Read that: NEARLY EVERY DOCUMENT REVIEWED BY THE AUDIT TEAM INVOLVED ONE OR MORE OF THE FOLLOWING.....
Wholesale document fabrication and slander of title, imposing potential double liability on the property owners and issuance of fatally flawed deeds.
It's not your house.
It was stolen.
In virtually every case reviewed over the period of the last two years.
No, the fraud has not stopped with the housing bubble collapse. It has instead accelerated.
Oh, and the county -- one county in Texas -- was apparently rooked out of over $868,000 during the same time by these practices.
And you guys wonder why I started writing The Ticker in 2007, and why, today, given the lack of outrage and action by the citizens of this nation, including but not limited to the more than 90% return rate for Representatives and Senators, it is very hard for me not to conclude that this has been one gigantic waste of time when nobody will get off their ass and do anything about their own continual financial rape?
The difference between******and sex is consent.
YOU ARE CONSENTING!
There comes a point where cheerleading for crooks has reached the level of the absurd.
One reason for optimism in the New Year is the housing market, which continues to heal despite the weak economic recovery. Case-Shiller, Lender Processing Services and other data trackers are reporting recoveries in many regions. Even more noteworthy is that the rebound is strongest in states that let lenders enforce contracts.
We're referring to the difference between "nonjudicial" states that have streamlined foreclosure procedures and the 23 "judicial" states that force lenders to go to court to enforce mortgage contracts. Prices are stabilizing in the former but still faltering in much of the latter, which isn't surprising, except to politicians. Housing markets can't clear until lenders can foreclose on delinquent borrowers and prices fall far enough to attract buyers who can afford the mortgage payments.
That's because in judicial states, which the lenders knew were judicial states when they made the loans, they can't generally prove up their claims in a lawful sense -- so they manufacture documents they don't have (on purpose) and then hope nobody looks too closely (or their opponent doesn't even show up!)
The Journal goes on to "decry" that these states take longer and people can live in the house without paying. But certainly this risk was known to the lender, with superior information and experience, at the time they made the loan, yes?
So where's the beef?
Look, if the lenders had their paperwork in order because they didn't shred or lose it in the first place, and could actually show up with a nice documentary trail showing every assignment, that they hadn't been paid off by some other instrument or game they played, and that in fact the alleged trust they're suing in the name of actually has the paper in question these cases would go pretty quickly -- and there would no big backlog.
But they didn't do that.
They could have also made prudent loans in the first place, instead of writing not one but two mortgages on two properties for over $1m each to someone with $100k of income. Yes, that happened around here in Florida, more than once, and then the banks are surprised when the borrower can't pay?
Was that an actual loan or was it some sort of scam where they found a rube to pass the paper on to at par (and then lost it on top of it!), played "pinky promise" and then when the expected default occurs they cry poverty and "injustice"?
I say that those who pulled some hinky crap shouldn't get rewarded for it. The putative homeowner who "bought" a house they can't afford shouldn't get to keep it. But the putative "lender" who didn't really loan anything as he had a buyer for the paper all lined up and then intentionally failed to properly transfer and record everything like he was supposed to shouldn't profit from this bogus deal either nor should he be able to abuse the courts, committing unbridled and outrageous acts of perjury.
Further, if said bankster shows up to sue for foreclosure he should have to prove up his case like anyone else, complete with full proof of standing including the original paperwork with all transfers documenting that it was assigned as required by law into the alleged putative trust that claimed to be holding it at the time of default!
If they can't do that then the court is simply rubber-stamping frauds that are now being whitewashed in the name of "expedience." And the reason we're seeing such a big backlog here in Florida is that these institutions come into court with intentionally incomplete paperwork, knowing damn well they can't prove up their case, and hope for a Judge who's got vodka in his water glass on the bench.
The problem isn't judicial foreclosure.
It's that there's so much damned fraud that neither side deserves to have any of their prayers for relief heard, and neither deserves to "win."
When you ask Judges to play Solomon it takes time, but the entire responsibility for this state of affairs lies with the banks -- not the borrowers.
“We need to look hard at some of the old assumptions and ask the question is homeownership the right solution for everyone?” Moynihan said today during a speech at the Brookings Institution in Washington.
Of course it's not.
Lenders need to carefully underwrite loans and ensure that borrowers have an incentive to maintain their payments. Still, he said, “I don’t think there is anything magic about a 20 percent down payment; 10 percent seems reasonable.”
Considering that you have 6% that disappears every time you transact (in the form of Realty commissions, plus a bit more for fees, costs, tax stamps, title policies and similar) 10% is dangerously close to zero in real terms.
The 20% down payment is not just about protecting the lender from the risk of value decline, although that's certainly a part of it. A 20% down payment makes it relatively easy to argue that the entirety of the created credit money is offset by locked-up asset value in the form of the capital represented by the house. In addition it limits leverage in home ownership to 5:1 and it is the limitation of leverage that holds down price ramps, making housing more affordable for everyone!
After all if you don't own a house you want prices to be low, not high!
The 20% down payment also shows that you can save back a significant amount of money. This sounds like "no big deal" but in fact it is a very big deal. Houses come with significant expenses and they're ongoing expenses. A house needs a new roof, furnace, water heater, A/C unit and carpeting from time to time. Your kid might break a window that needs to be replaced. Not only are there calamities (which you can insure against in whole or part) but there are ordinary costs of upkeep and maintenance that must be performed and if you're going to own a house you need to be able to budget and sock back the funds to handle those expenses as they arise.
Some people will argue that you can just borrow more and more money as necessary to fund those things, but what happens if your roof needs replaced while you're unemployed and thus don't qualify for a loan? Or if your furnace craps out in the middle of February, your credit cards are maxed, and you need a new one right now or you'll freeze?
The proved ability to accumulate a significant amount of capital is utterly essential to sustainable, and thus successful, home ownership. A 20% down payment made with your own funds that you can trace the provenance and accumulation of demonstrates your ability to accomplish this essential task.
Finally, home ownership makes labor far less mobile, and for some people this is just a bad deal all around, especially during difficult economic times. If you "own" a house but will lose 6% of the value in fees and costs selling it that grossly inhibits your ability to move where the jobs are. During good times this is not a big problem as you are likely to be able to find a better job (or any job!) where you live, but in tough times mobility is an asset.
Government, for its part, needs to get the hell out of the system. All it has done is distort and damage the public at-large, and it will continue to do so, because all attempts to "expand" home ownership involve destroying or ignoring one or more of these important metrics.
Better late than never Brian.
There's dumb, there's insane, and then there's Stiglitz and Zandi with this bit of tripe:
With principal writedown no longer an option, the government needs to find a new way to facilitate mass mortgage refinancings. With rates at record lows, refinancing would allow homeowners to significantly reduce their monthly payments, freeing up money to spend on other things. A mass refinancing program would work like a potent tax cut.
Refinancing would also significantly reduce the chance of default for underwater homeowners. With fewer losses from past loans burdening their balance sheets, lenders could make more new loans, and communities plagued by mass foreclosures might see relief from blight.
What they're advocating is a mass-refinancing game ala-HOLC from the Depression.
But there are several problems with this premise.
First, it didn't work, objectively. HOLC did nothing to end The Depression. It arguably made it worse, as it locked people into homes that they should have objectively abandoned and in addition it held the price artificially high, preventing market clearing.
The Depression did not end until we entered WWII. That worked, but not for the reason commonly believed (the "broken window" fallacy.) Rather, we both destroyed virtually all of the industrial production capacity in the western world (along with two major cities in Japan) and we killed off a huge number of productive workers. This made America the "last man standing" from an industrial perspective and we profited mightily from that in the next two decades.
But nobody in their right mind advocates starting a nuclear war in today's world to do the same thing -- right Joseph?
The other part of the "magic" of the 1950s and 60s was, of course, the "boomers." That too was a consequence of the war (more specifically, the end of the war) which created a huge boost in family-related things, including houses. Today such a "baby boom" is anywhere from unlikely to impossible; we have a much higher population density in America today than we did at the time (139 million .vs. 330 million) and resources were comparatively cheap. Today we have none of those advantages.
The problem Stiglitz and Zandi have with this proposal is that they're not bothering with the second-level analysis -- who is going to buy these homes as they turn over, and with what?
Yet that's the key. In the 1950s we had young families coming up from the baby boom's formation that required housing; there was a strong organic driver of demand, and the converstion of industry from wartime production to peacetime resulted in plenty of jobs and little debt for those who were coming back into the civilian workforce. The soldier returning home and starting a family did so with little to his name, but he also had little or no debt on his back as well. Given a good salary he was thus able to support his wife and children -- and did. At the same time the women who had temporarily manned factories making bombs, guns and aircraft during the war returned to the home and raised children.
Today our young people fall into two classes -- those who are qualified to pull coffees at Starbucks and those who have college degrees but also come with $50,000 or more in college debt. Neither is capable of taking on a $1,000/mo house payment, say much less a $2,000 one.
Yet that's position being put forward. If we were to "refinance" those "underwater" mortgages we do several things that are bad, not good:
In short what we have here is yet another attempt to hold asset prices high in the mistaken belief that this will somehow "help the economy." It will do no such thing, as it fails to recognize and deal with the fact that the natural buyer is out of the market due to our policies on educational lending and costs, while at the same time it attempts to bail out the speculator, the foolish and the banksters who wrote the paper, along with those who were foolish enough to buy it.
The fact of the matter is that rates should go up, not down. The market should be encouraged to clear. The people who are underwater should be encouraged to abandon their property to the market, wherever it may wind up. Prices will collapse and inventory will clear. Those who are overburdened will declare bankruptcy and start over. Those who foolishly lent money will lose their investments.
But this clearing of the market is the only way out. At the same time we must stop the inexorable march toward more debt and more leverage everywhere in our society. College loans must become rare rather than common, educational costs must come down, the abuse of populations and the environment in foreign lands must become more difficult and less profitable and that which we demand of government we must pay for in the present tense.
Until all of those happen there is no durable path forward, arm-waving by hopelessly conflicted and desperate men such as Stiglitz and Zandi aside.
The Obama Administration's latest attempt to manipulate the housing market hit a wall yesterday, with FHFA saying "no" to principal reduction.
Fannie Mae (FNMA) and Freddie Mac won’t forgive principal on delinquent mortgages they guarantee even as the U.S. Treasury Department offers them incentive payments for writedowns, the companies’ regulator said today.
Months of analysis showed there would be no clear benefit to taxpayers if the Federal Housing Finance Agency changed its policy barring the government-owned mortgage-finance companies from loan modifications including debt writedowns, Edward J. DeMarco, the agency’s acting director, said at a briefing with reporters in Washington.
“We concluded the potential benefit was too small and uncertain relative to unknown costs and risks,” DeMarco said.
Of course those on the left were immediately out claiming this decision was "political."
I don't buy it.
The problem with blanket programs of "amnesty" on principal value is that they tend to encourage strategic defaults. Just like the market has "anticipated" and gamed every decision The Fed has made over the last five years as the economy went down the toilet, and the drug-addled equity market has done since, so would such a program encourage the same sort of game-playing and "anticipation."
On balance this sort of game-playing is destructive, not constructive. The fact of the matter is that for everyone who "wins" from such a program, someone must lose. That "someone" would be the taxpayer, for such funds can come from only one place -- more national debt.
To a large degree this is like taking a $20 from your left pocket and placing it in your right, then claiming you're $20 richer. You're not, of course; all you've done is shift money around. What's worse is that due to frictional effects which exist in all economic transactions you actually make the system poorer.
And finally, the worst effect of all is that you retard and inhibit the loss of price in houses to sustainable levels -- a place where people can buy a home without depending on the premise of "ever rising prices" to be able to afford it.
The fact is that houses, when used as a place to sleep, are a consumer durable good, not an "investment." They require constant input of more funds (and/or sweat) in the form of upkeep, and what's worse state and local governments assess annual taxes on their ownership so they are all massive losers over the long haul. Of course the counter-argument is that "renting includes these costs in the rent so you can't escape" but the point isn't escape -- it's what housing is, and how it impacts on the macro-level economy as a whole.
Economic balance requires that houses sell for about 2x annual incomes. The fact of the matter is that houses are still "rich" to median incomes on this basis by about 30%; they would have to fall to about $100,000 in order to reach "fair value."
Worse, this presumes a 20% down payment, and the percentage of homebuyers who put that away continues to be in the tank. A big part of that is the insane leverage that we have heaped on college students via loans, destroying not only accumulation of capital for down payments but also payment capacity via the student loan payment that must be made first. Subtract off the missing down payment from the median price if you're looking at "lower" or "more affordable" down payments, as the 2x median incomes assumes 80% financing to call that "affordable." That would put the median home price, in a 0% down world, at $80,000!
This of course makes Realtors and others in the industry gasp; "that's impossible!" they claim. The blanching continues among county and state finance executives, who quickly calculate what happens when their revenue from property taxes goes down by 30% (or more.)
But not only is this sort of further price decline not impossible, it's entirely reasonable from a historical basis, and it is likely to happen before the economic adjustment is all said and done.
The best way to encourage the economic adjustment that has to take place is to "eat our peas" and allow the defaults that should happen to happen, along with the price adjustments that come from it. Along these lines we should be forcing mark-to-market for all held housing inventory on various balance sheets, especially bank balance sheets. This would in turn force disgorgement into the market and discovery of the clearing price, which is essential if we are to restore health to the housing industry -- and the rest of the economy.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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