Now They See the Light — 40% of Homes Underwater

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Editor’s Comment:

They were using figures like 12% or 18% but I kept saying that when you take all the figures together and just add them up, the number is much higher than that. So as it turns out, it is even higher than I thought because they are still not taking into consideration ALL the factors and expenses involved in selling a home, not the least of which is the vast discount one must endure from the intentionally inflated appraisals.

With this number of people whose homes are worth far less than the loans that were underwritten and supposedly approved using industry standards by “lenders” who weren’t lenders but who the FCPB now says will be treated as lenders, the biggest problem facing the marketplace is how are we going to keep these people in their homes — not how do we do a short-sale. And the seconcd biggest problem, which dovetails with Brown’s push for legislation to break up the large banks, is how can we permit these banks to maintain figures on the balance sheet that shows assets based upon completely unrealistic figures on homes where they do not even own the loan?

Or to put it another way. How crazy is this going to get before someone hits the reset the button and says OK from now on we are going to deal with truth, justice and the American way?

With no demographic challenges driving up prices or demand for new housing, and with no demand from homeowners seeking refinancing, why were there so many loans? The answer is easy if you look at the facts. Wall Street had come up with a way to get trillions of dollars in investment capital from the biggest managed funds in the world — the mortgage bond and all the derivatives and exotic baggage that went with it. 

So they put the money in Superfund accounts and funded loans taking care of that pesky paperwork later. They funded loans and approved loans from non-existent borrowers who had not even applied yet. As soon as the application was filled out, the wire transfer to the closing agent occurred (ever wonder why they were so reluctant to change closing agents for the convenience of the parties?).

The instructions were clear — get the signature on some paperwork even if it is faked, fraudulent, forged and completely outside industry standards but make it look right. I have this information from insiders who were directly involved in the structuring and handling of the money and the false securitization chain that was used to cover up illegal lending and the huge fees that were taken out of the superfund before any lending took place. THAT explains how these banks are bigger than ever while the world’s economies are shrinking.

The money came straight down from the investor pool that included ALL the investors over a period of time that were later broker up into groups and the  issued digital or paper certificates of mortgage bonds. So the money came from a trust-type account for the investors, making the investors the actual lenders and the investors collectively part of a huge partnership dwarfing the size of any “trust” or “REMIC”. At one point there was over $2 trillion in unallocated funds looking for a loan to be attached to the money. They couldn’t do it legally or practically.

The only way this could be accomplished is if the borrowers thought the deal was so cheap that they were giving the money away and that the value of their home had so increased in value that it was safe to use some of the equity for investment purposes of other expenses. So they invented more than 400 loans products successfully misrepresenting and obscuring the fact that the resets on loans went to monthly payments that exceeded the gross income of the household based upon a loan that was funded based upon a false and inflated appraisal that could not and did not sustain itself even for a period of weeks in many cases. The banks were supposedly too big to fail. The loans were realistically too big to succeed.

Now Wall Street is threatening to foreclose on anyone who walks from this deal. I say that anyone who doesn’t walk from that deal is putting their future at risk. So the big shadow inventory that will keep prices below home values and drive them still further into the abyss is from those private owners who will either walk away, do a short-sale or fight it out with the pretender lenders. When these people realize that there are ways to reacquire their property in foreclosure with cash bids that are valid while the credit bid of the pretender lender is invlaid, they will have achieved the only logical answer to the nation’s problems — principal correction and the benefit of the bargain they were promised, with the banks — not the taxpayers — taking the loss.

The easiest way to move these tremendous sums of money was to make it look like it was cheap and at the same time make certain that they had an arguable claim to enforce the debt when the fake payments turned into real payments. SO they created false and frauduelnt paperwork at closing stating that the payee on teh note was the lender and that the secured party was somehow invovled in the transaction when there was no transaction with the payee at all and the security instrumente was securing the faithful performance of a false document — the note. Meanwhile the investor lenders were left without any documentation with the borrowers leaving them with only common law claims that were unsecured. That is when the robosigning and forgery and fraudulent declarations with false attestations from notaries came into play. They had to make it look like there was a real deal, knowing that if everything “looked” in order most judges would let it pass and it worked.

Now we have (courtesy of the cloak of MERS and robosigning, forgery etc.) a completely corrupted and suspect chain of title on over 20 million homes half of which are underwater — meaning that unless the owner expects the market to rise substantially within a reasonable period of time, they will walk. And we all know how much effort the banks and realtors are putting into telling us that the market has bottomed out and is now headed up. It’s a lie. It’s a damned living lie.

One in Three Mortgage Holders Still Underwater

By John W. Schoen, Senior Producer

Got that sinking feeling? Amid signs that the U.S. housing market is finally rising from a long slumber, real estate Web site Zillow reports that homeowners are still under water.

Nearly 16 million homeowners owed more on their mortgages than their home was worth in the first quarter, or nearly one-third of U.S. homeowners with mortgages. That’s a $1.2 trillion hole in the collective home equity of American households.

Despite the temptation to just walk away and mail back the keys, nine of 10 underwater borrowers are making their mortgage and home loan payments on time. Only 10 percent are more than 90 days delinquent.

Still, “negative equity” will continue to weigh on the housing market – and the broader economy – because it sidelines so many potential home buyers. It also puts millions of owners at greater risk of losing their home if the economic recovery stalls, according to Zillow’s chief economist, Stan Humphries.

“If economic growth slows and unemployment rises, more homeowners will be unable to make timely mortgage payments, increasing delinquency rates and eventually foreclosures,” he said.

For now, the recent bottoming out in home prices seems to be stabilizing the impact of negative equity; the number of underwater homeowners held steady from the fourth quarter of last year and fell slightly from a year ago.

Real estate market conditions vary widely across the country, as does the depth of trouble homeowners find themselves in. Nearly 40 percent of homeowners with a mortgage owe between 1 and 20 percent more than their home is worth. But 15 percent – approximately 2.4 million – owe more than double their home’s market value.

Nevada homeowners have been hardest hit, where two-thirds of all homeowners with a mortgage are underwater. Arizona, with 52 percent, Georgia (46.8 percent), Florida (46.3 percent) and Michigan (41.7 percent) also have high percentages of homeowners with negative equity.

Turnabout is Fair Play:

The Depressing Rise of People Robbing Banks to Pay the Bills

Despite inflation decreasing their value, bank robberies are on the rise in the United States. According to the FBI, in the third quarter of 2010, banks reported 1,325 bank robberies, burglaries, or other larcenies, an increase of more than 200 crimes from the same quarter in 2009. America isn’t the easiest place to succeed financially these days, a predicament that’s finding more and more people doing desperate things to obtain money. Robbing banks is nothing new, of course; it’s been a popular crime for anyone looking to get quick cash practically since America began. But the face and nature of robbers is changing. These days, the once glamorous sheen of bank robberies is wearing away, exposing a far sadder and ugly reality: Today’s bank robbers are just trying to keep their heads above water.

Bonnie and Clyde, Pretty Boy Floyd, Baby Face Nelson—time was that bank robbers had cool names and widespread celebrity. Butch Cassidy and the Sundance Kid, Jesse James, and John Dillinger were even the subjects of big, fawning Hollywood films glorifying their thievery. But times have changed.

In Mississippi this week, a man walked into a bank and handed a teller a note demanding money, according to broadcast news reporter Brittany Weiss. The man got away with a paltry $1,600 before proceeding to run errands around town to pay his bills and write checks to people to whom he owed money. He was hanging out with his mom when police finally found him. Three weeks before the Mississippi fiasco, a woman named Gwendolyn Cunningham robbed a bank in Fresno and fled in her car. Minutes later, police spotted Cunningham’s car in front of downtown Fresno’s Pacific Gas and Electric Building. Inside, she was trying to pay her gas bill.

The list goes on: In October 2011, a Phoenix-area man stole $2,300 to pay bills and make his alimony payments. In early 2010, an elderly man on Social Security started robbing banks in an effort to avoid foreclosure on the house he and his wife had lived in for two decades. In January 2011, a 46-year-old Ohio woman robbed a bank to pay past-due bills. And in February of this year, a  Pennsylvania woman with no teeth confessed to robbing a bank to pay for dentures. “I’m very sorry for what I did and I know God is going to punish me for it,” she said at her arraignment. Yet perhaps none of this compares to the man who, in June 2011, robbed a bank of $1 just so he could be taken to prison and get medical care he couldn’t afford.

None of this is to say that a life of crime is admirable or courageous, and though there is no way to accurately quantify it, there are probably still many bank robbers who steal just because they like the thrill of money for nothing. But there’s quite a dichotomy between the bank robbers of early America, with their romantic escapades and exciting lifestyles, and the people following in their footsteps today: broke citizens with no jobs, no savings, no teeth, and few options.

The stealing rebel types we all came to love after reading the Robin Hood story are gone. Today the robbers are just trying to pay their gas bills. There will be no movies for them.

AP: BOA SETTLES WITH MISSISSIPPI PENSION FUND: $315 MILLION

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

JUDGE RAKOFF APPROVES SETTLEMENT

EDITOR’S COMMENT: SINCE JUDGE RAKOFF APPROVED THE SETTLEMENT, WE CAN ONLY ASSUME THAT THE NUMBERS WERE MORE IN LINE WITH WHAT WAS APPROPRIATE. But on the other hand, here you have payment from BOA to the actual creditors who advanced money for the funding of mortgages. They are getting $315 million. Why isn’t anyone asking how that affects the balances due to those creditors?

What if that payment completely resolves the outstanding balance of Joe Smith, the plumber who was foreclosed for not making payments that, it turns out, were indeed to be paid by third parties because of the faulty procedures and representations made by Merrill Lynch and the mortgage aggregators and of course the mortgage originators and mortgage brokers?

What happens to Joe’s house, now that the creditor has received payment in full? What happens to Joe’s house if the creditor received partial payment in addition to the foreclosure? Why is there no accounting to Joe, besides the 1099-A often issued to people who were foreclosed? Is this tax fraud?

You can’t pick up one end of the stick and not pick up the other. You can’t pay the creditor off, even in part, without reducing the balance owed by the debtor. This simple fact is being ignored, along with dozens of other accounting and legal issues that go with them. Will the attempt be made to categorize this as unspecified damages that have nothing to do with the balance owed to the creditor? Who is going to believe that?

And THAT is why you need the COMBO and loan level accounting together with perhaps even further research to determine if the creditor has received or agents of the creditor has received payments that should be taken into account, along with payments from the “debtor” whose debt may well have been paid off completely at closing. If so, then there was no mortgage encumbrance that should have attached to the land. The parties who were losing money on the deal had separate contracts with third parties and eventually they are getting paid even as millions of homes are being foreclosed for the SAME DEBT.

Don’t be intimidated. It is just arithmetic.

SEE FULL ARTICLE FROM ASSOCIATED PRESS.

NEW YORK (AP) — Bank of America agreed to pay $315 million to settle claims by investors that they were misled about mortgage-backed investments sold by its Merrill Lynch unit.

The settlement was disclosed in court papers filed late Monday in U.S. District Court in Manhattan and requires the approval of a judge.

The class action lawsuit was led by the Public Employees’ Retirement System of Mississippi pension fund. The fund claimed that the investments were backed by poor quality mortgages written by subprime lenders Countrywide Financial Corp., First Franklin Financial, and IndyMac Bancorp, a bank that failed in 2008.

The settlement represents another attempt by Charlotte, N.C.-based Bank of America Corp. to put its legal issues behind it. In the first half of the year alone the bank put up $12.7 billion to settle similar claims from different groups of investors.

U.S. District Judge Jed Rakoff has to approve the settlement, something that could prove difficult since the settlement includes no admission of guilt from Bank of America.

Just last week, Rakoff struck down a $285 million settlement that Citigroup Inc. reached with the Securities and Exchange Commission. The settlement would have imposed penalties on Citigroup even as it allowed the company to deny allegations that it misled investors.

Rakoff said the public has a right to know what happens in cases that touch on “the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives.” In such cases, the SEC has a responsibility to ensure that the truth emerges, he wrote.

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