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HomeMortgage 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…)
Mortgage Settlement Pisses Into the Wind
Posted by Larry Doyle on February 12th, 2012 5:34 PM |
In a nation now all too familiar with a “too big to fail” banking system, a heavily manipulated and high frequency dominated equity market, and an incestuous financial regulatory system, we should not be surprised with a mortgage settlement that does little more than ‘piss into the wind’.
Pardon my cynicism, but one does not need to look too deeply into the recently announced mortgage settlement to understand there is little in the way of meaningful justice embedded in this contrivance. (more…)
12th Street Capital Provides Perspective on the Foreclosure Fiasco
Posted by Larry Doyle on October 22nd, 2010 11:23 AM |
What the hell is truly going on within the entire mortgage foreclosure fiasco? There are seemingly more angles to this mess than there ever were choices of mortgage products themselves. Where can we turn to make some ‘sense’ of this madness? Let’s check in with the crowd on the cutting edge of this sinkhole, that is our friends at 12th Street Capital. Today they write,
Not surprisingly the ones that look to be best positioned during this mortgage foreclosure/put back fiasco are the lawyers. As reported by HousingWire.com late yesterday, “A spokesperson for the New York law firm Quinn, Emanuel Urquhart & Sullivan confirmed to HousingWire it has been hired by the Federal Housing Finance Agency, a move some say means the government-sponsored enterprises are going after bad mortgages it bought from originators.” Guess what, the GSEs have ALWAYS pursued repurchases. (more…)
Mortgage Modifications: Statistically Insignificant
Posted by Larry Doyle on October 29th, 2009 4:16 PM |
How meaningful is the mortgage modification program? What have we gotten for the billions committed to this initiative? Are you sitting down?
For frame of reference, the U.S. Census Housing Data indicates there were 110.3 million occupied housing units in the country in 2007. Of that number, 68.1% were owner-occupied. Simple math tells us 75.1 million people owned their home at that point.
Various studies indicate that approximately one of every three homeowners are now ‘underwater’ (mortgage balance exceeds home value). Many analysts believe that number is headed higher. A Deutsche Bank analyst projects one of every two homeowners will ultimately be ‘underwater.’
Simple math indicates that approximately 25 million homeowners are underwater. What is being done to support these homeowners? Uncle Sam’s primary program to support this growing problem is the ‘mortgage modification’ program. This program is supposed to be driven by mortgage servicers. How is it working? Let’s navigate. (more…)
Senate Approves Safe Harbor Mortgage Modification; Property Rights? What’s That?
Posted by Larry Doyle on May 6th, 2009 3:55 PM |
The assault on property rights continues as the Senate just passed the Safe Harbor Mortgage Modification legislation. Recall how I wrote the other day in Mortgage Magic or Mortgage Mayhem that this legislation would protect mortgage servicers from suit by mortgage investors.
Why would investors sue servicers? Servicers are charged with processing monthly principal and interest payments of mortgages and distributing the cash flow to investors. If they do not perform, then to this point they would and should be sued. Investors have the right to those payments for which they committed their funds.
The Safe Harbor Mortgage Modification legislation will protect servicers from lawsuits in the cases where mortgages have been modified and investors’ interests supposedly remain protected. One would think that covers all the bases. As I highlighted, however, the legislation may very well promote self-dealing amongst a number of the larger banks which both service mortgages and hold second mortgages.
From Bloomberg’s article, Senate Defeats TARP Measures To Move Safe-Harbor Bill:
The Mortgage Bankers Association and consumer advocates have endorsed the safe-harbor provision to protect mortgage servicing companies from being sued by mortgage-bond investors if they modify loans in accordance with President Barack Obama’s Making Home Affordable anti-foreclosure program.
“Safe harbor is something that you want as a servicer,” said Ajay Rajadhyaksha, the head of fixed-income strategy at Barclays Capital in New York. “Without the safe harbor, you’re far more skittish about doing anything.”
Corker said in a speech on the floor that the measure is a boon to larger servicers including JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Bank of America Corp. An amendment Corker sponsored that would have required borrowers to seek other forms of aid before their loans could be modified failed.
Mortgage bond buyers including Clayton DeGiacinto of Tower Research Capital in New York said allowing the safe harbor provisions removes any accountability servicers have to minimize investor losses and may make the process more susceptible to political pressure and more costly for borrowers.
“It ultimately makes bond investors skeptical and adds an additional layer of risk that will need to be priced into the securities,” said DeGiacinto, who manages a distressed mortgage fund.
I am all for credible and equitable legislation which promotes decreasing foreclosures. In the process, however, the legislation should be airtight in making sure there is no self-dealing and conflicts of interest. That question regarding this legislation remains outstanding.
While this legislation may help limit foreclosures in the near term, the real cost may be borne in the years ahead in the form of higher mortgage rates. Why might that happen? If banks which service mortgages are influenced and incentivized not to protect the investors’ property rights and thus don’t, the investors will sell their holdings, and take their bat and ball to another field.
LD
Mortgage Magic or Mortgage Mayhem?
Posted by Larry Doyle on May 5th, 2009 7:02 AM |
Are the largest banks in the land ready to defy the rule of law and self-deal with Uncle Sam’s blessing in the name of providing mortgage relief to homeowners currently strapped by first and second mortgages? The WSJ reports How Big Banks Want To Game The Mortgage Mess.
Is this another game of chance in which Uncle Sam wants to prime the pump in hopes of luring private capital into the economy? No, anything but. In fact, this is no game at all. Uncle Sam is proposing legislation which would protect mortgage servicers from being sued for not performing their duty to protect the property rights of mortgage investors (including pension funds, mutual funds, insurance companies). What does all this mean?
Investors in mortgage securities backed by first mortgages are entitled and expect protection of their capital by the performance of mortgage servicers handling the monthly payment of mortgage principal and interest. In fact, if the mortgage servicers do not perform the investors will and should sue.
The investors or holders of second mortgages will only receive a return if and when the first mortgage is current on its payment.
Will Congress pass legislation which would unintentionally incentivize large banks, which also happen to be large mortgage servicers, to game the mortgage modification process for their own benefit but at the expense of investors holding the first mortgages? The WSJ highlights:
Given the current housing crisis, there is wide support for measures to make it easier for homeowners to modify their mortgages. That is understandable. Nobody likes seeing the wave of foreclosures. Plus, mortgage modifications may help stabilize home values.
But in the rush to do something, Congress is showing a regrettable willingness to adopt constitutionally suspect legislation that runs roughshod over the Fifth Amendment of the Constitution, which prohibits the taking of private property without just compensation. (more…)
