Foreclosure Rights of Tenants and Landlords

The rights of Tenants and Landlords in the foreclosure setting is an issue that I see arising more and more these days. Accordingly, I thought I would take the opportunity to provide an overview of the law. Please note that this is WASHINTON LAW as it currently stands, however, each state has differing laws, laws are subject to change.

Federal Law – Protecting Tenants at Foreclosure Act of 2009

Rule- the new owner of the foreclosed home must notify the tenant AT LEAST 90 days before evicting the tenant. (this law is currently set to apply until 2014).

Washington Law – RCW 62.24.143

The Washington Law requires the foreclosing party (lender or trustee) provide written notice to the tenant before the foreclosure sale. This notice must explain that the sale may be held 90 days or more after the date of notice; and state that the person who buys the home is required to provide at least 60 days notice before evicting the tenant.

So which is it? A 60 day eviction notice or 90 day eviction notice.

As you can see, there is a conflict in the federal and state laws. As such, the purchaser of the property at a foreclosure sale will be required to provide the renters 90-day notice prior to eviction because of the Federal Law.

How does the new law affect a Tenant’s current lease?

** UNLESS the new owner is going to move into the property, the tenant can stay in the property until the lease ends!! (**this is huge- if the property reverts back to the bank, the tenant can stay in the home until the lease expires!)

** This currently applies to ALL LEASES entered into anytime prior to the transfer of title at foreclosure (the banks argued that this should not apply to leases unless they were entered into before the notice of default and notice of trustee sale).

Who does the tenant pay rent to?

Rent should be paid to the new owner post foreclosure. If the tenant has not been provided with payment information, then tenant should save the rent money until it is clear how payment should be made.

There are obviously some issues that may not be touched on in this post, but I hope it has provided a general overview that will assist you make the most of an abnormal situation.

For more information on your rights in Foreclosure or Short Sales, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
5400 Carillon Point, Bldg 5000
Kirkland, WA 98033
(425) 889-9300

What does the Foreclosure Crisis Mean for You?

Weitz – an article from the Wall Street Journal this weekend:

WSJ - For the vast majority of homeowners, new questions about the state of foreclosures appear to be irrelevant. Few people seem to have been wrongly thrown out of their homes, and those who have been are generally months or years behind on their mortgage payments.

But the fallout from the crisis is beginning to be felt in real-estate markets across the country, particularly in places dominated by vacation homes and investment properties. Some of the worst-hit areas could be Western ski towns, because fall is the busiest time of the year for sales.

By the Numbers
• 27% - Percentage of total home sales in 2009 that were second homes.
• 30% - Percentage of total mortgage defaults attributable to second-home and investment properties.
• 4.57% - Percentage of mortgages in some state of the foreclosure process, June 2010. (Weitz - and the loans that are in default is much higher)
• 9.4 Months - The average amount of time from default until foreclosure proceedings begin on a "jumbo" mortgage loan.

Real-estate salespeople in some of those places are worried. "September and October are usually the height of the selling-season for us," says Rich Armstrong, who owns the brokerage Rare Properties in Jackson Hole, Wyo. "Now we are seeing a number of what we call 'fence sitters,' people who would have leapt in even a month ago, but now are waiting on the sidelines."

The "foreclosure crisis" is a result of the frenzied real-estate boom and bust of the past decade. Banks made foolish loans, and borrowers signed up for them—only to default later, as the economy slumped. Banks rushed to reclaim properties, launching a record number of foreclosure proceedings.

In the past several weeks flaws have emerged in that complex process. Because of the high volume of foreclosures, the documentation supporting legal actions was prepared hastily, and some homes were seized improperly.

Yet the far bigger worry is what happens next. A frenzy of lawsuits and banks' examinations of their own practices could throw more of the millions of foreclosures of the past few years into legal jeopardy. Attorneys general in all 50 states are investigating, and plaintiffs' lawyers are working hard to perfect their legal strategies for suits on behalf of people who have been foreclosed on.

The suits might well fail. But just the threat that past foreclosure rulings might be overturned could result in collateral damage. In some places, banks are rushing foreclosed properties to market. In others, buyers are stepping back, refusing to buy foreclosed properties or "short sales"—homes sold by owners for less than the mortgage balance. In markets already beset with large inventories of foreclosed properties, the result could be a slower recovery.

Weitz – I hate to sound pessimistic, but I genuinely believe we have yet to reach a true bottom based on the huge supply of properties for sale across the country, and meager demand for those homes. This econ 101 fact, coupled with less access to financing, and fewer qualified buyers will lead to continued struggles.

I constantly hear that 'interest rates are at all time lows...now is a great time to buy. My response: what happens when/ if interest go up? Prices come down since there is a direct correlation to prices, and borrowing costs.

Coastal markets and ski areas are feeling the most anxiety. Some already are littered with foreclosures—in part because they're dominated by second-home and investment properties. Those owners are more willing to walk away from a house that isn't their primary residence.

Weitz - Coastal Markets are also under the most pressure since they are the highest priced, and had the most excessive appreciation during the boom.

Foreclosure tracker RealtyTrac estimates that, nationwide, 30% to 35% of properties in foreclosure are owned by investors or were second homes. In Aspen, Colo., the figure is about 60%, says Kim McKinley, owner of McKinley Sales Real Estate in Basalt and Aspen, Colo. If foreclosure proceedings slow from here, inventory could jump, leading to price weakness later.

The foreclosure mess could hurt homeowners in another way: The costs of buying a home and paying off the mortgage are likely to go up, say housing experts.
The rising costs will come both during the closing and throughout the life of the loan.

At the closing, the cost of title insurance, which protects a property buyer from claims of ownership made by other people, is likely to rise, industry officials say. Title insurance is one of those annoying costs that can sneak up on a buyer during a close; premiums average around $2,000 across states, says Tim Dwyer, CEO of insurer Entitle Direct Group.

The foreclosure mess has sent insurers scrambling. One of the largest, Old Republic Title Insurance, told its agents on Oct. 1 not to issue policies on homes that have been foreclosed by GMAC Mortgage or J.P. Morgan Chase. And on Wednesday, the nation's largest title insurer, Fidelity National Financial, said lenders must vouch for the accuracy of their paperwork before it will insure properties.

Just like homeowners-insurance rates rise after a hurricane, the rates for title insurance are expected to rise, to compensate for the added risk.

Other costs could be felt during the life of the loan. Until the current mess, servicing loans was a low-margin, high-volume business. Servicers collect mortgage payments from borrowers and send them off to mortgage holders, and if the loan gets into trouble, they manage the foreclosure. Few doubt this process will get costlier now that it is under scrutiny from regulators and the courts. That higher cost likely will show up in higher interest rates for borrowers.

Both of these higher costs also would hit homeowners who refinance their loans.
How much the costs of buying a home will rise is unknown. Mortgage industry officials say it is too soon to tell. And no one believes the costs will significantly change the price of a home. But with the housing market still weak, the uncertainty is making the prospect of buying—or selling—a home that much dicier.

The timing of the foreclosure mess is especially inconvenient for ski towns, given the fall selling season.

Property owners are growing nervous. In Park City, Utah, lenders are quickly unloading foreclosed homes ahead of what could be a long, stalled foreclosure process, says Joe Trabaccone, a real-estate agent there.

On Oct. 11, for example, J.P. Morgan Chase put up for sale an 8,000-square-foot home adjacent to a private gated golf course. Mr. Trabaccone initially recommended the property be listed for $1.6 million, but Chase opted for $1.26 million. "They are offering these homes far too low just to hurry up and sell them," Mr. Trabaccone says.

Even so, it hasn't worked. A buyer made an offer and signed a contract, but then backed out.

In South Lake Tahoe, Calif., on Thursday, Freddie Mac, the big government-sponsored guarantor of mortgages, put a foreclosed home that had just been listed for sale on hold, freezing the property until paperwork could be straightened out. The foreclosure mess "seems to be filtering down and it could be an impact," says Doug Rosner, the broker who had listed the home. Three other properties in town were also frozen, another real-estate agent says.

The "sand states" of Arizona, California, Florida and Nevada are being hit as well. These areas, too, have a lot of vacation and investment properties—and a lot of foreclosures.

The possible foreclosure wars to come loom so largely over Florida markets that Ms. Speronis is urging condo sellers to consider any offer they get, even if it is far below asking price or what is owed on the mortgage.

Dianne Cloutier, a records supervisor in Chelmsford, Mass., had been looking for a retirement property in Cape Coral, but decided to wait because of the foreclosure mess. "It's left us on hold until we are sure the banks have legitimately foreclosed on people and that nobody can come back on us to get their property back," she says.
Foreclosures aren't the only problem. Short sales are getting more difficult to pull off, too.

In Bend, Ore., agents say buyers are avoiding short sales or even backing out of contracts because they don't want to deal with paperwork hassles or the chance of a court challenge later.

The short sales "can be very frustrating," adds Becky Ozrelic, of with Steve Scott Realtors in Bend. "You just have buyers waiting and waiting."
For sellers, lining up a short sale was tough even before the latest foreclosure crisis. Banks and mortgage "servicers," the outfits that process payments, already had been scrambling to handle surging workloads.

For more information on your rights in foreclosure or short sale, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
5400 Carillon Point, Bldg 5000
Kirkland, WA 98033
(425) 889-9300

weitzlawfirm.com

Legal Action against Bank of America...finally!

Weitz - Let the games begin!!! As you know, I've been saying the bank mis-representation when selling off these loans was the biggest potential problem with 'foreclosuregate' (rather than robo-signers). Well, the first big case against this garbage was announced yesterday.

As Article from the WSJ today:

As banks restart foreclosures they had suspended, bondholders are stepping up efforts to recoup losses on soured mortgage portfolios amid concern about sloppy mortgage servicing and underwriting practices.

In a letter Monday, a group of institutional bond investors raised objections to the handling of 115 bond deals issued by affiliates of Countrywide Financial Corp., acquired by Bank of America Corp. in 2008.

Weitz - By the way, the plaintiffs include Fannie, and Freddie (ie. the US taxpayer).

The investor actions, which seek to have certain loans be repurchased among other things, come as Bank of America on Monday took steps to defuse claims that its foreclosure troubles are deep-seated. The bank on Monday said it was restarting the foreclosure of more than 100,000 homes.

Weitz - note the investors are seeking to to have these garbage loans re-purchased. If victorious in this action, and other like it, the banks will face severe financial difficulties (even with the on-going accounting fraud).

The letter, to Bank of New York Mellon Corp. and Bank of America, cited Bank of America's "failure to observe and perform, in material respects" its duties as the servicer for the bond deals. The failure to properly handle the loans "has materially affected the rights" of bondholders, the letter said.

The institutional investors, who include mutual-fund managers, government-related entities, insurance companies and investment partnerships, are seeking to have loans that didn't meet underwriting requirements repurchased and to be compensated for losses due to inadequate mortgage servicing, says Kathy Patrick, an attorney with Gibbs & Bruns, a Houston law firm representing the investors.

The group says it holds roughly $16.5 billion—or more than 25%—of the $47 billion in outstanding mortgage-backed securities from these deals.
"We are reviewing the letter," said a BNY Mellon spokesman. "It appears to be directed to Countrywide and does not ask BNY Mellon to take any action. We will continue to perform our duties as trustee." A Bank of America spokesman declined to comment.

As mortgage servicer, Bank of America is responsible for collecting loan payments and working with troubled borrowers. BNY Mellon, the bond trustee, is charged with administering the securitizations, or bond trusts, for the benefit of investors. Investors say they are concerned both about servicing and violations of representations and warranties made when the loans were packaged into bonds.

Monday's action lays the groundwork for what could be one of the first lawsuits by mortgage-bond investors seeking to enforce their contract rights, including loan buybacks, in response to the current foreclosure crisis. Investors have mounted other challenges based on alleged violations of securities laws.

On Monday, the Association of Mortgage Investors stepped up efforts to pressure banks by calling on state attorneys general to expand their investigation of mortgage-servicing practices to include violations dating back to the time when loans were packaged into securities.

Analysts are trying to tally up the costs of loan buybacks and foreclosure moratoria. In a report issued Friday, Barclays Capital said the current crisis could delay foreclosures by three to six months. Longer timelines could reduce yields on some bonds by as much as one percentage point, it said, and "drastically" reduce cash flows to some bond holders in the next few months.

In a separate report issued Friday, J.P. Morgan Chase & Co. bond analysts estimated that future losses from repurchases of loans that didn't meet sellers' promises could total $55 billion to $120 billion.

Even before the recent furor over "robo-signers"—back-office employees who approved hundreds of foreclosure documents daily without reviewing them—bond investors were raising concerns about servicer practices.

In August, a smaller group of investors in some Countrywide deals sent BNY Mellon instructions to investigate whether certain mortgages didn't meet representations made at the time the loans were packaged into securities. The group demanded that some loans be repurchased.

But the August letter, a BNY Mellon spokesman says, "did not comply with multiple requirements for giving direction to BNY Mellon in its role as trustee."
Recent disclosures of sloppy servicing practices follow questions about whether the processes for conveying loans to the bond trust were properly followed. Together, they "have exacerbated investor concerns and created delays and added costs that hurt investors," Ms. Patrick says.

Bond investors have been slow to press their claims, in part because of how the contracts for bond deals, known as pooling and servicing agreements, are written. Typically, these contracts require that bondholders gather 25% of the voting rights in the trust before they can enforce the contracts themselves. These provisions are intended to ensure that the action being requested will benefit bondholders as a group, rather than any one bondholder or subset of holders.

Earlier this month, a New York state justice dismissed a lawsuit by investors who argued they shouldn't bear any of the cost of an $8.4 billion settlement between state attorneys general and Countrywide Financial. The judge said the investors hadn't satisfied terms set out in the pooling and servicing agreements.
The Oct. 18 investor letter formally notifies BNY Mellon and Bank of America that investors believe that Bank of America has failed to meet its obligations as a mortgage servicer. The two companies then have 60 days to address the issues, says Ms. Patrick.

If the problems aren't resolved, that would trigger an "event of default" under the agreement, Ms. Patrick says, which would allow an investor to file a lawsuit against both companies. Investors "aren't trying to halt loan modifications for troubled borrowers," she added.

The move is one of a number investor actions seeking to recoup losses. In a separate action, a group of investors in 2,300 mortgage securities worth $500 billion this summer sent a letter to trust departments of several large banks expressing concerns about how loans are being handled.

David Grais, a New York securities lawyer, recently announced plans to hold a conference on "Robosigners and Other Servicing Failures." Mr. Grais represents Federal Home Loan Banks in San Francisco and Seattle that have sued Wall Street banks, seeking to force them to buy back mortgage-backed bonds. Similar lawsuits were filed last week by Federal Home Loan Banks in Chicago and Indianapolis.

But the time to pursue some of these claims is running out, Mr. Grais says. Under New York contract law, investors generally have six years from the time of a securitization to put back loans that violate representations and warranties, Mr. Grais says. State securities law generally gives investors one to four years after they discover a legal violation to put back bonds that weren't accurately described in disclosure documents.

"If people don't throw their hat in the ring, they are out of luck," Mr. Grais says.

Weitz- Let's get ready to ruuuumble!!

Banks Restart Foreclosures

Two major lenders at the center of the foreclosure crisis took steps Monday to put the mess behind them by restarting home seizures that were frozen by documentation concerns.

Weitz – no surprise there. As we’ve said – they’d “investigate” and find no problems.

Bank of America Corp. reopened more than 100,000 foreclosure actions, declaring that it had found no significant problems in its procedures for seizing homes. GMAC Mortgage, a lender and loan servicer, said that it also is pushing ahead with an unspecified number of foreclosures that came under intense pressure.

Bank of America prepared to restart 102,000 pending foreclosure actions where court approval is required, applying new signatures to documents in 23 states.
Monday's moves are part of a growing counterattack by lenders scrambling to stem a financial and political threat over allegations that certain employees signed hundreds of documents a day without carefully reviewing their contents when foreclosing on homes.

Weitz- signatures are not the issue here. The problem is the MERS issue, and the fraud issues.

Bank of America, the nation's largest bank in assets, which imposed on Oct. 8 a nationwide moratorium on the sale of foreclosed homes, said it has begun preparing new affidavits for pending foreclosures in 23 states where a judge's approval is required. The paperwork will be submitted to courts by next Monday, and foreclosure sales will resume in those states starting in November, according to the bank. "This is an important first step in debunking speculation that the mortgage market is severely flawed," said Bank of America spokesman James Mahoney. More details will be disclosed when the company reports quarterly results Tuesday.

Weitz – haha. Thanks James…if you say so!!

Citigroup Inc. Chief Financial Officer John Gerspach said the bank has found no reason to halt foreclosures, calling its internal procedures "sound." "We have not identified any system issues," he said Monday.

Weitz – how about the fraud you committed when you sold these loans to fannie and freddie (ie. Taxpayers) and assured they met quality standards?

Restarting the nation's foreclosure machine puts the lenders on a collision course with state attorneys general, who announced last week a nationwide investigation of foreclosure practices. Some state officials have been pushing for a wider halt to foreclosure sales, but Bank of America's moves show determination by at least some lenders to get back to business while the investigation proceeds.

A Bank of America spokesman said the bank has found "no cases" thus far of foreclosures that should not have "gone through." Last week, James Dimon, J.P. Morgan Chase & Co. chairman and chief executive, said that no one has been "evicted out of a home who shouldn't have been."

Weitz – for the most part, this is probably true – but they are hiding the ball for the larger issues of fraud in the origination and securitization processes.

Some attorneys general said they have little confidence that problems with foreclosures have been fixed. "We've been in discussions with some of the major servicers, and as part of that they've assured us that they are fixing this problem, but we're not just going to take their word for it," said Patrick Madigan, a spokesman for Iowa Attorney General Tom Miller.

Weitz – I commend the AGs, but I’d like to see less talk and more action on the real issues.

It will be hard for lenders to declare the foreclosure crisis over and get back to business as usual. Bondholders are escalating efforts to recover losses on soured mortgage-bond deals containing loans with flawed paperwork. (Weitz – DING DING!!!....the context is wrong in this article... The fraud existed in the origination and securitization process)....but this is the BIG ENCHILADA!!..if the bond holders sue and force the banks to take back these fraudulent loans, it will cripple many of the banks Meanwhile, federal banking regulators are assigning additional employees to an ongoing review of large mortgage-servicing operations, according to people familiar with the situation. Officials want to make sure that documentation procedures are being followed and companies are meeting all legal foreclosure requirements.

Bank stocks surged Monday as investors reassessed last week's outlook for the cost of the foreclosure mess. Citigroup shares jumped 23 cents, or 5.8%, to $4.18 a share in New York Stock Exchange composite trading at 4 p.m., on better-than-expected earnings. Bank of America rose 36 cents, or 3%, to $12.34, while J.P. Morgan was up $1.05, or 2.8%, to $38.20.

Weitz – I’m no financial analyst, but I’d highly recommend taking profits if you own the stock of these institutions. They are, for the most part, black boxes…no one outside of these companies truly knows their financial situation because of the legalized accounting fraud I often refer to.

Bank of America is the only major U.S. bank that announced a halt to all foreclosure sales while it reviewed documents for errors. Bank officials say they're readying new affidavits for 102,000 pending foreclosure actions.

A company spokesman said the largest investors in mortgages serviced by Bank of America have signed off on the new timetable. The bank will continue delaying foreclosure sales in the 27 states where court approval isn't required until a review is completed "on a state by state basis." The bank expects delays on fewer than 30,000 foreclosure sales nationwide.

GMAC, a unit of Ally Financial Inc., declined to comment on the number of foreclosures it has reviewed so far, but said they included loans with affidavits signed by employee Jeffrey Stephan. His testimony in a deposition that he signed 10,000 foreclosure affidavits a month without reviewing the underlying documentation led GMAC to halt evictions in 23 states last month while it scrutinized its procedures.

Ohio Attorney General Richard Cordray, who last week filed a lawsuit against GMAC alleging hundreds of counts of fraud related to foreclosure documents, said he is suspicious of efforts to replace paperwork. "Substituting new evidence in [cases] where there's been fraud won't help prevent the court from sanctioning them for the fraud that has already been committed," he said. "It doesn't unring the bell."

Weitz – if the banks committed fraud, the penalties should be severe, but it does not prevent an eventual foreclosure. The real issues are not falsifying documents. I’m sure they exist, but they are rare (especially in non-judicial foreclosure states like Washington).

Our Firm:

Weitz Law Firm, PLLC
5400 Carillon Point, Bldg 5000
Kirkland, WA 98033
(425) 889-9300

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The MERS problem - in plain english

Greetings Earthlings - Welcome to MERS!

Caution: do not read this post while driving a vehicle or operating heavy machinery as it may cause drowsiness.

MERS OVERVIEW

MERS ‘Mortgage Electronic Recording System’ has been a big issue in news as of late. There are a lot of complex legal issues involved with the MERS process that could lead to significant problems for the U.S. Mortgage Market.

In this post, I will try to simplify the issue as best I can and also provide an outline of some of the issues involved and why there may be problems moving forward for the banks. I have cited some authorities, but given that this is a blog post and not a law review article, I refrained on others.

The Background:

In the go-go years, Banks would create mortgage backed securities (‘MBS’) or Collateralized Debt Obligations (CDOs). They were simply a bundle of loans (or portions of loans) that were sold to investors (ie. pension funds, municipalities, etc.)

In every state in our union, a title and deed of trust (or mortgage) that is transferred is typically ‘recorded’ with the county recorder of register of deeds. This recording has provided a transparent vehicle for determining property ownership in our Country for generations. Typically, a fee is associated with recording of said documents. In King County, the fee is about $65.

In the mid-1990s, mortgage banks decided they did not want to pay the recording fees or create proper ‘assignments’ (ie. Transfer documents) when selling the mortgage to investors as that would obviously be incredibly cumbersome and expensive.

To avoid paying county recording fees, mortgage bankers decided to create a SHELL COMPANY that would pretend to own many of the mortgages in the county – that way, no assignment documents (or recording fees) would be necessary upon the transfer of a loan document.

Currently, about 60% of the nation’s residential mortgages are recorded in the name of MERS.

What exactly is MERS?:

In boilerplate security agreements included in mortgages or deeds of trust around the country, this clause is included:

“MERS”…..is a separate corporation that is acting solely as nominee for Lender and Lender’s successors and assigns. MERS is the mortgagee under this security agreement.

Essentially, MERS is claiming to be an ‘agent’ of the lender and a ‘mortgagee’ (owner with the right to foreclose). This raises two important issues:

1) If MERS is an Agent, it is uncertain whether MERS has the ability to list itself as the Morgagee.

2) If MERS is a mortgagee, both MERS and the companies that invested in these mortgages breach the longstanding precedent that a promissory note and mortgage are inseparable documents.

Court Cases: As of August, 2010, every state supreme court that has ruled on the issue has found that MERS is not a mortgagee or deed of trust beneficiary. (Arkansas Court; MERS v. Southwest homes of Arkansas)(Kansas – Landmark Nat. Bank v. Kesler); (Maine – MERS v. Saunders) which leads to the problem of conveyance of the mortgage.

MERS and the Problem with conveyance:

If MERS is neither a mortgagee, or a deed of trust beneficiary, the courts must soon confront the enforceability of the MERS security agreements as there is a compelling argument that loans originated through the MERS system fail to create enforceable liens.

The (Archaic) Legal Problem:
1) The Banks did not specify who the actual Mortgagee is (MERS is a shell company). This presumably breaks the chain of title, and breaks long standing precedent that a mortgagee must exist to enforce (foreclose) the document.

2) In many cases, the mortgage and the note may have been separated. This of course would violate the legal requirement that mortgage and note are inseperable.

Allowing either of these to continue would upset hundreds of years of legal precedent.

The Decision:
If the courts take a hard stand by invalidating liens because they do not specify a mortgagee, the markets very well may collapse.

Conversely, if they allow MERS to act as a ubiquitous national proxy system, they will alter the real property that has stood for generations.

My guess: Just as we don't depend on horses to transport us anymore or cook our meat over an open fire, we must adopt to a new era of technology and adopt the MERS system (warts and all). I think its fairly obvious that the courts/ politicians will take the easy way out and alter the law rather than create a tidal wave of title issues that could cripple the national real estate market.

Of course, they must first "investigate the problem" as they are now doing in all 50 states. This is purely my opinion, but I believe the investigation is mainly a political ploy to appease the constituents.

That said, there may be other issues looming similar in nature to this problem that will hopefully arise during these state "investigations" including: 1) fraudulent transfers/ misrepresentations by the bank in transferring these mortgages to the taxpayer (ie. Fannie/ Freddie) and other investors; and 2) the continuing accounting fraud in the banking industry that allows for record Wall Street bonuses while the rest of the country continues to struggle from a problem creating largely by Wall Street.

Our Firm:

Weitz Law Firm, PLLC
5400 Carillon Point, Bldg 5000
Kirkland, WA 98033
(425) 889-9300

weitzlawfirm.com

Mortgage Issues Cloud Recovery

Weitz - An article from the Wall Street Journal followed a Washington specific analysis of the mortgage issue.

Sales of foreclosed homes have helped lay the groundwork for housing recovery in many of the nation's boom-to-bust markets. Now, some real-estate agents say that recovery is at risk because of delays in bank foreclosures.

Weitz – what recovery are they referring to?!

Homes are being pulled from the market, and buyers—especially investors intent on quickly reselling foreclosed properties—are retreating to the sidelines amid growing uncertainty over the extent to which banks filed fraudulent foreclosure documents.

On Tuesday, Wells Fargo & Co. said it had started a review of all pending home foreclosures in states where certain paperwork was required but it did not suspend foreclosures or foreclosure sales, as have other big banks.

Meanwhile, GMAC Mortgage, a unit of Ally Financial Inc. and one of the first to suspend some foreclosures last month, expanded its review to all 50 states. Initially GMAC's review was limited to 23 states that require court approval for foreclosures.

Bank of America Corp. last Friday agreed to halt all foreclosures and foreclosure sales, the first bank to do so.

Uncertainty about the legitimacy of foreclosures threatens the market because about one in four homes sold during the second quarter was in some stage of the foreclosure process, according to RealtyTrac Inc., which tracks foreclosure filings.

Weitz – take note – ¼ of all homes sold in the 2nd quarter were at some stage of the foreclosure process. I’m seeing a lot of short sales in which the borrower has stopped paying the mortgage, and then tries to get a short sale for varies reasons including a smaller credit hit.

Some in Congress have called for a nationwide foreclosure moratorium, but Obama Administration officials said they didn't support such a broad move.

"If there is an empty house in the neighborhood that somebody has a contract on, and their closing date is next week, and there is a moratorium, that closing doesn't happen," Robert Gibbs, the White House press secretary, told reporters on Tuesday.

The administration's stance illustrates the policy conundrum: Officials say they want to root out possible wrongdoing by banks, but they also want to avoid policies that derail the fragile housing market by delaying inevitable foreclosures.

Weitz - Delaying foreclosures does not derail the fragile housing market...in fact, it helps short term as it would presumably keep some homes off the market at discount prices. The delay, however, would simply prolong the track to a true bottom.

The crisis has also put a cloud over whether banks can assert clear ownership of those properties. In the past week, two of the nation's largest title-insurance companies, Stewart Title Guaranty Co. and Old Republic National Title Insurance Co., have issued guidelines that could make it much harder to write policies on homes foreclosed by certain banks and in certain states.

"Title companies would be crazy to ensure title on anything remotely associated with a foreclosed property because we don't know how this is going to resolve itself," said Mark Hanson, an independent housing analyst in Menlo Park, Calif.

The result: Not only could sales slow on foreclosures now listed for sale, but it could also become harder to sell or refinance properties that have been foreclosed upon at some point in the past few years.

"Title-insurance costs can go up, purchasers can flee from auctions, and new home-buying families will decide to wait longer before re-entering the market," said Peter Swire, a law professor at Ohio State University who until August served as a top adviser on housing-finance issues in the White House.

So far, officials have downplayed those concerns. "We have not seen broad steps at this point by title insurers that would pose a significant risk to the market," said Shaun Donovan, the secretary of Housing and Urban Development.

But he said banks needed to correct their mistakes quickly "to give the market confidence that the...foreclosure process is working in the right way."

Weitz- good luck with that, banks. I bet your workers that you pay 12 dollar/hour will easily be able to sift through millions of documents and insure that properties have been transferred properly and abide by the ancient and complex real property laws of the U.S.....most attorneys couldn’t do this with one document, but I’m sure your staff will have no problem doing it with millions of documents.

Banks have begun discussions with title-insurance firms to prevent sales from
stalling further. Bank of America, for example, reached an agreement with Fidelity National Financial Inc., the nation's largest title insurer, last week to provide warranties that would indemnify the insurer against claims that resulted from foreclosure errors by the bank.

Real-estate agents are particularly worried about the situation's impact on investors, the buyers who fix up foreclosed homes for resale. Investors accounted for 21% of all home sales in August, according to the National Association of Realtors.

Some analysts say the loss of investors could be particularly damaging to the housing market because some they tend to buy large numbers of units at once.
"We're the lubricant in this recovery," said Gregor Watson, with McKinley Partners, a development company that has spent more than $35 million buying hundreds of foreclosed homes in California this year. "To create more doubt in investors' minds will have a dramatic impact on home pricing."

Mr. Mirmelli has already witnessed the downside of legal tangles between banks and homeowners. He said he purchased a Las Vegas home four months ago that remained occupied by the homeowner, who is suing his bank alleging that it shouldn't have foreclosed on the property because he had been pre-approved by the bank to sell it for less than the amount owed.

"It's frustrating," Mr. Mirmelli said. "The bank has taken our money, but we're still trying to get possession of our house."

Weitz – here’s the deal. I’m not terribly concerned with the ‘title issues’ in Washington State. (I say this because I assume the government will eventually let the paperwork problems slide as to hold the banks accountable to some of the more historic laws would create a title disaster).

Here’s why the title issues won't be an issue:

1) Washington is what is called a ‘race-notice’ state for solving title disputes. Thus, if you buy the home and record the title with the County Recorder before anyone else who makes a claim for the property.... You have won the ‘race’ to provide ‘notice’ to other potential owners…you will be the rightful owner. Period.

Here are the three situations that could arise in foreclosure:

a) Who holds title to the home before foreclosure? The home owner. That was easy.

b) Who holds the title if a buyer buys it at foreclosure? The buyer. There will be no issues with title assuming the title is properly recorded. That was easy too.

c) Who holds title if the bank forecloses, and no one buys the house at the foreclosure auction? The note holder. This one may get interesting, but there are very few foreclosures where the actual mortgage holder is unknown.

The issue, as I said, is whether the banks have the ‘right to foreclose’ because of the MERS issues, and whether the banks were fraudulent in this whole foreclsoure process (ie. fraudulent documents, bad notarization). (Look for a detailed post on the MERS issue later this weekend - I should warn you that you should not be operating heavy machinery when reading as it will cause drowsiness;).

For more information on your rights in foreclosure, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
5400 Carillon Point
Kirkland, WA 98033
(425) 889-9300

weitzlawfirm.com

State Attorney Generals Investigate Foreclosures

AP - Attorney Generals from all 50 states agree to investigate foreclosure fraud.

Below is a video from the Dylan Ratigan show showing an interview with the Attorney General of Ohio.



One of the issues that many are not talking about is the potential for the investors of the loans and/or the government to file lawsuits against the banks and force them to take these loans back...this is not simply a 'robo-singing' problem, or notary problem....forcing the banks to void the previous sales would force many of these banks into bankruptcy, or a more likely solution, would be to acitvate the 'Resolution Trust' authority that would allow the Government to take over the banks and transition the assets to smaller banks over time.

This could get interesting!!

Wall Street Pay at Record High

REALLY?!

Who do these people think they are!!

Its amazing what accounting fraud can do for your employee compensation:



Weitz - I love the argument that banks need to have huge compensation to "keep the best people". Are these the same "best people" that would have put these banks out of business had the government not bailed them out?!

There are a HUGE amount of law students, and MBA grads that find themselves un-employed in this market...I can assure you they could do an equally good job of taking government money, and then investing in government bonds (A huge revenue machine for many of these institutions. They certainly aren't making money by lending. Perhaps its the huge amount of bankruptcies and foreclosures that are lifting profits??...I say that sarcastically of course. The reality is they are taking money from the federal reserve at close to 0%, and either 1) gambling in the markets or 2) lending it back to the govvernment at 3.5%.

Bank fraud abundant in mortgage documents – How, Why and What’s next?

Two of the best media sources (Dylan Ratigan and Karl Denninger) for spreading the truth of our current situation get together on the Dylan Ratigan show to discuss the mortgage fraud situation.



Weitz - Here's the situation in simplified form:

1. Banks make loans; bundle them together (Mortgage Backed Security ‘MBS’)

2. Banks sell this ‘bundle of loans’ to Pension Funds or other investment vehicles who buy them because the companies that "grade" these securities’ (ie. Moodys and Standard & Poors) have graded them ‘AAA’ (A+ in school terms)...probably because they are compensated by the very party who is asking them to grade them.
(this is the equivalent of students deciding how much money their professors make- do you think the professor might give better grades?)

3. Banks then bet against the those Securities (because they knew they were given to unqualified borrowers (presumably)). (bet that borrow will not actually be able to pay for the loan)

4. Securities then ‘blow up’ (homeowners default)

5. Banks make money on the bets against those securities

6. Banks try to foreclose on the properties that made up those loans (on behalf of the new true owner – typically either a government entity or pension fund that lost money on it)

7. Banks don’t have the proper paperwork to legally foreclose on these properties

The problem – the banks did not adequately document the transfers of the title when they ‘securitized the loan’ (there is no legal ‘chain of title’ maintained); and the Bank presumably ‘illegally packed these because the banks ‘foreseeably’ saw a default in the making (probably the reason they bet against that very security)

8. Next - ??? – ask your local judge or politician- my guess is that we allow the foreclosures to continue, and cover up the ‘fraud’ or ‘malpractice’ (depending on your level of pessimism) because fixing the problem would cause most of the banks to go under. I would argue this should be done so America can operate with new banks that are healthy (rather than the zombie banks that currently run our country.

For more information on your rights in short sale or foreclosure, consider contacting a Seattle Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
5400 Carillon Point
Kirkland, WA 98033

weitzlawfirm.com

Higher Govt Loan Limits Extended

An Article from CNBC RealtyCheck:

There wasn't much fanfare, and it literally happened in the cover of night, but sometime after midnight Thursday morning, the U.S. Congress passed an extension of the increased Fannie/Freddie/FHA loan limits for high cost housing markets to a maximum $729,750.

Big deal, right. Well, Yes.

The higher loan limits for high-priced housing markets were instituted back in 2008, when President George W. Bush signed the Housing and Economic Recovery Act.
At the time, the mortgage market had crashed entirely, and the only games left in town were Fannie, Freddie, and FHA.

They each had a loan limit of $417,000, which knocked an awful lot of potential borrowers out of the game. The move was designed to moderate the credit crunch and promote borrowing and buying.

Since the peak of the housing boom in 2006, home prices are down 28 percent (S&P/Case-Shiller). That means many higher-priced markets aren't quite so high-priced anymore. Of course there are still hot spots, many in California, where the median home price is well over $417,000, but the national median home price currently stands at $178,600 (National Association of Realtors).

More important than home prices, however, are the players in the mortgage market today, or, shall I say, the lack of players in the market. Fannie, Freddie and FHA are originating around 90 percent of all new loans today. Higher loan limits therefore afford higher risk to these entities. The Federal Housing Administration (FHA) reports that loans over $400,000 have a higher risk of default.
Government officials continue to claim they want to increase private sector mortgage activity, and they have to. In order for the Obama Administration to expunge Fannie and Freddie from the U.S. mortgage market successfully, they have to ensure there's a market in existence behind them. Right now there isn't. Investors don't want to touch anything that doesn't carry a government guarantee.



Weitz - 90% of all loans back by government agencies...that is truly remarkable! Sounds an awful lot like Socialism to me. Socialism has a place, and arguably would be more beneficial for our current economic situation. We use socialist policies to bailout companies, yet our government leaves the general public to fend for themselves. Its called crony capitalism. If we're going to act socialist, lets just do it, and send checks to the people as well. Don't get me wrong, I'm a believer in capitalism, but it doesn't work if you don't let it work. The whole premise behind capitalism is that companies/ individuals have to face the risk of failing. If they do not, they will take unnecessary risks that could make them very wealthy...all the while knowing that the taxpayer must bail them out if they fail. (Sound familiar?)

Letting the loan limits drop to the previously legislated $625,000 limit, some argue, would have at least been a little boon to the jumbo market, which is struggling for business right now. But would it really juice the private mortgage market?

Some claim the only way the private market will ever recover is to start rolling back the loan limits, at least slightly, because if we continue the government loan limit status, nothing will change and the government will control 90 percent plus of the mortgage market for the foreseeable future.

The trouble with that argument is that at the present time there are no investors for the loans. (Weitz- because they are still overvalued due to government intervention)

There has been exactly one jumbo securitization in the past year, and it wasn't all that big.

Why?

Because potential investors in potential private label mortgage securities need to know what the new structures of these loans will be; they need comfort that their interests are aligned with the interests of all the players that exist between them and the borrowers (servicers, appraisers, etc.).

The Dodd-Frank financial reform bill did not mandate risk retention by any of the intermediaries, at least not yet. Policy makers have a year to define what exactly is a "qualified residential mortgage." So bottom line, without the increase in the loan limits, a fairly sizeable part of the mortgage market would have ground to a halt.

Lawmakers had no choice.

Weitz:

What does this mean?

The government will continue to back most of the loans issued (under the threshold of 729,000), and we as taxpayers will be on the hook for the losses should they occur. The banks will get paid for originating the loans, and government officials can all pretend that the market is in 'recovery' while we completely move away from a capitalist market place. If that statement seems like an oxymoron, thats because it is.

For more information on your rights in Short Sale or Foreclosure, consider contacting a Kirkland Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
5400 Carillon Point
Kirkland, WA 98033

(425) 889-9300
weitzlawfirm.com

TARP Bailout Ends - Don't believe the spin

WASHINGTON — An unpopular government-rescue program credited by economists with preventing another Great Depression will go out of business Sunday, two years to the day it was created.

On Oct. 3, the Troubled Asset Relief Program (TARP), known as the bank-bailout bill, loses authorization to make new expenditures. From that point on, TARP will be in wind-down mode, although much of money lent out has been repaid and at a profit for taxpayers.

Weitz - They paid it back because we gave them money at 0%, and let them loan it back to the government at 4%...well done, bankers. You should give yourself a huge bonus for your genius.

This is the equivalent of giving your alcoholic, irresponsible friend $50 dollars, then allow him borrow $5000 from you. Next, he's loans it back to you (only you have to pay interest - say 5%). He makes $250 from the interest, and then is able to 'pay back' the original $50 dollars he 'borrowed'. No logical business person would ever consider this loan 'paid off', but we're taxpayers...so we get fleeced.

If you follow the blog, you know I am a big fan of Dylan Ratigan. He does a great job of showing what a haux a headline such as this is.



Originally envisioned as a blank check for the government to spend up to $700 billion to rescue the financial system, the cost to taxpayers is estimated now to be only one-seventh of that amount. The government has earned almost $13 billion in dividends from the bank stock it received in exchange for the taxpayers' investment, and it earned $8.2 billion more from the sale of preferred stock.

The Treasury Department estimates taxpayers are still on the hook for about $100 billion, a number expected to shrink with continued repayments and asset sales. The nonpartisan Congressional Budget Office (CBO) recently put the estimated total TARP cost at about $66 billion.

Still, TARP became politically poisonous. People considered it free money for Wall Street executives whose recklessness dragged the world into the Great Recession. Now those executives are wallowing in bonuses while taxpayers remain plagued by 9.6 percent unemployment. (Weitz - we're not stupid)

"Objectively, TARP has been an economic success. Politically, it's been a miserable failure," said Darrell West, director of governance studies at the Brookings Institution in Washington, D.C., a center-left policy-research center.

Even though TARP was a Bush administration initiative and got strong congressional support from Republicans in 2008, today's GOP has painted TARP alternately as a Wall Street bailout or a cash kitty to fund Democrats' wish list.

"TARP turned out to be a slush fund," said Sen. Mike Johanns, R-Neb. "I would come to the office in the morning and see the latest thing the president has spent money for out of the TARP fund. It just turns my hair gray."

West said, President Obama "has not done as good a job communicating as he should. He's allowed the opponents to frame the issue unfavorably."

In the recently released "Pledge to America," a campaign document from House Republicans, GOP lawmakers vow billions in savings by eliminating TARP.
The problem is, recently passed legislation to revamp financial regulation already did that, and set the Oct. 3 TARP expiration date. That legislation also prevents the Obama administration from taking repayments to TARP and directing them to other priorities.
Shift in gears

When first presented by then-Treasury Secretary Henry Paulson, TARP money was supposed to be used to buy toxic assets from banks to bolster their balance sheets, allowing them to resume lending. Soon after the Oct. 3, 2008, creation of TARP, however, Paulson shifted gears and chose instead to inject $245 billion directly into banks.

That infuriated politicians and taxpayers alike. In 2009, after taking taxpayer money, many of the financial firms paid their executives huge bonuses. Some $40 billion in TARP money also was used to backstop insurer American International Group (AIG), which was rescued by the Federal Reserve in September 2008 to shore up the financial sector.

In December 2008, President George W. Bush authorized some $17 billion in TARP funds to help General Motors and Chrysler avoid bankruptcy. Eventually, expanding under Obama, some $82 billion in TARP money went to rescue the two automakers and keep credit flowing to their suppliers.

Unsavory as it was politically, economists credit these TARP efforts with helping to stabilize the financial sector and preventing an even worse outcome.
"I think it was a great success. The bank bailout part of TARP was an astounding success. Couldn't have gone any better," said Mark Zandi, chief economist with forecaster Moody's Analytics.

For politicians who voted for TARP, however, the challenge remains how to sell voters on the idea it prevented something bad from happening.
"I don't know of a single person who says if we hadn't done this, we'd be better off today," said Senate Banking Committee Chairman Chris Dodd, D-Conn., who is retiring and won't face the voters' wrath in November.

Of the $245 billion injected into 707 financial institutions, all but about $54 billion has been repaid. Of that outstanding amount, $30.75 billion is owed by big global banks that were subjected to special "stress tests" by regulators last year. The federal government still holds $16.5 billion of common stock issued by Citibank, for example.

However, several large regional banks, including SunTrust Bank, Regions Bank, KeyCorp and Fifth Third Bank, respectively, still owe $4.85 billion, $3.5 billion, $2.5 billion and $3.4 billion. The Treasury Department expects to be fully repaid, with interest and profit from its TARP cash injections.

"These weren't made as individual investments to save individual companies. They were meant to stabilize the system and the overall economy. And in that regard, this program has really been a success, and I think anyone who looks at it objectively will realize that," said Tim Massad, the acting assistant Treasury secretary for financial stability.

TARP also is unlikely to be fully repaid for the rescue of GM and Chrysler. GM has bounced back better than expected, and the company has announced its intent to issue stock either this year or early next year. However, that isn't expected to recoup fully the $49.5 billion in taxpayer aid to GM. Full repayment will take longer.
So if the automotive rescue doesn't break even, was it still successful?
"Yes. If you believe that we should be keeping manufacturing going in America — because what you would have lost if we hadn't gotten involved was not simply General Motors, but a substantial part of the supply chain, and that would have had a negative effect on Ford," said House Financial Services Committee Chairman Rep. Barney Frank, D-Mass.

At a recent meeting, Frank said there's more involved than just a sum.
"The problem is, if you say you owe us $10 billion, it's a failure. OK, we would have had $10 billion and no significant automobile manufacturing in America and no affiliated set of industries in America," he said. "I think that would have been worse."

Weitz- is it just me or is real estate still in dumps and banks still lying about their balance sheets? The presumption that 'we've dodged a bullet' is repulsive. Notice how Mr. Dodd is retiring this year...think its because he doesn't want to be around when reality sets in?

Still, TARP is likely to lose money in the end. Forecaster Zandi expects the final sum to be about $90 billion. More than half of that will be TARP money designated for foreclosure relief and other mortgage-finance efforts.

While $90 billion to $100 billion in final TARP expenses seems likely, Zandi and other leading analysts think it was money well spent in preventing an economic collapse.

"Ninety billion dollars is obviously well below the $700 billion appropriated and well worth the price. We got well more than $90 billion out of TARP," Zandi said.

Weitz - TARP was great in itself, but we're not stupid as a society. Bankers, who played a HUGE role in the devastation, are the only ones who have benefited from this crisis. The bailouts were guided toward a group of people who led us into this mess. Its repulsive.

Our Firm:
Weitz Law Firm, PLLC
5400 Carillon Point, Bldg 5000
Kirkland, WA 98033


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Bank of America Foreclosure Delays

Weitz - Don't get too excited by the title. Unforutnately, Washington is not included in the states effected (see below).

AP:

Bank of America is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents. The move adds the nation's largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them.

Two other companies, Ally Financial Inc.'s GMAC Mortgage unit and JPMorgan Chase, have halted tens of thousands of foreclosure cases after similar problems became public.

The document problems could cause thousands of homeowners to contest foreclosures that are in the works or have been completed. If the problems turn up at other lenders, a foreclosure crisis that's already likely to drag on for several more years could persist even longer. Analysts caution that most homeowners facing foreclosure are still likely to lose their homes.

State attorneys general, who enforce foreclosure laws, are stepping up pressure on the industry. On Friday, Connecticut Attorney General Richard Blumenthal asked a state court to freeze all home foreclosures for 60 days. Doing so "should stop a foreclosure steamroller based on defective documents," he said.

And California Attorney General Jerry Brown called on JPMorgan to suspend foreclosures unless it could show it complied with a state consumer protection law. The law requires lenders to contact borrowers at risk of foreclosure to determine whether they qualify for mortgage assistance.

Mark Paustenbach, a Treasury Department spokesman, said the Treasury has asked federal regulators "to look into these troubling developments."

A document obtained Friday by the Associated Press showed a Bank of America official acknowledging in a legal proceeding that she signed up to 8,000 foreclosure documents a month and typically didn't read them.

Weitz – 8,000/ month!! That is nearly 45 per hour!! Perhaps you should hire some more people, Bank of America!!! Unfortunately, foreclosures are not money makers for the banks, so they leave the departments dreadfully understaffed.


A lawyer for the homeowner in the case, James O'Connor of Fitchburg, Mass., said such problems are rampant throughout the industry.

"We have had thousands, maybe hundreds of thousands of foreclosures around the country by entities that did not have the right to foreclose," O'Connor said.

The disclosure comes two days after JPMorgan said it would temporarily stop foreclosing on more than 50,000 homes so it could review documents that might contain errors. Last week, GMAC halted certain evictions and sales of foreclosed homes in 23 states to review those cases after finding procedural errors in some foreclosure affidavits.

Consumer advocates say the problems are widespread across the lending industry.
"The general level of sloppiness is pervasive around the industry," said Diane Thompson, counsel at the National Consumer Law Center.

Mortgage finance companies Fannie Mae and Freddie Mac said Friday they're directing companies they work with that collect loan payments to follow proper procedures.

In some states, lenders can foreclose quickly on delinquent mortgage borrowers. By contrast, the 23 states in which Bank of America is delaying foreclosures use a lengthy court process. They require documents to verify information on the mortgage, including who owns it.

Those states are:

Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.

Weitz - Note there is no Washington on this list. We use non-judicial foreclosure system (ie. No courts are involved)…so the paperwork is less and the errors are not as frequent. That said, the banks are completely overwhelmed by this crisis. Perhaps they should use that TARP money to hire some folks to tackle this problem....just a thought.