STRATEGIC DEFAULTS RISING ON ROBO-SIGNED DOCUMENTATION

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

Both Mr Horton and Ms Gaughen are the types of people banks like to lend to. They made payments on time, they have jobs. However, the plunge in US house prices – which has been particularly severe in California and Florida – left both of them with mortgages worth much more than their homes. Not having put any of their own money into the homes – 100 per cent financing was a common feature of the housing bubble – they decided to walk away from their mortgages.

A particular worry is whether the tales of shoddy documentation completed by so-called “robo-signers” at mortgage lenders and growing foreclosure delays will affect people’s behaviour. It could for three reasons.

First, a longer gap between stopping payments and being evicted from the property allows people to build up a nest-egg. In many states, homeowners do not owe the bank anything more than the keys to their home if they default on a mortgage.

Second, a slowdown in foreclosures creates an ever-growing backlog of unsold homes, which will at some point be sold, pushing house prices lower. If people think home prices will not recover, they are more likely to throw in the towel.

Third, it further damages the reputation of the banks who made the mortgages, and this could make borrowers more unwilling to pay. “More bad news and uncertainty creates more anger against the banks and frustration with the system,” says Chris Mayer, Professor at Columbia Business School. “That’s not helpful.”

Foreclosures spawn new attitude to ownership

By Aline van Duyn

Published: October 22 2010 19:58 | Last updated: October 22 2010 19:58

Jeff Horton has a job, two cars and money in the bank. Yet, he stopped paying his mortgage a year ago. With shoddy documentation by mortgage lenders now delaying foreclosures across the US, Jeff thinks he will continue living for free for at least another six months, and probably longer.

The 33-year-old IT specialist is keen to put an end to his disastrous home purchase that will likely leave his bank with a loss of at least $100,000. Until the bank actually makes him leave, he will keep living in the Orlando house, and pocket the $2,200 he used to pay on his monthly mortgage. “I’m not stupid,” he says. “I will live for free until the bank takes over the house.”

Shasta Gaughen, an anthropologist living in California, stopped paying her mortgage in February. She has no idea when her home will actually be taken over. “I have been able to save significantly,” she says. “Every penny that was supposed to go to my mortgage went into savings, around $1,200 a month.”

Both Mr Horton and Ms Gaughen are the types of people banks like to lend to. They made payments on time, they have jobs. However, the plunge in US house prices – which has been particularly severe in California and Florida – left both of them with mortgages worth much more than their homes. Not having put any of their own money into the homes – 100 per cent financing was a common feature of the housing bubble – they decided to walk away from their mortgages.

Historically, homeowners have been reluctant to do this. Part of it reflects the fact that people want to “do the right thing”. “Borrowers are likely to stay in their houses until they are well beyond the book value underwater mark,” a Federal Reserve Bank of San Francisco analysis said this week.

Whether more of the millions of homeowners now facing “negative equity” decide to follow the path of Jeff and Shasta is making plenty of banks, regulators and investors very nervous. More defaults, especially by people still making monthly interest payments, increases losses for banks and the investors owning billions of dollars of securities backed by mortgage payments.

A particular worry is whether the tales of shoddy documentation completed by so-called “robo-signers” at mortgage lenders and growing foreclosure delays will affect people’s behaviour. It could for three reasons.

First, a longer gap between stopping payments and being evicted from the property allows people to build up a nest-egg. In many states, homeowners do not owe the bank anything more than the keys to their home if they default on a mortgage.

Second, a slowdown in foreclosures creates an ever-growing backlog of unsold homes, which will at some point be sold, pushing house prices lower. If people think home prices will not recover, they are more likely to throw in the towel.

Third, it further damages the reputation of the banks who made the mortgages, and this could make borrowers more unwilling to pay. “More bad news and uncertainty creates more anger against the banks and frustration with the system,” says Chris Mayer, Professor at Columbia Business School. “That’s not helpful.”

Indeed, Jeff tried to get his bank to reduce his monthly mortgage payments so that he could rent out the property. The bank was inflexible. When he read about million-dollar bonus payments to bank executives last year, he decided to stop making payments. “The bonuses were the last straw,” he says.

Jon Maddux, who runs YouWalkAway.com, which advises people on the foreclosure process, says calls about foreclosures have increased recently. “The banks are cutting corners in the foreclosure process and in some cases breaking the law and that sends the message to homeowners that, if the banks are not honouring their promises, why should the homeowners?” he says.

Regulators are trying to work out if the documentation problems create added risks for banks. There is an assumption that borrowers with good credit histories will keep paying. If that changes, there could be another wave of losses for the financial system.

13 Responses

  1. BSE

    Love it. Thanks.

  2. Zoe , I did not read all 54 pages , but I see many times CORELOGIC and ZILLOW .WHO PAYS THEM ? I think the FDIC should never have permitting the Banks to use AVM computer appraisal. Even the Appraiser have some black sheep ,but we would not have this underwater mess, because the would see the truth and not a aerial view.
    I have a empty lot , and ZILLOW put a house on , what a BS. Next Door , the come up with $ 142,000.00 and
    BoA come up with $60,000.00
    Somebody has to step in .I know the Appraiser association work on that , but the are not powerful enough.

  3. One key to strengthening our voice against the powerful bank machine is to educate those who call strategic defaulters, or any other kind, “deadbeats.” Caught redhanded, the banks worked to pit the two groups against each other. Homeowners who are struggling to continue paying their mortgage payment point their finger and question the morality of homeowners who are struggling less by not paying their mortgage. Right off the bat, the banks and main stream media came out full force, pointing at the “deadbeats. They reminded paying homeowners how they are “responsible” homeowners don’t deserve to have to pay for deadbeat s to stay in their home free. Until the slight turning of the tide, judges sounded off in agreement.

    Here’s an excellent tool to help educate homeowners who are continuing to pay the payment, out of “honor.” Once they see how utterly unwise it is (stupid seemed to a divisive word here) to continue paying on a home under water. Continuing payment is also unwise for those homeowners not under water, considering how the mortgage fraud makes it nearly impossible to buy or sell real estate with any hope of clear title. Without clear title, marketability is at best only a memory from yesteryears when we didn’t know what was going on behind the scenes. Wel… actually… hidden in plain sight. Plain sight being cooked books.

    Arizona Legal Studies
    Discussion Paper No. 09-35

    Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis

    http://www.sacbee.com/static/weblogs/real_estate/SSRN-id1494467.pdf

    I was pretty shocked by the calculation for determining if it is wiser to rent or buy. I hope to stay in my home, but if that doesnt’ work out, I’ll rent.

  4. Order the Orange Jump Suits

  5. “SUBSTITUTION OF TRUSTEE”

    WHEREAS, Stewart Tittle of California is the original Trustee and MERS is the original beneficiary.

    Now, THEREFORE, the undersigned hereby subsitutes Power Default Services Inc. whose address is C/O Fidelity National Title Company as Trustee under said Deed of Trust.

    CINDI ELLIS who has always been employed at American Home Mortgage Servicing Inc. in said link below now becomes assistant vice president of MERS

    http://www.linkedin.com/pub/cindi-ellis/10/b56/670

    KRAIG M KIRTLEY Notary Public is also the Executive Vice President at Fidelity National Title Company

    http://www.linkedin.com/pub/kraig-kirtley/10/375/b3

  6. The story I have been hearing is that tens of thousands of Mod letters have been sent by servicers in the past few weeks. Anyone who had an application pending is all of sudden getting the happy news in the mail.

    It appears to be a strong possibility that the banks and institutions that desire to foreclose on property are now offering these re-modifications NOT as a means to help homeowners, but rather as a way to create new paperwork and legal affirmation by homeowners to establish a pseudo title and lien that will stand up in court, allowing the banks to foreclose and move on.

    The Finance Examiner makes no assertion on what someone should do with their home, especially if they are in non-payment and in the process of foreclosure. However, it is highly suggested that you do nothing without the advice of an attorney, especially one in your area who has successfully argued the validity of improper ownership and documentation by the banks to foreclose on a mortgage, and do not simply accept a bank re-modification if there is ANY possibility the banks have no legal right to your property in its current state of ownership. You can check the MERS system database to see if your property is in it, and this will give you a piece to the puzzle that your note is part of a bundled RMBS, which now places the ownership of the lien in jeopardy by the bank.

    re-modificationsBanksloans

  7. I am fighting CHASE HELOC , I am fighting CHASE
    Credit Card raise from 2 % to 5% , both Classaction and I am fighting Promissory Note Forgery.
    No wounder that I dont like CHASE anymore , but I can not believe that CHASE has so stupid people , who think the AVG CORELOGIC Price is correct..
    Corelogic is a main problem , but nobody
    has a comments.FTC should shout down this website , Zillow the same way. I my subdivision a home was sold in the Family ( not foreclosure ) for $ 600 . A month later my home dropped $ 50,000.00 Underwater.
    Corelogic Computer will use that $ 600 to drop the price , and tomorrow you read a new low price Index.
    A Computer misreading ? the put all prices in one bucket and nobody recognize the mistake .
    CHASE also let me know , that the City website price did affect the underwater prices . If I check the price on my home , the City price drop was about $ 80,000.00 from 2007 until now , but Corelogic droped my home $ 190,000.00 . How is that possible .
    I hope my euro-english is not to bad.

  8. What Bank in its right mind would give me a loan?

    A bank that is really a broker
    A bank that falsifies papers to cover its track
    A bank that got its Fees and Commisions upfront
    A bank that later on services the loan and has the potentional to make a killing.
    A bank that falsifies papers to sell the loan multiple times
    A bank that falsifies notaries
    A bank that falsifies appraisals.

    The list goes on.

    So Judge if you have any retirement investments or business with the banks you are gonna go down with this fraud sooner or later just like the rest of us people.

  9. The lies that banks told honest people

    Some of us recorded the conversations for our records

    Pay back is a bit…..h

    The internet allow us to overwhelm their system and they made fatal errors

    Fat boy attorney trader of ndex west is so stupid because he bullies those uniform and his old boy judge connections are not as powerful with thefeds and doj

    Fight and object to these scum cockroaches

  10. The recession is going into stage two especially in California The Firing of City State and Federal Employees.

    Not to mention the downsizing of the Military.

  11. Cindi Ellis signs as the Assistant vice president of MERS but her background employs her working at American Home Mortgage Servicing Inc.

    http://www.linkedin.com/pub/cindi-ellis/10/b56/670

  12. How about Strategic Not Lending. The reason the Banksters are not lending even to people with great credit is because they know the prices are going even lower. Why would they lend to people with great credit if the bankster know that the prices of homes especially in A and B areas are going to go even lower.

    Not to mention the fact the alleged fraud will reveal that they sold loans multiple times and that their is a serious title issue.

  13. I wish more people did that. Bring down these criminal institutions..

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