Posts Tagged ‘Mortgage modifications’

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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Obama’s Housing Shell Game; Short Sales and Relocation Assistance

Obama’s Housing Shell Game; Short Sales and Relocation Assistance

Courtesy of Mish 

Toy house and car on pile of invoices

We’ve now come full circle. Instead of trying to get people to stay in their homes, Obama is willing to pay them to leave. Please consider Program Will Pay Homeowners to Sell at a Loss.

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Big Shell Game

Hand lifting up small pot to reveal red ball

Diana Olick describes the situation perfectly in Mortgage Principal Writedown Won’t Save Housing.

 

And so it begins. Big gun lawmakers are making the move toward principal writedowns as the last resort to save the housing market.

The problem is prices. Home prices have fallen so far in the hardest hit areas, the areas where the bulk of the troubled loans are, that banks would have to write down principal 30 to 50 percent to put borrowers back in the green. Accounting rules require that banks write down the value of those loans on their books, and experts tell me that if banks really accounted for all the losses in the home loan market, they’d all be insolvent.

That’s why the Obama Administration has created this kind of shell game in the first place.

I stole that shell game idea from


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Interest Scams and How to Avoid Them – Mortgage Madness!

 

Last week we talked about Predatory Lending.

This graphic (click to enlarge) gives a good diagram outline of the basics to avoid.  Most of them make their money by charging fees that seem reasonable but turn out to be insane: Payday Loans that can hit you with 360% interest, Rent-To-Own arrangements that have you paying two to three times more than the item costs and, of course, the second greatest scam of them all – Credit Cards – particularly the ones that are supposed to help people "re-establish" their credit.  What is a greater scam on the American consumer than credit cards, you may ask?  Why your home mortgage of course!

Now I know you, my sophisticated readers, find it obvious that ARMs and Balloon Payments are bad ideas but, in my previous life in the real eastate title business, I found that even the most savvy investor often fails to consider the long-term costs of even a conventional mortgage.  Many people make poor home investing decisions because they don't fully understand the debt they are taking on or the alternatives available to them.  

This did not matter when homes went up and up and up because even a bad investment made a little but "this time it IS different" and we may be in for an entire decade in which we may not see ANY rise in the value of homes – this is what has happened to Japan for the last TWO decades.  I'm going to go over some of the numbers, give you a few tools and see if we can't find some ways save you $100,000 on a $200,000 loan and show you how to set your kids up for life - does that sound interesting? 

Home Costs

Currently homes are, at least, reasonably priced in many parts of the country and the government is offering a first-time home buyer tax credit of $8,000, provided that you stay in the home for 36 months. This isn’t a tax deduction like your mortgage interest, which reduces your taxable income – a tax credit actually reduces your total income taxes owed. In addition, some states, such as California, are offering tax credits for home buyers that will further reduce your tax liability. Keep in mind that the federal program ends on April 30th of this year, and while it could end up being extended, it isn’t a given.

As a…
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Don’t Expect Miracles From Foreclosure Modification Efforts

Don’t Expect Miracles From Foreclosure Modification Efforts

foreclosureCourtesy of Mish

Inquiring minds are noting that Foreclosures Grow in Housing Market’s Top Tiers.

About 30% of foreclosures in June involved homes in the top third of local housing values, up from 16% when the foreclosure crisis began three years ago, according to new data from real-estate Web site Zillow.com. The bottom one-third of housing markets, by home value, now account for 35% of foreclosures, down from 55% in 2006.

The Zillow research compared homes against the median values for their local market and broke each market into three tiers by value. Zillow then looked at the share of monthly foreclosures in each tier over the past decade.

moving up, foreclosures Default rates are particularly high and expected to rise on option adjustable-rate mortgages, which allow borrowers to make minimum payments that may not cover the interest due. Monthly payments can increase to sharply higher levels after five years or when the outstanding balance reaches a certain level. A study by Fitch Ratings found that 46% of option ARMs were 30 days past due last month, even though just 12% of such loans have reset to higher monthly payments.

Zillow estimated that nearly one in four homes with mortgages was worth less than the value of the property at the end of June. Mr. Humphries said he didn’t expect to see foreclosure volumes level off until later in 2010.

Mad Scramble To Avoid Foreclosure Begins

Not only are foreclosures increasing, the value at risk is rising because of the shift to more expensive homes. The big hit comes when Pay Option ARM holders simply decide to walk away.

The Washington Post notes that Bank of America Scrambles to Modify Loans Ahead of Government Deadline. Please consider Racing the Clock to Avoid Foreclosures.

Bank of America employees are reminded every day of how far they still have to go. Just outside the elevators of their vast third-floor command center, attached to the wall, is a cardboard thermometer that shows them inching toward their goal of signing up 125,000 struggling borrowers for a federal program to modify their mortgages.

The company faces many of the same challenges as other major lenders addressing the foreclosure crisis. But with weeks remaining to meet the November deadline set by the Obama administration, Bank of America is trailing well behind the


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Mr. Nocera (And Regulators): WAKE UP!

Here’s another Karl Denninger informative rant, at The Market Ticker

Mr. Nocera (And Regulators): WAKE UP!

America, wake upI like Joe.  Really.  I’ve talked to him before, and his mostly "gets it."

That, in part, is why I left stunned with the lack of analysis on this piece:

O.K., that’s a bit of an exaggeration. But I was reminded of that meeting on Thursday night when I was shown a letter that the administration had just sent out calling for yet another big meeting at Treasury with yet another sector of the financial industry. Signed by Treasury Secretary Timothy Geithner and Shaun Donovan, the housing and urban development secretary, the letter demanded that representatives from the top 25 mortgage servicers assemble in Washington on July 28. It is likely to be every bit as painful for them as that Paulson meeting last October was for the bank C.E.O.’s.

The subject of the meeting is going to be loan modifications. Specifically, the government is going to be asking — in none-too-friendly fashion — why the nation’s big servicers aren’t doing more to modify loans for homeowners who are in danger of defaulting on their mortgages. Back in the spring, after all, they all signed onto the administration’s new Making Home Affordable program, which uses a series of incentives — not the least of which is $1,000 to the servicers for every mortgage they modify — to help keep people in their homes and prevent foreclosures.

 

Joe goes on to talk about the fact that servicers aren’t modifying many loans, and that the Obama Administration is getting annoyed with this.

Tell me something I don’t know.

Toward the end of the article Joe hits on the real reason for the "sticky" behavior with this, quoted from Mr. Alpert from Westwood Capital:

“Banks are saying no because they don’t want to take the loss,” said Mr. Alpert. “They would rather foreclose. That is just wrong.”

And then he dismisses it with:

In truth, servicers and banks don’t yet have powerful enough incentives to do large-scale mortgage modifications.

And this morning, we have Merideth Whitney who also doesn’t get it – she’s got a nice thesis, but both she and Joe unfortunately miss the reason…
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Kimble Charting Solutions

Are Energy Stocks Suggesting Long-Term Strength Here?

Courtesy of Chris Kimble

Energy stocks spent the decade of 2010 to 2020 mired in weakness… but is that trend coming to an end?

The past two years have seen the Energy Sector (XLE) surge as Crude Oil has rallied back over $80.

Today’s chart is a long-term “weekly” ratio chart of the Energy Sector to S&P 500. And this chart may be illustrating why energy stocks may be ready to out-perform in the weeks/months/years ahead.

As you can see, the XLE/SPY ratio formed a strong bottoming pattern over the past 24 months. And now the ratio is breaking o...



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ValueWalk

Another Promising Rebound

By Anna Peel. Originally published at ValueWalk.

We’re seeing a strong start to trading on Wednesday after what has been a very turbulent start to the week.

Q4 2021 hedge fund letters, conferences and more

We've seen some sharp sell-offs already this week but investors appear to be encouraged by just how quickly and strong markets have bounced back. Monday looked like it was going to be a bloodbath in equity markets but rather than panic, investors poured back in and seized upon the lower valuati...



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Zero Hedge

Nomura: Here Comes 'The Big One'

Courtesy of ZeroHedge View original post here.

Authored by Charlie McElligott, Managing Director of Cross-Asset Strategy at Nomura,

“Pre-FOMC drift” - but this time, thanks to a massive “kick-save” from Microsoft guidance which turned the entirety of global risk-assets from cratering lower in the after-hours trade last night to now, spasming higher into Fed later today (NQ +4.4% low to high) and with still substantial “short Gamma vs spot” out there for Dealer hedging purposes, as well as sharply “netted-down” exposure from Fundemental investors and outright “shorts” in CTA Trend….while conversely, we currently see a quiet R...



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Phil's Favorites

Indiscriminate selling

 

Indiscriminate selling

Courtesy of 

There are a few green stocks in the market today, and by “a few”, I mean you can count them on two hands and still have a few fingers left over. To gag yourself with. Those green stocks are things like Kohl’s (a special situation takeover story) and then it’s like grocery stores and shoe cobblers. That’s really it. Tesla is being absolutely mangled, which tells you which type of mutual funds and ETFs are being redeemed (liquidated?) today.

I have some buy limit orders in at completely out...



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Biotech/COVID-19

How mRNA and DNA vaccines could soon treat cancers, HIV, autoimmune disorders and genetic diseases

 

How mRNA and DNA vaccines could soon treat cancers, HIV, autoimmune disorders and genetic diseases

Nucleic acid vaccines use mRNA to give cells instructions on how to produce a desired protein. Libre de Droit/iStock via Getty Images

Courtesy of Deborah Fuller, University of Washington

The two most successful coronavirus vaccines developed in the U.S. – the Pfizer and Moderna vaccines – are both mRNA vaccines. The idea of using genetic material to produce an immune response has opened up a world of research ...



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Politics

5 things to know about why Russia might invade Ukraine - and why the US is involved

 

5 things to know about why Russia might invade Ukraine – and why the US is involved

Courtesy of Tatsiana Kulakevich, University of South Florida

U.S. President Joe Biden said on Jan. 19, 2022, that he thinks Russia will invade Ukraine, and cautioned Russian president Vladimir Putin that he “will regret having done it,” following months of building tension.

Russia has amassed an estimated 100,000 troops along its border with Ukraine over the past several months.

In mid-January, Russia began moving ...



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Chart School

Bitcoin Swings Down to Support

Courtesy of Read the Ticker

Come on! Seriously do you think a 400% rally for Bitcoin was going to be given to the public easily. Without any pain! Come on muppets!



The uniformed (public) buy when price is rising or breaking new highs, the informed buy when price is falling or breaking lows.



The informed have to do it this way as they are large volume players and the only way they can buy large volume is to create chaos. The chaos brings to the market the weak holders and a forced sell. Price is moved to where the volume can be accumulated, in a bull trend that is down to critical support.



Of course if price is in a true bull market the 'chaos' created should not break critical long term trend signals, ...



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Digital Currencies

The metaverse is money and crypto is king - why you'll be on a blockchain when you're hopping

 

The metaverse is money and crypto is king – why you’ll be on a blockchain when you’re virtual-world hopping

In the metaverse, your avatar, the clothes it wears and the things it carries belong to you thanks to blockchain. Duncan Rawlinson - Duncan.co/Flickr, CC BY-NC

Courtesy of Rabindra Ratan, Michigan State University and Dar Meshi, Michigan State University ...



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Promotions

Phil's Interview on Options Trading with TD Bank

TD Bank's host Bryan Rogers interviewed Phil on June 10 as part of TD's Options Education Month. If you missed the program, be sure to watch the video below. It should be required viewing for anyone trading or thinking about trading using options. 

Watch here:

TD's webinar with Phil (link) or right here at PSW

Screenshots of TD's slides illustrating Phil's examples:

 

 

&n...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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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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