com/2010/08/california-shadow-inventory-report-q2.html
I’d estimate the inventory “float” for California to be about 1 to 1.5 quarters worth of REO’s (60k -ish).
Ask yourself why would the bank take all the risk to have a home foreclosed on and not put it for sale. It makes no sense for them to do so.. and in fact they don’t do it.
I’ve never looked at it at a national level, I’ve got access to all the NAR data but I dont think they started reporting foreclosures as a % of sales until recently. California is a large enough sample size where I think you can get extrapolate and not be far off. Estimate 1 to 1.5 quarters worth of REO’s in inventory, round up and call it 2 quarters and you’re still only in the 500k home ballpark.
The data doesn’t support BR’s assertion :
http://www.realtytrac.com/content/foreclosure-market-report/q3-2010-and-september-2010-foreclosure-reports-6108
Last quarter was 288k REO’s for the US, BR’s assertion would mean they have approximately 7 quarters worth of REO inventory. NOBODY ANYWHERE is seeing that, it’s data pulled from the backside, a complete fabrication.
Effective Demand Says:
October 15th, 2010 at 3:22 pm
This shows the second half of point #6 is a non-issue just as the previous post shows the first half of point #6 is over-exaggerated:
http://www.americanbanker.com/news/bank-of-america-fidelity-national-1027074-1.html
Title insurance won’t be an issue going forward.
Andy T Says:
October 15th, 2010 at 3:23 pm
“We could make wild and unsubstantiated conclusions, but we prefer reason and logic.”
Funny stuff, that comment, given some of the histrionic proclamations made earlier this week.
kayem Says:
October 15th, 2010 at 3:32 pm
Earlier BR wanted to know actual stories, and others have argued that the the number of actual homeowners harmed is small. I think the magnitude of the problem should not be measured by the number of actual harmed homeowners, because really, so few of the foreclosures have actual homeowners living in them. How many stories have we all seen about vacant or half-finished developments or ghost towns (most recent: Einhorn/St Joe). So, regardless of how many individuals were harmed (or were deadbeats), the number of properties potentially without clear title (and subsequent problems with resale value and property values) is staggering.
Local anecdote: I’ve been watching the mess from my home in south Florida since 2002. Valuations in my historic neighborhood have made a complete round trip from 200K to 425K and now, as the foreclosures occur, below 200K. The adjacent new development sold out (preconstruction in 2004 and 2005), and completed construction in 2006. That fall, I counted lockboxes on 29 of 41, and only 1 real-live homeowner living there. Most of the places sat vacant for years, and now about half have renters and asking prices have plummeted. I can tell from the county’s property search records that most “owners” mailing addresses are different than the property address and many were out of state. Harmed homeowners? None. Properties without clear title if the whole development was in some trust without assignments? 41. Impact on property values in my neighborhood? Ah, that’s the question.
Housing recovery? Bueller? Bueller? Anyone?
Effective Demand Says:
October 15th, 2010 at 4:18 pm
Mannwich:
http://online.wsj.com/article/SB10001424052748703832204575210423113145954.html
You were saying? Turns out my estimates match up almost exactly with Barclays and I am sure their data is much better. Check out the spiffy chart, green line.
BR, I’d just remove #6 completely..
nofoulsontheplayground Says:
October 15th, 2010 at 4:25 pm
The best solution I’ve heard is the “California Solution.”
I believe in California if you challenge the ownership of the deed you need to put up the equivalent of the value of the note.
This keeps the deadbeats from dragging out the process. There have been hardly any instances of challenges like we’re seeing in Florida in California because of this law.
It should be adopted nationally, and that would solve the problem.
ReadingFundamental Says:
October 15th, 2010 at 4:27 pm
To whoever asked how anyone is collecting payments if the assignments were not done. Any time a loan is made it is set up day one on a loan servicing system. The originators made loans, and every now and then when they had a big enough “inventory” of them sold off pools of them for securitization. Some Wall Street firm would buy up a bunch of pools, pay lawyers to set up a REMIC and get it registered, and then sell bonds secured by those mortgages in the REMIC.
Now as soon as the originator sold the pool of loans it sent a “tape’ of the data – amount outstanding, interest rate, payment history, etc. to the new loan servicing company that would be handling the billing and collecting of payments for the REMIC.
When thousands of home loans are sold, the originators don’t want to pay people to sit and sign all those assignment documents and record mortgage assignments for them all at the courthouses, then the investment bankers putting together the REMIC don’t want to have to pay a bunch of people on behalf of the holding company (the mortgages go there until the REMIC has been created) to execute assignments of that stuff from the holding company into the REMIC, and pay to have all those mortgage assignments recorded.
In theory, a lawsuit against a borrower should not begin until someone has looked at ALL the loan documents – either originals or reliable copies, and the payment history, and signed an affidavit. All these entities were trading around data “tapes” instead of actual documents, so it appears that the folks hired at $12/hour (just a wild guess) didn’t ever look at any of this, they just signed.
I’ve signed a few affidavits in my time (for commercial transactions) and always went over them carefully. However, I ‘m an experienced financial services person with a B.A., and M.B.A., and a pretty long history of working with transaction and litigation attorneys.
dss Says:
October 15th, 2010 at 5:48 pm
Record number of foreclosures in 2009
This morning RealtyTrac® released its year-end U.S. Foreclosure Market Reporttm for the year 2009.
The report shows a total of 3,957,643 foreclosure filings (default notices, RealtyTrac Foreclosure Rate for third quarter 2009scheduled foreclosure auctions and bank repossessions) on 2,824,674 U.S. properties in 2009, a 21 percent increase in total properties affected from 2008 and a whopping 120 percent increase in total properties affected from 2007. The report also shows that 2.21 percent of all U.S. housing units (one in 45) received at least one foreclosure filing during the year, up from 1.84 percent in 2008, 1.03 percent in 2007 and 0.58 percent in 2006.
——————–
Almost 4 million filings on 2.8 properties, in 2009. How many properties are in default and have not been served?
Darmah Says:
October 15th, 2010 at 7:12 pm
Maybe not millions but you can search for an REO home among the 930,000 in the US according to RealtyTrac — http://www.realtytrac.com/states/bank-owned-props/index.html
Kris Dannon Says:
October 15th, 2010 at 7:19 pm
The humble settings where the robo-signer challenge began…
http://www.nytimes.com/2010/10/15/business/15maine.html
Small Business <b>News</b>: Marketing Mambo
It's a dance step every small business must master and arguably the most important especially in the beginning of your small business. Marketing encompasses.
Fox <b>News</b> Poll: GOPer Raese Leads By Two Points In WV-SEN | TPMDC
The new Fox News poll of the West Virginia Senate race has Republican businessman John Raese holding on to a narrow lead against Democratic Gov. Joe Manchin.
Arrowheadlines: Chiefs <b>News</b> 10/26 - Arrowhead Pride
Good morning! We have a full day of Kansas City Chiefs news. O-line love and praise for the running game and a shout out to DJ are ahead. There are also a few articles on the Buffalo offense and how productive they've been recently.
bench craft company complaints
bench craft company complaints
Small Business <b>News</b>: Marketing Mambo
It's a dance step every small business must master and arguably the most important especially in the beginning of your small business. Marketing encompasses.
Fox <b>News</b> Poll: GOPer Raese Leads By Two Points In WV-SEN | TPMDC
The new Fox News poll of the West Virginia Senate race has Republican businessman John Raese holding on to a narrow lead against Democratic Gov. Joe Manchin.
Arrowheadlines: Chiefs <b>News</b> 10/26 - Arrowhead Pride
Good morning! We have a full day of Kansas City Chiefs news. O-line love and praise for the running game and a shout out to DJ are ahead. There are also a few articles on the Buffalo offense and how productive they've been recently.
bench craft company complaints bench craft company complaints
Foreclosure Activity by Type
During the quarter a total of 269,647 properties received default notices (Notices of Default or Lis Pendens), a decrease of 1 percent from the previous quarter and a decrease of 21 percent from the third quarter of 2009, when default notices peaked at more than 342,000.
Foreclosure auctions were scheduled for the first time on a total of 372,445 properties during the quarter, the highest quarterly total for scheduled auctions in the history of the report. Scheduled auctions increased 5 percent from the previous quarter and were up 4 percent from the third quarter of 2009.
Bank repossessions (REOs) also hit a record high for the report in the third quarter, with a total of 288,345 properties repossessed by the lender during the quarter — an increase of 7 percent from the previous quarter and an increase of 22 percent from the third quarter of 2009.
Nevada, Arizona, Florida post top state foreclosure rates in third quarter
As it has for the past 15 quarters, Nevada continued to document the nation’s highest state foreclosure rate in the third quarter of 2010 despite a year-over-year decline in foreclosure activity. One in every 29 Nevada housing units received a foreclosure filing during the quarter, almost five times the national average. Nevada foreclosure activity increased nearly 1 percent from the previous quarter but was down nearly 20 percent from the third quarter of 2009.
Arizona posted the nation’s second highest state foreclosure rate for the fifth consecutive quarter, with one in every 55 housing units receiving a foreclosure filing, and Florida posted the nation’s third highest state foreclosure rate for the fourth consecutive quarter, with one in every 56 housing units receiving a foreclosure filing.
With one in every 70 housing units receiving a foreclosure filing during the third quarter, California documented the nation’s fourth highest foreclosure rate, followed by Idaho, with one in every 86 housing units receiving a foreclosure filing during the quarter. A total of 7,424 Idaho housing units received a foreclosure filing during the quarter, an increase of nearly 20 percent from the previous quarter and an increase of nearly 14 percent from the third quarter of 2009.
Other states with foreclosure rates ranking among the top 10 in the third quarter were Utah, Georgia, Michigan, Illinois and Hawaii.
Five states account for more than 50 percent of nation’s third quarter total
California alone accounted for 21 percent of the nation’s total foreclosure activity in the third quarter, with 191,016 properties receiving a foreclosure notice — the nation’s largest foreclosure activity total. California foreclosure activity decreased nearly 1 percent from the previous quarter and was down nearly 24 percent from the third quarter of 2009.
Florida foreclosure activity increased 12 percent from the previous quarter and was flat from a year ago, giving the state the second largest foreclosure activity total, with 157,026 properties receiving a foreclosure filing.
With 49,103 properties receiving a foreclosure filing in the third quarter, Arizona posted the nation’s third largest state foreclosure activity total. Arizona foreclosure activity increased nearly 8 percent from the previous quarter but was down 2 percent from the third quarter of 2009.
Illinois posted the nation’s fourth largest foreclosure activity total, with 47,802 properties receiving foreclosure filings, and Michigan posted the nation’s fifth largest foreclosure activity total, with 46,100 properties receiving foreclosure filings. Foreclosure activity in both Illinois and Michigan increased on a quarterly and annual basis in the third quarter.
Other states with foreclosure activity totals among the nation’s 10 highest were Georgia (41,231), Nevada (38,429), Ohio (36,677), Texas (34,187) and Washington (17,670)
And just like an inverse cash for clunkers, look for the mid-November update on October numbers to be a 50%+ plunge in numbers, especially in the Notice of Trustee and Foreclosure Sale categories.
61 Responses to “The Impact of Error From Securitization to Foreclosure”
Barry Ritholtz Says:
October 15th, 2010 at 12:02 pm
And no, this is not about keeping deadbeats in their homes.
VennData Says:
October 15th, 2010 at 12:14 pm
“…Had we performed GM-like prepackaged bankruptcies…” while – slightly – speculative and can surely be argued …has one unarguably powerful benefit: future bond investors will not expect to be bailed out. And that, as the list of pluses and minuses are drawn, trumps them all.
chartist Says:
October 15th, 2010 at 12:20 pm
I just saw a lawyer on CNBC bringing up one situation where fraud occurred: People got mortgages on the pretense that it was for their primary residence, hence getting a lower mortgage rate. But, it was obvious they were for investing or othewise not for their primary residence and hence should have been given a higher rate….and the buyers of those loans were not told this and therefore overpaid for the mortgages….Now that’s fraud and a big problem for somebody.
hammerandtong2001 Says:
October 15th, 2010 at 12:22 pm
Hold your horses…
I thought this whole mess was just some book-keeping technicality mumbo jumbo…
(har, har…)
Said this the other day: I’m happy to pay my mortgage on the first of the month to somebody (anybody!) — that is — if you can PROVE that I owe you the money. Until then, it’s escrowed.
.
dead hobo Says:
October 15th, 2010 at 12:25 pm
Barry Ritholtz Says:
October 15th, 2010 at 12:02 pm
And no, this is not about keeping deadbeats in their homes.
reply:
————-
Not even just a few? Mean bastard. These people aren’t deadbeats. They’re payment impaired.
Otherwise, best story to data anywhere on the problem.
DL Says:
October 15th, 2010 at 12:28 pm
“Had we performed GM-like prepackaged bankruptcies, these issues would not exist”.
. . . . . . . . . . . . . . . . . . . . . .
So, throwing taxpayer money, and bondholder money at the UAW is a good thing?
DM RTA Says:
October 15th, 2010 at 12:28 pm
We do not know exactly how many structured products contain errors of Notes or Assignments, but a rough estimate is “More than a few.”
I feel like this is a dumb question but how are the securitized issues receiving the expected cash flow if there are mistakes that amount to more than a few? If the assignments are not in place properly then how do the various servicers know where to send the monthly principle and interest payments? And wouldn’t errors be showing up with the MBS holders?
Mr.Sparkle Says:
October 15th, 2010 at 12:31 pm
@chartist – Everyone likes to trot out their favorite anecdotes to make their case.
Maybe we’re just all too fixated on examining this issue through the “rule of law” lens. Perhaps we should be looking at this as an “unintended stimulus package.”
It seems that this is only going to be really resolved on a case-by-case basis that will take years to sort out. And considering the different set of legal standards in each state, this probably makes some sense. So in the meantime, there should be a bonanza for lawyers and “allied tradespeople” extracting fees from the banks and servicers. Call it a trickle-down stimulus even, since we all know where the TARP money went.
When uncovered in these cases, fraud should be punished severely. Let the DAs wanting to make names for themselves roll the little fish robosigners/filers on the bigger fish in the banks. Someone borrowed and falsified the intent? That’s probably not only fraud against the bank but it wouldn’t surprise me if there were some property tax fraud thrown in the mix. Bust them too. Punish them all. I suspect that the truly innocent parties in this whole fiasco are few and far between.
HEHEHE Says:
October 15th, 2010 at 12:34 pm
“These are problems of the banks own making, and we should make sure that the costs of these do not fall to the taxpayers.”
Good luck with that;)
deanscamaro Says:
October 15th, 2010 at 12:43 pm
I was wondering when you would put out a post such as this! Back long ago, in the clouds of time, I remember when you had a post or two about the problem of losing sight of ownership on mortgages as these securitization packages were sliced and diced and sold off to the highest bidder.
What comes around, goes around. Speed kills! Where were/are we to turn to stop things like this from happening…….the banksters???……our congressmen who were/are being paid off by the banksters???
Bend over, please, while you receive our latest delivery.
Mutant_Dog Says:
October 15th, 2010 at 12:48 pm
@DM RTA, good question. IF the legality of any assignment to the MBS is in question, the cash-flow stream paid as a result of that assignment should be under review as well. Off-the-cuff, I’d say that, now the foreclosed parties have much more stringent legal representation, and discovery, in their current predicament, than is routine to a mortgage-payer. IOW, the MBS world has just now become aware, itself, of the potential problems in this regard.
cwf Says:
October 15th, 2010 at 1:11 pm
To those few who have argued here, “the system is not perfect”, and that errors will happen when such a large number of loans/foreclosures are processed (the same argument several pro-bank analysts on CNBC have used), I ask this question:
Does US Law treat differently
a) A corp that does 1,000,000 transactions with 1,000 of them breaking the law (perjury, false docs, forgery, fraudulent representations, etc.)
vs
b) A corp that does 1,001 transactions with 1,000 of them breaking the law?
If so, banks should find out what the tolerable (by US Law) ratio of criminal transactions vs. proper transactions is, and try to maintain a level of criminal transactions just under that ratio. Easy money.
Arequipa01 Says:
October 15th, 2010 at 1:13 pm
Speaking of solutions:
Howzabout a lil thing we like ta cawl “adverse possession”
Hit it boys:
http://www.expertlaw.com/library/real_estate/adverse_possession.html
alnval Says:
October 15th, 2010 at 1:14 pm
“At the current stage, we really do not know how extensive the problems are.” (BR)
IMO regardless of the extent of the problems associated with errors in the foreclosure process and how resolving them will impact the resolution of the current crisis, if the Amherst report is to be believed, we’re still looking at the possibility of 20 percent of the 55 million existing mortgages going into default.
It seems to me that these two problems cannot be separated. Any resolution of the mortgage crisis is going to have to consider both issues. Having mechanisms in place to resolve both will be essential. Given the potential magnitude of the default problem some deference should probably be given to stopping the forest fire before it consumes the fire house and the local water supply. That may mean that the government will be forced to install a moratorium on any court action designed to resolve questions of ownership until the impact of a 20 percent foreclosure rate on the national economy can be brought under control.
I continue to fear, however, that our culture of self-serving denial will continue to prevent us is from accurately scoping this problem so we can get on with fixing it. What iceberg?
Arequipa01 Says:
October 15th, 2010 at 1:17 pm
This is for all the deadbeats and you know who you are (Kenny L- I’m lookin at chu!):
Blues Comin’ Home Baby (Melvin Taylor- Chicago based axe swinger)
http://www.youtube.com/watch?v=Qpv7uPJgeSQ
obsvr-1 Says:
October 15th, 2010 at 1:21 pm
@Speaking of solutions:
Howzabout a lil thing we like ta cawl “adverse possession”
Hit it boys:
http://www.expertlaw.com/library/real_estate/adverse_possession.html
— Reply
Nice try, the statue of limitations varies by state, but it takes anywhere from 10 – 30 years to make an adverse possession claim – this is a dog that won’t hunt.
pintelho Says:
October 15th, 2010 at 1:22 pm
Maybe some previous astute commenter has already raised this concern..
Does anyone know how much of this affects the three stooges…you know Fannie, Freddie, and Ginnie?
That makes this a tax payer issue as well…
Bastardos!
S Brennan Says:
October 15th, 2010 at 1:31 pm
Yes, the elites have decided, once again, as it always has been and will forevermore be…
Patricians: “It’s the Plebeians, it they would just fight and die in our imperial wars, pay for our tax cuts and shut up. I mean it’s not like we keep everything of theirs. We let them benefit a little from their labor don’t we…don’t we?”
Plebs: “We who are about to be crushed in your wars and brought to destitution in Patrician financial schemes salute you!”
Details here:
http://www.msnbc.msn.com/id/39674290/ns/business-real_estate/
Mark E Hoffer Says:
October 15th, 2010 at 1:34 pm
“… Under normal circumstances, the reckless illegality we have seen from banks would have caused the US Attorney to become involved in the investigations. Instead, the nation’s chief law enforcement officer has a conflict of interest…”
” Under normal circumstances ” ? Really ? Like, When?
Long Story Short, AG “Bag” Holder, like the Line of AGs before him, Is a walking ‘Conflict of Interest’.
Sorry, but that ain’t what that ‘Office’ does..
Friday links: bullet bonds Abnormal Returns Says:
October 15th, 2010 at 1:42 pm
Congress won’t let the too-big-to-fail banks to get torpedoed by foreclosure-gate. (NetNet also Big Picture)
Pocket QQ Says:
October 15th, 2010 at 2:03 pm
The Impact of Error From Securitization
What impacts (if any?) does this have on all RE transactions past and present? Are forged documents in refi and sales? Are people being economically impacted because nobody can figure out who owns what?
bman Says:
October 15th, 2010 at 2:06 pm
I am getting rather bored with homeowners referred to as deadbeats. How about we think up something creative, Pioneers for homeowners, Vultures or some similar carrion creatures for bankers.
The pontificating drolls who go on about “well if the homeowner had just respected his usurious mortgage agreement,” while the whole economy went to hell as a result of the same bankers running a gambling based con game on the rest of the world, are quite repulsive, and in the process shine a light on their level of ignorance, or their conflicts of interests.
mbelardes Says:
October 15th, 2010 at 2:18 pm
I’m tearing through analyst opinions and they are not paying any respect to the legal implications of this in their belief that this isn’t a big deal.
Due process of law in the deprivation of real property is a big deal. Fraudulent Affidavits to the court to begin the foreclosure of a property is a big deal.
IF this was as widespread as I bet it is, the banks are going to get ripped from the bully pulpit to the balance sheet.
obsvr-1 Says:
October 15th, 2010 at 2:22 pm
Why should the SEC settle a civil case and not go for jail time for one of the most corrupt CEO’s behind this mess ? !!!
Public May Be Deprived of Seeing Angelo Mozilo Tried in the ‘Flesh’
http://nymag.com/daily/intel/2010/10/public_will_probably_be_depriv.html
Freestate Says:
October 15th, 2010 at 2:31 pm
Does anyone know what the potential impact on title insurance companies is? Do they get stuck holding the bag here?
Jonke Says:
October 15th, 2010 at 2:32 pm
Even the Swedes figured out 18 years ago that you shall not bail out banks or keep the toxic assetts in the mis-managed banks. Let the fundamental law be valid even in banking: too little equity = company gone from your ownership. Governements shall not own banks in a long term perspective, they shall create strong regulators that have the authority to ask tough questions and enforce regulation indpendent of how much money a bank or a banking organisation has donated or if a politician has worked their earlier. The bailed out bank shall be placed under public ownership in a special banking vehicle that seperates the good parts from the bad and does IPO’s on the good parts, place the bad parts in a toxic fund that is given minimum 5 years to dispose the assetts in an optimal way, both from a return perspective and market disruption perspective. The banking vehicle should be run by professionals and not politicains or left over managers from the failed banks.
It is many times better to let the property then evict on of the few who wants to live their and a bank is not suited for that but a toxic assett fund would be able to do that.
The American bank solution is a typical example that validates Barry’s statement that politics in the US today is not left-right it is individual vs corporation.
sahillyard Says:
October 15th, 2010 at 2:32 pm
The Fed owns a good portion of the mortgage backed securities. Will they force the underwriters to take them back? This could get more interesting. Anybody know how well Maiden Lane is doing?
AGORACOM Says:
October 15th, 2010 at 2:39 pm
I’ll second the motion that this is one of the best, clear articles on the subject.
Further, I repeat from my post yesterday that the Feds do not have a “waive to wand”. This bank cluster f*$k is beyond their reach. As Barry stated:
“This is going to be challenging to resolve, as the parties involved are sophisticated investors who will seek to enforce their warranties and contracts via the courts.”
Barry forgot to add in the fact that these parties are “highly motivated” (i.e. very pissed off) at being taken by the Wall Street machine and are salivating to take them for everything they have. On the one hand, you have investors like that little town in Norway that are all but broke thanks to buying these non-performing assets.
On the other hand, you have ARM homeowners that lost everything thanks to mortgage brokers selling Wall Street crack. To be clear, I have little sympathy for the NINJA homeowners – but that is not the point. They are a pissed off group and now they have some leverage.
The banks dodged the first bullet, they won’t dodge this one.
What is still up for debate is whether the costs will be fall to taxpayers. In my opinion, US taxpayers ultimately gave TARP a pass the first time (though they did put up a strong fight) based on fears of economic catastrophe. They won’t do it again.
Regards,
George … The Greek …. From Canada
Michael Says:
October 15th, 2010 at 2:40 pm
Barry,
I like the tone of this piece…. more a focus on the facts, less on emotion. Plus as I stated before in a comment, I tend to believe INCOMPETENCE is at the root of most, but not all, problems; rather than outright devious/fraudulent behavior.
On a high level, I think one can argue that our society has become too complex for the skill level of the average employee to handle, e.g. the skill level of the people putting together mortgages and now foreclosing on them. It may surprise you to learn that half the people are below average! :)
Regards,
Michael
Effective Demand Says:
October 15th, 2010 at 2:53 pm
“Banks are sitting on millions of foreclosed properties. ”
I’d love to see you prove that assertion.. you can’t because it isn’t true!
There are many homes in the foreclosure process, the number of homes foreclosed on is a much smaller number. If the float is a million at any one point in time i’d be absolutely shocked, it certainly isn’t 2 million (millionS).
As for title insurance, the banks will either become self insuring or indemnify the title insurers for that specific flaw in title like BofA just did with a title insurer. It’s a minor issue that can be easily addressed.
I think you are at the point of extreme, zero hedge level exaggeration on point #6 which makes me suspicious of all your other points.
Mannwich Says:
October 15th, 2010 at 2:54 pm
@Effective Demand: It’s not true? You can’t prove that either. Go to places like FL, Cali, NV and AZ and there’s likely more than a million there alone.
chartist Says:
October 15th, 2010 at 2:55 pm
Somewhere there’s a sniper with a dwindling 401K who just read Matt Taibibi in Rolling stone, practicing his nail a banker from North Jersey shot…… We’re headed for revolution…..Who will be the victim of the shot hear round Wall Street?
DeDude Says:
October 15th, 2010 at 2:59 pm
“These people aren’t deadbeats. They’re payment impaired”
- or sick, or unemployed, or making a (nothing personal) business decision, or…..
until you actually talk with the individual parties involved it is not going to be possible to judge them – not that lack of specific knowledge would hold back most people. Nothing creates such a good warm feeling as condemning others as being bad immoral deadbeat people.
Effective Demand Says:
October 15th, 2010 at 3:15 pm
Mannwich,
I’ve been through this in California with many misinformed people. You look at the number of foreclosures taken in (its public record) vs the absorption rate and you can get the basic float.
There are a large number of homes in THE FORECLOSURE PROCESS but the number of homes FORECLOSED ON and held in inventory is relatively small.
Here is the data I have put together from public reports from Dataquick (the gold standard for RE data in CA):
http://effectivedemand.blogspot.com/2010/08/california-shadow-inventory-report-q2.html
I’d estimate the inventory “float” for California to be about 1 to 1.5 quarters worth of REO’s (60k -ish).
Ask yourself why would the bank take all the risk to have a home foreclosed on and not put it for sale. It makes no sense for them to do so.. and in fact they don’t do it.
I’ve never looked at it at a national level, I’ve got access to all the NAR data but I dont think they started reporting foreclosures as a % of sales until recently. California is a large enough sample size where I think you can get extrapolate and not be far off. Estimate 1 to 1.5 quarters worth of REO’s in inventory, round up and call it 2 quarters and you’re still only in the 500k home ballpark.
The data doesn’t support BR’s assertion :
http://www.realtytrac.com/content/foreclosure-market-report/q3-2010-and-september-2010-foreclosure-reports-6108
Last quarter was 288k REO’s for the US, BR’s assertion would mean they have approximately 7 quarters worth of REO inventory. NOBODY ANYWHERE is seeing that, it’s data pulled from the backside, a complete fabrication.
Effective Demand Says:
October 15th, 2010 at 3:22 pm
This shows the second half of point #6 is a non-issue just as the previous post shows the first half of point #6 is over-exaggerated:
http://www.americanbanker.com/news/bank-of-america-fidelity-national-1027074-1.html
Title insurance won’t be an issue going forward.
Andy T Says:
October 15th, 2010 at 3:23 pm
“We could make wild and unsubstantiated conclusions, but we prefer reason and logic.”
Funny stuff, that comment, given some of the histrionic proclamations made earlier this week.
kayem Says:
October 15th, 2010 at 3:32 pm
Earlier BR wanted to know actual stories, and others have argued that the the number of actual homeowners harmed is small. I think the magnitude of the problem should not be measured by the number of actual harmed homeowners, because really, so few of the foreclosures have actual homeowners living in them. How many stories have we all seen about vacant or half-finished developments or ghost towns (most recent: Einhorn/St Joe). So, regardless of how many individuals were harmed (or were deadbeats), the number of properties potentially without clear title (and subsequent problems with resale value and property values) is staggering.
Local anecdote: I’ve been watching the mess from my home in south Florida since 2002. Valuations in my historic neighborhood have made a complete round trip from 200K to 425K and now, as the foreclosures occur, below 200K. The adjacent new development sold out (preconstruction in 2004 and 2005), and completed construction in 2006. That fall, I counted lockboxes on 29 of 41, and only 1 real-live homeowner living there. Most of the places sat vacant for years, and now about half have renters and asking prices have plummeted. I can tell from the county’s property search records that most “owners” mailing addresses are different than the property address and many were out of state. Harmed homeowners? None. Properties without clear title if the whole development was in some trust without assignments? 41. Impact on property values in my neighborhood? Ah, that’s the question.
Housing recovery? Bueller? Bueller? Anyone?
Effective Demand Says:
October 15th, 2010 at 4:18 pm
Mannwich:
http://online.wsj.com/article/SB10001424052748703832204575210423113145954.html
You were saying? Turns out my estimates match up almost exactly with Barclays and I am sure their data is much better. Check out the spiffy chart, green line.
BR, I’d just remove #6 completely..
nofoulsontheplayground Says:
October 15th, 2010 at 4:25 pm
The best solution I’ve heard is the “California Solution.”
I believe in California if you challenge the ownership of the deed you need to put up the equivalent of the value of the note.
This keeps the deadbeats from dragging out the process. There have been hardly any instances of challenges like we’re seeing in Florida in California because of this law.
It should be adopted nationally, and that would solve the problem.
ReadingFundamental Says:
October 15th, 2010 at 4:27 pm
To whoever asked how anyone is collecting payments if the assignments were not done. Any time a loan is made it is set up day one on a loan servicing system. The originators made loans, and every now and then when they had a big enough “inventory” of them sold off pools of them for securitization. Some Wall Street firm would buy up a bunch of pools, pay lawyers to set up a REMIC and get it registered, and then sell bonds secured by those mortgages in the REMIC.
Now as soon as the originator sold the pool of loans it sent a “tape’ of the data – amount outstanding, interest rate, payment history, etc. to the new loan servicing company that would be handling the billing and collecting of payments for the REMIC.
When thousands of home loans are sold, the originators don’t want to pay people to sit and sign all those assignment documents and record mortgage assignments for them all at the courthouses, then the investment bankers putting together the REMIC don’t want to have to pay a bunch of people on behalf of the holding company (the mortgages go there until the REMIC has been created) to execute assignments of that stuff from the holding company into the REMIC, and pay to have all those mortgage assignments recorded.
In theory, a lawsuit against a borrower should not begin until someone has looked at ALL the loan documents – either originals or reliable copies, and the payment history, and signed an affidavit. All these entities were trading around data “tapes” instead of actual documents, so it appears that the folks hired at $12/hour (just a wild guess) didn’t ever look at any of this, they just signed.
I’ve signed a few affidavits in my time (for commercial transactions) and always went over them carefully. However, I ‘m an experienced financial services person with a B.A., and M.B.A., and a pretty long history of working with transaction and litigation attorneys.
dss Says:
October 15th, 2010 at 5:48 pm
Record number of foreclosures in 2009
This morning RealtyTrac® released its year-end U.S. Foreclosure Market Reporttm for the year 2009.
The report shows a total of 3,957,643 foreclosure filings (default notices, RealtyTrac Foreclosure Rate for third quarter 2009scheduled foreclosure auctions and bank repossessions) on 2,824,674 U.S. properties in 2009, a 21 percent increase in total properties affected from 2008 and a whopping 120 percent increase in total properties affected from 2007. The report also shows that 2.21 percent of all U.S. housing units (one in 45) received at least one foreclosure filing during the year, up from 1.84 percent in 2008, 1.03 percent in 2007 and 0.58 percent in 2006.
——————–
Almost 4 million filings on 2.8 properties, in 2009. How many properties are in default and have not been served?
Darmah Says:
October 15th, 2010 at 7:12 pm
Maybe not millions but you can search for an REO home among the 930,000 in the US according to RealtyTrac — http://www.realtytrac.com/states/bank-owned-props/index.html
Kris Dannon Says:
October 15th, 2010 at 7:19 pm
The humble settings where the robo-signer challenge began…
http://www.nytimes.com/2010/10/15/business/15maine.html
bench craft company complaints
Small Business <b>News</b>: Marketing Mambo
It's a dance step every small business must master and arguably the most important especially in the beginning of your small business. Marketing encompasses.
Fox <b>News</b> Poll: GOPer Raese Leads By Two Points In WV-SEN | TPMDC
The new Fox News poll of the West Virginia Senate race has Republican businessman John Raese holding on to a narrow lead against Democratic Gov. Joe Manchin.
Arrowheadlines: Chiefs <b>News</b> 10/26 - Arrowhead Pride
Good morning! We have a full day of Kansas City Chiefs news. O-line love and praise for the running game and a shout out to DJ are ahead. There are also a few articles on the Buffalo offense and how productive they've been recently.
bench craft company complaints bench craft company complaints
Small Business <b>News</b>: Marketing Mambo
It's a dance step every small business must master and arguably the most important especially in the beginning of your small business. Marketing encompasses.
Fox <b>News</b> Poll: GOPer Raese Leads By Two Points In WV-SEN | TPMDC
The new Fox News poll of the West Virginia Senate race has Republican businessman John Raese holding on to a narrow lead against Democratic Gov. Joe Manchin.
Arrowheadlines: Chiefs <b>News</b> 10/26 - Arrowhead Pride
Good morning! We have a full day of Kansas City Chiefs news. O-line love and praise for the running game and a shout out to DJ are ahead. There are also a few articles on the Buffalo offense and how productive they've been recently.
bench craft company complaints bench craft company complaints
Small Business <b>News</b>: Marketing Mambo
It's a dance step every small business must master and arguably the most important especially in the beginning of your small business. Marketing encompasses.
Fox <b>News</b> Poll: GOPer Raese Leads By Two Points In WV-SEN | TPMDC
The new Fox News poll of the West Virginia Senate race has Republican businessman John Raese holding on to a narrow lead against Democratic Gov. Joe Manchin.
Arrowheadlines: Chiefs <b>News</b> 10/26 - Arrowhead Pride
Good morning! We have a full day of Kansas City Chiefs news. O-line love and praise for the running game and a shout out to DJ are ahead. There are also a few articles on the Buffalo offense and how productive they've been recently.
bench craft company complaints bench craft company complaints