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  1. California Rejects Mortgage Settlement Despite Promise of $15B

    By on January 27, 2012

    I’ve written about the proposed mortgage settlement a lot over the past year or so.  I have made no secret that I believe it is a bad deal all around.  The proposed settlement figure – $25 billion – seems to me to be totally inadequate compared to the scale of the damage resulting from mortgage fraud (and according to the terms of the proposed settlement, much of this figure would come from pension funds that own mortgage backed securities).  This is a pittance when you consider the damage is most likely well into the trillions of dollars.  The investigation into mortgage abuses (if you can call it an investigation) has been virtually nonexistent.  The settlement includes no criminal charges.  The settlement would possibly preclude states from pursuing additional judgments down the road.

    I think this is a horrendous deal all around.  Nevertheless, there is considerable political pressure on state attorney generals to sign off on the plan.  A group of attorney generals, including California AG Kamala Harris, is holding out from signing off on this settlement.

    Today, Shahien Nasiripour from the Financial Times reports that California was offered a whopping 60% of the proposed $25 billion settlement, and still turned it down.  Last Wednesday Harris called the settlement “inadequate“, and according to the FT article, Harris’ office deemed that the settlement lacked transparency, real relief, and accountability.

    I have no doubt that the settlement is indeed lacking in all these areas.  That California would turn down 60% of the proposed settlement seems to indicate just how inadequate it is – for the entire country.  Dave Dayen of FireDogLake does a nice job of further breaking down the inadequacy of the settlement here.

    It is worth dwelling on this for a moment.  If Nasiripour is correct (and I trust that he is), the cut of the settlement for the remainder of the country would be $10 billion.  The whole settlement, as proposed is absurd.  This is even more absurd.  This country needs a real investigation into mortgage and foreclosure abuses, this is not an issue that can be allowed to be swept under the rug.  The largest financial market in the world was decimated.  Millions lost their homes.  This cannot be allowed to stand.

    Recently there was an uproar over the proposed anti-online piracy bills SOPA/PIPA (and rightfully so in my opinion).  There should be a furor over this magnitudes of order larger than what we saw a few weeks ago.  People should be up in arms about this.  That they are not saddens me.

    Category: Mortgage Rates

  2. California and Nevada Announce Joint Investigation Into Mortgage and Foreclosure Fraud

    By on December 7, 2011

    Late yesterday, Attorney General Kamala Harris of California and Attorney General Catherine Cortez Masto announced an agreement to jointly investigate misconduct and fraud in the mortgage industry.  Both AGs withdrew from the 50-state foreclosure settlement earlier in the year over concerns that investigations into mortgage and foreclosure misconduct were incomplete and inadequate.

    Of the joint investigation, AG Harris commented:

    “The mortgage crisis is a man-made disaster that has taken a heavy toll on the country, but it saved its worst for California and Nevada.  The mortgage crisis is a law enforcement matter, and we will prosecute to hold accountable those who are responsible and also protect the homeowners who are targeted for fraud.  I am delighted that California and Nevada are entering into this alliance to leverage the best results for our investigations and look forward to forging similar collaboration with other states.”

    Masto commented:

    Continue Reading…

    Category: Mortgage Rates

  3. Fannie, Freddie Subpoenaed by California AG for Investigation into Mortgage Abuses

    By on November 17, 2011

    Yesterday Alejandro Lazo and Jim Puzzanghera of the Los Angeles Times reported that California Attorney General Kamala Harris has subpoenaed government sponsored entities (GSEs) Fannie Mae and Freddie Mac as part of an investigation in mortgage origination, securitization, and foreclosure practices.

    Harris announced that she was withdrawing from the proposed 50-state Attorney General mortgage settlement back in October, saying that the settlement was “inadequate for California homeowners”, and that the settlement would “excuse conduct that has not been properly investigated”. Attorneys General from Nevada, Arizona, Massachusetts, Illinois, Delaware, and New York have all indicated that they will conduct independent investigations into mortgage abuses, effectively dooming the broader settlement.

    The subpoenas will look into details on the GSEs’ roles in the housing bubble, mortgage originations during the bubble years, mortgage securitizations, as well as their foreclosure practices in subsequent years.

    It is believed that these subpoenas could be an effort to create leverage over the GSEs and force them into adopting policies including principal write-downs, which are opposed by Ed DeMarco, the head of the Federal Housing Finance Agency, which has overseen the housing giants since they were seized by the federal government in 2008 in order to prevent them from collapsing.

    While the California investigation is only in its infancy, I will be interested to see what details emerge.  More as this situation develops.

     

     

     

     

     

    Category: Mortgage Rates

  4. California Investigation Into Mortgage Abuses Widens

    By on October 20, 2011

    It appears that California Attorney General Kamala Harris is following through on promises to conduct her own independent investigation into mortgage abuses.  The attorney general’s office has reportedly subpoenaed Bank of America in connection with the investigation.  Bank of America purchased failing lender Countrywide Financial in 2008.  Countrywide was particularly active in originating subprime loans in California.

    From today’s Los Angeles Times, Alejandro Lazo and E. Scott Reckard report:

    “Investigators with the state attorney general’s office have subpoenaed Bank of America Corp. in connection with the sale and marketing of troubled mortgage-backed securities to California investors, according to a person familiar with the probe. 

    The state is trying to determine whether the bank and its Countrywide Financial subsidiary sold investments backed by risky mortgages to institutional and private investors in California under false pretenses, according to the person, who was not authorized to speak publicly and requested confidentiality.”

    Harris backed out of the broader 50-state attorney general settlement/investigation earlier in the month over concerns that the pending* deal was “inadeqaute for California homeowners” and that the settlement would “excuse conduct that has not been properly investigated”.  AGs from Massachusetts, New York, Delaware, Arizona, Kentucky, Nevada, and Minnesota have all indicated that they will pursue independent investigations of mortgage abuses.

    *This deal is only really nominally “pending”.  For months now, Iowa Attorney General Tom Miller (who is heading up the investigation) and others involved in the talks have claimed that a deal is imminent.  In my opinion, a broad settlement has an infinitesimal chance of being reached.  I cannot imagine why the banks would ever agree to a deal with only some of the states, leaving them open to liabilities in others.  No matter what spin the investigators try to put on this, it doesn’t change the fact that this settlement is pretty much dead on the table.   

    It’s going to be pretty interesting what this investigation turns up, and how far Harris will delve into the origination, securitization, and foreclosure processes.  I don’t know if this is simply a leverage play for a settlement, or if this will turn into an investigation that could actually send people to jail – but it’s going to be intriguing to watch it develop.

     

    Category: Mortgage Rates

  5. California Foreclosure Filings Surge 26% in Q3

    By on October 19, 2011

    According to an article by Alejandro Lazo in the Los Angeles Times yesterday, foreclosure tracker DataQuick saw a surge in foreclosure filings in California in the third quarter.  Notices of default rose 25.9% percent from the second quarter to the third quarter.  Filings were at a three-year low in the second quarter.  Despite the increase, foreclosure filings are still down 14.4% year-over-year.

    Foreclosure activity was down considerably in the wake of the robo-signing scandal, as judicial and regulatory authorities cracked down (to some degree) on foreclosures practices over sloppy paperwork.  The revelations over the robo-signing scandal created a sort of de facto moratorium on foreclosures as banks scrambled to get their paperwork in order.  Despite evidence that robo-signing is still occurring (see this article from American Banker), major lenders are once again ramping up foreclosure efforts.

    That foreclosures are rising again should come as no surprise.  Economically, we are still in much the same situation we were in last year, with high unemployment levels and declining or stagnant home prices.  Across the country about 25% of all homeowners with mortgages are underwater (owe more on their mortgage than their home is worth).  Negative equity levels in California are higher than average, with 31% of mortgaged homes underwater.  Negative equity levels are the number one predictor of eventual default.

    The rise in foreclosures coincides with California Attorney General Kamala Harris’ decision to pull out of the 50-state foreclosure fraud settlement (although it’s actually more like a 43-state settlement now, because the AGs for Massachusetts, New York, Delaware, Arizona, Kentucky, Nevada, and Minnesota have also shown the desire to conduct their own independent investigations into mortgage fraud).  With the 50-state agreement almost certainly dead, it is now to AG Harris to investigate foreclosure activities in the state independently.

    For a while I’ve been predicting that we will see a second wave of foreclosures.  The robo-signing problems seem to have held this second wave off for a while, but I fear that they are here now.  Barring some sort of moratorium or agreement with banks, I suspect that we will see foreclosures increase more throughout the winter as home prices once again begin to decline.

     

     

    Category: Mortgage Rates

  6. Foreclosures Once Again Rising in California and Nevada

    By on September 14, 2011

    It took a while due to increased judicial scrutiny on foreclosures, and shoddy bank paperwork, but we are beginning to see a rising tide of foreclosures in many states.

    As reported yesterday by Diana Olick of CNBC and Jon Prior of HousingWire, notices of default are rising in many western states, notably California, Arizona, Washington, Oregon, and Nevada.  Bank of America alone issued 116% more foreclosure starts in August than in July.  Notices of default in California were up 70% in August.

    Foreclosure activity was reduced or even suspended in some states as judges increasingly scrutinized bank paperwork, often finding it lacking (to be kind).  The robo-signing scandal lengthened foreclosure times and served to cast doubt over the chain of titles of many foreclosed properties. Problems with the Mortgage Electronic Registration System as well as the mortgage securitization process have frequently made it clear what entity has standing to foreclose on a particular property.

    The rise in foreclosures is mostly occurring in non-judicial foreclosure states where a lawsuit is typically not required to foreclose on a property. There tends to be less scrutiny on these types of foreclosures than in judicial foreclosures, where the case is reviewed by a judge.

    According to a recent Harvard study, there were nearly 2 million homes with mortgages that were at least 90 days delinquent as of March 2011. There were an additional 2.2 million homes in the foreclosure pipeline.  3.5 million foreclosures were completed between 2008-2010.

    At this time, it really isn’t clear what will happen with the huge supply of homes that are delinquent or in some stage of foreclosure.  This excess supply will continue to put downward pressure on home values, as it doesn’t appear that there is a great demand for these homes.

    The foreclosure crisis continues, with no real end in sight, and our lawmakers appear not to have any real concrete plans to deal with it.  Until this situation is squared away, the housing sector will remain a drag on our economy.

     

    Category: Mortgage Rates

  7. NY, California AGs Meet to Discuss Investigation Into Housing Crisis

    By on July 15, 2011

    California Attorney General Kamala Harris

    Late yesterday, Nathaniel Popper and Alejandro Lazo of the Los Angeles Times reported that California Attorney General Kamala Harris may join the attorneys general of New York and Delaware in an investigation into potential mortgage origination, securitization, and foreclosure practices.  The article says that Kamala met with New York Attorney General Eric Schneiderman to discuss the matter and the possibility of some form cooperation in the investigation. Schneiderman made headlines a few weeks ago when he announced he would take “the hardest line” against the currently proposed “quick, cheap” 50-state foreclosure settlement.  According to the article:

    “New York and Delaware have more than a dozen attorneys working full time on the effort and have subpoenaed or requested information from 13 financial firms, including Goldman Sachs and JPMorgan Chase & Co., according to people familiar with the investigation. The people spoke on condition of anonymity because of the sensitivity of the investigation.”

    In late May, Harris announced her own investigation into mortgages and said that the investigation would look into three areas:

    • “Corporate fraud, including instances in which bundled mortgages were sold as securities to the state or its pension funds under false pretenses.”
    • “Scams, including instances in which consultants, lawyers and other took fees from people in foreclosure, saying they would help the homeowners get loan modifications or other remedies, but delivered nothing.”
    • “Fraudulent lending practices, including deceptive marketing, failure to fully disclose loan terms and qualifying people for loans who couldn’t afford the terms.”

    This is yet another signal that the 50-state attorney general investigation will likely fall apart as another key AG opts to pursue their own case.  The investigation has come under considerable criticism for its distinct lack of actual investigation as well as its failure to bring about any criminal charges against those who may have committed fraud contributing to the economic meltdown.

    California was hit especially hard by the housing crisis.  More than 500,000 homes in California were in some stage of foreclosure in 2010, and home values are down by more than a third since the market peaked in 2007.  More than 2 million homeowners with mortgages in California are underwater.

    There’s no telling where this investigation may go, and if it will actually have teeth, but it is a situation worth monitoring, and I will be sure to follow up as the story develops.

     

     

    Category: Mortgage Rates

  8. California Short Sale Times Improving

    By on June 3, 2011

    Short sales comprise a significant portion of the home sales conducted in California, due to the large number of distressed property owners in that state.  In 2009, 18.5% of all transactions in Southern California were short sales.  By January 2011, this number increased to 27.3% of all transactions.

    A short sale is when a homeowner who has negative equity sells their home for less than what they owe on the mortgage (this requires approval from the lender).  The lender then forgives the remainder of the debt.  For example, a homeowner could owe $200,000 on their mortgage while their home value has declined to $150,000.  In a short sale scenario, they may sell the house for $150,000 and the lender forgives $50,000 worth of debt.  Although the borrower’s credit will be impacted, the severity is less than if the home was foreclosed upon (in addition, the borrower may owe taxes on the forgiven debt).  Typically lenders lose less money on short sales than on foreclosures, which is why they allow them to proceed.

    According to data from the California Association of Realtors from March, a whopping 43% of California short sales under contract fall through.  A lot of this is due to the extended length of time that it takes to conduct a short sale.  Much of this is a result of the large number of short sale requests, and the limited amount of staff that banks have to respond to these requests.  For this reason, it can often take 30-6o days before the lender even responds to a short sale request, frustrating both buyers and sellers.  Completing a short sale may take six months or more.

    A report from the Contra Costa Times suggests that the response time may be improving, which will hopefully facilitate short sales.  The speedier short sales are due to increased staffing levels at banks and the Home Affordable Foreclosure Alternatives program (HAFA).  HAFA incentivizes lenders and servicers to commit to short sales, and requires them to reply to requests within 45 days.  Lender participation in HAFA is increasing, along with response times.

    Increasing the efficiency of the short sale process would be hugely beneficial in California (as well as many other states).  The HAFA program, which has been relatively ineffective up until now, could be very helpful.  We will see what happens.

     

     

    Category: Mortgage Rates

  9. Falling SoCal Home Sales Sparks Fears of Lost Summer Buying Season

    1 By on May 16, 2011

    Foreclosures, declining home values, and lingering high unemployment is continuing to hurt the housing market in Southern California, much to the chagrin of realtors and builders for whom the spring buying season can be make or break.  An article from the Los Angeles Time last week by Alejandro Lazo stated that home sales in Southern California in April were down 9.2% from the year prior.  This is the lowest April number in three years, and 25.4% below the April average according to MDA DataQuick.  The median home value is down 1.8% year-over-year, falling to $280,000.

    Home prices have been declining since the expiration of the first time home buyer tax credit last year, and this is keeping many buyers on the sidelines.  Zillow recently predicted that the housing market would bottom out in 2012.  The fear of losing money is just one of the factors driving low demand for homes.  The difficulty in attaining credit also limits the number of people looking for homes.  Underwriting standards tightened in response to the housing collapse, and if the new qualified residential mortgage regulations come to pass, high down payment requirements will make it even more difficult for many to get a home.

    The economic situation in California does not indicated that the housing market will turn around anytime soon.  Across the country, about 28% of homeowners with mortgages owe more on their loan than their home is worth.  The numbers are a little higher in California, where nearly 1 in 3 homeowners is underwater.  California also saw some of the biggest run-ups in home value over the bubble years, which means that many of the people who are underwater are extremely far underwater.  Unemployment in California is still north of 12%, significantly higher than in the rest of the nation (which averages 9% unemployment).

    One area that has picked up is cash home sales.  There has been a steep increase in the sales of cash homes in California.  As of January, more than 31% of home sales were of the cash variety, as investors gobble up foreclosed and distressed properties in hopes of making quick profits.  The predominance of foreclosed property sales is yet one more factor weighing on home values in the Golden State, but this inventory must be cleared before the market can recover.  If you are in Southern California and are buying or selling a home, I’d like to hear your perspective.  Is the market really that bad?  Let me know in the comments section below.

    Category: Mortgage Rates

  10. California Legislation Would End Dual-Track Foreclosures

    By on April 27, 2011

    We’ve discussed the problem of “dual-track” foreclosure-modification a number of times in this space over the past year or so.

    Dual-tracking occurs when a delinquent or distressed homeowner applies for a loan modification, and their lender simultaneously begins the modification and foreclosure processes.  Often times, the borrower is under the impression that they are in line for a mortgage modification only to be hit with an auction notice before their modification is processed.  Lenders defend the practice by saying that already long foreclosure times would be extended even further if dual-tracking were discontinued.  Lenders further claim that discontinuation of dual-tracking could open them up to further losses.  Critics of the practice say that it is disingenuous and that it strings along borrowers who are already in a bad spot.

    Alejandro Lazo of the Los Angeles Times has done a particularly good job covering the issue as it relates to the California housing market, and has a new article up this morning about attempts to end the practice in California.  There is a proposed law in the California legislature that would require lenders to issue a yes or no decision on mortgage modifications prior to beginning the foreclosure process.  This would end dual-tracking in California.  From the article:

    Continue Reading…
    Category: Mortgage Rates

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