Subscribe: RSS Feed | Twitter | Facebook | Email
Home | Contact Us

Archive for the ‘foreclosures’ Category

Bill Black: Regulators’ Latest Betrayal of Homeowners

Posted by Larry Doyle on May 1st, 2014 10:22 AM |

I sing the praises of former banking regulator Bill Black in my book, In Bed with Wall Street, for many reasons.

Black stands up, speaks out, and tells it like it is while all too many in our nation’s capital and regulatory offices prostrate themselves in service and homage to powerful financial elites. Major props to Black for bringing attention today to another in a long line of betrayals of American homeowners.

The WSJ and other periodicals recently made passing reference to an egregious travesty within the bank settlements of foreclosure abuse. Props to Barry Ritholtz at The Big Picture for providing the forum for Black to expose real fraud in the system and the accompanying degradation of the rule of law in the process. Let’s navigate as Black provides the transparency that is truly the great disinfectant to a system that smells: (more…)

Mortgage Foreclosure Abuse: The Fight Continues

Posted by Larry Doyle on January 27th, 2014 8:28 AM |

I wish I had the silver bullet to address and fix the rampant abusive practices that have transpired within the mortgage servicing entities of many of our large banks and elsewhere.

I don’t.

That said, the ongoing problematic issues within mortgage servicing practices remain prevalent. How do I know? I hear from people entangled in this mess on an ongoing basis.

In my opinion, these issues go right to the core of what I believe is the problem with the structure of our banking industry in America today. That problem centers on the fact that we have a few banks (e.g., JP Morgan Chase, Bank of America, Wells Fargo) that dominate the market, especially within the mortgage realm.

As many longtime readers of my blog are aware, this economic structure known as an oligopoly allows, if not promotes, the following abusive type practices: (more…)

Judge Rakoff: Why Have No High Level Executives Been Prosecuted In Connection With The Financial Crisis?

Posted by Larry Doyle on November 14th, 2013 11:15 AM |

It is not often that I have had the pleasure of reading and reviewing two Sense on Cents instant classics in the course of just a few days but today I am excited to bring you another absolute MUST READ.

None other than Judge Jed Rakoff, who has heard many of the major financial suits brought over the course of the last few years, spoke the other day to the New York City Bar Association regarding the question so many in our nation still ask, “Why have no high level executives been prosecuted in connection with the financial crisis?

In what might have been a fabulous foreword to my upcoming book, Rakoff skillfully delivers what I believe is an incredibly excoriating indictment of those within the Department of Justice,the SEC, and elsewhere. (more…)

Rackets + Inmates Run Asylum = Banana Republic Recommended

Posted by Larry Doyle on April 12th, 2013 8:06 AM |

Not that we needed any further evidence that the inmates on Wall Street are running the asylum in Washington or that our nation is seriously eroding from within, but recent testimony regarding the settlement of the mortgage foreclosure debacle provides it.

You recall the shenanigans within this foreclosure fiasco where the banks often employed individuals for $10/hour to robo-sign documents and illegally foreclose on people’s homes, don’t you? I defined this specific practice and much of what it encompassed as part and parcel of an enterprise that could only be described as racketeering. Well, there’s more.  (more…)

The Real Issues Behind the Foreclosure Crisis

Posted by Larry Doyle on October 13th, 2010 12:32 PM |

What is really going on in regard to the moratorium on mortgage foreclosures? A lot. Not all of it would qualify as the best of “sense on cents.” My thoughts include the following:

1. Can we now declare the HAMP (Making Home Affordable) program to be totally futile? How is it that everybody on Wall Street and in Washington is now promoting that the economy will be harmed if we forestall the mortgage foreclosure process? What the hell have the wizards in Washington been doing via HAMP and through Freddie and Fannie for the last 18 months? The simple fact is our policy makers have done everything in their power to inhibit the markets from working. Now, all of a sudden, they become proponents of free market principles? Were we born yesterday? Not here at Sense on Cents.

I have continually harangued our Washington politicos for not allowing the housing market to clear, and highlighted how forestalling that process would only prolong our economic pain. We’re feeling that pain now and will be for the foreseeable future.

2. Where are we going with this moratorium? (more…)

A Proposed Solution to the Foreclosure Crisis

Posted by Larry Doyle on August 17th, 2010 12:12 PM |

With the Conference on The Future of Housing Finance being held in Washington today, do we really expect the government to propose anything that may help support or fix our system of housing finance? I am not optimistic and I am an optimist by nature. I am a big believer in unleashing the power and strength of entrepreneurial minds to address our problems. Why haven’t these minds developed solutions? Do you think that these minds are stifled by the overwhelming presence of Uncle Sam? I do. Back to housing and entrepreneurial spirits.  

I love when Sense on Cents can provide fertile ground for the free and open exchange of ideas, opinions, thoughts, and analysis on critically important issues of the day. I am deeply grateful when people not only comment here at Sense on Cents but I encourage people to provide written commentary. I can not promise that I will run every commentary that is submitted but I will seriously review and consider running those that I believe are deserving of greater exposure. I appreciate your allowing me to make those judgments. Plus ….it is my blog.

I have always maintained that jobs and housing are the two great linchpins upon which our economy rests. The government has thrown hundreds of billions of dollars at our housing crisis with no meaningful success….all reports aside. What can be done to solve the foreclosure crisis weighing on our housing market, our economy, and ultimately our nation?  (more…)

Moody’s Sees Foreclosure Bubble

Posted by senseoncents on February 26th, 2010 10:57 AM |

Great minds think alike. On the heels of my initial morning commentary regarding my belief that housing will remain under pressure, my friends at 12th Street Capital shared a recently released report from Moody’s on the residential mortgage market.

What does Moody’s see? A foreclosure bubble. Ouch!!

Moody’s writes:

HAMP, Moratoriums, and Court Delays Expand Foreclosure Bubble: >>>>> (more…)

Uncle Sam’s New Mousetrap to Stem Foreclosures

Posted by Larry Doyle on October 13th, 2009 2:40 PM |

Despite hundreds of billions of dollars in support of Freddie Mac, Fannie Mae, the Federal Housing Association, and mortgage modifications, our housing market continues to be swamped with an ever increasing wave of foreclosures. The shadow supply of homes overhanging the market is estimated to be in the realm of 15 month’s worth.  Last week, I wrote that Washington needed to address this issue in my post  “Washington Needs a New Housing Model.”

Thanks to our friends at 12th Street Capital, we learn today that Treasury will release a new plan next week to stem the wave of foreclosures. How might this work? Let’s navigate a release which came from the Mortgage Banker’s Association convention currently ongoing in San Diego. Housing Wire reports, Treasury to Announce New Program to Avoid Foreclosure:

The United States Department of the Treasury is launching, with an official announcement expected next week, a new program to help ailing borrowers escape foreclosure.

The Chief of the Homeowner Preservation Office at the Treasury, Laurie Maggiano, released information on the Home Affordable Foreclosure Alternatives (HAFA) while speaking at the MBA’s 96th Annual Convention going on in San Diego. The official launch is expected in the next week or so.

HAFA already holds the support of Fannie, according to a VP at the agency, Eric Schuppenhauer, who believes the new program allows borrowers in imminent default to “make a graceful exit” from their home. HAFA will keep the stigma associated with foreclosure away from the borrowers, he added, and help keep communities intact.

Maggiano adds that HAFA will offer financial incentives to both servicers and borrowers, and associated secondary investors, in order to facilitate a short sale or deed in lieu of the property.

Borrowers will need to be Home Affordable Modification Program (HAMP)-eligible and Maggiano released some stats for the crowd’s consumption. 2,484,783 homeowners have requested information on HAMP. 757,955 HAMP plans were offered. 487,081 trials are underway.

Other additional [1] incentives to the short sale industry are nearly developed. The IRS will soon offer a 4506EZ form that will enable servicers to pre-fill out the information so that it only requires a borrower’s signature. It also will include softer language so as not put potential participants off.

For those unaware, a “short sale” entails a home being sold for less than the balance of the mortgage. The homeowner is not held responsible or liable for making up the difference between the proceeds generated by the sale and the mortgage balance. That difference is eaten by whomever ‘owns’ or is holding the mortgage. The owner or holder could be the originator if that entity never sold the mortgage. The owner or holder could be a trust on behalf of investors if the loan had been securitized.

What is the motivation to promote short sales rather than allowing the foreclosure process to run its course? Short sales may be short in terms of proceeds although they are not necessarily short in terms of time. That said, short sales typically do expedite the sale of a home. Short sales have typically occurred at a 10-20% discount to the market. Why? The homes have not been prepared for sale, meaning ‘dressed up.’

The monetary incentive provided to mortgage servicers to promote short sales will likely have a similar impact as the monetary incentive provided to modify mortgages. What has that impact been? Not much.

While many of Uncle Sam’s programs have been designed to buy time and allow the market and economy to recover, that approach has proven not to work so far in housing. Will this short sale program work to support housing? I doubt it.

I think what this program will look to achieve is to actually lessen the negative stigma associated with the term foreclosure. If Uncle Sam can say foreclosures are declining, he can then wave the flag as making progress on housing.  What he will be doing, however,  is merely ‘redefining’ foreclosure or in other words, ‘putting perfume on a pig.’

This program theoretically will negatively impact bank capital as banks will be forced to take a loss sooner rather than later on those mortgages they hold which are involved in short sales.

Aside from that development, real integrity in this process would include:

>> Add short sales to foreclosures as a more robust measure of housing supply stemming from delinquent mortgages.

>> Assess home prices along with rental rates to measure overall cost of housing.


Washington Needs a New Housing Model

Posted by Larry Doyle on October 8th, 2009 12:04 PM |

Traders, strategists, analysts, economists, and politicians will always review models of past behaviors in an attempt to forecast future developments. In the process, the models are only as robust as the inputs. Many of the aforementioned individuals will become overly dependent on models. The risk in that process is that the models ‘work until they don’t work.’ As a result, programs, policies, and procedures are implemented that perhaps exacerbate rather than amend a situation. I believe this scenario is playing out in our housing market.

The breakdown in Washington’s housing model revolves around the newly developed phenomena known as “strategic mortgage defaults.” I highlighted this topic a few weeks back in writing, “Strategic Mortgage Defaults Have Major Implications for Markets and Economy.” We see more evidence of this new extension on our housing model in a report released by Reuters, The Flood of Foreclosures Shows No Sign of Ebbing:

The Center for Responsible Lending says foreclosures are on track to wipe out $502 billion in property values this year.

Investor's Real Estate Guide

That spillover effect from foreclosures is one reason why Celia Chen of Moody’s says nationwide home prices won’t regain the peak levels they reached in 2006 until 2020.

In states hardest-hit by the housing bust, like Florida and California, the rebound will take until 2030, Chen predicted.

“The default rates, the delinquency rates, are still rising,” Chen told Reuters. “Rising joblessness combined with a large degree of negative equity are going to cause foreclosures to increase,” she added.

Anyone doubting that the recovery in U.S. real estate prices will be long and hard should take a look at Japan, Chen said.

Prices there are still off about 50 percent from the peak they hit 15 years ago.


Strategic Mortgage Defaults Have Major Implications for Economy and Markets

Posted by Larry Doyle on September 21st, 2009 11:29 AM |

The Brave New World of the Uncle Sam economy has brought our economy and markets into realms very rarely seen or experienced. One of those realms which has received very little coverage, but will have major implications for the economy and markets going forward, is “strategic mortgage defaults.” What are strategic mortgage defaults and what will be the growing impact of this phenomena? Let’s navigate.

High five to KD of 12th Street Capital for bringing this development to our attention. The Los Angeles Times profiles this very troubling slope on our economic landscape in writing, Homeowners Who ‘Strategically Default’ on Loans a Growing Problem:

With foreclosures, delinquencies and loan losses at record levels, strategic defaults and walkaways are among the hottest subjects in residential real estate finance. Unlike in earlier academic studies, Experian and Wyman could tap into credit files over extended periods to identify patterns associated with strategic defaults.

The number of strategic defaults is far beyond most industry estimates — 588,000 nationwide during 2008, more than double the total in 2007. They represented 18% of all serious delinquencies that extended for more than 60 days in last year’s fourth quarter.

Strategic mortgage defaults are nothing more than a very calculated financial maneuver primarily by people with high credit scores. These people are literally walking away from their homes – and the mortgages on those homes – with little to no warning or indication of stress typically identified by increased delinquencies on the mortgage payment or other credit payments.

Why are people doing this? To fully understand the reasoning behind people strategically defaulting, we need to understand why people bought these homes and took out these mortgages in the first place. Over the last decade, many people purchased homes, including their primary residence, for investment purposes as much as for shelter and protection. As with other investments, these high credit and financially savvy people are assessing the market value of their home relative to their carrying costs (mortgage payments, taxes, utilities, etc) and making the decision that they are financially better off walking away from the property and mortgage than continuing to make the payments.

Is there a moral failure in this practice, especially on behalf of those individuals who do have the financial wherewithal to make their payments? Perhaps, but we should not kid ourselves that people bring their morals – or lack thereof – into their financial affairs. (more…)

Recent Posts