Nation in Denial — No Recovery Without Fixing Housing and Foreclosures


COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary CLICK HERE TO GET COMBO TITLE AND SECURITIZATION REPORT

by Bruce Judson


As we start the New Year, the executive branch and Congress continue to pretend the gravest risk to our economy and social stability does not exist: the ongoing foreclosure crisis.

The financial crisis began with the housing crisis and it will not end until we resolve housing. Government policymakers who seemingly ignore this basic fact are leading the nation to another potential catastrophe.

Last week, a number of important events occurred in Washington, including important recess appointments by President Obama. However, the most noteworthy event did not make front page news: the Federal Reserve ‘s (apparently) unsolicited memo to the committees of Congress that oversee financial services warning of the dangers the current housing market poses for the economy. (Scroll down for the memo.)

This represents an extraordinary action and underscores both the seriousness of the continuing crisis and the absence of meaningful discussion of the problem in Washington.

Bernanke’s memo reviewed federal actions to date and effectively concluded that they were unlikely to solve this national tragedy. The memo concluded, in part:

The challenges faced by the U.S. housing market today reflect, in part…a persistent excess supply of homes on the market; and losses arising from an often costly and inefficient foreclosure process (and from problems in the current servicing model more generally)…

Absent any policies to help bridge this gap, the adjustment process will take longer…pushing house prices lower and thereby prolonging the downward pressure on the wealth of current homeowners and the resultant drag on the economy at large.

This memo is notable for several reasons. First, it’s important to remember that when the Fed speaks, it does so in sober, limited terms. So an unprompted Fed warning suggesting “a persistent excess of supply” and a “resultant drag on the economy” is comparable to the Secretary of Homeland Security holding a press conference to warn of the risk of an imminent national emergency.

Second, an unprompted memo from Bernanke to the House means that he is so deeply worried he felt the need to speak out in as strong a voice as his position permits. Third, the Fed rarely speaks on issues unrelated to its direct activities. Indeed,The Wall Street Journal subsequently wrote that, “For an institution that jealously guards its independence, the Federal Reserve is wading into treacherous political waters.” This further underscores the severity of the risks the Fed foresees.

Finally, a further indicator of the depth of the Fed’s concerns is what may be an apparently unprecedented set of coordinated speeches by three top Fed officials. On Friday, the presidents of the New York and Boston Fed banks, and Betsy Duke, a Fed Governor, all gave speeches detailing the need for aggressive action to spur a housing recovery. For example, William Dudley, president of the New York Fed, told a group that, “The ongoing weakness in housing has made it more difficult to achieve a vigorous economic recovery.”

There are a multitude of additional indicators that our current treatment of the housing sector will at minimum prevent an economic recovery and at worst have disastrous consequences for the stability of the financial sector as well as the health of the middle class. (For the record, my analysis leans toward the latter of these two viewpoints.) These include the reportedly poor health of our financial institutions (zombie banks), the administration’s seeming efforts to cover this fact up, and the inevitable failure of federal homeowner assistance programs that rely on the cooperation of financial institutions whose profit incentives are in the reverse direction.

Read more:

20 Responses

  1. Could this possibly mean that principle corrections are finally on their way?

  2. @Ann,

    Great order from liberal, (shall we say… “socialist”?) MA. For some weird reason, anytime there is mention of a social measure or decision affecting the greater number and for the greater good, Americans immediately start screaming “soclialism!!!”… Go figure.)

    I wish to point to the second portion of that order:
    2) “It also has been suggested that, if the court were to hold that unity of the mortgage and note is required under existing law, the court’s holding should be applied PROSPECTIVELY only.”

    Even if the proper decision were ultimately made, it will most likely be “prospectively”, leaving the millions who already lost their house between 2005 and now forced to engage into some fight in order to be compensated for their loss or to simply forget about it.

    Hence the absolute necessity to confiscate bankers’ assets and prosecute. We either go for justice or we don’t. Half-ass will leave too much of a bitter taste into too many mouths to promote economic stability and the return to greatness.

  3. correction–it’s myles, not myles i

  4. This is an important thread I’m seeing in this conversation: whether the banks/lenders must be registered in the state to do business in the state. For years, MERS was not licensed uhtll 2010 in California. Judges have interpreted the California Commercial and other codes as saying that once MERS got licensed, then all of their shady contracts were RETROACTIVELY made good, not PROACTIVELY, as is the issue in Massachussets.

    Homework–can everybody please find out if MERS is licensed in their state, when it was, and most importantly, if your state law allows a company to suddenly make all their years earlier contracts RETROACTIVELY valid. So if MERS, or some other bankster, in 2012, decides to register in your state, after doing years of contracts, will your state ridiculously allow those contracts to become valid, RETROACTIVELY???
    Please find out and tell the Mass A.G., this site, me, and whatever few good guys are still out there.

  5. And now from Zerohedge …

    Is The Fed’s Balance Sheet Unwind About To Crash The Market, Again?

    Submitted by Tyler Durden on 01/13/2012 – 01:58

    AIG American International Group Bond China Exchange Traded Fund Failed Auction High Yield Investment Grade M2 New York Fed Reality Recession Recoupling Sovereigns

    Almost six months ago we discussed the dramatic shifts that were about to occur (and indeed did occur) the last time the New York Fed tried to unwind the toxic AIG sludge that is more prosaically known as Maiden Lane II. At the time, the failure of a previous auction as dealers were unwilling to take up even modest sizes of the morose mortgage portfolio was the green light for a realization that even a small unwind of the Fed’s bloated balance sheet would not be tolerated by a deleveraging and unwilling-to-bear-risk-at-anything-like-a-supposed-market-rate trading community. Today, we saw the first glimmerings of the same concerns as chatter of Goldman’s (and others) interest in some of the lurid loans sent credit reeling. As the WSJ reports, this meant the Fed had to quietly seek confirming bids (BWICs) from other market participants to judge whether Goldman’s bid offered value. The discreteness of the enquiries sent ABX and CMBX (the credit derivative indices used to hedge many of these mortgage-backed securities) tumbling with ABX having its first down day since before Christmas and its largest drop in almost two months. The knock-on effect of the potential off-market (or perhaps more reality-based) pricing that Goldman is bidding this time can have (just as it did last time when the Fed halted the auction process as the market could not stand the supply) dramatic impacts as dealers seek efficient (and critically liquid) hedges for their worrisome inventories of junk. The underperformance (and heavy volume) in HYG (the high-yield bond ETF we spend so much time discussing) since the new-year suggests one such hedging program (well timed and hidden by record start-of-year fund inflows from a clueless public which one would have thought would raise prices of the increasingly important bond ETF) as the market’s ramp of late is very reminiscent of the pre-auction-fail-and-crash we saw in late June, early July last year as credit markets awoke to the reality of their own balance sheet holes once again.

  6. EXTRAORDINARY- EATON v. FANNIE MAE, Court American Idol Style
    January 12th, 2012 | Author: Matthew D. Weidner, Esq.
    WOW! The Massachusetts Supreme Judicial Court seems poised to drop another Ibanez-like bomb….only this time, the fallout could be much, much bigger.

    The case is Eaton v. Fannie Mae….the extraordinary thing the court seems to be signaling is they are poised to issue a ruling that will conform with existing law but they are concerned that if they do so, it will have very significant impact. In a most extraordinary order, the court is asking for input from the general public before issues its ruling. Now, I wonder whether there is any precedent in American jurisprudence when a High Court has reached out and asked the general public to provide input on how it should rule? All I have to say is…..WOW?!?!?!?!!?

    We know what the law is. We know what the problem is, the banks have made such a mess of our entire real property system that it has crumbled all around us. Make no mistake:


    And we have all lost. We are living in a nation now that is covered in the radiation from one coast to another. Our entire legal system is thoroughly contaminated. Our entire financial system is contaminated. Our entire government, at every level and right up to White House has been entirely contaminated….for decades now.

    And how do you clean it up? Well, years ago those of us on this side of the aisle said, “slow things down, fix what’s broken, get your paperwork and accounting in order before you go to court”. But they refused to do so, and our “leaders” failed to listen.

    But what if our nation’s “leaders” did listen? No free houses. They could have forced homeowners to pay portions of their income and established standards that the lenders would have been forced to follow in order to preserve the sanctity of the court and land title systems before proceeding forward. But no one listened. Instead, they all kept running straight into the blast zone. They all kept heading straight for the mushroom cloud.

    There is still (somewhat) of an option. It involves real negotiated solutions and modifications. Waivers of deficiencies and short sales. Now I’m sorry here but this is really going to blow some people’s gonna hurt and sound terribly unAmerikan…..the banks are going to have to pay some consequence for their crimes, for their errors, for their fraud. There will be a consequence for the years long abuse of the American people.


    Our courts are going to have to step up and return their focus to the steady and abiding light of The Rule of Law. The Law can no longer yield to the expediency of The Banks. We will apply the law and the FIRE will burn. It will be a long and it will be an inferno. But the FIRE must burn. And like controlled burns in forested areas, the FIRE will yield regrowth, regeneration and new life.

    But enough about this, read The Order, then click on a link below for great analysis:

    ORDER :Having heard oral argument and considered the written submissions of the parties and the various amici curiae, the court hereby invites supplemental briefing on the points described below. Supplemental briefs shall not exceed fifteen pages and shall be filed on or before January 23, 2012. 1. It has been claimed that requiring a unity of the mortgage and the underlying promissory note, in order for there to be a valid foreclosure, would cloud any title that has a foreclosure in the chain of title, regardless of how long ago the foreclosure occurred. The parties are invited to address whether they believe that such a requirement would have such an effect, and if so, what legal or practical measures exist that might limit the consequences of such a requirement.

    2. It also has been suggested that, if the court were to hold that unity of the mortgage and note is required under existing law, the court’s holding should be applied prospectively only.

    The parties are invited to indicate on what authority they believe (or do not believe) the court could make such a holding prospective only.


  7. Contingencies risk, contract allocations, dispursement of liabilities , off balance sheet risk, reverse sale provisions, recourse and transfer of favorable accounting , assets offsetting liabilities….each pool was part of a series causal to an M& A in sheeps clothing.

    The foreclosing parties are subrogating against the consumer who is not obligated for the principal debt.

    These things that took place are liberties afforded the registration and not something new and unheard of. They are none the less a prohibition against foreclosure and call to the matter the true source of the recovery – the FHLBB under the provisions of TARP.

    And still I see complaints talking about fraud, RICO, Acco fastners and and DisneyLand coupons.

    Fools – we look like fools going into court reciting this hysteria when the courts are wanting to assist you in your endeavors.

    Insanity …I would say so ….

  8. Good results count more than bad ones.

  9. @Ann,

    I can see why you’re upset. I was as well reading the transcript.

    Yet, the defense attorney made a serious mistake this site has been warning people forever against: when questioned about the expert and why there was an expert and what the expert would say, etc., he did admit, right off the bat, that… well, yes, the defendant should get the free house “if it comes to that”.

    Was defense attorney dealt a bad blow? Absolutely! Was he prepared for it? I don’t think so.

    There’s gona be plenty os cases like this one, all over the country. In the light of it, we can do one of two things: get very depressed over it and let it crush us or keep fighting, simply because tremendous progress has been made in the past year.

    Folding like a cheap suit under adversity is not an option.

    Stay away from the free house. My advice? Ask for mediation if it is offered. When in mediation, raise the issue of note, standing, will the servicer accept to write a hold harmless and indemnification agreement in case any other entity were to assert a claim against the homeowner after the fact, etc.

    If mediation fails, nothing stops you from raising those issues at trial.

    That would be my strategy.

    Bad judges exist. That one was an a.h. That case appears appealable (I didn’t read it to the end, though. But from the tone of it, I expect the judge ruled in Favor of D.B.).

  10. @ used car guy how is the depo going of joan m mills??

  11. Transcript of a Foreclosure “trial”….
    January 12th, 2012 | Author: Matthew D. Weidner, Esq.

    I am utterly speechless here. For those that wonder what life trying to see what standing up for consumers and the Rule of Law is like, I want you to read the attached transcript:


    That’s all. No commentary. No editorial content. Just. Well. I don’t know what to say.

  12. Bank United Offering Deficiency Waivers, Cash for Keys
    Posted on January 11th, 2012 by Mark Stopa Esq.

    I’m pleased to report that I received settlement offers from Bank United today in three different foreclosure cases. Each offer entailed: (1) a deed in lieu of foreclosure; (2) a deficiency waiver, and (3) $3,000 cash for keys, given when the homeowner vacates the home and leaves it in broom-swept condition. Perhaps better yet, each offer was totally unsolicited and did not require any financial disclosures.

    Bank United is a small bank, so its cases constitute a small portion of my caseload and foreclosure cases in general. However, this is another illustration that if you defend your foreclosure case, and force the bank to prove its entitlement to foreclosure, then the bank may get frustrated, give up, or simply decide it’s better to settle.

    Also, I’ve been arguing for a long time that financial disclosures are not required for a deficiency waiver, and these settlement offers are another illustration of that. Banks may want financial information, but they don’t need it. Hence, if a bank is forcing you to provide financial information so it can “evaluate” whether to give you a deficiency waiver, you should think twice – it may well be evaluating your financial situation so it can better assess how to collect from you.

    Mark Stopa Esq.

  13. Usedkarguy,

    Do you know that, from my research, I discovered that most non judicial states seem to have the same kind of law, i.e., non judicial can only apply to lenders “authorized to do business in the state where they wish to foreclose”.

    Interestingly enough, I haven’t seen that issue raised much. What constitutes “authorization”? Does the entity have to be registered with the state? Are there statutory requirements to comply with? It goes to standing and gets raised a lot in debt collection defense. I haven’t seen it addressed much in non judicial foreclosure defense.

    Am I to understand that every “bank” is authorized to do business in every state? Has the issue simply been overlooked and non judicial procedures has been allowed when they should have? Was it really resolved ahead of time?

  14. I think this is Fort Smith, as in Arkansas.

    Foreclosure activity stalls, properties in limbo
    Submitted by The City Wire staff on Thu, 01/12/2012 – 9:40am.
    story by Kim Souza

    Irvine, Calif.-based RealtyTrac reports 7,685 foreclosure filings in Arkansas during 2011. The distressed mortgage activity across the Natural State declined 61% from the prior year.

    In the Fort Smith region, Sebastian and Crawford counties posted 350 new filings last year, a 71% decline from 2010. North of the Bobby Hopper Tunnel, Washington and Benton counties reported 1,786 new filings in 2011, a 59% drop from the prior year, according to RealtyTrac.

    The sharp decline is related in part to a federal court ruling that has virtually halted foreclosure transactions in the state since October.

    On Sept. 29 U.S. Judge Audrey Evans (Eastern District) ruled that only lenders “authorized to do business in the state” can use the non-judicial method of foreclosure. She cited statute 18-050-117 in the Arkansas Code, which became law in 2003. The vast majority of foreclosures have historically been non-judicial, an abbreviated form that does not require a judge to hear the case.

    Lawyers, title companies, lenders and real estate professionals have scrambled to sort out a heap of properties left in limbo. Northwest Arkansas agents estimate roughly 200 foreclosed homes were recently pulled from the multiple listing service and continue to languish in limbo. Statewide, more than 500 homes nearing the end of the foreclosure process have dropped out of sight since July, according to RealtyTrac.

    Joanie Stell, a broker with Coldwell Banker in Fayetteville, said after the court ruling homes that had made it to the end of the foreclosure pipeline in 2011 were pulled off the market by Fannie Mae, Freddie Mac and HUD — the U.S. Department of Housing and Urban Development.

    “We are hearing it could take up to 14 months before some of those properties come back on the market for sale. Lenders are having to go back to square one and start the process over again if they are among those out-of-state banks who improperly used the non-judicial method,” Stell said.

    RealtyTrac indicated it took lenders an average 333 days to complete the foreclosure process in Arkansas during the back half of 2011.The process took 157 days in the first six months of the year.

    Nationally, RealtyTrac estimates foreclosure filings were down about 34% in 2011, involving more than 1.88 million properties. Arkansas foreclosure filings were down about 12% from 2010, prior to the recent ruling.

    Brandon Moore, CEO with RealtyTrac attributes the decline in filings to a lack of clarity regarding documentation and legal issues.

    “We are continuing to see a highly dysfunctional foreclosure process that is inefficiently dealing with delinquent mortgages,” Moore noted in the release.

    Joel Doelger, spokesman with Credit Counseling of Arkansas, said the recent foreclosure wrinkle could buy some distressed property owners more time to work out deal with lenders. The agency has seen a 45% drop in foreclosure counseling appointments since September.

    Bertha Gutierrez, a statewide housing counselor with CCOA, has noticed fewer acceleration letters from out-of-state banks since October. She also said the ongoing confusion in protocol is allowing some homeowners to remain in their home while their case is under review.

  15. Remembering Ross Perot…

    “So, you own one penny. It’s you net worth. That’s what you’re worth. Now, if you find one penny in the street, you’ve doubled your net worth!”

    Oh man! Those were the days…

  16. Duh…

    The biggest financial scandal ever visited upon humanity started… with mortgage fraud. Wouldn’t that make sense that the solution has to start right there as well?

    Removing the fraud by straightening out the official land records, county by county. That causes thousand to find employment right away.

    Receivership of all TBTF;

    Firing of all executives and confiscation of all their assets; subsequent prosecutions. Regardless how performed, money laudering is money laundering. If the EPA has the legal right to consfiscate the assets of individuals suspected of drug-related crimes, I don’t see why our government shouldn’t confiscate the assets of all individuals suspected of mortgage-related fraud; Take away first. Then, indicte, prosecute and convict. if we can do it in one area, we can do it in all areas involving fraud.

    Use whatever was confiscated to fix all land records and write off most mortgages;

    Use the rest to indemnify those who lost their houses a while back;

    Dismantlement of the banks into small banks and establishment of stringent regulations;

    All those actions require staff. That takes care of a great proportion of the unemployed.

    And, in the meantime, nothing stops us from fixing our infrastructures and investing in global warming R&D… ‘cuz the way i see it, fixing the mortgage mess without tackling the environment ain’t gona do much good…

    All this can be done. Let’s just put it up for referendum. I bet the great majority of people would vote in favor of it. Especially if Obama visits them every night on TV for 2 weeks with charts, graphs, explanations about what happened and why, etc. Remember Ross Perot ? That’s what he did and he was funny as hell too!

    Referendum… Hmmm! It doesn’t even exist in our constitution. Shouldn’t it?

  17. […] See original article: Nation in Denial — No Recovery Without Fixing Housing and Foreclosures […]

  18. Instead of Nation in Denial. How about Wallstreet (Obama) wants us the Nation and for that matter International investors to believe there is a recovery without dealing with the housing crisis.

  19. Our economy can not recover until they deal with the “Titles”. But you can not talk to…, negociate or reason with Greed! If a court order is what we need to clear our title .. then its a court order we will get.
    Our ONLY debt collector is going to get a Haircut and we are going to get Good Title again. We enabled them with the power over us and we can take it away from them to!

  20. Bernanke did speak on 60 minutes and through his whole interview, I got the impression of a deer caught in the headlights. He said that they will not, under any circumstances, let the big banks fail. I felt like he was holding something back and was scared to death. That’s was just my take on it. It had a rather chilling effect on me.

Leave a Reply

%d bloggers like this: