Foreclosure Probe Talks Include Investors Urging Resolution

Very interesting discussions going on as noted in this bloomberg story.  It will be interesting to see how this ultimately shakes out…

Foreclosure Probe Talks Include Investors Urging Resolution

By Margaret Cronin Fisk and David McLaughlin – Nov 25, 2010

Mortgage-backed securities holders are pushing for a resolution of a 50-state probe of foreclosure practices, attorneys general in Iowa and Arizona said as talks with lenders and servicers expand to include investors.

“The mortgage backed securities are worth pennies on the dollar, so any kind of recovery would be better,” Arizona Attorney General Terry Goddard said in an interview. Owners of mortgage-backed securities are “one of the players urging a resolution,” he said. State officials have begun informal talks with some investors, Iowa Attorney General Tom Miller said.

All 50 U.S. states are investigating whether banks and loan servicers used false documents and signatures to justify hundreds of thousands of foreclosures. The probe, announced Oct. 13, came after JPMorgan Chase & Co. and Ally Financial Inc.’s GMAC mortgage unit said they would stop repossessions in 23 states where courts supervise home seizures and Bank of America Corp., the largest U.S. lender, froze foreclosures nationwide.

The probe has since widened to include other mortgage practices, with attorneys general suggesting any potential resolution should include improving the loan modification process, barring foreclosures when people are modifying loans and creating a general fund to compensate homeowners who may have been victims of wrongful foreclosures.

“Robosigning was the straw that broke the camel’s back,” Goddard said, referring to the practice of loan servicer employees signing thousands of documents without determining if they were accurate. “It was proof positive that it wasn’t just in one state and virtually every financial institution was complicit.”

Expand Their Talks

Miller, the leader of the 50 attorneys general in the investigation, said Nov. 23 that the states plan to expand their talks with investors to face-to-face meetings.

“They are an important part of the resolution,” he said in an interview.

Dallas attorney Talcott Franklin and Houston lawyer Kathy Patrick, who represent investors in mortgage-backed securities, didn’t return calls or emails seeking comment.

A group of investors coordinating through Franklin’s RMBS Investor Clearing House owns at least 25 percent of voting rights in more than 3,000 mortgage securitizations, he said Nov. 12. Patrick represents bond investors including the Federal Reserve Bank of New York and BlackRock Inc., which are seeking to force Bank of America to buy back bad home loans.

No Quick Accord

A quick settlement is unlikely, Miller said.

Reports of a quick resolution are “totally wrong,” the Iowa official said. “It’s going to take a little longer.”

The interests of some investors are one obstacle to a quick settlement, said Miller.

Pooling and servicing agreements may dictate rights on loan modifications, and there are restrictions on gaining approval for adjustments on portfolios owned by government sponsored enterprises, such as Freddie Mac and Ginnie Mae.

“We’re working with our federal partners” to resolve this, Miller said.

Laurie Goodman, an Amherst Securities Group LP analyst, said at a conference in October that investors owning mortgage- backed securities fear any settlement with the attorneys general will involve “a large scale modification effort” that hurts bondholders. This reluctance isn’t universal, Miller said.

“Some of them tell us they’re not opposed to modifications,” he said.

Payment Beats Foreclosure

Investors are realizing that “foreclosure takes them out of the picture,” said Arizona Attorney General Goddard. “It’s far better to have someone pay, even if it’s a reduced value.”

Banks have suggested the securities owners may block a settlement that includes loan modifications, said Chris Katopis, executive director of the Association of Mortgage Investors.

“The servicers are painting us as a convenient patsy,” he said. “We find it absolutely inaccurate that we’re holding up the modification process.”

The mortgage investors oppose eliminating the so-called dual track, in which homeowners can be facing foreclosure while being considered for a loan modification, Katopis said.

“The dual track is a tool for avoiding foreclosures,” he said in a phone interview. “You have to hold people’s feet to the fire somehow.”

Iowa’s Miller rejected that argument, saying “dual track is fundamentally a bad practice. It creates great anxiety and uncertainty for the homeowner. The problems in modifications have not been to get homeowners to agree.”

No Global Accord

Miller has said that there wouldn’t be a global settlement of the 50-state investigation.

“It would be one bank at a time,” he said on Nov. 8.

A universal settlement is unlikely because the banks and servicers have been “all over the board” about whether they have a problem with their foreclosure procedures or whether they’ve done anything wrong, said Mark Kaufman, the Maryland Commissioner of Financial Regulation.

While the 50-state group has begun talking to banks as part of its investigation, individual attorneys general are continuing with separate probes.

Illinois Attorney General Lisa Madigan is reviewing information provided by mortgage companies, spokeswoman Robyn Ziegler said. The office demanded information from 26 companies, including Wells Fargo & Co. She declined to comment about which companies have provided information or about any meetings with them.

“We’re reviewing information they provided to us, and we’re in discussions with them,” Ziegler said.

Florida Talks

Florida Attorney General Bill McCollum’s office has spoken with representatives of Bank of America, JPMorgan, Detroit-based Ally, PNC Financial Services Group Inc. and Goldman Sachs Group Inc.’s Litton Loan Servicing, according to his spokeswoman, Sandi Copes. McCollum asked to meet with the companies in October to discuss their foreclosure practices.

The office had follow-up discussions with Bank of America, New York-based JPMorgan and Litton.

“We have had constructive meetings with attorneys general and a number of positive steps have been discussed,” Jumana Bauwens, a Bank of American spokeswoman said in an e-mail. She declined to elaborate.

Donna Marie Jendritza, a spokeswoman for Litton, declined to comment immediately. Thomas Kelly, a JPMorgan spokesman, declined to comment.

McCollum also is seeking to meet with San Francisco-based Wells Fargo. The request came after the bank said that it found problems with foreclosure affidavits, Copes said

Talks ‘Will Continue’

“I think the conversations will continue for the foreseeable future,” Copes said. “It’s too early to determine what resolutions will be pursued.”

Vickee Adams, a spokeswoman for Wells Fargo, didn’t return a phone call seeking comment.

If banks fail to reach an agreement with the attorneys general group, “they could be facing 50 separate pieces of litigation,” Arizona’s Goddard said.

While the states have recently begun talks with investors, negotiations with banks and mortgage services continue, said Richard Blumenthal, Connecticut’s attorney general.

“Loan servicers and lenders are cooperating with our investigation, which has expanded beyond robosigning. Ongoing discussions with lenders and servicers include reforming the loan modification process and greater foreclosure relief for homeowners,” Blumenthal, who was elected U.S. senator for Connecticut this month, said in a statement.

“We will explore all options, including possible legal action, if discussions fail to produce a settlement assuring the rule of law, property rights and fair treatment,” he said.

To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, at and; David McLaughlin in New York at

To contact the editor responsible for this story: David E. Rovella at


Is It Time to End the Mortgage Tax Deduction?

Larry says “I hope not” that would be a big mistake.

Published: Monday, 15 Nov 2010 | 12:01 PM ET
By: Diana Olick
CNBC Real Estate Reporter

It was floating around as a less-than-politically-enticing possibility for a while, and then the president’s deficit commission gave it legs. They proposed taking a hack saw to the mortgage interest deduction, and slimming it down to size.

Now, as we watch the lame duck Congress hash and re-hash old issues for the next few weeks, we know a far more subsidy-wary set of lawmakers are packing their camp trunks for Capitol Hill.

Home buyer tax credits and mortgage bailouts included, the mortgage-interest deduction is the biggest ongoing boon to the housing market and one of the costliest deductions in the U.S. tax code. It will slice an estimated $131 billion out of tax revenue in 2012.

The Wall Street Journal calls it the “sacred cow of the tax code,” while the New York Times deems it “politically sacrosanct.” That’s because it’s one of very few tax breaks upon which the middle-income earner can depend. While a cut in the tax break might have been slightly palatable during good times and a housing boom, it seems like a nail in the coffin to the housing market today.

I agree with the Mortgage Bankers Association that “limiting its use will have negative repercussions for consumers and home values up and down the housing chain,” but does that mean it should forever exist? Does it necessarily mean it shouldn’t be scaled back?

This is the constant conundrum. Housing subsidies do nothing but push borrowers to take on more debt. They inflate home prices artificially by giving buyers more spending power. Perhaps if subsidies were gone, home prices would settle to levels of actual affordability.

The mortgage-interest deduction is not a boon for the rich, since it’s capped at a million dollars anyway, and some argue that it doesn’t promote home ownership because other countries that don’t have it do have similar ownership rates as the U.S.

Proposals to minimize the deduction have failed because there aren’t a whole lot of Americans who can look at the growing deficit and say, “Sure, I’ll give up some of my own cash to shrink it a bit!” And their representatives in Congress know that.

Still, proposals to minimize the deduction have failed because there aren’t a whole lot of Americans who can look at the growing deficit and say, “Sure, I’ll give up some of my own cash to shrink it a bit!” And their representatives in Congress know that.

With mortgage interest rates now at near-historic lows, and home prices falling to far better levels of affordability, would a cut in the mortgage-interest deduction really affect a potential buyer’s ability to purchase a home? It shouldn’t, because if need be they could just buy a slightly less expensive home. There are plenty of those around.

But in today’s market everything is about fear and perception; the very perception that government is pulling the remaining bits of rug out from under the housing market will weigh far more heavily on a buyer’s decision-making process than any real fiscal calculation weighing down their bank accounts.

Devastating Portrait of Florida’s Rocket Docket Foreclosure Courts

This is a pretty amazing (incredible, unbelieveable???) story about the courts rubber stamping the banks foreclosure paperwork and more.  I could go on but it’s better to just read the story itself.  This is a synopsis/critique from CNBC on Matt Taibbi’s Rolling Stone Magazine story.  Follow the link and read the whole story.  Very interesting.  There is plenty of blame to go around for this insane housing and resulting economic crisis but you’ve just got to wonder about … well, just read the story and come to your own conclusions.  Then post your comments/thoughts.  Happy Monday!  Let’s all have a great week as we ponder what we are thankful for.


Published: Saturday, 13 Nov 2010
Senior Editor,

The latest issue of Rolling Stone is out with a devastating portrait by Matt Taibbi of the foreclosure process in Florida. If it pierces the public consciousness the way Taibbi’s articles on AIG and Goldman Sachs [GS  165.83  -1.88  (-1.12%)   ] did, it could be a game-changer.

Justin Sullivan | Getty Images

The set-up is pretty simple. Taibbi goes down to Florida and sits in on one of the make-shift foreclosure courts Florida has set up to deal with the enormous volume of foreclosure cases in the state. It’s really just a small conference room run by a formerly retired judge who has been brought on to speed through foreclosures.

Taibbi discovers far worse than sloppy paperwork on the part of banks—although he discovers plenty of that too. He discovers that the foreclosure process is heavily skewed to favor the banks. If a homeowner doesn’t show up to defend himself or herself, the judge issues the foreclosure order. If the bank fails to send a representative, he just pushes back the date. When a bank submits a trail of ownership of the mortgage note that makes no sense, it just comes back later with a different set of ownership documents.

From Rolling Stone:

This is the dirty secret of the rocket docket: The whole system is set up to enable lenders to commit fraud over and over again, until they figure out a way to reduce the stink enough so some judge like Soud can sign off on the scam. “If the court finds for the defendant, the plaintiffs just refile,” says Parker, the local attorney. “The only way for the caseload to get reduced is to give it to the plaintiff. The entire process is designed with that result in mind.”

Is this a fair portrait of the foreclosure process? We have no idea. But it may well wind up changing the politics of foreclosure in a way that could make it far costlier for a bank to foreclose on a homeowner. Depending on your point of view, that could either convince banks to be more open to loan modifications or keep the housing market in turmoil for even longer. But poison or pure, this apple looks ripe for the picking.

By the way, Taibbi’s success at piercing through the public consciousness tends to bother financial reporters. (I’ve had occasion to duke it out with him in the past on the issue of naked short selling.) But he is a good story-teller and a thorough reporter who obviously takes time and effort to learn about his subjects. Importantly, he doesn’t let his stories get bogged down in technical jargon—one of the errors that makes so much financial journalism boring.

The complete Rolling Stone story is here

Matt Taibbi: Courts Helping Banks Screw Over Homeowners

Retired judges are rushing through complex cases to speed foreclosures in Florida

Foreclosure Activity Decreases 4 Percent in October

IRVINE, Calif. – Nov. 11, 2010 — RealtyTrac® (, the leading online marketplace for foreclosure properties, today released its U.S. Foreclosure Market Report™ for October 2010, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 332,172 properties in October, a 4 percent decrease from the previous month and almost exactly the same total reported in October 2009. One in every 389 U.S. housing units received a foreclosure filing during the month.

“October marks the 20th consecutive month where over 300,000 U.S. homeowners received a foreclosure notice,” said James J. Saccacio, chief executive officer at RealtyTrac. “The numbers probably would have been higher except for the fallout from the recent ‘robo-signing’ controversy — which is the most likely reason for the 9 percent monthly drop in REOs we saw from September to October and which may result in further decreases in November.”

Are they crazy or trying to actually throw us into a deep(er) recession/depression…

I read this article today on the Presidents “National Commission on Fiscal Responsibility and Reform.”    The title reads: U.S. Debt Proposal would cut Social Security, Taxes and Medicare.

A presidential commission’s leaders proposed a $3.8 trillion deficit-cutting plan that would trim Social Security and Medicare, reduce income-tax rates and eliminate tax breaks including the mortgage-interest deduction.

The plan would overhaul the federal budget by throwing out hundreds of tax breaks for items such as capital gains and child care. It would raise the gas tax, slash defense spending and bring down health-care costs by clamping down on medical malpractice suits. The Social Security retirement age would be raised to 68 in about 2050 and 69 in about 2075.

The understatment of the day is by Erskine Bowles, co-chariman:

“This country’s out of money and we better start thinking”

Daahhh, that sounds like a good idea.  We all have our own beliefs, issues and hot buttons when it comes to government and politics so I’ll not start a debate on philosophies however I think anyone with half a bit of common sense could probably agree we need to cut the size of our government.  It has grown too large and too chaotic to effectively manage any real important issues of our time.  Everyone of us has to do more with less these days, the government should too.  Too many perks, too many back room dealings, no beneficial legislation.  It’s not about passing laws, heck in this irrational, politically correct era they could probably do more good by repealing old, out of date and wasteful laws and programs that have outlived their usefulness.  Now there is a useful house cleaning task.  Another thought: If our beloved government is so concerned about our health and welfare as mere civilians and they want to put us all on a even playing field (ahh, there’s a whole other debate there) they should make themselves subject to the same laws, the same Health Care programs and the same Retirement benefits.  Remember those, my dad used to talk about those but they are long gone for those of us in the civilian class.

This country was build by individuals.  Small businesses.  The government needs to stop trying to make everybody equal as not everyone is endowed equally.  Equal in the eyes of God and our Constitution but not in ability or gumption.  Unfortunately the truth, also known as reality sometimes hurts.  We don’t all have the same physical build, health, strength, skills, capacity for “knowledge”, and so on.  America is the land of opportunity.  I think the largest group of people that truly appreciate and believe that are those that legally immigrated to the USA with nothing but determination and ambition and made a life for themselves.  Our government was formed to protect us from tyranny (what an irony) and to create an environment for all to have the same opportunity as everyone else.  That is a good an noble cause but one that is lost in political correctness, cronyism, special interest lobbying and clever sound bites that may make the cut to a short news story.  Politicians need to stop building their own political fiefdoms and elitist class and do Americas business, not funny business.  How vain that politicians can claim they know what’s best for me better than I do.  How ridiculous and outrageous we have become.

America, I believe is the greatest country on the planet and one with the greatest opportunity for anyone with the will, passion and drive to achieve incredible dreams.  Not a bad thing.  Our government needs to get out of the way and let the market work things out.  We did have the largest economy which was a direct result of the freedom of opportunity.  Now China with the largest population in the world has eclipsed us, heck they own us with all the US government debt they own.  However China is a communist state and the growth has come from the government machine which owns most business’ or says who gets to start one (or not) as well as the banks so who do you think gets money when they need it.  God has truly blessed the USA.  I just hope we don’t live to witness our own self destruction.  I believe there is a quote from Abraham Lincoln that says something to the effect that no other nation will every be able to physically (by strength, militarily) take over the United States but that if we ever come to ruin it will be grown from within.  Hmmmm, there’s some food for thought.

God bless you all.


Larry Andershock

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