Posts Tagged ‘HAMP’

Foreclosure Fraud For Dummies, Part 3: What’s the Worst and Slightly Better Case Scenario?

Foreclosure Fraud For Dummies, Part 3: What’s the Worst and Slightly Better Case Scenario?

By Mike Konczal, courtesy of New Deal 2.0foreclosures

The foreclosure crisis is heating up. Will it all come crashing down, or can we find a way out of the mess? **This is Part 3 in a series giving a basic explanation of the current foreclosure fraud crisis. You can find Part 1 here and Part 2 here.

Right now the foreclosure system has shut down as a result of the banks’ own voluntary actions. There is currently a debate over whether or not the current foreclosure fraud crisis could explode into a systemic risk problem that imperils the larger financial sector and economy, and if so what that would look like.

No matter what happens, the uncertainty about notes and what is currently going on with the foreclosure crisis is terrible for the economy. Getting to the heart of this problem so that negotiations can be worked out is important for getting the economy going again. There is little reason to trust whatever the servicers and the banks conclude at the end of the month, and the market will know that. Only the government can credibly clear the air as to what the legal situation is with the notes and the securitizations.

But I want to get some unlikely but dangerous scenarios on the table in which this blows up. Bangs, not whimpers.  The kind where Congress is pressured to act over a weekend.  I had a discussion with Adam Levitin about how this could explode into a systemic problem.

Title Insurance Market Breaks Down

The first scenario involves title insurance, specifically a situation wherein title insurers decide to take a month off from writing title insurance even on performing and current loans to investigate what is going on with note transfers.

If that happened, there would be no mortgage sales (except for those involving cash) in the country. The system would simply stop. Everyone with an interest, from realtors to Wall Street to construction to huge sections of the economy, would face a major crisis from this short-term pinch. There would be a call for Congress to step in immediately.

You can tell that the title insurance market, which is largely concentrated and also holding very little capital to deal with a nationwide crisis,…
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Who Rules America?

Professor William Domhoff has updated his excellent study of wealth distribution in America and the results are just as sickening than they were in 2005!

We looked at the uneven distribution of incomes when I wrote "The Crisis of Middle-Class America" earlier this month and I’ll re-post the main chart here as it’s important for the readers to get a fix on where they really are on the economic food chain.  When I talk about the need for more taxes, I’m generally (like our President) referring to the top 1%, the 1.4M people in this country who earn more than $393,000 a year - where 10% more tax ($40,000) may force them to skip a vacation vs. the alternative of taxing the bottom 90%, who earn $30,000 a year, which would force them to skip heat, food, clothing, etc.  

The chart above EXCLUDES capital gains, which are over 70% of the top 0.01%’s incomes so it grossly understates the situation but it does give you a clearer idea of what was going on in the lower brackets leading up to the crisis.  Go ahead, do the math – adding up the total wages of the bottom 90% against the total wages of the top 10% give you a real idea of what a "fair and just" system we’re participating in:

14,836 people earn $17,271,381 in average annual income ($256Bn), 133,525 earn $2,569,388 ($343Bn), 593,444 earn $760,680 ($451Bn), 741,805 earn $393,583 ($292Bn), 5,934,440 earn $188,513 ($1,119Bn) and 7,418,050 earn $117,688 ($873Bn) while the the wages of the bottom 90% are 133,524,900 people earning and average of just $30,173 ($4,029Bn).

So interesting fact number one is that the 13M people in the top 10% earn (not including capital gains, which make up the bulk of their true income) salaries of $3.3Tn while the other 133M schlubs earn $4Tn.    

We are NOT going to be able to "fix" this country until we recognize that this is fundamentally unfair.  Even for those of us in the top 10%, we need to recognize that those other 133M people are our customers, in the very least.  If they have more money to spend, then we will, in theory, be able to make more money serving them.  What’s really gone wrong in this equation is that the top 0.01%, including our multi-national corportate citizens, who control 34.6% of our nation’s wealth (very good chart series here) have already effectively pulled up anchor and are sailing away to warmer waters. 

In Robert Frank’s…
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Even Though HAMP Failed Miserably, White House Commits $3 Billion to “Help” Homedebtors

It’s unfair (yes, taxpayers who are renting or paying their mortgage do notice), and it won’t work anyway. – Ilene

Even Though HAMP Failed Miserably, White House Commits $3 Billion to "Help" Homedebtors

Courtesy of Jr. Deputy Accountant 

HAMP was an abject failure (ask anyone who tried to get their loan modified and I’m sure they can tell you) but since the government only knows one method of problem resolution (throwing money it doesn’t have into the bottomless pit), it’s decided to throw some more cash at the problem in the hopes it will go away. OK, I’m sure the White House is reasonable enough to know that the problem will never go away so let’s change that to "get better enough to keep the pitchforks at bay for a few more months".

MarketWatch:

The White House on Wednesday said it would spend an additional $3 billion to help distressed homeowners in the states with the highest jobless rates to pay their mortgages.

The latest round of funding pushes the total federal commitment up to $4.1 billion. The government already runs two other programs to help homeowners modify existing mortgages or make their monthly payments.

The White House is authorized to spend up to $50 billion to help homeowners under the Troubled Asset Relief Program originally created by the Bush administration to bail out Wall Street.

The government has bailed out everyone from automakers to the unemployed and still hasn’t made much headway when it comes to clearing up the economy’s clogged pipes, what makes it think this $3 billion it does not have and cannot afford will somehow be different?

Free money for everyone! Hey, I’m broke and angry, where’s my cut? It’s a shame I’m being left out of the free money party because I am A) still employed and B) a renter. Way to reward me for my responsible behavior, you asshats. If we ever get out of this mess I am SO buying a bunch of crap I can’t afford at the start of the next bubble blowing party, screw that. 


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John Paulson Will Be Wrong This Time

Courtesy of Jim Quinn at The Burning Platform

John Paulson Will Be Wrong This Time

We have arrived at critical juncture in the ongoing financial crisis. Have the government actions of the last year successfully spurred the animal spirits of Americans, resulting in a self-sustaining recovery?

The Obama administration and most of the mainstream media would answer yes. GDP has been positive for the last four quarters. Consumer spending has increased in five consecutive months. Corporate profits have been relatively strong. The country has stopped losing jobs. The missing piece has been a housing recovery.

No need to worry. Famous or infamous (depending on your point of view) $15 billion man John Paulson has assured the world that house prices will rise 8% to 10% in 2011. His basis for this forecast is that California prices have rebounded 8% to 10% in the last year, and this recovery will spread to the rest of the nation.

Maybe Paulson has teamed up with his buddies at Goldman Sachs to develop a product that guarantees a housing recovery. I tend to not believe anything that comes out of the mouth of anyone associated with Wall Street, but let’s assess the facts and see if they point to an impressive housing recovery in 2011.

The man who has been right on housing for the last ten years has been Yale Professor Robert Shiller. His analysis of U.S. housing prices from 1890 until present, which he first published in 2005, unequivocally proved that we were in the midst of the greatest housing bubble in history. At the same time, David Lereah, the chief economist (shill) for the National Association of Realtors, was pronouncing it was the best time to buy. He published his masterpiece of market tops, Are You Missing the Real Estate Boom? at the 2005 housing peak. He called a bottom in January 2007, and the NAR has continued to tell Americans it is the best time to buy for the last five years as prices have dropped 36% nationally.

 

Dr. Shiller continues to be the voice of reason when it comes to the housing market. He is doubtful that the recent “recovery” will continue:

    “Recent polls show that economic forecasters are largely bullish about the housing market for the next year or two. But one wonders about the basis for such a positive forecast. Momentum may be on the forecasts’


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Obama’s Home Affordable “HAMP” Program a Failure; Another Huge Wave of Foreclosures Coming

Obama’s Home Affordable "HAMP" Program a Failure; Another Huge Wave of Foreclosures Coming

Courtesy of Mish 

Over a third of HAMP participants have exited the program and another batch is coming up. Those leaving the program will likely end up in foreclosure. Moreover, 4 million delinquent borrowers are not even eligible for the program.

Please consider Borrowers exit troubled Obama mortgage program.

The Obama administration’s flagship effort to help people in danger of losing their homes is falling flat.

More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. That’s more than the 27 percent who have managed to have their loan payments reduced to help them keep their homes.

Last month alone, 150,000 borrowers left the program — bringing the total to 436,000 who have exited since it began in March 2009. A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

"The majority of these modifications aren’t going to be successful," said Wayne Yamano, vice president of John Burns Real Estate Consulting, a research firm in Irvine, Calif. "Even after the permanent modification, you’re still looking at a very high debt burden."

HAMP Performance Report Through May 2010

Here are a couple of charts from the Making Home Affordable Program Servicer Performance Report Through May 2010.

Hamp Trials Started

Permanent Modifications

Waterfall of HAMP-Eligible Borrowers

Not all 60-day delinquent loans are eligible for HAMP. Other characteristics may preclude borrower eligibility. Based on the estimates, of the 5.7 million borrowers who were 60 days delinquent in the 1st quarter of 2010, 1.7 million borrowers are eligible for HAMP. As this represents a point-in-time snapshot of the delinquency population and estimated HAMP eligibility, we expect that more borrowers will become eligible for HAMP from now through 2012.

Only 30% of the 5.7 million borrowers who are 60 days delinquent are eligible for the program. 4 million delinquent borrowers are stuck. Of those eligible for the program, only 346,000 have completed the trial and received a permanent modification.

Many of those receiving a permanent modification will slip back into default and head for foreclosure. Many of those who…
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Internet Foreclosure “Myths”

Internet Foreclosure “Myths”

Foreclosure sign taped to a front door.

Courtesy of Patrick Pulatie, originally published at The Implode-O-Meter Blog

Just over two and one half years ago, I began to work with homeowners facing foreclosure. At that time, there were two or three websites that had any information on foreclosure prevention and any viable defenses to foreclosure. Since that time, starting in late 2008, and throughout 2009, there has been an explosion of websites featuring foreclosure information. This has been both good and bad for the homeowner facing foreclosure; good because homeowners have been able to learn much about their situation, and know that they were not alone, but bad because there is much “inaccurate” information about foreclosure defenses being presented. This article is intended to help the homeowner sort the good and the bad.

I write this knowing that I am going to receive significant negative feedback from many different sources. Some will be disputing what I write because they have heard of people with positive results. Some will argue because for them, the distribution of such information is part of their business model and the more people who know that what they “preach” is not effective, the less they will make. Others will disagree because I am at direct odds with certain people that they follow, ones who have high visibility, but have not stepped into court rooms in years. More will even argue that I side with the lenders.

There is a particular motivation for writing this. I receive phone calls daily and weekly from homeowners who have read these from sites, and are thinking that if they just do one thing or another, their problems will “magically” disappear. Others are Pro Se litigants, doing their own lawsuits instead of hiring attorneys. They want me to review their filings, advise them where they are wrong, or do Predatory Lending Examinations. I refuse to do this because I will not work with a person who does not have an attorney, and I am not an attorney and cannot give legal advice. The sad part is that in their filings, I can immediately spot so many errors that it is obvious that they should just start packing to move.

The criteria for being considered a "myth" includes the probability of a desired outcome, and/or…
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HAMP = Foreclosure

Iconic Houses

Yesterday’s article "Is 103 Months to Clear Housing Inventory Too Optimistic?" included an excerpt from the WSJ’s "Number of the Week: 103 Months to Clear Housing Inventory," suggesting there were at least 103 months of housing inventory yet to hit the market. Patrick Pulatie, CEO of Loan Fraud Investigations, wrote to me that he believed the 103 estimate was far too low.  

One of Pat’s reasons was that "the HAMP modifications will have a failure rate of at least 75%.  That is due to the Debt Ratios that the mods are approved at. In Feb, the mean ratio was 59.8%.  In Mar, it was 62.7%, which to increase that much, most every Mar approval was far above the 62.7 number."

In this article, Pat discusses the HAMP loan modification program in more detail. 

HAMP = Foreclosure

Courtesy of Patrick Pulatie (originally published at Implode-O-Meter Blog)

Foreclosure Filings Spike Upward Nationwide

Over the last year, I have been watching the HAMP modification program with great interest. I have wanted to believe that the Federal Government would actually put into place a loan modification program that would help homeowners, though I knew that this was likely false hope. The results are now in, at least in my opinion.

HAMP is a fraud. Nothing else can be said otherwise. The Government has once again put into place a program that will not help homeowners. Instead, HAMP modifications will end up postponing homes foreclosures for a period of time for modified loans, but, most will end up losing the home in the end, except for a “very” lucky few who actually make it. I cannot believe that the Government expected anything other than the HAMP program would end up being a failure. To understand what to expect, we must look inside the numbers.

In March, the February results for HAMP were released. Key points of the update were:

Foreclosed Homes Sold At Denver Auction

* 1.3 million total trial modification offers.
* Almost 1.1 million trial modifications have begun since the program began.
* 72,000 new trial modifications started in February.
* More than 170,000 permanent modifications granted to date.
* 91,800 other permanent modifications offered and awaiting acceptance.
* 0.9% permanent modifications cancelled
* 8.8% total modifications cancelled, 88,663 total

If one looks at these numbers and compares the…
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HAMP to the Rescue

HAMP to the Rescue

 

Courtesy of MIKE WHITNEY writing at CounterPunch 

jr. deputy accountantLast Friday, the Obama administration announced changes to its Home Affordable Modification Program (HAMP) The most significant change is "principal reduction". By reducing the balance on underwater loans, the administration hopes to lower the number of foreclosures which have soared to more than 300,000 per month.  This looks like a plan that could work, since most foreclosures are the result of  negative equity or unemployment. If the banks and other investors agree to the terms of the program (and it looks like they will) then more homeowners will be able to avoid foreclosure, prices will stabilize, and the recovery will gain momentum. There is one drawback, however, which is moral hazard writ large.  The new program rewards the speculators who bet on dodgy investments and who’ll be able to exchange their garbage securitizations for government-guaranteed FHA loans.

In fact, it looks like that was the real purpose of the program from the very beginning. This is an excerpt from March 30, Bloomberg News:

"Subprime-mortgage securities are rising at an accelerating pace as the U.S. begins to encourage reductions to homeowners’ balances, which may lead to fewer foreclosures and a quicker end to the housing slump….Subprime-loan bonds rated AAA when created in the first half of 2006 climbed 3.2 percent last week to 49.1, the highest since January 2009, according to Markit Group Ltd.

“Senior-ranked bonds tied to borrowers with poor credit will mostly benefit after the Treasury Department said for the first time it would seek to cut the size of mortgages, reducing the likelihood that loan modifications will fail, according to JPMorgan Chase & Co., Morgan Stanley and Barclays Plc. The revised plan also supports the housing market by helping avert more foreclosures, Amherst Securities Group LP analyst Laurie Goodman said." (Bloomberg)

So, it looks like Obama’s modification program has touched-off a gold rush in toxic paper. Subprime securitizations which had been worth next to nothing, are presently the hottest item on Wall Street. Main Street’s loss will, once again, mean windfall profits for Wall Street’s hedge fund managers and brokerage kingpins. It’s a subprime bonanza! A recent interview I had with a Wall Street veteran (anonymous) had this to say on the topic: 

"It sounds like the investors in securitizations will be swapping underwater real estate for government-insured paper… I


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Phil's Favorites

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