Every now and then in the comments something other than name-calling and my hostile and ill-advised rants defending my previously constructed straw men arguments shows up, and we learn something. Such is the case tonight, as D-Day had two good comments explaining what the WH can do regarding a moratorium (not much without Congress, as suspected):
Just to address the issue at hand, there is constitutionally permissable recourse for the federal government, though not simply the President with an executive order, to issue some sort of moratorium to cover foreclosures. First of all, they could ban foreclosures on the mortgages the government owns or otherwise guarantees, through Fannie and Freddie. And that’s around 97% of all mortgages. The Financial Stability Oversight Council ushered in with Dodd-Frank could shut down foreclosures if they assert that continuing them amidst the mass fraud would constitute a systemic risk. Independent regulators like the FDIC or the OCC could potentially enact foreclosures on the parent companies of the servicers, which they regulate. Finally, Congress could pass something that denies states funding unless they freeze foreclosures.
But as I said earlier today, the chief executive could not accomplish such a moratorium by himself.
Let’s also recall that moratoria have occurred during the last couple years, including a big one in California. And since the banks themselves are doing the pausing, with more likely to follow, arguing about the impact of moratoria is kind of irrelevant. The banks affected obviously see value in them, they’re not doing them to be nice. I think the whole focus on the Administration’s position is misplaced, though I think their argument sounds to me like “so what if the cops planted evidence, surely the murder suspect committed some crime.”
On the “potentially 450,000 foreclosures” issue, which I also wrote, I think there’s ample evidence in the record that the fraudulent foreclosure processes were systemic and industry-wide. Pretty much every major servicer used MERS for securitization, which set this whole thing in motion. I was hypothetically playing out the implications of an industry-wide penalty under Cordray’s lawsuit, which I find perfectly acceptable.
Also, this, when asked how it would all play out, etc.:
Ask yourself what JPM, GMAC and BofA are doing right now. They’ve already imposed said moratorium. The cover story is they’re fixing “technical paperwork errors.” In reality they have to be pretty panicked. BofA made a deal yesterday with a top title insurer to basically eat any losses they incur on houses without clear title. Others are probably trying to do the same. The investors are breathing down their necks to take back the securitized loans, too. The rating agencies are threatening downgrades. This is a cover-up to a bigger cover-up of shitty loan origination and securitization, and no amount of pretending it doesn’t exist will stop the bleeding. So acting like everything hinges on what Obama does about a moratorium is silly. It’s more like what he should do about the aftermath, because a moratorium is already in place for about 25% of the market and it’s a matter of time on the other 75%.
And in my view, Obama should work expeditiously to stop foreclosures from happening, through legitimate loan modifications that reduce principal. With the heat on the servicers, this has the potential to look attractive to them. They could reduce the principal commensurate with the market and then offer servicers half the upside on any appreciation. They could institute right to rent. They could take another shot at cramdown (a longshot). In short, they could find a solution to accomplish what they said they would do in January 2009 – fix the housing market. Now that we know there’s systemic fraud at its heart, it’s even more imperative to do so. We won’t get an economic recovery without fixing this.
Good stuff. Anyone have anything to add?
Just curious how Obama would go about doing this?
If I recall correctly, there was not too much support for the notion of renegotiating principal early on, something which Roubini argued would be the only stable way of returning the housing market to the much lower value that houses should be at. (The New Deal HOLC [PDF] did do principal reduction, though it wasn’t a large part of its loans and refinancing programs.)
@El Cid: No, the DFH crowd has (correctly, IMHO) been screaming for cramdown since day one, but that got shot down because no one likes to listen to a hippy.
Is it Hippy or Hippie?
At this point, why is anyone bothering to pay their mortgage? Seems to me that anyone who took out a mortgage in the last ten years has a pretty good shot if they challenge the alleged note holder to actually produce the fucking note.
It’s not hard to have an informed opinion when you have information at hand…
I most certainly didn’t see THIS story on CBS, hear it on NPR…
BofA made a deal yesterday with a top title insurer to basically eat any losses they incur on houses without clear title. Others are probably trying to do the same.
BTW, it’s HIPPIE, not HIPPY. The former is a noun; the latter is an adjective.
Looks good to me.
Considering the problems, I’m worried about those states that don’t require bankruptcies go through the courts (like California.) When title is presumed to be in order, it’s less of a worry, but since that’s the crux of the problem here, well, I think the homeowners need a move transparent forum.
Given the breadth of fraud here, the DOJ really must open an investigation. What these banks did to create the financial mess is beyond excuse, but here’s yet more malfeasance – and clearly deliberate. Time to start frog-marching executives.
The 450,000 number is a McEstimate. It’s indefensible.
As for the idea of loan modifications, I really think the ship sailed a long time ago. We’re still in a mess.
If only someone in the MSM had explained it like that, it would have made sense to me.
So, following up on what dday said, if the banks are going to be eating potentially huge losses (if I understand that part correctly), what happens next? Does this lead to a 2008 crisis, part 2? Given that nothing is going to get done in Washington until late January (and probably not even then given GOPer obstruction), my assumption is that anything that requires congress to intervene isn’t going to happen. So what then?
@calipygian: I’ve been considering it… My mortgage transferred 5 times in 3 years before it settled with my current lender. Who the fuck knows what state that paperwork is in or if I’m even paying the right people.
Totally OT: The miners are coming up! The miners are coming up!
The rescue op in Chile tested the capsule, lowering a rescue worker down into the mine. Now the first miner is coming up. They say it’ll take about 15-17 minutes for the capsule to come back up.
I’m watching via Anderson Cooper on CNN, but MSNBC is also covering it (I just think Cooper’s coverage is better).
I anxiously await the explanation of how Fannie Mae and Freddie Mac made these banks do all this.
It should be interesting when the general public realizes that they can stop making payments on their house and no one can take away their home.
I’d like to say it’s neither, but I’m of a younger generation who’s tired of everything being discussed in the language of boomers. :)
After a day of reading one non sense meme after another on how Obama could and should usurp the property laws of the land, and by decree, cancel the constitution with an executive order, I am ready to hop in a canoe to Guatemala and live in a jungle haven, eat coconuts and be entertained by an inexhaustible supply of nubile native girls.
So it looks good to me, though a little wordy for what should be common fucking sense. I can and did quit the democrat party, but to quit being a liberal, I would have to quit myself, so I will just suck it up and keep explaining it isn’t cheese, that big white ball in the sky at night. And Obama is not really Stalin, in spite of rumors to the contrary.
I am in favor of cramdown. I know it is unlikely, but the rationale for exempting mortgages from restructuring by a bankruptcy judge died when the nature of the mortgage business changed from safe 30 year fixed rates to securitized Wall Street toys.
@John Cole: I’m going to add some nuance here.
The early case for cramdown was that it was necessary to address a massive, and potentially crippling problem of negative equity. That not doing cramdown would lead to a death-spiral of bankruptcy, leading to lower home prices, leading to more negative equity and more bankruptcy, etc.
That scenario never came about.
The case for cramdown here is somewhat different. This isn’t a response to bad decisions by borrowers but by a systemic fraud by lenders. It’s being proposed as a stopgap settlement for homeowners – take a reduced principal to stay in your home and save everyone the legal hassle of unravelling your title at this moment. It’s a deal that the banks might be willing to take, and the investors since they’ll continue to get their returns if that mortgage is being paid. The problem with cramdown as a solution is that it’s not a solution – it’s a settlement. It doesn’t fix the title problem at all – it just kicks it down the road for a while by resetting the foreclosure clock for the homeowner. That in itself isn’t necessarily a bad thing, as it prevents a system shock from happening now in favor of a slower, more manageable response. From the consumer side, it helps keep people in their homes.
The extreme position would be to argue that these title cases should forfeit the home to the homeowner. That sounds cool on paper, but it’d be a legal nightmare. Mortgages are such high value items that you’d have a tidal wave of lawyers trying to get 15% of that market, and almost every homeowner would have a serious financial interest to participate. You think the mesothelioma ads on TV are bad…
As I just said below, I suspect that the mortgages that are being foreclosed on are the canaries in the coal mine that are pointing to a much, much bigger underlying problem. There’s pretty much zero chance that mortgages with cloudy titles are the only ones being foreclosed on. More like damn near everything has a cloudy title now thanks to the banksters’ sloppy procedures and the people being foreclosed on are finding out about it before everyone else.
If that’s the case, well, we’re pretty fucked.
One of those hippies, at least to a degree, was Ben Bernanke.
@CaseyL: The first miner is probably a few minutes or less from emerging at this moment.
Crisis part 2 consists of the lawsuits that expose the economic impact of the fraud through settlements.
Crisis part 3 will be the dampening effect on the recovery as clouded deeds block potential sales due to uncertainty.
Gore Vidal put the fraud and corruption at in the proper macro place. Barry Ritholtz does the same in the micro context.
When contracts are not enforced, when contracts are unenforceable, when fraud and negligence go unprosecuted, we’re just another banana republic state with no legal framework, it’s every party for themselves within anarchy.
First miner’s up. Family’s there.
I had a thought that is keeping me up.
I refinanced about 7 years ago, bank sold the note to a mortgage company that was shut down about two years ago, and was subsequently picked up by another outfit. Pretty typical.
My concern is, what if the title is clouded? When I finish paying, what kind of assurance do I have that I will receive a clear title? How can I check this?
Christ, what a mess…
@El Cid: Very, very cool. Good on Chile.
so, so wonderful to see the first miner emerge. it’s as if Orpheus won.
Barb (formerly gex)
Am I the only one nervous to see large banks seeking insurance for housing losses? Seems a bit deja vu.
Yeah, the more I have read and learned about all this the last few days, I down with cramdown. It seems the only solution, which means it will never happen.
And if some bankers aren’t being frogmarched soon, I am seriously going to start looking for a country that has fewer banana republic-like features. I simply can’t take much more of this; I’m getting too old for this shit and need to live out my twilight years somewhere less stressful and full of stupid. I’m thinking Antarctica.
The Republic of Stupidity
And Barney Frank… don’t forget Barney…
And ACORN… too… also…
Saaaaaaaaaaay… mebbe this is where James O’Keefe starts out on the long, winding road to rehabbing his reputation…
Face it folks. We and our economy is screwed for the near term, until most, if not all of the supply side mania poison is drained from the system. Little to do but ride it out and not do anything rash and temporary to make the certain pain any worse. And maybe shore up the safety net and noodle about how nice it would be if we could fix the 30 year clusterfuck of GOP governance and economic theory, without the assholes that caused it fighting us every square inch of the way.
And what Obama can do is quit lying about how recovery is just around the corner, and tell us the truth, that it is going to be a long time coming, and will not be like it was, and that if we don’t do drastic things like yesterday, then the shit will fall harder than it has to. It may make him a one termer, but an honest one termer. No more lies about the mess we are in.
And now is when the Keynesians say Stuck is full of shit, and stupid, (which may be more or less accurate) and all we need is some more stimulus to make it all better. bullshit.
Its been a pretty shitty past two months and its damn time we got a positive story and I is loving the miners coming up. Hate to say it but I do wonder if that moron in W.Va would have let the miners die or bothered to go through all this to keep them alive.
Also too, Mary Landrieu is the c word. The b word is still holding up Jack Lew’s nomination to OMB because the WATB wants expedited rules(read : roll back all those awful new regs) to get those oil drilling permits going. This after saying that she was holding up the nom till Obama dropped the moratorium. I wish Obama had the balls to tell this piece of trash that the moratorium in on again.
Completely off topic, but the first Chilean Miner has made it to the surface. He was greeted by his children and wife and the President and First Lady of Chile. He is now on his way to the hospital and the rescue capsule is on its way back down for the next man.
I am proud to be a member of the human race tonight.
Left Coast Tom
@Martin: Regarding cramdowns, I guess Tanta’s explanation left me with the view that a cramdown was simply an acknowledgement by bankruptcy courts that what lenders claim is secured isn’t really secured in the face of negative equity. And that a cramdown would occur for any secured debt except for first-lien mortgages, and the present evidence doesn’t say they should be an exception. And that a cramdown would be a just punishment for lenders’ decision to embrace appraisal fraud during the bubble – next time they’d think twice about the idea.
I can’t say I agree with either of your arguments (past, or present), because it doesn’t really address either of the issues you outline.
kommrade reproductive vigor
Breaking: 1 down, 32 to go.
Remember how libertarians used to say they valued the enforcement of contracts and the legal forms of property rights and protection from violence as the only forms of acceptable government authority? Does that still hold here?
Barb (formerly gex)
@General Stuck: I’m with you, Stuck. Stimulus can only do so much, and then unemployed Americans will still be looking for jobs and working Americans will still be dealing with stagnating wages.
@General Stuck: Cuba survived the ‘special period’ when their massive Soviet fuel and petroleum product subsidy was removed. Surely we can learn how to garden in all of our backyards and balconies and alleys too.
Left Coast Tom
@Left Coast Tom:
Tom+3…I should have typed primary-residence mortgages.
You are absolutely correct. This is a point that I made in the earlier thread today. The issues apply to every mortgage that has been securitized — not just the loans currently in foreclosure.
@Martin: “The early case for cramdown was that it was necessary to address a massive, and potentially crippling problem of negative equity. That not doing cramdown would lead to a death-spiral of bankruptcy, leading to lower home prices, leading to more negative equity and more bankruptcy, etc.”
My reason for favoring cramdown back in the day was as follows:
(1) We had way, way too much debt floating around. Serious deleveraging was going to have to happen, and that meant that debts were going to get written off, one way or another.
(2) This was more likely to happen with debts held by large corporations than with those held by consumers (and small businesses.) This is unfair.
(3) That said, there is a real moral hazard problem. On the other hand, there’s also a moral hazard problem involving people who write/buy loans, who should have to eat some of their errors too.
(4) How delightful, then, to discover a way in which consumer debt can be written down in a reasonable way that no one would voluntarily seek out (since you have to go through bankruptcy to get it), helping only people who can reasonably propose to pay when the house is written down to its present value, and thus *not* people who took out loans that were just crazy. Deleveraging: check. For ordinary people: check. Moral hazard? Nope. Keeping people in their homes? Check. Penalize both borrowers and lenders? Check.
What’s not to like?
@El Cid: But Cuba don’t get much tea party. Otherwise, my brown thumb is ready.
Odie Hugh Manatee
Agreed, I want to know what he can do. It’s easy to say ‘he can or should do this’ but the devil is in the details.
What can he do? Is it legal, within his constitutional powers as the chief executive and realistically possible? How it will be received politically and how will it be reported on are two other considerations?
Same here, time to get the pain over with and get on with it. A cramdown makes sense so you know that will be the last thing they want to do. They (pols/banks/markets) want to delay the day of reckoning (and the imposition of reality) for as long as they can. In some respects, this almost seems like a game of hot potato and we just have to wait a bit longer until we get to see who bets burned.
I bet it ain’t the crooks.
@Barb (formerly gex):
Title insurance is totally normal — you can’t get a mortgage without it, because otherwise neither party would be willing to loan or pay the money for a property since they would have no assurance of actually owning it at the end. My dad did title insurance for 30 years before he retired in the 1990s, so it’s not some new innovation.
The worrisome part is that BofA seems to basically be admitting that they were writing mortgages for properties that didn’t have clear title, so now they want their asses covered when those mortgages go belly-up. If they’re admitting that, that means there’s a potential title problem with everything that they wrote.
question about the mine rescue: is there a backup capsule in case the original one is damaged in transit? considering how thorough the Chileans have been, i’d expect so, but i’d love to know for sure.
@General Stuck: Cuba just laid off a million workers. Good luck finding a job there. The black market is pretty thriving, though.
To be fair, Cuba’s government emphasizes that this is a complete revision of the legal system with regard to self-employment, to make it a much more possible route to a legitimate income, given how almost anyone doing so was earlier forced to do this informally.
I accept your apology for calling me an idiot.
Also. Colt McCoy. Take it easy. He is just a kid.
I’m in favor of cramdown because I feel like the folks in Washington aren’t really well situated to oversee the renegotiation of millions of mortgages and they’ve pretty much exhausted the possibilities in that regard. Using the bankruptcy system will only address a fraction of the troubled mortgages, but at least it’s a process that understands how to cut deals.
I’m not an expert because this isn’t my area, but I’d think the bankruptcy process could serve to resolve the title issues as a side effect. After all, anyone with a claim against the debtor’s property is supposed to come before the court and get it adjudicated. And at the end of the day, a nice clean title document can be issued reflecting the renegotiated terms and leaving no doubt as to who the secured party is. Would this not work?
@Left Coast Tom:
I think Martin is putting forth a new theory for cramdown to fit the current circumstances. Tanta’s case made sense at the time with the facts on the ground at that point, but sadly she’s not with us anymore to give us a new analysis based on this new information about potentially cloudy titles that’s just come out.
Well, they aren’t necessarily admitting that (though they could be). If BofA is worried that the title insurance companies won’t cover purchases of their foreclosures, then even if they know that their loans are good, they’re going to make that deal to ensure that business doesn’t stop. And why not? If the loans are good, there’s no risk to them.
Basically, their position makes perfect business sense, so you can’t read anything into it. They’e big enough that they know if the loans are bad, they’ll bankrupt every title insurer out there and they’ll still get stuck with the bill. So they have to make this deal if the loans are bad and they might as well make the deal if the loans are good.
As commenter mclaren noted on an earlier thread (nice job also, too), any mortgage that has been securitized is at risk of being found defective. What percentage of mortgages does this apply to? It may be tough to find out, since Phil Fucking Gramm thought it would be a swell idea for all of this to occur in an unregulated shadow banking industry.
@Mnemosyne: thanks for the mention of Tanta, of sacred memory. would that she were here to make sense of this mess for us.
Foreclosure Fraud Nightmare Scenario Could Dwarf The Lahman Weekend.
Foreclosure Fraud: It’s Worse Than You Think
Why Are Bailed-Out Banks Breaking into Struggling Borrowers’ Homes?
Last week Florida resident Nancy Jacobini revealed that an agent hired by her bank broke into her home after she fell behind on her mortgage payments. Thinking she was being burglarized, Jacobini called 911. We speak to Jacobini’s lawyer Matthew Weidner and Bruce Marks, the founder and CEO of the Neighborhood Assistance Corporation of America, a housing services organization that’s been calling for a national moratorium on foreclosures for years.
Left Coast Tom
@hilzoy: Yes, I liked your reason number 4 all along, as well. It doesn’t seem like the sort of thing that would have helped out Casey Serin, while it would help people whose biggest mistake was believing their Realtor[tm] and their lender back in 2005.
@tim serbo: I don’t recall having seen that another one is waiting to go, but I did hear them discussing that there were others but they adjusted the wheels on the current one, and I suppose they could do that to the others.
Brilliant. I’ll pay that the ultimate complement by stealing it.
Left Coast Tom
@Mnemosyne: I think her case for cramdowns then still makes full sense now. I think the current issues are quite different, though she had something relevant to say about them as well, which is helping to inform my caution about the more extreme claims being made.
@hilzoy: Well, I think the case before is what was the likely outcome of doing it? A gazillion foreclosures wasn’t the sole problem. A gazillion people out of work leading to foreclosures was the problem. And that’s still the problem. I guess we need to know how much these would need to be crammed down to bring these loans in line with income.
But even with cramdown, the titles are still going to be fucked. They just won’t all be fucked today.
I have nothing to add, except I am eagerly awaiting what the glibertarians at Reason have to say about this.
Will they take the WSJ editorial page position? Which appears to be: ‘law shmaw, documents shmocuments, property rights smhoperty rights’ this is all gummint technicalities and useless bureaucratic paperwork trivial pursuit. The big banks know what is best for them all, so let their doom fall upon the masses!.
Having to abide by the law is for the little, ‘lesser’ people, who need to have their last resort for life savings, their social security accounts, also foreclosed.
Edit: I also wonder what punishments and public humiliations will be announced for the DF commie hippies (and upstanding citizens like myself) who warned early on that the mortgage and housing crisis required a systematic response, like mortgage modification, cramdown, or a new HOLC?
Left Coast Tom was the one who brought her up originally. Her lucid explanations of all of this complicated stuff are sorely missed.
@wilfred: you’re welcome to it, friend.
Wait…is this *the* hilzoy? (Who left Obsidian Wings, after which I stopped reading it.)
Do you (and others) think that the articles on this are right? The articles from non-permabears saying that this is like Lehman Brothers, that we’ll have a banking crisis in 3-6 months, etc. I mean, this is what makes me worry that they might be on to something – @Barb (formerly gex):
@Mnemosyne: thanks to Left Coast Tom, then. Tanta was my first stop on the internets when everything was falling apart in 2008. smart and expert as hell, and manifestly good.
@Montysano: Thanks, I had forgotten that little detail. Both William Black and James Galbraith were warning early on that fraud, malfeasance and negligence would play a big role in the crisis. And that it would be better to look into in earlier than later. I had forgotten about that too.
Again, let me emphasize mclaren’s point from earlier today (and please correct me if I’m wrong): the vast majority of securitization in the mortgage industry took place in a totally unregulated opaque market. There is no exchange with a centralized list of these securities.
How could anyone with an IQ north of 100 have thought that this was a good idea?
Our buddies the Gramms…
So, correct me if this doesn’t make sense – perversely, since this is an opaque market, couldn’t the banks (with a congressional assist) paper over all this fraud and keep from having to take serious losses?
(I have my doubts that congress can do anything for at least a few months, so that may not be possible.)
Or are we going to see some major downgrade / shitstorm with one of the major banks soonish?
Left Coast Tom
@tim serbo: She was a happy discovery for me back in 2007 when I knew something was badly fucked regarding mortgages but didn’t really know what. Her writing style and approach to her readers was excellent, I would have been happy with her writing on any topic, she happened to be writing about mortgages.
@El Cid: thanks for the info. one more reason this rescue is, or should be, a model for crisis management that will be studied for years to come.
Well, someone has to take the losses. The people who bought these securities thought they were buying AAA rated instruments, not trash.
I don’t think They know what to do.
I’ll just repost what I put in the old thread:
Given that we’re dealing with the most conservative court since the Lochner Era, I doubt any purely “Right to Rent” legislation would pass muster without extending the right to the creditor to force an auction of the property. Overall I’d say this would be a good deal for those facing foreclosure, but the question of whether Congress would enact such a policy has no definite answer. If they won’t do cramdown, they likely wouldn’t do this.
Plus I’m not sure how this would work with respect to the modern bankruptcy code. Chapter 13 wasn’t added until 1938, and the entire code was effectively replaced forty years after that.
IIRC, when they first found the miners were alive, the estimate was “maybe out by Xmas”. A very impressive effort.
The New York Times takes a happy, cheerful look on how everything sucks everywhere and will probably get worse in a review of the awful employment and housing and commercial real estate situation in Atlanta.
@Left Coast Tom: i loved her writing. unshowy, unobtrusive, respectful of her readers, each sentence bringing new information to bear. i actually worked on mortgage securities back in the early ’80s at Salomon Brothers (yes, i did my bit, however small, to bring on the thrift crisis, to my enduring shame), and i thought i knew the business pretty well. but i learned something new from every one of her posts.
It still seems to me weirdly like buying trading cards. When you buy trading cards, the most valuable commodity is the unopened pack, because you don’t know what’s inside. It could be the one rare card that everyone wants, or a bunch of crap, but as long as you don’t open it, it could be either one.
It seems like that’s what happened with the bundling of these mortgages: everyone was buying that unopened pack of trading cards and acting like everything inside the bundle was a Stan Musial rookie card.
ETA: I do not buy trading cards, so I’m sure someone will come along in a moment or two to let me know I don’t know how the trading card market works. I still stand by my metaphor, in that mcmeganish kind of way
@Montysano: The miners were down there for 17 days before anyone knew that they were alive. And they were all alive. They were lucky enough to have a good safe space, a water supply, and a tiny amount of food. The job those 33 guys did maintaining discipline, focus, and hope is just remarkable.
2nd one’s coming up right now.
@soonergrunt: I can’t help but think this wouldn’t end this way in the United States.
Odie Hugh Manatee
I would love to be able to read her assessment of where we are today. She had a way of cutting through the bs and getting to the point in very clear and concise, yet very understandable, terms. She knew her stuff and was very good explaining it. CR comes across as a lot more technical and a bit stand-offish in his reporting. Tanta dug into it with gusto and loved what she did.
Mortgage Pig fan here! I will always remember the fun she had with it.
Funny what a week does. Where are all our gallant TARP defenders now? Wasn’t it just such a good deal for Americans everywhere to take the hands-off approach to our nation’s financial sector? Too much meddling and intervention into the vagaries of that profession, and who knows? They might not have been able to pay us back so promptly and go about their merry way, driving our economy forward to a brighter, wealthier tomorrow.
Because anybody who insisted that the entire sector was consumed by outright fraud and illegality was just being churlish…
This 2nd guy up is a trip. He hugged the President like 5 times while joking even with him, and then he ran up to the workers at the separation barrier and rallied them into cheers.
thread needs fresh pic of the cutest puppy that has ever lived.
I know I do.
On CNN: “As the rescue pod nears the top, from the shaft comes the cry “Viva Chile!”
Great, great stuff.
@Odie Hugh Manatee: damn! i forgot about the Mortgage Pig. Tanta somehow made me feel like sanity would prevail, in a bit.
I read that they built 3, and the one they are using is the biggest.
I’m watching these men get pulled out of the mine in Chile and am just freaking the hell out. This is incredible.
Sepulveda brought souvenirs! What a clown.
They said the counselors have advised the miners there would be a huge rush of euphoria, and then a sense of let-down as they return to normal life. I’m sure that’s true, but it’s going to be a long time before their lives return to normal. It’ll be interesting to see where life leads them after this.
@El Cid: yeah, but i sorta wish he’d canoodle with the Mrs. a bit longer.
The court that struck down the foreclosure moratorium in 1934 WAS the Lochner court, for all intents and purposes. It was the “bad” New Deal court that struck down several of Roosevelt’s programs, before he threatened to pack the court and they started making friendlier rulings. Having said that, it was a unanimous decision and it seems to still get cited as good law from time to time.
The theory is that a mortgage is a property interest that the government can’t just take away without compensation. However, I’m not convinced a moratorium is necessarily the same thing as taking away the secured interest. Forcing the creditor to accept less than his vested interest, however, does seem to present a problem, at least outside the bankruptcy context.
People never mention that part of the court packing story; you’d think they might. But then it would interrupt the narrative that it was a complete failure on FDR’s part.
Ok, how about setting up another resolution trust corporation and then shove Kelo v New London far far far up the mortgage industry’s ass?
@tim serbo: I told my husband that, in the event that he gets trapped underground in a mine for 70 days, I would do him immediately upon his rescue no matter what he smelled like. Hey, I’m a giver.
@suzanne: i hope your husband knows what a lucky man he is.
and now, good night to all. gotta get up in the morning and write a story about the foreclosure mess. i’m better informed now than i was when i got home this evening. thanks, all.
The switch in time
That saved nine
So far, I haven’t heard any cohesive rightwing talking points about the foreclosure mess. This one may be hard to spin. At least I hope it is.
Could this actually help the Dems in November? Yeah, we’ll all be living in a van down by the river, but as long as Orange Julius isn’t Speaker, I can deal.
buyin those xlf jan+ puts as they go outta the money. lets talk in a year and see if I survived. K?
I’m outta here, too. Work tomorrow, and I’m happy to be there.
That’s a common experience here, isn’t it?
That was a cheerful article. I feel sorry for most of these people, but not:
How can you be one of dozens of banks to invest in one desert property and go fucking bankrupt? I have a feeling that wasn’t the only shady deal these idiots were involved in.
blah blah blah.
You’re right, it probably wasn’t the only deal that went bad for those banks, but Merrill Ranch was going to be friggin’ huge, like, maybe one of the largest developments in history… Del Webb and Pulte were essentially going to build an entire town of cheaply made, uber-expensive houses. With a waterpark. And a train.
no, there was, it was/is called MERS, the problem is that they didn’t follow the LAW and actually hike the paperwork from place to place .. instead they came up with a “business model” that purported that their statements were the same as wet ink signatures. This is a Major No No for REMICS etc.
This looks relevant too, reading now, then off to nap for a bit.. g’nite all!
How this will play out:
1. The big investors in mortgage-backed securities who have lost money — like CalPers — and the AGs who want to be Governors are going to sue (a) the trustee of the trust which sold the MBS [no assets there, but the trustee might be forced to put defaulting loans back to the entity who sold the loan to the trust], (b) the originator of the trust — ie the big investment banks which bought the loans then sold them to the trust that they created, (c) and everyone else — lawyers, accountants, downstream originators and jesus christ himself if they can get jurisdiction, for fraud in the formation and administration of these trusts. The outcome of these lawsuits is anybody’s guess at this point.
2. The big banks are in deep do-do on the foreclosure fraud issue. People go to jail for committing perjury, and there are big federal penalties, like RICO, if there is a conspiracy to commit fraud on the courts. Senior bankers do NOT want to go to jail. I bet that there is a massive effort over the next six month to one year to clean up foreclosure procedures, settle the class action cases and generally clear title.
3. Somebody out there, even if it’s a bankruptcy estate, owns the loan and the mortgage. The idea that lots of people are going to suddenly not have to pay their mortgage because the debt is untraceable is ludicrous. There’s too much money at stake.
4. So, one version — foreclosures get stalled six months to 1 year. The foreclosure mills get shut down, some mid-level executives get minor jail sentences, and then foreclosures start back up (because at the end of the day, lots of people aren’t paying their debts.)
Alternatively, the issue of whether the trusts were legally formed or not turns out to be more important than foreclosure. Massive disputes break out between AGs, investors, trustees and originators on a deal-by-deal basis as to who has title to the note and mortgage. Foreclosure is stalled for 5+ years as the courts try to figure out who is the proper plaintiff.
My bet is on the first alternative. It’ll take some fancy legal footwork, but even I (an unemployed developer’s attorney) could put together an interim settlement in which everyone who has a potential claim to own the note sells that claim to a new entity which then forecloses on the property and puts the money in escrow. The bankers and investors want to fight amongst themselves; they don’t want to deal with stinky little individual landowners.
The real reason D.C. doesn’t want cramdowns or a moratorium on foreclosures:
Banks’ $4 trillion debts are ‘Achilles’ heel of the economic recovery’, warns IMF
05 Oct 2010
More taxpayer support is needed to ensure global financial stability despite the billions already pledged, the International Monetary Fund has warned, as banks remain the “achilles heel” of the economic recovery.
Lenders across Europe and the US are facing a $4 trillion refinancing hurdle in the coming 24 months and many still need to recapitalise, the Washington-based organisation said in its Global Financial Stability Report. Governments will have to inject fresh equity into banks – particularly in Spain, Germany and the US – as well as prop up their funding structures by extending emergency support.
“Progress toward global financial stability has experienced a setback since April … [due to] the recent turmoil in sovereign debt markets,” the IMF said. “The global financial system is still in a period of significant uncertainty and remains the Achilles’ heel of the economic recovery.” …
Currency wars are necessary if all else fails
By Ambrose Evans-Pritchard
10 Oct 2010
This escalation of the global currency war (which is barely on the radar screen of US media) is why your standard of living is about to take a major hit, even if you still have a job. Speculators will respond to a weaker dollar by sending the price of oil and other commodities (wheat, corn, etc.) through the roof, which means we’ll soon see huge increases in the cost of food, gasoline, utilities, and everything else.
A new study says Wall Street pay is set to break a record high for the second consecutive year. According to the Wall Street Journal, the top thirty-five financial firms are on pace to hand out $144 billion in compensation and benefits this year — a four percent increase from 2009. Total profits are estimated at $63.1 billion, a 20 percent decline from 2006.
(via DemocracyNow’s headlines today)
@Martin: “Well, I think the case before is what was the likely outcome of doing it? A gazillion foreclosures wasn’t the sole problem. A gazillion people out of work leading to foreclosures was the problem. And that’s still the problem.”
Well, I was never looking for the one magic bullet that would end the economic crisis, just for things that would make it better. And insofar as large amounts of debt need to go away so that people can start spending money again, making some of it go away in a non-moral-hazard-producing way seemed like an excellent idea.
As I understand it, cramdown would only be applied in cases in which writing the loan down to the present value of the home would allow the borrower to construct a reasonable repayment plan, which the court accepted. So the court would be empowered to see how much it could be written down, and to accept that only if the borrower could reasonably expect to pay the written-down amount.
@BR: Wow, that’s the second time in one day that someone has asked that, in those words. Yes. ;)
The entity who sold the loan.
lots and lots of those originators don’t exist, they were not big banks. They SOLD the loans TO big banks. (for big fees)
Who is the bag holder when there is no Bag?
If I had a mortgage, I would immediately shift all payments to a trust, which would only pay my payments to a entity who could provide a wet ink signature (I know what the paper I signed looks like)
and for all you young folks just contemplating buying a home … scan/photograph all real documents at very high resolution BEFORE you take possession.
(also, a physical imprint on the document can’t hurt)
follow the chain though, the debt is now owed to calpers and other pension funds and mutual funds ’round the world who thought they were buying a legit REMIC and not a house of cards. (Hello! Moral hazard, come and get it!!)
cramdown will/has to cascade, and That’s what the admin is hoping against hope to avoid. (they won’t/can’t solve it, they were handed a F’d system)
restitution from the banksters through the courts will take far too long to politically pay off, so the can gets kicked as far as possible?
I haven’t yet found a graceful way outta this…
needs to be read as:
“large amounts of debt payments need to go away”
“Large amounts of dividends need to go away”
Just Think about the Flow… $$$ – – – > $$$ – – – > = Poof ! ! ! = Screw you grandma.
Correct, but I question how many loans that would apply to. I mean, my sense is that 80% of the foreclosures have little to no income behind them, and so there’s no reasonable number to cram the mortgage down to. Yeah, it would help a number of homeowners (no small thing) but I don’t know it would accomplish much in the grand scheme.
@General Stuck: I have never seen a close-up of Charlie’s face. He looks so different! What a cutie.
@kommrade reproductive vigor: More of a literal 1-up.
me so sad.
been tracking this improbable property since ages ago..
sold way way back for 150-175,000 (It’s off the chart now, and can’t recall.) sold by that owner for 380,000 – flipped almost immediately – 6 months later, at the TOP of the bubble – for 450,000,09/26/2006.
re-sold @ Major loss this spring finally for: 04/20/2010 Sold $164,000.
Flipped almost immediately for: 07/23/2010 Sold $255,000
So, who gets crammed?
Angry Black Lady
My law firm handles almost all of the foreclosure litigation for several of the big players. I worked those cases for 6 months. Two words: Lost. Mind.
Now I’m back to my bread and butter, insurance coverage! Oooh aahhh. No more foreclosure lit for me. (For now, anyway.)
Needless to say, I wish I could comment but I can’t. Ethics and all that.
But I find this thread very interesting.
I don’t know about that… a bankruptcy court finding regarding title would preempt state law, and any challenges to that finding would have to be taken up in Bankruptcy court, where some tough laches standards would apply. As long as there is some sort of notice or constructive notice to competing creditors claiming some sort of interest in the note, I think that could work.
If congress could amend the the bankruptcy code to allow a national mortgage registry, and would define notice to include a few months of a mortgage instrument being listed there before the debtor’s reorganization, I think it could be pretty foolproof.
Would not do any good for mortgages that are still being paid, but is there really any chance that a hidden assignee could foreclose on a homeowner who had made all payments they had been notified were legitimately due? Under what principle could a mortgagor be obliged to pay off a debt more than once?
@Xenos: Or maybe it is just simpler than that. If in a chapter 13 case the debtor moved to cram down the mortgage, then an adversarial hearing would be scheduled. MERS would file a responsive pleading, which debtor could move to strike on the basis of lack of standing. If the bankruptcy court deems MERS or one of the trusts standing behind MERS has standing, that could clear up title, no?
Alternately, without any changes in the law, a chapter 7 or 13 debtor could just go ahead and list the mortgage in the schedules as an unsecured debt. MERS, or whomever, would get notice that the debtor was claiming them as unsecured, and would have to file a response within a couple months. I am not a bankruptcy attorney (which is obvious to anyone who is), but if I were I would probably not have the balls to test this theory out. A whole industry would stomp on you and demand fees and costs…
It’s about time the shit started hitting the fan. This is the obvious reason for the total stagnation of progress in this country for almost a decade now. It’s pretty obvious the banks are petrified to lend any money because they have been trying to bury this mortgage fraud for the last two years and when its fully exposed, who knows, these assholes may be insolvent. Now wouldn’t that be novel? But we know our goody, two shoes government will just bail them out again, because that’s who Richard Shelby and Chris Dodd really, really work for. We all know that.
The banks have not been a friend to anyone but themselves for the last two years, so it’s not like they are going to stop lending money because they never started after they received TARP.
So in the end whatever happens I’m positive the United State Government and the Federal Reserve will fix all the boo boo’s of Wall Street again so they will be free to concoct the next bubble to screw the American people some more, because that’s what Wall Street is all about and nothing else.
DreswS is the business and economics editor for his family
Mike Konczal at Rortybomb has several good posts on this issue. From my cursory reading it sound like the banks are imposing a moratorium because they may be on the hook to buy back their
shittytroubled assets. To quote Mike K.:
“If more than 0.01% (!) of mortgage notes weren’t properly transferred, the trust can force the sponsor (in this case, Goldman Sachs) to repurchase the bad mortgages.”
That’s why there is a moratorium and that’s why this could be a real disaster for the big banks
DrewS is the business and economics editor for his family
Mike Konczal at Rortybomb has several good posts on this issue. From my cursory reading of one of his recent posts, it sounds like the banks are imposing a moratorium because they may be on the hook to buy back their
shittytroubled assets. To quote his summary of one agreement between Goldman & DeutscheBank:
“If more than 0.01% (!) of mortgage notes weren’t properly transferred, the trust can force the sponsor (in this case, Goldman Sachs) to repurchase the bad mortgages.”
I think that’s why the banks have imposed a moratorium, and why this could be a real disaster for the big banks
@Xenos: On that note you need to watch a little bankruptcy suit in Mississippi district. The big deal is this amended filing. In it, the National Bankruptcy Trustee for the region, for herself and all the other national bankruptcy trustees, joins as plaintiff. On the hook are Prommis, LPS, and their attorneys and agents. While the specific charge is illegal fee sharing, the underlying issues that discovery will cover include wholesale creation of documents.
It’s worth recalling that almost all foreclosures in the US are followed by or accompanied by bankruptcy. If this case demonstrates that LPS, who provided documents to all five of the major lenders as well as MERS (and other places), provided false documents that led to bankruptcies, things turn uglier.
“First of all, they could ban foreclosures on the mortgages the government owns or otherwise guarantees, through Fannie and Freddie. And that’s around 97% of all mortgages.”
Last I heard this is true of new originations (after you include the FHA and Ginnie programs that have shot back up in market share from their non-existent levels during the boom), but it’s only backing about half of all existing mortgages, not 97%.
They should be negotiating a way to allow home owners rights to see the note waived in exchange for a cramdown down to the market value of the home, issuing new, non-fraudulent paper trails in the process to reboot this massive fuckup.