Politicians Encourage Strategic Default with Foreclosure Moratoria

The announcement by BofA — who was blackmailed by numerous government officials — to suspend all foreclosures strongly encourages strategic default. Why would anyone pay their mortgage when they know they can stop paying and keep their house?

Irvine Home Address … 13 GREENWOOD Irvine, CA 92604

Resale Home Price …… $415,000

C'mon and hold me

Just like you told me

Then show me

What I want to know

Why don't we steal away

Why don't we steal away

Into the night

I know it ain't right

Robbie Dupree — Steal Away

Steal away. No, i don't mean to move quietly off into the night, I mean brazenly steal the house your living in. Why don't borrowers steal away? Why don't they keep the house and ignore the mortgage. With news like this, I really don't understand Why Struggling Homeowners Keep Paying Their Mortgages; after all Squatting is Becoming a Way of Life for Many Delinquent Borrowers, and now, the bank is stopping all foreclosures. Given these circumstances, isn't strategic default the most prudent course of action?

Not everyone will strategically default. Many borrowers really can afford their payments, and they rightfully figure the foreclosure moratorium will end; however, the struggling masses who are considering accelerating their defaults have just been given the green light to bail because they know the bank isn't going to foreclose on them. This is a dumb policy the banks will later regret.

BofA Halts Foreclosures

Bank Expands Freeze After Pressure From Government-Run Mortgage Firm


Bank of America Corp. imposed a nationwide moratorium on foreclosures and the sale of foreclosed homes after it came under intense pressure from a government-run housing-finance giant worried about documentation problems, people familiar with the situation said.

The bank called the halt as concern mounted from legislators and state prosecutors about procedures used by lenders to foreclose on homes. Many banks use so-called robo signers, employees who sign hundreds of documents a day, without carefully reviewing their contents, when foreclosing on homes. Critics say that could result in improper foreclosures.

Improper foreclosures? Has anyone anywhere documented a case where a borrower who was current on their payments was foreclosed upon? Anyone who is not making their payments who ends up in foreclosure has experienced a "proper foreclosure." The notion of an improper foreclosure is simply a politician's fantasy. It gives those seeking election to public office something emotional to bluster about. The reality is there are no improper foreclosures.

Freddie Mac, the government-run mortgage-finance company that along with Fannie Mae owns many of the mortgages serviced by banks, pressed Bank of America to expand its search for problems with the foreclosure documentation process, said the people familiar with the situation.

On a call Thursday with several banks that included Bank of America, a Freddie official said the mortgage company wanted the institutions to look at foreclosure documentation across all 50 states, and asked them to consider putting a stop to the entire foreclosure process, say people familiar with the call.

Freddie Mac, an entity under government conservatorship and run by the Treasury department, asked major commercial banks to stop foreclosing on delinquent borrowers. This is one of two things: (1) It is a purely political act of desperate Democratic incumbents (Harry Reid and others) to make themselves look good going into next month's elections, or (2) the GSEs want to ramp up their own foreclosures while prices are still elevated and they don't want competition from the major banks (Government Expedites Foreclosures, Threatens Banking Cartel). I lean more toward political causes, but the economic issue cannot be dismissed.

Many in the banking industry fear that the widening paperwork problem could cause further delay on foreclosures and threaten an already weak housing market, which in turn is stalling the broader U.S. economic recovery. On the other hand, it could provide a brief financial respite to people who have defaulted on their mortgages and are still occupying their homes.

Could provide a respite? Do we need to give squatters any more breaks? For those of you waiting for these squatters to move out of your future home, how do you feel about this? You are paying a subsidy to the people living in your future home while you continue to work, pay bills, and rent.

As of August, there were more than 4.4 million home loans that were either in the foreclosure process or 90 days past due, according to mortgage research firm LPS Analytics. Since 2006, about 6.4 million homes have been lost through the foreclosure process.

Lost through the foreclosure process? Where did those houses go? Into the black hole of shadow inventory? The idea that these houses have been "lost" is very irritating. Any of those homes "found" on the MLS have been purchased by an owner-occupant or a cashflow investor who rented it out. While the squatter is living in the house, it is a completely non-productive asset; it costs money to maintain, but it produces no income. Foreclosure is the process by which we recycle these homes and obtain value from them. Nothing is lost in the foreclosure process.

Edward DeMarco, who heads the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, said in an interview that officials were working to find a "tailored" response to the foreclosure problem that won't cause broader problems for the fragile housing market. "We are trying to be quick but measured in the approach and the response taken," he said. "We're concerned about the whole housing market, and we're concerned about what this means for taxpayers and other market participants."

Can you find any substance to Mr. DeMarco's comment above? I read only bullshit.

Last week Bank of America, J.P. Morgan Chase & Co. and Ally Financial Inc. agreed to more closely examine documents used in 23 states where a court's approval is required to foreclose on a home. J.P. Morgan said its review suspended nearly 56,000 foreclosures.

In conversations with Bank of America, Freddie said financial penalties or litigation could result if the bank did not take additional steps, said a person familiar with the conversations. Bank of America told Freddie that an audit of procedures in the 23 states uncovered no errors, this person said.

But Freddie said the work didn't go far enough and asked for a review in all 50 states, as well a stop to any foreclosure sales, said people familiar with the situation. Freddie Mac declined to comment.

Of course Freddie Mac declined to comment, they just threatened B of A with a lawsuit if B of A didn't do what Freddie Mac asked. This is government extortion through an intermediary.

Bank of America Chief Executive Brian Moynihan said Friday that the bank hasn't found problems in its foreclosure process, but opted to temporarily halt all foreclosures to "clear the air." He said the bank wants to "go back and check our work one more time."

Its decision is expected to stop "a couple of thousand" foreclosure sales scheduled for the next week, according to one person familiar with the matter said. The bank declined to specify how many homes it has in the foreclosure pipeline.

All this is only expected to stop a few foreclosures for a single week? Talk about a tempest in a teapot. i hope the politicians get some mileage out of this.

So far, Bank of America is the only lender to expand its foreclosure freeze, but others may be forced to begin or broaden a review, banking executives say. Wells Fargo & Co., one of the nation's largest mortgage lenders, says it hasn't stopped foreclosing on any properties.

Apparently, the government is threatening other major banks, and they fully expect them to capitulate. Unbelievable.

At this point, J.P. Morgan isn't expanding its foreclosure moratorium, but is widening its document review beyond the 23 states where it has frozen foreclosures, according to a person close to the bank.


Bank of America services 14 million mortgages, or one out of every five in the U.S., and its loan-servicing portfolio exceeds $2.1 trillion in size. Of its mortgages, 10 million came from its 2008 acquisition of troubled California lender Countrywide Financial Corp. More than 80% of its delinquent loans were acquired through Countrywide.

What a great bargain that deal turned out to be, right?

A push over the last week from politicians and law-enforcement officials troubled by reports of foreclosure problems only intensified the pressure on Bank of America, which has been working to improve its relations in Washington. It concluded that reviews in just 23 states wouldn't cut it with elected officials in the other states, a person close to the bank said.

"In this intense political season we are in, it didn't play well to say do it in some states but not your state," this person said.

That confirms this is nothing but a political ploy. Disgusting.

Senate Majority Leader Harry Reid (D., Nev.), whose state has been hit hard by foreclosures, and House Oversight and Government Reform Committee Chairman Edolphus Towns (D., N.Y.), both said Friday they welcomed Bank of America's move and called on other banks to follow.

Cassandra Toroian, chief investment officer at Bell Rock Capital LLC, a money-management firm, says the additional reviews are unlikely to significantly impact the outcome for homeowners who are facing foreclosure. "It's just delaying the inevitable," she says.

Actually, this policy is likely to have impact — it is going to cause more accelerated default.

Momentum builds for full moratorium on foreclosures

By Ariana Eunjung Cha, Steven Mufson and Jia Lynn Yang

Washington Post Staff Writers

Saturday, October 9, 2010

Senior Obama administration officials said Friday that a nationwide moratorium on foreclosure sales may be inevitable, despite their grave reservations about the impact a broad freeze would have on the nation's housing market and economic recovery.

Their remarks were made as pressure for a nationwide moratorium mounted Friday when Bank of America, the nation's largest bank, halted evictions in all 50 states. Senate Majority Leader Harry M. Reid (D-Nev.), who is locked in a tight reelection campaign, called on other major lenders to follow suit.

The White House has so far resisted joining the election-season calls for action but convened two interagency meetings this week to discuss reports that banks filed fraudulent documents to evict borrowers who missed payments as well as fundamental questions about whether banks are seizing properties without having clear ownership of the mortgages.

I know the Democrats are desperate right now, but this kind of pandering is a major turnoff. It's the kind of thing that makes me want to see them lose. It's also clear evidence that the pressure being exerted by Freddie Mac is coming directly from the Obama administration and Harry Reid.

One meeting was made up mostly of groups that regulate the housing industry, including the Department of Housing and Urban Development, the Treasury Department and the White House. The other, which involved the U.S. Securities and Exchange Commission, the Internal Revenue Service and U.S. attorneys from across the country, was focused on the question of whether financial fraud was committed.

With foreclosed properties comprising one in every four homes sold in the United States, the spreading moratorium could disrupt real estate deals in progress, slow down the process of clearing the backlog of troubled home loans and prolong the economic recovery, analysts said.

A freeze would also strike at the financial sector, just two years after it suffered one of the worst crises in its history. One government official who has been in discussions with several big financial firms said the banks are bracing themselves for a wave of lawsuits from homeowners who are fighting to keep their homes and from investors who had bought mortgage loans on Wall Street. On Friday, while the Dow Jones Industrial Average crossed 11,000, most major bank stocks fell.

It looks as if the government is going to delay the recovery by keeping a huge overhang of shadow inventory despite the inevitably lawsuits.

… Also Friday, the Federal Housing Administration said it had asked agency-approved mortgage servicers – which includes the nation's largest banks – to immediately audit their foreclosure operations. The FHA can impose financial penalties on companies that do not follow rules set by housing regulators.

Questions over the legal standing of banks in foreclosure proceedings as well as reports that these firms cut corners as they pushed foreclosures through the legal system fueled calls in Congress for a nationwide freeze and federal investigations.

Another tool of threat the government has is the FHA.

Reid, who had earlier sent a letter to major banks asking them to suspend foreclosures in Nevada, expanded that call Friday after Bank of America's announcement.

"I thank Bank of America for doing the right thing by suspending actions on foreclosures while this investigation runs its course," he said.

The Senate banking committee's chairman, Christopher J. Dodd (D-Conn.), said Friday that his panel will hold hearings Nov. 16 to investigate the morass.

Rep. Edolphus Towns (D-N.Y.), chairman of the House Committee on Oversight and Government Reform, said the top 10 mortgage lenders should immediately suspend foreclosure proceedings in all states.

"The implications of ignoring the foreclosure problems are far too great to be ignored," he said Friday.

Bullshit. I can't believe these guys have the nerve to say these things. I suppose they are politicians in close elections, so nothing should surprise me. These guys are unbelievable.

… "Calls for a blanket national moratorium on all foreclosures are a bad idea and would cause significant harm to communities at risk, the unstable housing market and the fragile economy," the industry letter said.

Suspending foreclosures could end up forcing banks, which act as service companies for the loans, to spend billions of dollars to compensate investors who own the pools of mortgages they manage. And it could add to the losses at Fannie Mae and Freddie Mac, the two government-owned mortgage financiers.

Pension funds and other investors in the pools of mortgage securities are worried that the big banks will get special treatment from Washington.

"What's happened is a gross mishandling of paperwork and often times a misrepresentation of the transaction," said Chris Katopis, a spokesman for the Association of Mortgage Investors. "The banks have to have some responsibility and accountability for this."

chaa@washpost.com mufsons@washpost.com yangjl@washpost.com

The only people who benefit from a moratorium are politicians and squatters. Everyone else gets screwed.

HELOC abusing squatters will benefit from a moratorium

As you contemplate whether or not this moratorium idea is good or bad, take a hard look at the people who will benefit the most. Today's featured property is a particularly bad case of HELOC abuse and squatting. They went to the housing ATM every year for another withdrawal. The income subsidy was enormous. After you see how these people lived over the last decade, ask yourself if this is the kind of behavior we want to subsidize and see more of.

  • This house was purchased on 7/22/1998 for $132,000. Their original mortgage and down payment does not show up in my records. Let's assume they used an 80% first mortgage ($105,600) and a $26,400 down payment. This may have been a 3% down FHA purchase, but I don't know.
  • On 10/4/2001 they refinanced with a $130,000 first mortgage.
  • On 12/24/2002 they refinanced with a $175,000 first mortgage.
  • On 10/30/2003 they refinanced with a $279,300 first mortgage.
  • On 11/15/2004 they refinanced with a $385,000 first mortgage.
  • On 11/14/2005 they refinanced with a $450,000 first mortgage.
  • On 12/28/2006 they refinanced with a $524,000 Option ARM.
  • Total mortgage equity withdrawal is $418,400.

  • Total squatting time is about 20 months.

Foreclosure Record

Recording Date: 09/11/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 06/08/2009

Document Type: Notice of Default

Foreclosure Record

Recording Date: 05/12/2009

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 05/06/2009

Document Type: Notice of Default

This family lived off their housing ATM machine. They were pulling out an average of $83,680 per year. That was roughly the median income in Irvine during that time.

Do you think we should encourage this kind of financial management? If we bail these people out or let them keep their house, we are ensuring we will have many more borrowers who emulate them in the future.

Irvine Home Address … 13 GREENWOOD Irvine, CA 92604

Resale Home Price … $415,000

Home Purchase Price … $132,000

Home Purchase Date …. 7/22/1998

Net Gain (Loss) ………. $258,100

Percent Change ………. 195.5%

Annual Appreciation … 9.2%

Cost of Ownership


$415,000 ………. Asking Price

$14,525 ………. 3.5% Down FHA Financing

4.21% …………… Mortgage Interest Rate

$400,475 ………. 30-Year Mortgage

$78,371 ………. Income Requirement

$1,961 ………. Monthly Mortgage Payment

$360 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$35 ………. Homeowners Insurance

$320 ………. Homeowners Association Fees


$2,675 ………. Monthly Cash Outlays

-$309 ………. Tax Savings (% of Interest and Property Tax)

-$556 ………. Equity Hidden in Payment

$22 ………. Lost Income to Down Payment (net of taxes)

$52 ………. Maintenance and Replacement Reserves


$1,884 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$4,150 ………. Furnishing and Move In @1%

$4,150 ………. Closing Costs @1%

$4,005 ………… Interest Points @1% of Loan

$14,525 ………. Down Payment


$26,830 ………. Total Cash Costs

$28,800 ………… Emergency Cash Reserves


$55,630 ………. Total Savings Needed

Property Details for 13 GREENWOOD Irvine, CA 92604


Beds: 3

Baths: 1 full 2 part baths

Home size: 1,642 sq ft

($253 / sq ft)

Lot Size: 2,110 sq ft

Year Built: 1976

Days on Market: 128

Listing Updated: 40459

MLS Number: S619881

Property Type: Condominium, Residential

Community: El Camino Real

Tract: St


According to the listing agent, this listing may be a pre-foreclosure or short sale.

Wonderful 3 bedroom 2.5 bath, two car garage with enclosed paito. Close to shoping, fwy, school and parks. Price to sell!

paito? shoping? That description is fewer than 20 words, and the realtor managed to misspell two of them.

94 thoughts on “Politicians Encourage Strategic Default with Foreclosure Moratoria

  1. Eventual home buyer

    For those of you waiting for these squatters to move out of your future home, how do you feel about this? You are paying a subsidy to the people living in your future home while you continue to work, pay bills, and rent.

    I’m pissed about this. I’ve waited patiently on the sidelines for literally years waiting for the market to correct itself and the banks and gov’t keep doing the same song and dance to keep irresponsible loan owners in the banks homes. I have money for 20% down, a decent job and I can’t buy a reasonably priced home. This is pathetic.

    1. aceman

      Me too man, I have been waiting patiently thinking early next year would be great, now I am considering that it may be alot longer than I expected. I hate this situation my love for this state and country are at an all time low…I am fed up! what a mess we are all in!

    2. Shevy

      Exactly! *It’s a smoke screen. They are setting us up for another round of money to go from responsible Americans to the banks through more modificaiton money etc. What’s sad is it’s unlikely to help anyone but the banks. Of course, they will pretend it’s absolutley necessary and that they are helping those underwater, current homeowners, and that it’s in everyone’s interest not to allow the banks to lose money on these deals.

      In reality they are creating indentured servants and only helping the banks. The American public has to wake up and realize that the only people benefiting are bankers and come out with a united message to stop the games of stealing from the middle class to give to the banks.

      1. Planet Reality

        The American public only cares about what it can get right now.

        Can I get that over priced car loan at 0%?

        Can I go to a private college take on obscene amounts of debt, then get a job that barely covers the interest of the debt and is eventually defaulted on and backed by the government.

        The banks provide the social benefits the masses demand, and everyone will help pay for it so the banks don’t lose. This is our form of socialism. It’s been like this for a long time, your mistake is thinking that this is new.

        1. AZDavidPhx

          Agree with PR on this one with the exception that it did not become a big Socialist Pissing Ground overnight a long time ago. It’s all in increments.

          The camel stuck the nose into the tent a long time ago and has been squeezing itself in inch by inch every year ever since. The camel entered the tent and opened up the backdoor for his elephant girlfriend and they are both now kicking back chilling on the couch with a bunch of free beer that they snagged from the tent’s refrigerator while the circus owners slave away to make sure that the beer in the fridge doesn’t run out and force the animals to have to get up and go find another tent to mooch off of.

          1. matt138

            the only proper solution we have is a massive curtailing of the size and scope of govt.

            The american public does not understand this because they think the govt can create jobs, engineer economic “soft landings”, and allocate resources in prudent fashion. This is all a pipe dream and our current situation is evidence.

            Until we realize this, we will be walking in circles mumbling to ourselves about hairbrain govt regulation schemes as our only salvation.

          2. AZDavidPhx

            I was thinking more Government would help us here. We need us a good Department Of Homeland Housing. We will bring in FHA, HUD, Fannie Mae, Freddie Mac, and AIG into our newly formed ministry. We’ll give it a fancy mission statement: To protect citizens of the United States of America from the threat of homelessness internally and abroad. We’ll get a nice graphic designed and drawn and have it etched into a building somewhere in Washington DC..

            The DOHH will offer each American citizen a 500 year mortgage at 1% interest and will not require any proof of income. All loans will be fully backed by the faith of the US Government. Each mortgage will be packaged into a security and sold to the Federal Reserve for a secret undisclosed price.

            You have to think outside the box these days. These are hard problems that require real solutions. I am here to help.

          3. AZDavidPhx

            Think of all the great jobs this will create for ex-mortgage brokers and real estate agents! Solve homelessness and unemployment at the same time. Talk about efficiency!

          4. Anonymous

            There is a Dr. Seuss children’s book to teach kids to resist freeloaders, but I’ve never seen it in bookstores or advertised. Discovered an ancient copy in the library system one day searching for Seuss books and read it. I guess since the book was published in 1948, the adults feel that kids need to learn how to give everything away is good (ex. The Gving Tree is often touted as a wonderful book) rather than saying enough ti freeloaders is good.

            Thidwick the Big-Hearted Moose

            Thidwick, a moose who lives in a herd “about sixty or more” , accepts a bug living on his antlers for free, who tells a spider of the free housing, and both accept a “Zinn-a-zu” bird. The herd rejects Thidwick after the Zinnazu bird’s wife, a woodpecker, and four squirrels move in. After a bobcat and turtle settle, winter moves in, and although food is scarce, they refuse to let him travel to the other side of the lake. Thidwick realizes that he has lost his autonomy and that the collective in his antlers has forced him to support them. Pressure hits the poor moose after three mice, a fox, a bear, and 362 bees move in on his antlers, but trouble switches thoughts fast after seeing hunters who “must get his head for the Harvard Club wall”. When Thidwick is trapped after an attempt to escape, he suddenly remembers that antler-shedding season has arrived. He bucks the antlers off, leaves the freeloaders at the mercy of the hunters and swims to the other side of the lake to rejoin his herd. His antlers, and the former squatters, are stuffed and mounted.

    3. AZDavidPhx

      This moratorium is complete BULLSH_T. They may as well just be handing out no strings principal reductions. It’s a great excuse for the banks to stall while they “evaluate their practices” which code language for “Jack Off”.

      Imagine that you are a house debtor who can afford your payments. Why not just roll the dice now and stop making your payments while the bank is jerking itself off to taxpayer porno? You may get 2 years free rent or more. If the bank calls your bluff, just cure the loan at the last minute and risk a slightly dinged credit score from some late payments.

      Hey Swiller, the writing is on the wall. Time to make your move.

      1. octal77

        …If the bank calls your bluff, just cure the loan at the last minute and risk a slightly dinged credit score from some late payments…

        The beauty of this scheme is that if home prices
        continue to decline you have the option to *actually* default and foreclose.

        If they don’t you still win as noted above.

        Even Al Capone might blush at this one..

        “It just had to stop.” – As John Dean once said to Richard Nixon

    4. AZDavidPhx

      Message to the United House Debtors of America:

      Everyone immediately default on your mortgage. The banks are willing to trade you free rent in exchange for time to siphon tax payer dollars to make themselves whole. Cease and desist all mortgage payments immediately – It’s time to make the bottom of their scheme fall out and collapse in on itself. Government is going to print fresh money to make sure your master never lost a penny. After this outrage I am now changing my position and encouraging every screwed house debtor to tell their bank to shove their mortgage where the sun doesn’t shine. Let the Government print another trillion to pay for it – no point in you slaving away to pay an impossible debt.


      1. J Thompson

        Agreed totally, and did it a year ago, and have been living rent free. No longer believe that even if I paid off my mortgage I would even have clear title, so I cut my losses.

  2. BigF

    Wow, I think Im going to buy a house NOW, and put the minimum down payment as needed… THEN after making two payments, Im going to stop, and squat!

    Paying rent is for SUCKERS when you can buy a house, and squat for up to 2 years! What a deal!
    Im in! Fuck paying rent anymore…

    Who knows HOW LONG this moritorium is going to last, and it can possibly last a LOOOONNNGGGG time.

    So for those who are angry, dont be… Join the party while you can and ENJOY LIFE! I am!

    1. MbinRI

      Depending on how this plays out, the real suckers could be people like me who have actually paid their mortgage. Now I don’t think that squatters would ever be able to obtain title or sell “their” home but that doesn’t make me any happier.

      1. Shevy

        Exactly. I cannot believe there’s not more of an outcry from the majority about this and everything else they are letting the banks get away with, this hurts a majority of Americans. Until 50% of people in America have a plan squat this type of policy should have a majority opposition if people are educated about this. In reality, if more people end up with mods as a result of this, it will likely hurt them as well.

        It only temporarily helps the squatters that don’t get tricked into a mod, those that sell and rent, and the bankers.

        1. AZDavidPhx

          There won’t be any outcry. With a 65-something% of the sheeple population that “owns” houses – it’s crystal clear that the ruling majority are going to be all for anything that gives them hope for house price stabilization.

          1. Jimmyd

            Id say that the dumbing down of America over the last 20 years has been a GREAT SUCCESS!!!

            Hey everyone, they aint making anymore land!
            Buy NOW, and SQUAT forever!!!!!!!

            Screw morality, and trying to do the right thing.
            Lie, cheat, and steal baby! Seems to be paying off for many people, except for those who’ve been playing by the rules, to wit Im seeing now are
            called SUCKERS.

          2. AZDavidPhx

            Imagine the calculations that the retiring boomers are making.

            Sell your overpriced house now for whatever it will fetch. Put a few hundred grand into the bank. Move to a non-recourse state and get yourself a nice small condo to squat in for a couple of years on a nice 30 year FHA loan with a 3.5% down payment. After a few months, stop paying and claim financial hardship and demand a loan modification. Become a squatter and milk it for a couple of years. By the time they get you out, house prices have declined another 15%-20% and you pull that money out and buy a place all cash, letting the taxpayers have their condo back.

            The possibilities are endless when the Government is co-signing your loans!

    2. Chris

      BigF, do it now and let us know how you’re living it after 2 years. I’m sure IHB will still be around by then 🙂

  3. Shevy

    I really don’t get what they are thinking. They have created a situation that will reward this.
    No kidding, FHA loan $729,750 seller will pay closing costs, may even be a creative lender that can figure out a gift. That’s cheap living for 2 years. I believe Larry has featured a company called “you walk away” I’m waiting for someone to start, “You stay for free” using your scenario.

  4. maddmike

    It seems like we are living in the bizzaro world. Never ask if it can get worse… you know the answer.

    1. AZDavidPhx

      Hey Awgee –

      Maybe your kooky predictions for principal reductions were not so far off afterall. Certainly seems like we are taking our first step with the banks seductively leading their sheep down the garden path.

  5. Soylent Green Is People

    Once the Gubmint through their proxies FNMA and FHLMC say “Jump”, the banks will as “how high?”. Eventually this command and control banking system will collapse under it’s own weight. Expect an October surprise with a Federal moratorium until they “work out” some form of national standard – this is a repeated meme from my last weeks comment. The earliest the mills can ramp up will be January 2011 after the every year Holiday Moratorium of Foreclosures.

    Why are we relying on the same people who got us where we are to get us out of this disaster? Madness of the first order.

    My .02c

    Soylent Green Is People.

    1. AZDavidPhx

      Hey come on now. The least you could do is be fair. Everybody involved has now learned their lesson and has written “I promise to be a good boy from now on” on the chalkboard 10 times.

      I don’t know about you, but I am satisfied with that. I say we give them another chance – It will be different this time! Just be positive and accept that magical thinking works. Here, have a nice refreshing glass of Kool Aid to get you started.

  6. Pwned

    To anyone who thought all these bailouts saved us from a greater depression and that they were anything other than a handout to powerful political contributors, this latest nonsense should prove to you that you were wrong. To make the situation even worse, I’m afraid the vast majority of underwater homedebtors will continue to service their crushing debt. Like trained dogs they don’t know how to do anything but please their masters.

  7. darms

    Improper foreclosures? Has anyone anywhere documented a case where a borrower who was current on their payments was foreclosed upon?

    SPRING HILL — Charlie and Maria Cardoso are among the millions of Americans who have experienced the misery and embarrassment that come with home foreclosure.

    Just one problem: The Massachusetts couple paid for their future retirement home in Spring Hill with cash in 2005, five years before agents for Bank of America seized the house, removed belongings and changed the locks on the doors, according to a lawsuit the couple have filed in federal court.

    You’ll get no sympathy from me for the squatters & HELOC abusers and had everything been legal & proper the foreclosure process should have been expedited. The problem is it now appears lenders & servicers engaged in massive fraud of their own WRT forged loan documents which will cause massive problems with the titles of these foreclosed properties. One thing I’ve been reading a lot of lately is that these foreclosure moritoria are as much for resolving the fraud (and potential title problems) as for providing political cover. Would you buy a foreclosed property knowing you could face a lawsuit over the property’s title a few years later?

    1. Honcho

      What is this “fraud” of which you speak? Not reviewing documents before filing a notice of default or instituting a foreclosure action and signinig an affidavit saying it was reviewed?

      Seriously, what is the fraud they engaged in that has caused his halt?

      1. AZDavidPhx

        Honcho is exactly right. This talk about “fraud” by the banks is just hyperbole – being used as a smoke screen. I love all this “Robo Signer” talk as though they are going to somehow prove beyond any reasonable doubt that banker lazyness is fraud. The banks are just going to claim that it’s an unfortunate result of all the immoral little piggies who stopped paying their bills – forcing the banks to become swamped and overwhelmed while government forced them to move quickly. The other banks know a good opportunity when they see it and are using the Government’s rhetoric as an excuse to extend and pretend by halting foreclosures while they review the legality and figure out the meaning of life.

        The folks who run these banks are not stupid. They have legions of lawyers on their payroll to make sure that all of their scams, methods, and procedures are followed with every letter of “the law”.

        1. darms

          Did you see this post from Yves Smith@Naked Capitalism last week? here While it’s not an easy read it’s in depth & informative plus she & others have had a lot to say on this after the DOCX Forged Document price list showed up. The basic problem is that because of MERS, deeds were not being reported when they changed hands due to all the slicing & dicing going on and they changed hands many, many times. Apparently “wet ink” documents are required in order to transfer these deeds in most locales, not facsimile copies. Courts & judges require the foreclosing attorneys to inspect each & every document in a foreclosure case but when someone signs off on 10K of these a month it’s obvious these documents were not properly vetted or examined. Meaning now it’s not at all clear which party (if any) has standing to sue for foreclosure. And the gaps in the title chain have made at least one title company stop writing insurance polices from JP Morgan & I thought I read BofA as well. Again from Naked Capitalism, a good article here about “Wells Fargo dumping title risk on hapless buyers via a new addendum imposed on buyers shortly before closing.”.

          Worse, due to back dating & obvious signature forgery (will search for that if requested) it means many of the MBS bonds may not actually own the notes (or portions of) they think they own. It’s a complicated situation that has only recently come to light, I would love to see analysis from someone more qualified than myself. But the foreclosure situation has become a great deal more than squatters & HELOC cheats getting a free ride.

          1. Honcho

            So… Mortgages were assigned. At the time of the assignment, it wasn’t signed by the originating lender to te subsequent assignee (and eventually trustee). There are other documents showing this transfer did actually occur(and you can track the assignment of the mortgage in this fashion inside the MERS system). The problem, as you noted, is that the transfer of the document wasn’t in the proper form (everything else matches and is sufficient to assign the mortgage).

            Now, tell me, as a court, what do you do. Do you allow the foreclosing party to prove ownership of the note and the ability to foreclose (absent the “wet ink” assignment) or do you allow the defaulted borrower to remain in the home? The argument on behalf of the borrower isn’t that he can’t be sure who owns the note (since that can be proven from the assignment and tracking of the mortgage), but the actually owner of the note can’t enforece it because it wasn’t signed by the prior assigning party. Should the assigning party show up to try to enforce the note, the borrower points to the papertrail and says that the note has been assigned and that the original assignor can’t enforce it because they have already been paid for the subsequent assignment.

            Keep in mind that most of this is a moot point because the assignment were made in blank (meaning that there was no signature), effectively turning the note into bearer paper (meaning that whoever holds the note can enforce it).

            Tell me what a court is supposed to do when the situation is that muddy. Not enforce the note, which is properly held by the trust or foreclosing party, and give a defaulted borrower a free home, or find that, despite the lack of a “wet ink” assignment, that the “bank” can enforce the note?

            Keep in mind, none of this applies in CA because CA is a non-judicial foreclosure state.

  8. Renting in Newport

    These are amazing times we are living in. There are so many potential ramifications of what is happening now that it boggles the mind. I will admit that I am not an expert at these things, so it’s possible that my thoughts here are way off base. But…

    1. Current non-defaulted, non-short sale sellers will have to provide verification to the new buyer that the title of the home can legitimately be transferred over.

    2. Buyers can potentially be buying homes and making payments to entities without proper title documentation. In other words, what happens to the money they’ve been paying if they’ve been paying it to the wrong entity?

    3. Foreclosed buyers whose homes have already been sold to others might be able to make a claim that the forecloser was illegal and attempt to retake ownership of the homes that others have already bought.

    4. Banks may have been foreclosing and reselling homes when in reality, they no longer own the title to the home. The title belongs to someone else, and they are reaping the money off of a second sale when that money really needs to be going to whoever now owns the title.

    It is this fourth point that makes me think that BofA’s freezing of foreclosures may be necessary. If they no longer own the title, we do not want them foreclosing and reselling homes only to find out later that they didn’t have the right to do that. Do we? Am I off base here?

    1. Honcho

      I won’t go into the securitization process, but the loans are “owned” or “held” by trusts, typically. This is 100% legal and legitimate. The loans were assigned to the trusts, making the trust the “owner” or “holder” of the loan. There are agreements as part of the securitization process that state that the servicer (or some other entity) is charged with foreclosing when necessary.

      The argument that a “bank” is foreclosing on a loan that it does not own is bogus.

  9. lisa

    IIMHO, if without government intervention, the home price in Irvine should go down another 30%.
    But sorry, the decision had been made 1and ½ year ago when the stock market about to crash. It is already irreversible now.
    In order to continue this path, the mortgage rates will continue go lower, until 3%, this is quite possible because Japan, HK, Korea and Taiwan, those countries with higher RE prices, their mortgage rates is usually around 2.5%.
    That means, Irvine home prices will not go too much lower from here, maybe another 10%, even the affordability is a issue for normal income family.
    Recently, I have chance to visit a few old TIC apartment buildings, the living condition is very poor there measured by the rental rates. I feel very sorry for those persons that have to stay here, usually because better school,

    1. Planet Reality

      You are exactly right. I have made this rational conclusion here for a while. The next round of quantitative easing will push long term mortgage rates into the 3s%, and if it doesn’t the follow round of quantitative easing will.

      Just like Japan the premium areas will remain very costly while the less desirable areas that experience the majority of the job losses and income reduction will feel the pain.

    1. AZDavidPhx

      Funny stories (not for the folks involved) but most likely the exception rather than the rule. More than likely 99.9% of the evictions that take place are justified robo-signed or not. There are bound to be mishaps along the way when you deal with such a high volume of mortgages. Let the mistakes be corrected as they occur – it is absolutely no excuse for a nationwide “freeze” on foreclosures. It’s making a mountain out of a molehill excuse for another round of extend and pretend delay and pray.

      1. Soylent Green Is People

        We have no disagreement between us. As CR has noted, no one disputes that the people were behind on their loan and that 99.9% of all foreclosures were being completed for justifiable reasons. That’s coming from our joint perspective here on Planet Reality.

        Back over on Planet of Zero Responsibility, the victim class and their attorney contingent is going to war over this minor kerfuffle regarding how many angels can dance on the head of a pin. They will demand retribution, delay, and likely see every servicer grind to a halt because out of 9 million foreclosures, 900 deeds were improperly executed in a foreclosure sale. Does it suck to be that .01 percent? Sure, but do you then stop everything because of it? You do on Planet Zero.

        My .02c

        Soylent Green Is People

        1. AZDavidPhx

          Imagine the Government issuing a nationwide moratorium on arrests because a few innocent people were arrested for crimes they did not commit. It all comes down to having the system in place to deal with mistakes when they are made. These blowhards who cherry-picking isolated events and exaggerating matters are wasting everyones time. Planet Zero, Victim Class – The lawyer’s bread and butter.

  10. lisa

    “Obama Says No To National Foreclosure Freeze”

    You still care about what he said? Freeze will help his 2012.

    IIMHO, if without government intervention, the home price in Irvine should go down another 30%.
    But sorry, the decision had been made 1and ½ year ago when the stock market about to crash. It is already irreversible now.

    In order to continue this path, the mortgage rates will continue go lower, until 3%, this is quite possible because Japan, HK, Korea and Taiwan, those countries with higher RE prices, their mortgage rates is usually around 2.5%.

    That means, Irvine home prices will not go too much lower from here, maybe another 10%, even the affordability is a issue for normal income family.

    1. kkk

      “the decision had been made 1 and ½ year ago when the stock market about to crash”

      the stock market’s percipitous decline started in sept 2008… over 2 years ago… get your facts straight.

  11. theyenguy

    Thanks for another timely article with insightful comments.

    You sound despondent today; perhaps about the lack of falling real estate prices, and about the entitlement of banks to value property via FASB 157 at mark to managers best estimate, and about the millions living payment free in mortgaged property, and about possible fraud issues, as well as issues with the whole securitization process.

    I’m getting up there in years, and I am low income, and I rent at very low cost, and I look at things from a global perspective.

    The world wide principle is that the word, will and way of politicians, government administrators and banking leaders is emerging as the governing principle in economic affairs.

    Observant Minds should look for a Financial Regulator, acting in concert an unannounced council of stakeholders, specifically elected officials, bank presidents, SEC/ECOFIN officials, and GSE administrators to effect policy that sustains an intertwined state corporate rule, that maintains the interest of the political and economic elite. One of their goals is to maintain the value of banking and real estate assets at the current levels as much as possible; and as such, they effect policies to mitigate deflation. I present several examples below:

    The Dodd Frank legislation established a Federal Financial Regulator, that being the Treasury Secretary, and granted him wide discretionary power of the economy.

    From the Robert Wenzel EconomicPolicy Journal article, Secret SEC Meeting with Goldman Sachs and JP Morgan, I conclude that in the US, through an October 6, 2010, meeting of bankers, investment bankers and SEC officials, an elite group of stakeholders has arisen to serve as a “banking, lending, credit, and investment Regulatory Council”, supporting the Financial Regulator in overseeing the US economy.

    Tyler Durden writes in article Karl Denninger Explains Foreclosure-Gate On The Ratigan Show, that Karl Denninger not only provided one of the most comprehensive explanations of where we are in the mortgage foreclosure imbroglio, how we got here, and where we are going to date; but said in his concluding remarks: “What if we find that of these $6 trillion in securities that are out there, outstanding right now, half or more of them are defective. You put them back on the banks and they all blow up. You know what – we have a resolution authority under Frank-Dodd, how about if we use it?”

    So, I believe that the Dodd Frank legislation, will empower the Federal Financial Regulator, to eventually intervene in the issue of mortagage moratorium. He will provide a solution that integrates the banks with the Government to rule over the people.

    One can use the link provided for more insight and comments on this concept.

    1. bltserv

      FYI: Karl Denninger has been calling for the end of the world for years. As a big time Neo Con and Teaparty nut case. He wants to scare you as much as possible for political reasons. As far as he is concerned. He predicted the dow should be at 2000 right about now. He has some valid points. But fear is what he is really all about. He makes money at it as he is a “short” player in the equity markets.

  12. Matt C.


    Let me start off by saying I’ve been reading your blog for several months now, and find it to be one of the best ‘bubble blogs’ available. I’ve been fascinated by the causes of the mortgage bubble, and have found your blog to be entertaining, informative and intelligent. Your lines of reasoning are smart, logical and backed up by facts, and you really have an impressive ability to cut through the B.S. and present an unvarnished reality. I’ve found your arguments persuasive, and agree with you that government props in the housing market over the past several years have done nothing but prolong the pain, and that foreclosure is the superior method of principal reduction. However, between this post and the prior “Private Property Rights: A Casualty of the Housing Bubble,” I really have to take exception.

    There is ample evidence that several of the top national banks have filed fraudelent documents with the courts in many foreclosure cases — perhaps tens of thousands — through fraudelent affidavits and “robo-stamped” endorsements. I think you and others would like to write this off as a simple ‘hiccup’ in the system, sensationalized by the media. I have to disagree. Such fraud strikes at the very heart of our system of due process and the rule of law. And it makes me just as angry as watching people squat in their homes for 18 months.

    I am not arguing that those who don’t pay their mortgages shoudn’t be foreclosed upon. They absolutely should. But speaking of protecting our “nation’s sacred system of land rights,” while at the same time allowing banks to give the middle finger to the rule of law, is completely contrary. If banks wish to take away a person’s home through the foreclosure process, they should and must perform proper due dillgence and follow state and federal laws and regulations. To do otherwise is immoral and unethical.

    Now, do we need a “foreclosure moratorium” to sort out this mess? Some say no, others say yes. I’m not sure where I lie, but I do think that people can debate the point in good faith. Excoriating those who say a moratorium is necessary simply sours the discourse and serves no purpose.

    1. Honcho

      Again, another poster claiming “fraud” on the part of the banks.

      What is the fraud? Please tell me.

      I’m not being patronizing. I seriously want to know where the fraud is in “robostamping” and endorsement and how that constitutes fraud?

          1. Matt C.

            Are you seriously defending the practice of signing off on legal documents, for which a person attests to doing something they didn’t actually do? I sure hope you’re not in a position of public trust.

          2. honcho

            Look, do they need to do things by the book? Yes. I’m not claiming otherwise.

            The issue that I have is the characterization of this mess as fraudulent.

            Sloppy paperwork is not fraud.

          3. Matt C.

            You are absolutely correct. There has to be an element of conscious intent in order for there to be fraud. And I also believe in the old addage “never attribute to malace what can be adequately explained by incompetence.” However, thousands of signed legal documents attesting to something which didn’t happen is, in my mind, more than just laziness or sloppiness. I suppose we’ll have to agree to disagree.

        1. Honcho

          And, who exactly has been harmed by the robostamping of a document? If the mortgage has been transferred or assigned to a trust (and there is a contract evidencing the fact that the mortgage was assigned to the trust, otherwise it wouldn’t have been assigned to the trust), and a “robostamper” is the signature for the asignment to the trust (again, separate from the contract evidencing the transfer of the mortgage), who has been harmed?

          The borrower accents to the assignment of his mortgage when he agreed to accept the loan. Is he harmed when/if a “robostamper” is the person transfering the mortgage?

          The problem you are starting to see is that certain judges are rejecting the robostamping as an effective assignment. This leads to the ridiculous outcome that only the originating lender would be entitled to enforce the note (absent a subsequent assignment), a note that has already been legally assigned to the trust (or another party) via contract. If the originating lender showed up to attempt to foreclose, exhibit #1 would be the contract transferring the note (and ability to enforce the note) to the trust.

          So, for an exercise in futility, we can require the assignee to go back and get a “real” signature from the assignor and start the process over again. However, many of the originating lenders are now defunct, so you will have to go through a bunch of other hoops to either gets the assignment recognized by a court, or use some other process to get an effective assignment (and that is if you don’t accept assignments in blank, effectively turning the note into bearer paper).

          1. Matt C.

            Very simply, all of us are harmed when a bank (or some other entity, or even an individual) believes that following the law is just too much of a burden. A legal document has been signed and notarized attesting that a certain action has been performed, i.e. proper due diligence and research has occurred to ensure the foreclosure is valid. Even if it turns out that all the documents are factually correct (and, as AZDavidPhx has pointed out, it is likely nearly all are), that act is wrong and fraudelent. The law isn’t just for us little people. Maybe I’m old-fashioned that way.

            What I’m asking of the banks is simple: If a document is to be signed, it should be signed by a real human being who actually performed the act attested to in the document. If that takes banks a lot of time to do, tough luck. Lenders must fulfill their legal obligations to process foreclosures.

          2. AZDavidPhx

            The problem is quantifying out how much due diligence is enough. If you expect it to be such that a mistake is never made then any mistake would be fraud. I agree that it is pretty ridiculous that they appeared to not even read the paperwork. However, they more than likely “trusted” that their streamlined system worked and had enough checks and balances to eliminate mistakes. Mistakes were made and not caught. It’s crappy work, but not a fraud on the court as has been alleged. I haven’t heard of anyone being wrongly foreclosed that was not eventually cleared up.

          3. Matt C.

            Let me ask you this: Would you give the same level of forgiveness to a borrower who signed a mortgage application without reading it? I suspect not. I certainly expect a borrower to live up to his or her mortgage contract, or else be foreclosed on.

            But I think you’re missing my broader point: Signing a document which you didn’t read and attesting to something you didn’t do, then submitting it to a court of law as correct and true, is indefensible, regardless of intention. You do that thousands upon thousands of times, and it is hard for me to see how one can claim a simple error in judgement has been made by the banks in question. A case can be made (and will be made) that such behavior rises to the level of malfeasance.

            All I’m asking is what’s being stipulated to in a signed affidavit acutally occurs. Or else what’s the point of contract law?

          4. Honcho

            I guess I fail to see your point?

            If the only thing wrong with the document is that it was robosigned or the person didn’t review the file (and the file accurately reflects that the borrower defaulted), what is the issue you have?

            Certainly, hold the individual or bank accountable (criminally in the case of the person who signed such a document), but I don’t see why we should stop and reset a foreclosure or halt ALL foreclosures from moving forward in this situation? This isn’t a situation where the documents reflect that the borrower wasn’t in default or the bank wasn’t entitled to foreclose.

            Your solution seems to be to throw the entire real estate industry into chaos as the penalty for the bank. How about we take a more measured approach and have a penalty that accurately reflects the wrong done by the bank. The way I interpret your argument, you would not allow a bank to foreclose where they would otherwise be entitled to foreclose because no one reviewed the file but otherwise filed paperwork claiming they did, or, where a forclosure has already occured, a person would be entitled to have their house returned to them, even though the record would show that they defaulted on their loan and the bank was, in fact, entitled to foreclose. That seems like a rather harsh outcome.

          5. Matt C.

            Is a foreclosure moratorium the proper course of action? I honestly don’t know. But look, if you decide to ignore the law, either through incompetence or malace, you should expect to deal with the consequences.

            You interpret my argument correctly: Banks should not be able to process foreclosures, even if they are entitled to, unless they follow the laws and regulations put in place by the federal and state governments to do so. This includes providing courts with true and correct signed affidavits. I believe this to be neither harsh nor chaotic. This is the rule of law, the thing that separates us from the uncivilized.

            That’s what I’m pissed about. I don’t get to flaunt the law just because it is inconvenient or slows things down. That’s what these banks did. That a few innocent people got caught up in this mess is tangential to the argument. Although I think we’d all be a lot less charitable if we were one of those wrongly foreclosed on.

    2. AZDavidPhx

      I highly doubt that there is any real evidence of fraud by the banks. It sounds like a conspiracy theory. The banks were certainly being lazy and trying to streamline the process and make it more efficient but the mistakes that arise are proof of some kind of pre-meditated fraud. If the banks screwed up and foreclosed on the wrong people then they are responsible for a remedy to the problem.

      These corporations are full of lawyers who get paid lots of money to make sure that the bank’s scams and cons are perpetrated within the bounds of the laws. The banks have no reason to break any laws – if a law exists that they don’t like then they just lobby to get the law changed.

      The real fraud in all of this is the 30 year mortgage that allows people to borrow huge sums of money that they will never repay. It lays the foundation of the Ponzi Scheme that is our real estate market in this country.

      1. Matt C.

        It’s not the motive that matters — whether the banks perpetuated fraud through laziness or premeditation doesn’t matter. What does matter is the outcome — thousands of foreclosure documents signed off, where the signer didn’t perform proper due diligence or review to ensure the documents were accurate. The act of signing a document and submitting it to the court attesting that you did something you did not is offensive to our system of laws.

        1. AZDavidPhx

          You would think that they would double check and triple check, but even so – mistakes still happen. I am not a “Loy Yah” but it seems to me that fraud has to have some element of intent to it. I don’t see how sloppy work by a bank becomes fraud. If the banks were forging signatures and documents then that is one thing, but if the guy did a poor job of reviewing the documents that’s another. Not fraud. I highly doubt you are going to see banks directing employees to forge documents. You may have some isolated incidents where employees committed fraud, but I highly doubt it will be shown to be a common occurrence. Like I said before, what is most likely is 99.9% of the evictions are justified.

  13. HydroCabron

    Will the sales history of a property will now become a large factor in the price? Houses owned since before 2002 by long-term owners, with obviously clean titles, may carry a substantial premium: you know that you actually own the damned thing.

    Perhaps every neighborhood will split into two housing markets: those homes which did not change hands between 2002 and 2009, and which are eligible for title insurance, and those which were flipped/HELOC’ed during the bubble, which sell at a discount because you’re on your own as far as title issues are concerned.

    1. HydroCabron

      Addendum: If you’re interested in purchasing a property purchased by a knife catcher during the 2007-2013 downslope, you should probably finance as much of the property as possible, so as to insulate yourself from the loss of anything more than your down payment.

      Property financed through credit unions, and any other institution unlikely to re-sell its loans, may also be more desirable.

      1. N4

        …or you could just buy title insurance to insulate yourself from the loss of anything.

        Buying property that was at one time or another owned by a trust, partnership, corporate entity, or individual who may have married, divorced or died at any point and having that cause title trouble is much likelier than a mortgagee’s paperwork error coming back to bite. Good luck mitigating any of these risks through diligence. That’s why title insurance was invented.

  14. Swiller

    Hate to tell you David, but the writing has been on the wall for a few years now. You can head over to Loansafe.org to find the real stories of real people losing their homes.

    I haven’t seen many “strategic defaulters” except those who are smart enough to see the down payment is long gone, and there is only debt servitude to the banksters.

    The writing is on the wall to at least 2012, that’s when the Mortgage Debt Relief Forgiveness Act expires. Don’t need to be charged income for the banksters losses, pretty incredible how I can lose 20% but get ZERO write-off, but the banksters can charge people income when they lose capital.

    I’m watching, but I’m not in a big hurry. At minimum it takes 6 months to get foreclosed and evicted…that’s exactly what I would plan my departure on, anything else is just the bankster wanting to pad his “losses”.

    1. matt138

      Isn’t it the IRS who taxes non purchase money debt forgiven?

      When do banksters charge people income when the bank loses capital?

    1. HydroCabron

      I feel that you have a solid case. Further payment would only hurt your competitive disposable income situation vis-a-vis your non-paying homedebtor neighbors.

      Further, after you have ceased payment of rent, you should be allowed to squat, for a vacant rental might cause rents to fall too quickly, harming landlords.

      And a further 9-month delay before eviction is appropriate, I feel, in order to ensure that your landlord (BOO!) has followed all policies and procedures in such a manner as to rule out even the mere whiff of fraud.

    2. AZDavidPhx

      I’m sure the majority of house “owners” would have a moral objection to your squatting rent free in a house that you do not own. You should have taken out a 30 year mortgage first before you initiated your squat then it would be OK but if you are a renter then you are not entitled to free rent. How can you call yourself a renter if you are not paying rent? See? That’s the difference between an owner and a renter. Renters pay – owners do not.

      Sorry, but you will just have to keep paying your rent while the owners work things out with their bank.

  15. flyovercountry

    Sloppy paperwork is where you make a larger than acceptable number of mistakes in the paperwork.

    Deliberately violating the procedures on a large scale is not sloppy, it is breaking the law. In a judicial foreclosure, the court is accepting a notarized affidavit stating that the the bank has reviewed the facts of the mortgage and that to the best of their knowledge the facts as stated are true.

    If they have made no attempt to verify the facts, but have a notarized statement saying that they have reviewed them, how is that any different than perjury?

    Foreclosures need to happen. But the banks wrote the fine print in the contracts and had their lobbyists work on the laws. The least they can do is actually follow the process that they set up.

    In the end, a foreclosure is enforced by the sheriffs office, which means an armed response to kick someone out of their house. That is the sort of thing you have to get right.

    1. Honcho

      Then hold the bank and/or individual accountable for filing a false affidavit (civilly or criminally).

      I’m not sure how overturning or delaying a foreclosure is the answer when 1) the borrower has defaultd, and 2) the paperwork shows that the person defaulted.

  16. darms

    Mike Konczal @ Rortybomb has put up a four-part Foreclosure Fraud For Dummies series.
    part 1

    part 2

    part 3

    part 4
    Maybe it’s nothing but what I’ve been reading the last couple of weeks scares the crap out of me. If you thought the recent bailouts were egregious just wait…

    1. Elisende

      Thanks for this, darms. In all the years I’ve been reading this blog, I’ve disagreed sometimes with IR but never seen him this far off base on an issue.

      The banks have been knowingly providing false affidavits to the courts. That’s fraud. Yes, nearly all of the borrowers in question are in default but do we really want to live in a society where the bank can just whip up documentation of possession out of thin air and have that be uncritically accepted? I don’t.

      If the documents weren’t ‘wet ink’ transferred to the mortgage trusts, then the trusts don’t actually own them. The problems with this could go far, far beyond properties in default.

      I’m with you, darms: this scares the hell out of me.

      1. honcho

        Not true. The trust certainly owns or holds the notes, even without a “wet ink” signature.

        MERS was set up to allow the transferability of mortgages on the secondary market. There have been several challenges to the MERS system and everytime (as far as I am aware) MERS has been found to be legitimate and legal. Mortagaes are assigned and transferred within the MERS system without wet ink signatures.

        Try another argument.

        If you want to punish the banks for filing false affidavits that’s. Fine, but I don’t get why your remedy is to reward a borrower who is coming onto the scene with unclean hands as a defaulted borrower.

  17. Chris

    Question for IR and the rest of the folks here on the forum: is REO home’s title safe? I mean if I’m buying REO from a first, would the 2nd/3rd/etc be knocking on my door even though I’ve bought the REO from the first outright?

    Would title company know whether there was/were 2nd/3rd/etc before REO?

    1. Chris

      Addition: I would expect 2nd/3rd/etc to take complete loss after auction failure, that has been my understanding.

  18. MalibuRenter

    I have a different read on this. It’s about to become a way of collecting billions of dollars in fines and settlements from lenders and servicers.

    This smells like tobacco, and a number of states are going to jump in. Because they have budget problems, inviting targets, the ability to collect huge fines, and this is election season, state attorneys general are diving at this.

  19. darms

    I’m not pushing a point nor am I disagreeing w/anybody here – I’m just really concerned about the stuff I’ve been reading the last two weeks (and I read a lot) and what it means to the future of this economy. My only reason to post this here is that IR’s astute observers tend mostly to be a thoughtful bunch (been reading this for years) & I’ve noticed this particular flavour of foreclosure fraud has not been a conversation topic here, yet. MERS wasn’t established until 1998 and didn’t get out of hand until 2004 or so but the slicing & dicing of mortgages has been rather frenzied for a while (my 1987 mortgage was sold within a month after origination) – it appears to me that everyone whose mortgage has been sold via that MERS process could find a problem in their title chain and that goes for both those who are in arrears on their mortgage and those who have never missed a payment.

    Did you see that comment upstream that suggested

    Houses owned since before 2002 by long-term owners, with obviously clean titles, may carry a substantial premium

    Change that date to 1997, is that not something to be concerned about, especially since it is responsible homeowners and lower to middle income taxpayers (like me) who will end up with the tab for this sh*t? Yikes.

    I supported myself for 38 years in the electronics industry (hardware design/manufacturing engineering) but that industry is gone & won’t return in my working lifetime.

  20. Honcho

    MERS is simply a system to track assignments of mortgages. The chain of title is clear in the MERS system.

    This was a trending argument for a while among lawyers looking for a way to defeat/block foreclosures. They lost at every turn.

    1. darms

      No, that’s the heart of the problem – MERS was created so that the mortgage ‘owners’ could escape the title transfer fees at the county tax offices. That’s why all the forged documents are out there, why all the ‘dog ate my title’ excuses exist. Land/property title transfer is a fundamental part of western law and the MERS system was specifically designed to evade that. Please read the links I & others have posted & then comment.

      1. honcho

        uh. I represented MERS for a while in various junk lawsuits filed against them. Pretty sure I know what I am talking about.

        The assignments are tracked inside the MERS system. Therefore, documents do not need to be recorded in the real property records. The fact that a transfer or a mortgage is not recorded in the real property records is of no effect to its enforcement.

  21. desertmick

    You folks need to read CalculatedRisk.com today.
    The TD(s) are unenforceable as a matter of law because of the core defect in the sensitization process. (The notes were sold without the TD(s).)

    The banking system is going to implode.

    1. darms

      please give us a naked HTML link at the least – I bounced over to CalculatedRisk.com & couldn’t find the page you refrenced

  22. JSL

    Like many of you, I’m so frustrated at these squatters living for free, while the prudent folks like us are priced out by these inflated home prices. What’s even more frustrating is that no one has any real solutions to fix the problem. I propose one, please read it here and let me know your thoughts. Thanks.


  23. Kirk

    Man, this blog has become a place for crybabies.

    But, I agree that this foreclosure moratorium is 90% about the upcoming elections. Let’s keep in mind though, that there is no actual mandated moratorium. The banks decided to do this on their own with a little arm twisting.

    Boo hoo.

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