Government-Sponsored Housing Fraud
by ilene - June 2nd, 2010 12:15 pm
Government-Sponsored Housing Fraud
Courtesy of Karl Denninger at The Market Ticker
The proposed rule would also establish a method for evaluating and rating Enterprise performance in each underserved market for 2010 and subsequent years and describes the transactions and activities that would be considered for compliance. The Enterprises would be evaluated on four statutory assessment factors: 1) the development of
loan productsnew ways to rip people off,more flexible underwriting guidelineswillful blindness to unsustainable debt-service ratios, andotherinnovative approaches to providing financingother ways to rob the taxpaying and homeowning public; 2) the extent of outreach to qualified loan sellers and other market participants; 3) the volume of loans purchased relative to the market opportunities available, subject to the statutory condition that FHFA not establish specific quantitative targets; and 4) the amount of investments and grants in projects that assist in meeting the needs of the underserved markets.
Well there you have it. Congressional and FHFA "mandates" to make loans that are unsustainable and impossible to justify on any sort of conservative, fact-based analytics, which incidentally demand that the solution to this problem is lower prices for homes, which then leads to sustainable mortgages with no more than a 36% back end ratio and 20% down payments!
Thank the lobbyists and Congress, once again, for refusing to deal with the actual problem – overly-inflated real estate prices, which incidentally, still exists, and instead directing the taxpayer to bend over once again.
And The Housing Fraud Continues
by ilene - May 31st, 2010 1:51 am
And The Housing Fraud Continues
Courtesy of Karl Denninger at The Market Ticker
From a report emailed to me over the weekend:
At the core of the foreclosure-prevention strategy is ignoring delinquencies. The percentage of older delinquent loans not yet in foreclosure is startling: 60% have at least 12 missed payments, and 35% have at least 18 missed payments. Add to this that three-fourths of delinquent loans are not in foreclosure, and we see that hidden losses well exceed those in the open.
Uh, they’re not being "ignored" – this is systemic and intentional fraud.
Remember, these loans are either being held by someone or securitized into some sort of package. When you have a loan that has no chance of "curing" (to cure a loan with 12 missed payments the borrower would have to come up with the 12 payments to bring it current!) that loan should be carried at its recovery value – that is, the value of the collateral that can be seized and sold, LESS the cost of eviction, remediation and resale.
Does anyone recall all the entries I’ve written about getting competent legal and accounting (tax) advice before proceeding with any sort of action regarding walking away, short sales or foreclosure? This same report says:
Many homeowners would be better off going into foreclosure, than doing a short sale. Short sales are fraught with potential legal, credit, and complicated tax issues. For example, someone who refinanced could owe capital gains taxes, which are not forgiven under federal and California temporary debt relief acts. In the foreclosure route, borrowers can live in their house mortgage-free for at least one year, maybe two years. Both short sales and foreclosures are reported as “account not paid in full”, and are equally damaging to a credit score. An exception exists if short sellers can negotiate better terms with their lender on recourse liens. The other possible advantage to a short sale is the ability to get a mortgage again in 2 years (Fannie, Freddie), rather than having to wait 3-5 years after a foreclosure.
Homeowners pursue short sales, unaware of the problems they are creating for themselves. Their agents never warned them of deficiencies, ruined credit, taxes due on forgiven debt, or legal consequences. Agents made flowery promises to get listings, and now the lawsuits are starting.