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


EDITOR’S NOTE: The Great Depression showed us that housing prices could drop 25.9%. The Great “recession” has now passed that drop and so far, has fallen 26%. There IS a difference however. In the run up to the Great Depression loose capital combined with other factors sent asset prices upward, but if you look at Schiller and Case Schiller Analysis you see four differences graphically.

The first difference is that in the time leading up to the Great Depression real banks were lending real money and therefore they had the constraint of risk on their own capital. Liars loans didn’t exist. It always was up to the bank’s underwriters to confirm every fact or representation made by or on behalf of the borrower, who incidentally didn’t use mortgage brokers because mortgage brokers, for the most part, didn’t exist. In the time leading up to the Great Recession, there were no real banks taking real risks. Whoever was named as payee on the note never handled the money much less funded it. Whoever was named as lender on the mortgage or deed of trust suffered the same impairment.  Mortgage brokers were sent out in virtual armies with minimal training other than scripted sales pitches.

  • Thus without any risk of loss on the loans and the business model being that the “loan originator” would merely present itself as the lender in exchange for a fee, and there being no underwriting process for which anyone could point their finger at and make a claim the object changed from making good loans that would enhance the income and balance sheet of the party representing itself at closing as the lender, to a different business model: get all the people you can regardless of qualifications to sign loan papers.
  • In Florida these armies of “Loan counselors” or mortgage brokers included 10,000 convicted felons — so it was obvious that Wall Street wanted. The lender identified by the mortgage broker was usually not the lender identified on the closing papers and the lender on the closing papers was not the lender who advanced the money to fund the loan.

The second difference is that the run up didn’t get much out of standard territory in relation to median income adjusted for inflation. It peaked for sure and back then it was considered an extraordinary peak, but it didn’t come close to the run-up in prices preceding the Great Recession.

The third difference is that there was no specific correlation between housing prices and target markets for Wall Street backed mortgages. In fact, there were no Wall Street backed mortgages. So the decline was felt throughout the country, some parts more than others. The types of mortgages available were limited to what you could count on one hand in the time preceding the Great Depression. The number of mortgage “flavors” preceding he Great recession burgeoned to over 400 different kinds of mortgages — a number that baffled Alan Greenspan along with mortgage brokers, borrowers and those who assisted borrowers at closing. The same stack of papers were thrown at the borrower at closing — but only in size and form — the content of those papers was very different from borrower to borrower.

And the fourth difference is that rampant falsely inflated appraisals were absent in the Great Depression but the cornerstone of the Great Recession.

So the takeaway idea in this article is that the whole securitization scheme was a scam that artificially raised the APPARENT housing prices in entire geographical areas that had been targeted by Wall Street. Thus the “decline” in prices is merely a correction to come back in line with median income which has been stagnating for 30+ years. And THAT is why I say that principal reduction is unnecessary. It is a PRINCIPAL CORRECTION back to reality and away from the fraudulent claims at closing and all the way up the securitization chain.


Housing Market Slips Into Depression Territory

By: Cindy Perman
CNBC.com Staff Writer

As the economy revs back to life, with signs of hiring on the horizon, the housing market is being left behind like Macaulay Culkin in “Home Alone.”

Macaulay Culkin
Macaulay Culkin

In the past few years, we’ve all been careful to choose our words carefully, not calling it a recession until it fit the technical definition and avoiding any inappropriate use of the “D” word — Depression.

Things were bad but the broader economy never reached Depression territory. The housing market, on the other hand, just crossed that threshold.

Home values have fallen 26 percent since their peak in June 2006, worse than the 25.9-percent decline seen during the Depression years between 1928 and 1933, Zillow reported.

November marked the 53rd consecutive month (4 ½ years) that home values have fallen.

What’s worse, it’s not over yet: Home values are expected to continue to slide as inventories pile up, and likely won’t recover until the job market improves.

And while the president is physically protected in an emergency, whisked to a bunker at an undisclosed location, the actual White House is not: The value of 1600 Pennsylvania Avenue has dropped by $80 million, or nearly 25 percent since the peak of the housing boom. It’s current value is $251.6 million, according to Zillow, down from $331.5 million.

Oh-h say can you see … by the dawn’s ear-ly light …


16 Responses

  1. very concerned

    Taking a wild guess that your servicer is not a subsidiary of major banks — but, likely servicer such as Ocwen. Correct??

  2. very concerned

    GSEs typically remove non-performing loans from securitized trust within 180 days. What they do with collection rights after that is in files of GSE and servicer. But, servicer is never the creditor unless they actually purchase collection rights to non-performing loans. Either way, servicer is acting as a debt collector and must verify the debt to you — according to federal law. They must provide this information to you. But, servicers still think they do not have to provide info, and that is a problem our government is ignoring.. . .

  3. M. Turner: Why don’t you get that story about the Judge in Cleveland losing his house to Dylan Ratigan. Maybe he will put it on his show. http://www.challenginforeclosure.com Sirak@challengingforeclosure.com

  4. Here is where that article below came from:
    Cuyahoga County Juvenile Judge Peter Sikora faces foreclosure on his lakefront home
    Published: Friday, January 07, 2011, 5:15 AM Updated: Friday, January 07, 2011, 12:05 PM
    James F. McCarty,The Plain Dealer By James F. McCarty,The Plain Dealer

  5. Ohio Judge Follows JPMorgan Chase’s Advice, Ends up in Foreclosure

    I have to tell you… I’ve been waiting for this to happen.

    Ohio Judge Peter Sikora was looking to take advantage of the lowest mortgage interest rates in decades and refinance his eight-bedroom, lakefront Cleveland home, so he contacted his bank, JPMorgan Chase. With property values in decline in Cleveland, Chase said no to refinancing but told the judge to apply for a loan modification instead. The judge followed JPMorgan Chase’s advice to the letter and as a result has fallen a year behind on his nearly $1 million mortgage… hasn’t paid his property taxes… and now has ended up in foreclosure.

    So, all I can think of to say is… don’t you just hate these irresponsible sub-prime borrowers who should never have been allowed to buy their homes in the first place and now think they’re entitled to loan modifications? I know I sure do. Maybe if the judge had called a scammer and paid an up front fee… he would have gotten his loan modified… no, wait… that’s not right… maybe if he had called a lawyer he would have… wait, no… he is a lawyer, right. Well, maybe if he… oh wait, I know… MAYBE IF HE HAD NOT BELIEVED THE LIES TOLD BY JPMORGAN CHASE… yeah, that’s sure as shootin’ where he went wrong.

    According to a story in the Cleveland Plain Dealer, that I’m betting mysteriously isn’t going to get a lot of national attention…

    “The bank advised me that the only way they would consider a loan modification would be if I fell behind on my payments,” said Sikora, 59, a judge since 1989. “I took their advice and put the money aside.”

    The judge has now pinned his hopes on an upcoming mediation session to keep him in his Edgewater Drive home, which according to the Cuyahoga County Auditor’s Office, appraises at $844,000. Sikora told the Plain Dealer in a telephone interview that he has the money to make his mortgage payments, and that the only reason he’s in foreclosure is that he followed the advice of officials at JPMorgan Chase & Co.

    Sikora, who was elected in 2008 as president of the Ohio Association of Juvenile Court Judges, also said that he was surprised when, back in June, right smack dab in the middle of his negotiations with JPMorgan Chase, the bank went ahead and filed the foreclosure lawsuit against him seeking $999,000, including $6,400 in unpaid property taxes.

    According to Sikora…

    “It’s unfortunate that it’s gotten to this situation, I’ve been talking with them for more than a year, but the bank hasn’t been responsive.”

    JPMorgan Chase hasn’t been responsive? Well, that can’t be right, can it? Aren’t we all so surprised that Chase wasn’t responsive? And the fact that Chase would file for foreclosure while in the middle of negotiating with him over a loan modification… that they told him he should apply for by stopping making his mortgage payments… well, frankly I’m just shocked, aren’t you? Totally taken aback, I’d have to say.

    I’ll tell you what’s really surprising to me… there are two things:

    1. A judge worked with JPMorgan Chase for over a year to get his mortgage modified, ended up in foreclosure… and all he has to say is that it’s “unfortunate”.
    2. Bank of America hasn’t done this to a judge yet.

    Oh, and there was one more thing in the Cleveland Plain Dealer’s story that didn’t surprise me in the least…

    “The attorney for JP Morgan Chase did not return a phone call.”

    No surprise there.

  6. I think that government agencies will purchase all the foreclosed homes that nobody else will want to buy. I’m picturing a “landlord and the tenants” scenario. We will be renting from the U.S. gubmint.

  7. ANON,

    How do we know 100% who our true creditor is? We must know this to defend ourselves. Without the accurate documents, the mills will just lie and get away with it. What can a person do to locate this information. Nothing is forever hidden, it can be located, just how do I do it? Our assignment to the servicer was recorded. Our loan is Fannie, but where and who is our real creditor? We were prime.

  8. Unfortunately, this entire Ponzi scheme has caused the value of everyone’s home to go down. The banksters have killed the equity in everyone’s home. As we keep going with this foreclosure nightmare, more and more people are losing equity in their homes and do not want to continue to make payments for an underwater house.

    My fearless forecast is that there will be many more “strategic defaults” coming up this year. If you income has dropped, what is the point of overpaying for your house. http://www.challengingforeclosure.com Sirak@challengingforeclosure.com

  9. Housing prices will go so low even a unemployed guy will be able to buy one!

  10. Ian

    There are many types of derivatives — and many types of credit default swaps (and CDOs are derivatives themselves).

    The SPVs were set up in “waterfall structure” — lower tranches provided credit enhancement to upper trances. Lower tranches were not passed through cash flow until upper tranches were first paid (over Collateralization allowed some anticipation of pass-through to lower tranches).

    Non-performing loans would be subordinated to lowest residual tranche (owned by servicer) –and collection rights would be swapped out to the servicer — who would then continue to collect for itself — or distressed debt “Investor/buyer”.

    But defaults came so fast — that a “trigger event” occurred and credit default swap protection on upper tranches was triggered. Since swap protectors could not perform their obligation due to size of demand — the government stepped in and paid (100%). The lower tranches did not have swap protection — but much smaller principal was invested in these tranches.

    After the bailout — the “waterfall structure” was destroyed and, in my opinion, the entire SPV structure. The only remnants are “collection rights” — which the servicer holds for itself – or other investor (debt buyer/hedge fund/ (REIT as M. Soliman states).

    The irony of the whole situation is that foreclosure attorneys still attach themselves to original SPV — (now dismantled) – and to which loans were not even properly conveyed to begin with.
    All have a right to know their CURRENT creditor — and it is not the servicer, not the trust, and not the trustee. Past “creditor” (even if there WAS valid conveyance) is irrelevant. This affects ability to negotiate – and validity of possible meaningful modification. There can be NO modification without identification of CURRENT creditor.

  11. Foreclosures have reached a record high – 1 in 45 in country receive notice — and in Nevada 1 in 11.

    The main reason the government has not done something to stop foreclosures is Bernanke’s reasoning of “moral hazard.” 1 in 25 of all homeowners are underwater — thus, Bernanke reasons that the government cannot help foreclosure victims – otherwise others who are still paying will foreclose to get the same benefit.

    However, Bernanke refuses to acknowledge foreclosure fraud – and that the foreclosures are the root cause of drop in value of properties. Government, to date, has also done little to investigate fraud in the origination of the mortgages that are the cause of much foreclosure fraud.

    Importantly, many distressed debt buyers are being unjustly enriched by mortgage/foreclosure fraud. This is because even though borrowers have not been given a principal correction — loan collection rights have been swapped/sold at steep discounts, thus, allowing for a nice profit on foreclosures..

    Therefore, Bernanke and government is looking at the situation backwards. There is a moral obligation to restore foreclosure victims to “whole” given the mortgage origination/foreclosure fraud. Not everyone was a victim of those particular loans that were perpetrated during the height of the Wall Street mortgage madness. If foreclosures were stopped — home values would gradually improve – benefiting all — and the economy.

    The real “moral” issue is the absurdness of allowing foreclosures to continue at a record never seen in this country before.


  13. ANONYMOUS or GREGORY BRYL- LL has had very few posts since inception regarding credit default swaps,and how they work. There is not much publicly available info on the mechanics of cds. However,here is my take,correct me if you can help.If someone were to buy (at the time) cds on a $100million pool of mortgages,say at 20 basis points($200k)paid monthly. The cds buyer is betting that the loans in the tranch or tranches he is betting against will fail. Some of the tranches “fail” when only 7% of the loans default. If the MBS investors got 25%,and lost 75%, then the cds buyer gets the 75%. Now where I start to go astray in my understanding, is that the cds purchaser is supposed to get paid,not all at once, but as portions of the mbs tranches he has bet against go bad. I feel that this is where the servicer foreclosing, then not transmitting notice and monies to trustee, is where the race to foreclose(and not report)picks up. Furthermore, it has been publicly stated that there are 6-700 trillion dollars in derivatives outstanding, although I don’t know what % of them are mbs,or rmbs. Looking at the $dollar gains by the cds or cdo investors,this is an incredible amount of money. The servicers are not forwarding the foreclosure/reo/resale proceeds to the investors. Can you please comment on this? Thanks.

  14. how do you use this info to force banks to accept short sales and or judges to say the banks are negligent for not allowing the sale, which in turn caused the property to loose value even more, especially when the lender knows the borrower cant pay.

  15. Kickboxer,

    Your comments are true. The banks did not build dreams but only a wasteland of ghettos. Take a drive out to North West Phoenix so you can marvel at the John McCain projects. Nothing but Pottersville. Those in office have know respect for the home owner and the taxpayer.

  16. And this is why, those of you who can still afford to make mortgage payments, should be angry at the banksters. Return that anger to its rightful owner. You need to redirect your anger from us distressed borrowers to the tbtf banks that brought all this upon us.

    Of my neighbors who are still making payments, many of them do not want to make any repairs to their places because they have zero equity. Who wants to put out thousands of dollars for a new roof when you don’t have equity? I feel bad for all homeowners. Forget about improving the property. Our homes are no longer an asset.

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