by ilene - May 31st, 2010 1:51 am
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.
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Tags: big banks, Fannie Mae, FDIC, Freddie Mac, housing fraud, HUD, Mortgages, RESPA, short sell, TARP funds
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by ilene - January 16th, 2010 1:49 pm
Courtesy of Karl Denninger at The Market Ticker
During the bubble we had banks that knew (because the FBI had warned them in 2004, there were stories in the media in 2006, and in 2007 HUD published a study) that virtually ALL stated and reduced-documentation loans were fraudulent.
They wrote ‘em and securitized ‘em anyway and I have not been able to find ONE prospectus from that period in which the above fact was disclosed to buyers of that securitized debt. Not one.
This was a major contributor to the bubble and subsequent bust. Indeed, without it the "home price appreciation" that occurred could not have, as there were insufficient numbers of people with incomes to support the prices being asked. The bubble would not have happened and neither would have the bust without this active fraudulent activity up and down the line. If the actual character of the loans in these securitized instruments had been disclosed to buyers these securities would have been absolutely unmarketable and the bubble would have instantly stopped inflating.
But we know for a fact that these disclosures were not made, this debt was sold, and literally hundreds of billions of dollars of losses were taken by investors who believed that the loans in these securitized instruments were "good" when they were not. There have been ZERO investigations or prosecutions thus far related to this practice.
Now when stuck homeowners are trying to execute a short sale we have allegations that the banks are illegally trying to get something for their second liens (HELOCs and "silent seconds") which in fact are worth NOTHING in a short sale for less than the outstanding first mortgage balance.
As Diane Olick has reported:
But here’s what’s not legal and what’s apparently happening quite often recently. Since many second lien holders are getting very little, they are now allegedly requesting money on the side from either real estate agents or the buyers in the short sale. When I say "on the side," I mean in cash, off the HUD settlement statements, so the first lien holder doesn’t see it.
"They are pretty clear and pretty upfront about the fact that if the first lender knows they are getting paid, the first lender will kill the short sale," says Brandt.
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Tags: disclosure, HUD, mortgage fraud, second lein holders
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by ilene - December 11th, 2009 3:40 pm
Courtesy of Mish
In response to Taxpayers On The Hook For Ginnie Mae’s Rampant Growth I received a nice Email from the Center for Public Integrity inviting me to take a look at Ginnie Mae’s Troubled Issuers. The data is interesting to say the least.
Problem Issuers by Compare Ratio
Compare ratio is the comparison of a lender’s default rates with other lenders in a geographic region as defined by HUD. For example, if a lender has a compare ratio of 200 percent, the Federal Housing Administration loans made by that lender are defaulting at twice the rate of its competitors in its geographic region. A compare ratio of 200 percent or more is grounds for suspension and a compare ratio of 150 percent or more indicates "a problem" lender, according to FHA Commissioner David Stevens.
Compare Ratios Over 150%
- Pine State Mortgage Corporation – 314% – Default Rate 18.86%
- Premium Capital Funding, LLC dba Topdot Mortgage – 238% – Default Rate 14.31%
- Ideal Mortgage Bankers, Ltd, dba Lend America^ – 235% – Default Rate 14.14%
- IndyMac FSB, dba OneWest Bank – 211% – Default Rate 12.67%
- First Horizon Home Loans dba First Tennessee – 207% – Default Rate 12.45%
- First American Mortgage Trust – 205% – Default Rate 12.31%
- First Guaranty Mortgage Corp. – 204% – Default Rate 12.26%
- American Financial Resources, Inc. – 202% – Default Rate 12.16%
- Weststar Mortgage Corporation – 198% – Default Rate 11.88%
- Gateway Mortgage Group – 198% – Default Rate 11.9%
- Colonial Bank – 189% – Default Rate 11.38%
- MVB Mortgage Corporation – 183% – Default Rate 11.01%
- GMAC Mortgage – 171% – Default Rate 10.29%
- Allied Home Mortgage Corporation – 168% – Default Rate 10.09%
- Taylor Bean & Whitaker Mortgage^ – 163% – Default Rate 9.77%
- Shore Financial Services, Inc. dba Shore Mortgage – 159% – Default Rate 9.54%
Problem Issuers by Loan Volume
The charts in the article are interactive so please give it a look.
GMAC – The Gift That Keeps On Giving
None of the above banks should be doing business with Ginnie Mae. Indeed, most of them should not be doing business at all, especially GMAC.
To help bailout GM , the Obama administration screwed the bondholders to appease the unions, and taxpayers
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Tags: FHA Audit, Ginnie Mae, homebuyer assistance program, HUD, Mortgages, SFDPA loans
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by ilene - October 7th, 2009 1:55 pm
Wecome to Pam Martens! Pam wrote this article for CounterPunch and kindly allows us to reprint it here. This is Part One of CounterPunch’s Special Investigation Series - I’m looking forward to additional great articles by Pam. – Ilene
By PAM MARTENS
A federal agency tasked with expanding the American dream of home ownership and affordable housing free from discrimination to people of modest means has been quietly moving a chunk of that role to Wall Street since 2002. In a stealth partial privatization, the U.S. Department of Housing and Urban Development (HUD) farmed out its mandate of working with single family homeowners in trouble on their mortgages to the industry most responsible for separating people from their savings and creating an unprecedented wealth gap that renders millions unable to pay those mortgages. This industry also ranks as one of the most storied industries in terms of race discrimination. Rounding out its dubious housing credentials, Wall Street is now on life support courtesy of the public purse known as TARP as a result of issuing trillions of dollars in miss-rated housing bonds and housing-related derivatives, many of which were nothing more than algorithmic concepts wrapped in a high priced legal opinion. It’s difficult to imagine a more problematic resume for the new housing czars.
To what degree this surreptitious program has contributed to putting children and families out on the street during one of the worst economic slumps since the ’30s should be on a Congressional short list for investigation. HUD’s demand for confidentiality from all bidders and announcement of winning bids to parties known only as “the winning bidder” deserves its own investigation in terms of obfuscating the public’s right to know and the ability of the press to properly fulfill its function in a free society.
Despite three days of emails and phone calls to HUD officials, they have refused to provide the names of the winning bidders or the firms that teamed as co-bidders with the winning party. Obtaining this information independently has been akin to extracting a painful splinter wearing a blindfold and oven mitts.
That a taxpayer-supported Federal agency conducts a competitive bid program of over $2 billion and then refuses to announce the names of the winning bidders is beyond contempt for the American people. If the…
Tags: affordable housing, American Casino, Bear Stearns, Citigroup, home ownership, HUD, Lehman, Mortgages, TARP, Wall Street
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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