Mortgage Modification Update - Banks Response to Administration Program

The banking industry privately knocked the Obama administration's nascent proposal to force banks to modify mortgage loans, saying the plan won't help solve problems facing troubled borrowers.

The nation's largest banks haven't yet seen a proposal that is designed to help resolve mortgage-servicing errors that affected troubled borrowers. But industry executives are bristling at the administration's new approach, disagreeing that principal reductions will help borrowers and, in turn, the broader housing market.

Though a unified settlement is uncertain and would have to appease regulators, banks and state attorneys general, some officials are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers.

The proposal "would bring with it enormous costs that would far outweigh any potential benefits," Chris Flanagan, a Bank of America Corp. mortgage strategist, said in a research note Thursday.

Even an amount of $20 billion "would accomplish little" in addressing borrowers who currently owe $744 billion more on their mortgages than their homes are worth, Mr. Flanagan added.

Weitz - What Mr. Flanagan is trying to say is 'if we have to write down principle, we won't be able to continue our accounting fraud that Congress has so graciously made legal in 2008. If we can't continue our accounting fraud, we won't be able to pay record bonuses, and I may not be able to vacation in Belize next Spring'.

Asking servicers to assume the costs of all write-downs is unfair unless the administration can pinpoint the "source of harm," said Bob Davis, executive vice president of the American Bankers Association. If the loans are going bad because of economic conditions and job loss, "it's not clear why servicers would bear the brunt because it's outside their control."

Weitz - Well Bob, perhaps because the taxpayers bailed you out in historic fashion, and then you proceed to kick folks out of their homes without a single bit of aid or assistance.

The pushback is the latest symptom of the warring interests in the housing market and the difficulty fixing problems that existed long before the foreclosure-paperwork crisis erupted last fall. Economists have said that the U.S. economy's recovery is threatened the longer the foreclosure process is delayed.
The proposal is the Obama administration's latest effort to revamp the way mortgage companies help troubled borrowers and address concerns that past initiatives didn't go far enough to help troubled borrowers.

The administration's signature Home Affordable Modification Program, or HAMP, helped more than 500,000 borrowers lower their monthly payments through interest-rate reductions. But it has fallen short of ambitious goals to modify millions of loans since its introduction two years ago. Last year, the White House unveiled new measures to encourage banks to write down loan balances, but they haven't been widely used.

Given the banks' track record in reworking loans, some attorneys who represent borrowers in foreclosure question whether the administration's proposal could work. "Requiring banks to eat the loss, and at the same time allowing them to administer the program, is a recipe for a program that will not do anything except raise people's expectations and frustrate them," said Gloria Einstein, an attorney at Jacksonville Legal Aid Inc. She said an independent third party should administer the program.

Banks have resisted reducing loan balances in part because of concerns that it could encourage more borrowers to stop making payments in order to receive a smaller loan.

Weitz - I can buy that argument as it does create a slippery slope. The problem is that these folks are going to stop paying anyways and allow their home into foreclosure. Modifications would cease the seemingly endless supply of foreclosures on the market.

The plan also may face some resistance on Capitol Hill. House Republicans on Thursday said they would prepare bills next week to terminate HAMP and similar programs. The administration's proposal appeared to be a ploy to "revamp" the HAMP program, said U.S. Rep. Patrick McHenry (R., N.C.). "If this is their attempt to create HAMP 2, then I find it deeply troubling."

The White House declined to comment.

"The administration's ongoing review is focused on getting to the bottom of the problems in the foreclosure process and holding appropriate parties accountable," said a spokeswoman for the Department of Housing and Urban Development. "Doing so will help homeowners, the housing market and our economy, and any suggestions to the contrary are simply wrong."

Any settlement that includes loan write-downs would require banks such as Bank of America Corp., Wells Fargo & Co. and J.P. Morgan Chase & Co. to complete modifications within one year from the settlement's date, said people familiar with the matter. Banks could face additional fines if they don't comply with the terms of the settlement, and they would have to hire independent auditors to provide monthly updates on their progress and compliance with the terms.

Penalties could be assessed depending on the volume of loans that are 90 days or more delinquent in each bank's servicing portfolio, and by the extent of any deficiencies uncovered by bank examiners, these people said.

Any settlement that includes loan write-downs would require banks such as Bank of America, Wells Fargo and J.P. Morgan Chase to complete modifications within one year from the settlement's date, said people familiar with the matter.

The push for write-downs likely would focus on loans that banks service on behalf of other parties, and not for loans that they hold on their books. The settlement would require servicers to comply with existing investor contracts, and some of those contracts could complicate efforts because they give investors authority to reject reductions of loan balances.

Banks consider their mortgage-servicing problems as technical matters, such as the filing of foreclosure documents that were never verified by so-called robo-signers, say people familiar with the situation. Bank executives also want any penalties to reflect the fact that few borrowers have been improperly ejected from homes, these people say.

But some state attorneys' general and federal regulators are pushing for as high a figure as possible, arguing that mortgage servicers have chronically underinvested in their operations, making it difficult for borrowers to get timely, effective help before falling further behind on their mortgages.

Susan Wachter, a real-estate finance professor at the University of Pennsylvania, said the proposed settlement would provide "disincentives for wrongful behavior" by mortgage servicers.

Weitz - For more information, see the Principle Reduction Alternative.

For more options on your rights in Modification, 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

Principle Reduction Modifications

An Overview of the Principal Reduction Alternative (PRA) program:

PRA was designed to help homeowners whose homes are worth significantly less than they owe by encouraging servicers and investors to reduce the amount you owe on your home.

Eligibility

You may be eligible for PRA if:
• Your mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac.

Weitz - Ha!...nice work govrnment. "We'll reduce your principle as long as the loan is not insured by Fannie or Freddie which owns or guarantees a huge majority of mortgages in the country"...thanks for another worthless program! Nevertheless, if you're loan is not in this category - continue reading.

• You owe more than your home is worth.
• You live in the home carrying the mortgage you want to modify.
• You obtained your mortgage on or before January 1, 2009.
• Your mortgage payment is more than 31 percent of your gross (pre-tax) monthly income.
• You owe up to $729,750 on your 1st mortgage.
• You have a financial hardship and are either delinquent or in danger of falling behind.
• You have sufficient, documented income to support the modified payment.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.
Program Availability

More than 100 HAMP-participating servicers are required to evaluate homeowners for principal reduction. Participating servicers are required to develop written standards for PRA application. The largest servicers include Bank of America, CitiMortgage, JP Morgan Chase, and Wells Fargo.

1. AgFirstFarm Credit Bank
2. Allstate Mortgage Loans & Investments, Inc.
3. American Eagle Federal Credit Union
4. American Finance House LARIBA
5. American Home Mortgage Servicing, Inc
6. AMS Servicing, LLC
7. Aurora Loan Services, LLC
8. Bank of America, N.A.1
9. Bank United
10. Bay Federal Credit Union
11. BayviewLoan Servicing, LLC
12. Bramble Savings Bank
13. Carrington Mortgage Services, LLC
14. CCO Mortgage
15. Central Florida Educators Federal Credit Union
16. CentrueBank
17. CitiMortgage, Inc.
18. Citizens 1st National Bank
19. Citizens Community Bank
20. Citizens First Wholesale Mortgage Company
21. Community Bank & Trust Company
22. Community Credit Union of Florida
23. CUC Mortgage Corporation
24. DuPageCredit Union
25. Eaton National Bank & Trust Co
26. Farmers State Bank
27. Fay Servicing, LLC
28. Fidelity Homestead Savings Bank
29. First Bank
30. First Financial Bank, N.A.
31. First Keystone Bank
32. First National Bank of Grant Park
33. First Safety Bank
34. Franklin Credit Management Corporation
35. Franklin Savings
36. Fresno County Federal Credit Union
37. GFA Federal Credit Union
38. Glass City Federal Credit Union
39. GMAC Mortgage, LLC
40. Golden Plains Credit Union
41. Grafton Suburban Credit Union
42. Great Lakes Credit Union
43. Greater Nevada Mortgage Services
44. Green Tree Servicing LLC
45. Hartford Savings Bank
46. Hillsdale County National Bank
47. HomEqServicing
48. HomeStarBank & Financial Services
49. Horicon Bank
50. Horizon Bank, NA
51. Iberiabank
52. IBM Southeast Employees' Federal Credit Union
53. IC Federal Credit Union
54. Idaho Housing and Finance Association
55. iServeResidential Lending LLC
56. iServeServicing Inc.
57. J.P.MorganChase Bank, NA2
58. Lake City Bank
59. Lake National Bank
60. Liberty Bank and Trust Co.
61. Litton Loan Servicing
62. Los Alamos National Bank
63. Magna Bank
64. MainstreetCredit Union
65. MarixServicing, LLC
66. Metropolitan National Bank
67. Midland Mortgage Company
68. Midwest Bank & Trust Co.
69. Midwest Community Bank
70. Mission Federal Credit Union
71. MorEquity, Inc.
72. Mortgage Center, LLC
73. Mortgage Clearing Corporation
74. NationstarMortgage LLC
75. Navy Federal Credit Union
76. Oakland Municipal Credit Union
77. OcwenFinancial Corporation, Inc.
78. OneWest Bank
79. ORNL Federal Credit Union
80. Park View Federal Savings Bank
81. Pathfinder Bank
82. PennyMacLoan Services, LLC
83. PNC Bank, National Association
84. PNC Mortgage3
85. Purdue Employees Federal Credit Union
86. QLending, Inc.
87. Quantum Servicing Corporation
88. Residential Credit Solutions
89. RG Mortgage Corporation
90. Roebling Bank
91. RoundPointMortgage Servicing Corporation
92. Saxon Mortgage Services, Inc.
93. Schools Financial Credit Union
94. SEFCU
95. Select Portfolio Servicing
96. ServisOne Inc., dbaBSI Financial Services, Inc.
97. ShoreBank
98. Silver State Schools Credit Union
99. Specialized Loan Servicing, LLC
100. Spirit of Alaska Federal Credit Union
101. Stanford Federal Credit Union
102. Sterling Savings Bank
103. Suburban Mortgage Company of New Mexico
104. Technology Credit Union
105. The Golden 1 Credit Union
106. U.S. Bank National Association
107. United Bank
108. United Bank Mortgage Corporation
109. University First Federal Credit Union
110. VantiumCapital, Inc.
111. Verity Credit Union
112. VistFinancial Corp.
113. WealthbridgeMortgage Corp.
114. Wells Fargo Bank, NA4
115. WescomCentral Credit Union
116. Yadkin Valley Bank

Effective Oct. 1, 2010 – Dec. 31, 2012.

Future of Fannie of Freddie - your governement at work

A recent article in the WSJ regarding White House Proposal on Fannie, Freddie:

AP - The Obama administration outlined on Friday its plans to begin shrinking the government's broad support of the nation's crippled mortgage market, a process that officials said could take several years and would include phasing out Fannie Mae and Freddie Mac.

Officials portrayed a housing-finance system that would include a role for both the public and private sectors, but would be different from the current system in that the government's role would be smaller, underwriting standards would be tighter, and borrowers would be required to hold larger amounts of equity in their homes.

Weitz – allow me to translate – housing financing would be darn near impossible to obtain unless you are able to put down a significant down payment, strong income, and strong credit.

Rep. Randy Neugebauer, R-Texas, chairman of a key House oversight subcommittee, is encouraged by the Obama administration's proposal to restructure Fannie Mae and Freddie Mac. But he's disappointed there's no clear long-term reform plan.

The proposal offered a series of short-term steps that would help attract private capital into the mortgage market, including a reduction in the maximum loan sizes that Fannie and Freddie can purchase and gradual increases in the fees the mortgage companies charge lenders. Both of those steps could make it more attractive for lenders and investors to buy loans without government backing, but they could also raise borrowing costs for millions of Americans and weigh on the nation's home-building industry.

Weitz – How could is possibly encourage private capital if the government pulls its guarantees?! This will KILL financing of Real Estate in America – especially at the high end range (above $625,000) and make all loans more expensive.

"The cost of mortgages is probably going to go up, and home ownership is probably going to go down," said Daniel Mudd, the former chief executive of Fannie Mae who is now CEO of Fortress Investment Group. "Both of those things arguably could be a good thing."

Weitz - What?! costs of mortgages is going to go up, and home ownership is going down and that a GOOD THING?! For who?...That's some delusional rationale.

The administration said it would support allowing maximum loan limits to fall to $625,500 from $729,750 as scheduled on Oct 1. It also said it would push to increase minimum down payments to 10% on loans eligible for purchase by Fannie and Freddie. Insurance premiums charged on new loans backed by the Federal Housing Administration could also go up.

Administration officials said the process of transitioning to a post-Fannie and Freddie world would take at least five to seven years, in part because the housing market remains too fragile. Many analysts say the process, which includes dismantling, moving, or reassembling the firms' infrastructure, could take even longer.

The long-awaited proposal was thin on specifics about what would replace Fannie and Freddie, which the government took over in 2008, and which have racked up $134 billion in taxpayer losses. Instead, it outlined three options that were designed to frame what promises to be a prolonged and heated political debate over how to structure the nation's $10.6 trillion mortgage market.

Option 1:
The first of those would put the vast majority of the mortgage market in the hands of the private sector, where lenders would originate mortgages and securitize them without any government backing. The middleman role currently played by Fannie and Freddie would no longer exist.

The government's role would be limited to the FHA and a few other smaller housing agencies, and their reach would be sharply reduced from current levels. The FHA backed 20% of all new mortgages last year. Some conservatives have called for such a private market.

Weitz – this would hurt; Fannie and Freddie back an overwhelming majority of new real estate loan issuance's right now. For the private sector to get comfortable making loans, interest rates would have to go up dramatically as the risk tolerance for the private sector would be far less and they would expect a premium in return.

Option 2:

The second option, championed by a handful of economists, would also create a mostly private market with a limited government backstop that would primarily become active buying or guaranteeing loans in periods when private lenders retreated during financial shocks.

Weitz - great...but this 'period of financial shock' could last a long time

Option 3:

The third option would create new privately owned companies to buy mortgages from banks and sell them as securities. Those securities would be explicitly guaranteed by the government as long as they meet certain criteria. The government would collect fees for that backing, just as the Federal Deposit Insurance Corp. insures bank deposits and regulates banks.

These new companies would essentially replace some of the functions filled by Fannie and Freddie. An array of academics and industry groups have backed such a proposal, and senior Obama administration officials, such as Treasury Secretary Timothy Geithner, have publicly discussed its merits.

Weitz - the problem with this is that no private company is stupid enough to back these loans as the interest rates Fannie and Freddie are doing it. Quite simply, this would never work.

The housing industry greeted the proposal coolly, and some mortgage industry officials criticized the administration for not providing more detail. "It was a political football that they punted back onto Congress's side of the field," said Joseph J. Murin, the former president of Ginnie Mae, a government-owned corporation that guarantees payments on mortgages backed by federal agencies.

Republicans face their own divisions over what kind of role the government should play in the market, while Democrats have generally said a federal backstop function is needed to ensure broad access to homeownership and the 30-year fixed-rate mortgage, in particular.

Weitz – this is the problem – we need to government to prevent a further collapse of Real Estate, yet the economy won’t be truly corrected until we let it collapse; it’s a catch 22 that no one wants to talk about. Thus, the democrats admittedly want the government involved, and the republicans implicitly know the government needs to be involved (or the crash would occur). The problem is they are both trying to prop up a broken system, but politically feel that is necessary.

Many industrialized nations don't have institutions like Fannie and Freddie, and instead rely more heavily on their banking systems to fund mortgages.
But some economists have noted that the mistakes in the U.S. private sector were far greater than the mistakes made by Fannie and Freddie. For example, private-label mortgage securities, which are not government-backed, have performed more poorly than those backed by the mortgage giants. Nearly 45% of private-label loans originated in 2006 had been 90 days past due at least once, compared with 13% for Fannie and Freddie, according to a report from the firms' federal regulator published in September 2010.

"The part of the market that was the most private was also the worst," said Michael Barr, a former assistant Treasury secretary who left the Obama administration in December. He said the report should help remind lawmakers that the government has long had a role backstopping mortgages. "People seem to think there's a nostalgic world that we never had," he said.

Weitz – this is true, but there is a catch – Wall Street screwed up badly, and we didn’t hold them accountable. In order for true capitalism to work in the future, you have to allow the risk of failure as a self-controlling tool to lessen the risk taking. Without the risk of failure, we are destined for bubbles and subsequent busts.

The Obama administration outlined plans to begin shrinking the government's broad support of the nation's crippled mortgage market.

The proposals are likely to set off a furious effort by the financial-services industry to protect generous subsidies and seek out new revenue sources. Investors haven't been willing to buy mortgages that don't have government backing primarily because there haven't been enough steps taken to overhaul the market for private-label securities, said Joshua Rosner, of investment-research firm Graham Fisher & Co. "Investors are on strike," he said.

Weitz – What Josh is trying to say is that there is no support for mortgages from the private sector because 1) interest rates are not indicative of the risk involved (higher risk loans require higher interests); and 2) housing is still overpriced so the private side would rather trade commodities than invest tons of money for a 5% return in Real Estate.

His clients would buy securities without government backing "hand over fist" if the industry had adopted clear and transparent standards, said Mr. Rosner. "The industry isn't doing that, because it's playing for a guarantee."

Weitz – the real story here is that the real estate market is not even close to a point which would allow the government to not be involved. Some would argue that a further collapse would actually be a good thing so the prices get to a point where the typical consumer can buy a house without spending half his/ her paycheck on interest payments to the bank. That said, politicians see falling real estate as a negative and my guess is they continue to use the government (taxpayers) to prop it up with the FHA, Fannie, Freddie guarantees....the saga continues.

Our Firm:

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

(425) 889-9300

Fed Up with the Fed

Ben Bernanake (Head of the Federal Reserve) comes out today and defends printing money policy in front of Congress. To sum up - we print money, we send to Wall Street who gambles with it, and pays themselves huge bonuses while the rest of America continues to deteriorate as the job and housing situation continue fall apart. Meanwhile, interest rates remain are un-naturely low which deprives any folks looking for risk free investment, and the value of the dollar continues to fall so we can all get squeezed by the rising cost of commodities like food and gas. Great plan if you work on Wall Street....not so great for everyone else.

Thanks Dylan for getting this out to the masses!

Visit msnbc.com for breaking news, world news, and news about the economy

Foreclosure Inventory - the elephant in the room

A Post from one of our favorites: Diane Olick of CNBC Realty Check outlining the giant elephant in the room - phantom inventory.

AP - You can talk all you want of renewed interest in housing, slowly increasing sales and supposed stabilization in prices, but the elephant in the room is slowly growing, and banks, Fannie, Freddie and the government know it. I'm talking about foreclosures.

Economist Mark Zandi, often quoted by lawmakers on both sides of the aisle, told the Senate Budget Committee this morning that while he's "optimistic" with regard to the economy's prospects, "At the top of my list of concerns, at least in the near term (6 to 12 months), is the ongoing problem in the housing market and the foreclosure crisis."

REO inventory is rising, he proved through some slides. Four million seriously delinquent loans, out of 50 million first mortgage loans, "so that's a lot." And while he noted that the problems appear to have peaked, there are still over 600,000 properties in REO, which will only put more pressure on prices when they come to market.

Weitz - eventually, they banks have to sell these properties - this will lead to increased supply of homes and likely push prices further down. I'm not sure why the banks hold these foreclosed properities for so long. I suppose they're expecting some miracle in the form of a robust economic recovery to save them...I think they'll be dissapointed.

Zandi called modification efforts "inadequate," despite the 1.5 to 2 million modifications a year. "In the context of all the problems that we've got, it's still quite small," he noted. Zandi's biggest concern is that 14 million homeowners, according to his calculations, are underwater (owe more on their mortgages than their homes are worth), and 4 million of those are underwater by more than 50 percent. "That's deeply underwater," he elaborated.

This testimony just happened to coincide with a few blurbs of information I've noted over the

1. Chase announced yesterday that it has plans to add 25 new Chase Homeownership Centers in 19 states this year. "The best way to help borrowers find ways to stay in their homes is to sit down face-to-face and discuss their individual circumstances," writes Chase Home Lending CEO David Lowman in the press release.

2. Wells Fargo is holding 20 mediation events across the country this year, inviting more than 150,000 borrowers who are behind on payments. These will be held at hotels and convention centers, much like the non-profit Boston-based NACA has been doing for years.

3. Fannie Mae is expanding its loss mitigation efforts, trying to modify more borrowers, and if not, trying to find foreclosure alternatives, like short sales or deeds in lieu. They are also testing a program in Florida to negotiate modifications before going to court.

4. Earlier this week, the Hope Now coalition of servicers and investors reported it had done well more than twice the number of loan mods in 2010 than the government's Home Affordable Modification Program.

Bottom line: banks, Fannie, Freddie...they really get it now. Foreclosures are ramping up again and are endangering today's fragile housing recovery. Rick Sharga at RealtyTrac claims we have yet to see the foreclosure peak. Regardless, even if 2011's number is slightly lower than the peak, it is more critical now than ever before to stem the tide because housing is struggling to recover on it's own without government intervention (other than incredibly low mortgage rates, which don't appear to help much). Last year various government incentives helped mitigate the foreclosure losses to the overall market; the market doesn't have that benefit now.

Weitz - I would say rephrase to say the housing is 'failing' to recover despite enormous government intervention.

Zandi says one answer is for Fannie and Freddie to stop charging higher refi rates for borrowers with low credit scores and higher LTV's (loan to value ratios) in order to facilitate more refinancing, even when borrowers are underwater. These are loans the GSE's likely already own or back. "It will cost Fannie and Freddie in interest income, but they will benefit in the form of fewer foreclosures," argues Zandi.

Weitz - this is an interesting comment - I have client all the time ask me about the long term credit concerns of foreclosure/ short sale. While there is no magical ball to turn to, my personal belief is that the government is going to continue to 'lower lending standards' to prop up housing.

For more information on your rights with an underwater loan, 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

Walking away from mortgage - Washington

A great clip from the Dylan Ratigan show regarding 'strategic default' or 'walking away from mortgages':

Visit msnbc.com for breaking news, world news, and news about the economy

Remember, all States have different laws regarding the foreclosure process, and deficiency rights of the banks. Further, many homeowners can get out from under their mortgages without actually having to have a foreclosure on their credit score.

For more information, consider contacting a Seattle Short Sale Facilitation or Foreclosure Attorney.


Our Firm:
Weitz Law Firm, PLLC
5400 Carillon Point, Bldg 5000
Kirkland, WA 98033
(425) 889-9300
weitzlawfirm.com

Foreclosure Update in Seattle

A CNBC Report on Foreclosure updates:



Of note is that Seattle has had the biggest turn up in Foreclosures in the nation (up 23%) - not a big surprise if you follow this blog.

Wall Street pay continues to soar

A great clip with Dylan Ratigan and Michael Lewis (author of Liar's Poker).

What can you say about this?...other than it stinks. The guys that caused the problem walk away as the big winners while the general public gets fleeced via a dollar collapse, tax payer abuse, and the continued fall of their real estate.

Visit msnbc.com for breaking news, world news, and news about the economy

The Highlights:

1) 2010 Pay up 5.7% to 135 Billion
2) Wall Street Revenue of $417 Billion – How? It’s obviously not from lending proceeds as lending as fallen off a cliff (see M3). Thus, it can only be 1) government handouts, and 2) trading profits (with taxpayer funds).

So I ask – what positive role do these institutions play in the economy? aside from giant leaches of capital? Anyone? Anyone?

Banks kicked in the Mass (Court)

Big Case decision out of Massachusetts recently...I'll provide the article and my feedback as usual

AP

The highest court in Massachusetts ruled against Wells Fargo & Co. and U.S. Bancorp in two foreclosure cases that cast doubt over whether some home loans were properly handled when packaged into securitizations.

Justices in the state's Supreme Judicial Court upheld a lower court's decision to void foreclosure sales of two homes in Springfield, because owners of the loans couldn't prove that the mortgages had been assigned to them. Both loans were assembled into mortgage-backed securities sold to investors.

A Wells Fargo branch in San Francisco. Shares of the bank fell 2% on the ruling, and other banks saw share-price losses as well.

Weitz - It won't hurt the banks that badly. Most are simply servicing companies now. More than half the primary loans out there are held by Fannie Mae and Freddie Mac (officially called 'quasi-government agencies' - unofficially called cash pits of US Taxpayer dollars). You can thank your govt officials for using your tax dollars to bail out the banks.

Bank stocks fell on worries that Friday's ruling could make it harder for financial firms to foreclose on mortgages that wound up in securities. The defeat also might provide ammunition to mortgage-bond investors who have accused and even sued servicers for what the investors claim is systematically shoddy loan documentation.

The ruling against the fourth- and fifth-largest U.S. banks in assets came amid a delay in the crafting of new standards for mortgage lending as top U.S. regulators clash over protections for homeowners facing foreclosure.

The logjam is a sign of how strongly the financial crisis still looms as regulators work to implement the Dodd-Frank financial-overhaul law passed last summer. To help prevent another housing collapse, lawmakers included a provision requiring issuers of mortgage-backed securities to keep 5% of the risk, since investors would suffer losses when loans go bad.

Weitz - 5% of the risk? So my down side is 5%, and my upside is billions of dollars in fees to originate and sell the loan. The financial regulation touted by congress and the administration was largely worthless in my opinion. It did absolutely nothing to fix our problems and end the banks siphoning of capital in this country.

Six federal agencies must sign off on the provision before it is released for comment, but their tentative goal of completing a proposal by the end of December came and went with no agreement. The delay was caused partly by disagreement about whether to include new protections for homeowners on the brink of foreclosure within this so-called risk-retention rule or separately, people familiar with the negotiations said. The Dodd-Frank law requires that the regulators finalize the risk-retention requirement by April.

The snag indicates that implementing the changes triggered by the new law could be messy as regulators wrestle to reach consensus. Friday's court ruling brought even more anxiety to the mortgage-securitization market.

The Massachusetts case is a closely watched example of what some mortgage experts describe as "show-me-the-paper" cases over widely used procedures for transferring loans after they are made. Individual loans often are sold to an investor, with the new owner's name left blank in loan documents to minimize paperwork hassles as the loan subsequently changes hands before being combined with other loans into mortgage-backed securities.

Justice Robert J. Cordy concluded in a concurring opinion that the two banks showed "utter carelessness" when they "documented the titles to their assets." If the ruling is followed by lower courts in Massachusetts or emboldens borrowers and investors elsewhere, it could delay or even derail some foreclosures. That would make it harder for banks to recoup loan losses by selling homes that are seized through foreclosure proceedings.

"It's deeply disturbing to investors that it even got to this point, but it potentially strengthens any bondholder claim that the servicers are mishandling foreclosures," said Talcott Franklin, a lawyer representing bond investors.

Susan Wachter, a real-estate finance professor at the University of Pennsylvania, called the ruling a "landmark decision" with nationwide implications because Massachusetts loans wound up in many securities.

Shares of Wells Fargo, based in San Francisco, fell 2%; U.S. Bancorp, Minneapolis, slipped 0.8%. Betsy Grasek, an analyst with Morgan Stanley, wrote in a note to clients that the declines created "buying opportunity for bank stocks," adding that the court ruling "is not saying the foreclosure process is flawed."

R. Bruce Allensworth, a partner at law firm K&L Gates who represents U.S. Bancorp, said the decision would have no effect outside Massachusetts. In a statement, Wells Fargo said the ruling "does not prevent foreclosures on loans in securitizations."

Weitz - unfortunately, he is right...for now.

In the risk-retention spat, the Federal Deposit Insurance Corp. has insisted that forthcoming rules also contain new standards for mortgage servicers that collect mortgage payments and distribute them to investors.

Other regulators agree on the need for such changes but want to tackle them through a separate rule or possibly legislation. Those officials are concerned that the FDIC's approach wouldn't cover all mortgages, adding that it is unclear whether regulators have legal authority under the law to impose standards on mortgage servicers.

Industry officials are pressing for a delay, claiming that trying to define what kind of mortgages are deemed safe and therefore exempt from risk-retention requirements is complicated enough. "There should be a discussion on how you look at servicing standards and what they should be," said Paul Leonard, vice president of government affairs at the Housing Policy Council, a mortgage industry group. "We think they should be done separately."

The FDIC has the support of some top Democratic lawmakers, along with some investors in mortgage securities, economists and consumer groups. Supporters argue that servicing standards are a crucial part of the housing market's recovery and that the industry is long overdue for reform.

"We needed this three years ago; we needed it 20 years ago," said Alys Cohen, a lawyer with the National Consumer Law Center, a liberal consumer group. Including standards in the Dodd-Frank mortgage rules guarantees they will be in place by April, "which is lightning speed by federal rule-making standards."

Last month, the FDIC published a legal memo stating that servicing standards are "clearly permitted" under the risk-retention rules. Andrew Gray, an FDIC spokesman, said regulators were asked as part of the new law to "help ensure strong underwriting and a safe and stable securitization market, and the FDIC strongly believes that servicing standards are a critical part of this effort."

As a result of the recent foreclosure mess, regulators have been reviewing the mortgage-servicing system. Possible guidelines being discussed include a requirement that servicers establish a single point of contact for delinquent homeowners and disclose whether they own an interest in loans they handle.

Weitz - While the Mass Court decision is not a positive for the banks, I personally believe the effects will be minimal. The decision has no weight outside of the Massachusetts. Nevertheless, Rome was not built in a day and you can be assured the next 6 months - 1 year will have some very interested court decisions across the country.

Foreclosures top 1 Million in 2010

The below article discussing the continuing problem of foreclosures that does not appear to be alleviating.


AP- Realty Check (CNBC)

Banks seized more than a million U.S. homes in one year for the first time last year, despite a slowdown in the last few months as questions around foreclosure processing arose, a leading firm said Thursday.

Banks foreclosed on 69,847 properties in December, bringing the year's total to 1.05 million, topping the prior record of 918,000 homes seized in 2009, real estate data firm RealtyTrac said.

Weitz - the banks typically slow down in December for the Holidays anyways, so I don't think there are many definite conclusions to be drawn from the December stats aside from - if the foreclosures were effectively halted for 2 months, yet we still had an annual record, the numbers are obviously terrible.

The number of foreclosure filings, which includes default notices, auctions and repossessions, was a record 2.9 million last year, including 257,747 filings in December.

Weitz - this is an important stat that shows the weakness is going to continue for the immediate future. Foreclosures 'filings' are obviously a precursor to a foreclosure in many cases.

"Total properties receiving foreclosure filings would have easily exceeded 3 million in 2010 had it not been for the fourth-quarter drop in foreclosure activity - triggered primarily by the continuing controversy surrounding foreclosure documentation and procedures that prompted many major lenders to temporarily halt some foreclosure proceedings," said James J. Saccacio, chief executive officer of RealtyTrac.

"Even so, 2010 foreclosure activity still hit a record high for our report, and many of the foreclosure proceedings that were stopped in late 2010,-which we estimate may be as high as a quarter million, will likely be re-started and add to the numbers in early 2011," Saccacio said.

December filings were 2 percent lower than November and 26 percent lower than December 2009.

The firm said Nevada, Arizona and Florida continued to post the highest foreclosure rates in the country. And just five states - California, Florida, Arizona, Illinois and Michigan - accounted for more than half of all foreclosure activity.

One in every 11 housing units in Nevada received at least one foreclosure filing in 2010, more than four times the national average.

Weitz - 1 in 11?!...that is extraordinary. Look out for ghost towns in the desert.

In 2005, before the housing bust, banks took over just about 100,000 houses, according to the Irvine, California-based company.

Weitz: Bottom line is the problem we have discussed at nausea on the blog is continuing to unfold. I predict foreclosures for 2011, 2012 and possibly beyond to exceed even these awful numbers of 2010. There are simply too many distressed homes on the market that have not been addressed.

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

Our Firm:

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

(425) 889-9300

weitzlawfirm.com

Schiff- Home prices are still too high

An Opinion piece by Peter Schiff in the Wall Street Journal today. The ironic thing is that Mr. Schiff is a notorious 'inflation' hawk. I've always disagreed with in certain respects, but this article indicates that he would probably be categorized in the skewflation camp.

Nevertheless, as pessimistic as it may seem, Mr. Schiff makes a lot of points that are awfully hard to dispute.

AP- Most economists concede that a lasting general recovery is unlikely without a recovery in the housing market. A marked increase in defaults and foreclosures from today's already elevated levels could produce losses that overwhelm banks and trigger another, deeper financial crisis. Study after study has shown that defaults go up when falling prices put mortgage holders "underwater." As a result, the trajectory of home prices has tremendous economic significance.

Earlier this year market observers breathed easier when national prices stabilized. But the "robo-signing"-induced slowdown in the foreclosure market, the recent upward spike in home mortgage rates, and third quarter 2010 declines in the Standard & Poor's Case–Shiller home-price index—including very bad October numbers reported this week—have sparked concerns that a "double dip" in home prices is probable. A longer-term view of home price trends should sharply magnify this fear.

Even those economists worried about renewed price dips would be unlikely to believe that the vicious contractions of 2007 and 2008 (where prices fell about 30% nationally in just two years) could return. But they underestimate how distorted the market had become and how little it has since normalized.

By all accounts, the home price boom that began in January 1998, when the previous 1989 peak was finally surpassed, and topped out in June 2006 was extraordinary. The 173% gain in the Case-Shiller 10-City Index (the only monthly data metric that predates the year 2000) in those nine years averaged an eye-popping 19.2% per year. As we know now, those gains had very little to do with market fundamentals, and everything to do with distortionary government policies that mandated loans to marginal borrowers, and set off a national mania for real-estate wealth and a torrent of temporarily easy credit.

If we assume the bubble was artificial, we can instead imagine that home prices should have followed a more traditional path during that time. In stock-market terms, prices should have followed a trend line. When you do these extrapolations (see lower line in the nearby chart), a sobering picture emerges. In his book "Irrational Exuberance," Yale economist Robert Shiller (co-creator of the Case-Shiller indices along with economists Karl Case and Allan Weiss), determined that in the 100 years between 1900 and 2000, home prices in the U.S. increased an average 3.35% per year, just a tad above the average rate of inflation. This period includes the Great Depression when home prices sank significantly, but it also includes the frothy postwar years of the 1950s and '60s, as well as the strong market of the early-to-mid 1980s, and the surge in the late '90s.

In January 1998 the 10-City Index was at 82.7. If home prices had followed the 3.35% annual 100 year trend line, then the index would have arrived at 126.7 in October 2010. This week, Case-Shiller announced that figure to be 159.0. This would suggest that the index would need to decline an additional 20.3% from current levels just to get back to the trend line.

How has the market found the strength to stop its descent? No one is making the case that fundamentals have improved. Instead, there is widespread agreement that government intervention stopped the free fall. The home buyer's tax credit, record low interest rates, government mortgage-assistance programs, and the increased presence of Fannie Mae, Freddie Mac and the Federal Housing Administration in the mortgage-buying business have, for now, put something of a floor under house prices. Without these artificial props, prices would have likely continued to fall.

Weitz - this is the story no one talks about. The measures taken to 'prop up' the market were unsustainable. Now, the tax credit has run it's course, and interest rates are creeping back up from historic lows. I still maintain that a second leg down in prices is imminent. The extent of the drop is hard to predict, but I would be very surprised if it did not exceed the 5% drop that many 'experts' are predicting.

Where would prices go if these props were removed? Given the current conditions in the real-estate market, with bloated inventories, 9.8% unemployment, a dysfunctional mortgage industry and shattered illusions of real-estate riches, does it makes sense that prices should simply fall back to the trend line? I would argue that they should overshoot on the downside.

With a bleak economic prospect stretching far out into the future, I feel that a 10% dip below the 100-year trend line is a reasonable expectation within the next five years, particularly if mortgage rates rise to more typical levels of 6%. That would put the index at 114.02, or prices 28.3% below where we are now. Even a 5% dip would put us at 120.36, or 24.32% below current prices. If rates stay low, price dips may be less severe, but inflation will be higher.

Weitz - if Mr. Schiff is correct, our "recovery" will most certainly be short lived and things will likely get worse before they get better...a scary proposition indeed.

From my perspective, homes are still overvalued not just because of these long-term price trends, but from a sober analysis of the current economy. The country is overly indebted, savings-depleted and underemployed. Without government guarantees no private lenders would be active in the mortgage market, and without ridiculously low interest rates from the Federal Reserve any available credit would cost home buyers much more. These are not conditions that inspire confidence for a recovery in prices.

In trying to maintain artificial prices, government policies are keeping new buyers from entering the market, exposing taxpayers to untold trillions in liabilities and delaying a real recovery. We should recognize this reality and not pin our hopes on a return to price normalcy that never was that normal to begin with.

Mr. Schiff is president of Euro Pacific Capital and author of "How an Economy Grows and Why it Crashes" (Wiley, 2010).

Higher rates threaten recovery

A nice video on the overview of the recent uptick in mortgage rates. Higher rates will obviously lead to lower purchasing power for buyers, and presumably lower prices in housing. This will be an interesting trend to follow in the year to come.

Fannie and Freddie consider principle reduction loan modifications

Fannie Mae and Freddie Mac are in talks with Obama administration officials to join fledgling government programs aimed at reducing loan balances of mortgages where borrowers owe more than their homes are worth, according to people familiar with the situation.

Weitz – while I commend the administration for trying to help out homeowners, I fear this would create a ‘slippery slope’. What about those that aren’t 'underwater', or those that have been renting during this crisis.

An agreement with the two government-owned mortgage giants to write down so-called underwater loans could reduce the threat to the U.S. housing market from the glut of homeowners believed at risk of default should their personal finances or home prices worsen. A deal would deepen losses at Fannie Mae and Freddie Mac, which already have cost taxpayers about $134 billion.

Weitz – Fannie and Freddie are explicitly backed by the US Government. Losses for them are irrelevant at this point.

Fannie Mae and Freddie Mac, which own or guarantee about half of all first-lien mortgages in the U.S., have been highly reluctant to reduce loan balances, especially for borrowers who are still making payments.

The Obama administration is pressuring Fannie Mae and Freddie Mac, through their primary regulator, the Federal Housing Finance Agency. The administration wants the firms to join a program run by the Federal Housing Administration that allows banks and other creditors, which agree to write down mortgages, to essentially hand off the reduced loans to the FHA.

Weitz – take note we’re going to use the FHA to absorb all these loses for banks, Fannie and Freddie. I’m OK with this, but would really want the banks to have share in the burden (rather than exclusively being the problem of the US taxpayer).

Federal officials estimate that 500,000 to 1.5 million homeowners could benefit from the program—a fraction of the estimated 11 million borrowers who were underwater as of June 30, according to CoreLogic Inc. That figure represents about 23% of all U.S. households with a mortgage.

Industry executives say the FHA program—as well as a related initiative by Treasury—will be only marginally helpful to the housing market without the participation of Fannie Mae and Freddie Mac. The program completed three loan modifications during its first three months and received 61 applications

Participation by Fannie Mae and Freddie Mac would put additional pressure on the nation's biggest banks to follow suit. Banks have shown little enthusiasm for the programs without the two mortgage giants.

David Stevens, the FHA's commissioner, said resistance by lenders has been exasperating. Obama administration officials have given lenders "a responsible way to address borrowers with negative equity, he said, "and if institutions are blatantly refusing" to participate, then that is "short-sighted."

The arm-twisting is the latest sign that loan-modification efforts aren't doing enough to address the threat that more borrowers will default on so-called underwater properties.

"Letting the status quo continue is going to be much more expensive than people think," said Kenneth Rosen, a professor of economics and real estate at the University of California, Berkeley. "We've got a downward spiral in housing here, and they'd better break the back of this with some shock and awe.''

Weitz – Mr. Rosen, what about allowing the market to self adjust. The government can do nothing but prolong the agony. Just look at the tax credit effectiveness...turns out it was a waste of taxpayer money.

The ongoing discussions underscore the sometimes awkward relationship between the Obama administration and FHFA, which has overseen Fannie Mae and Freddie Mac since their takeover in September 2008 and is charged with stemming taxpayer losses. An FHFA spokeswoman said participation in the FHA and Treasury loan-modification efforts is under review.

The two mortgage companies rarely reduce loan balances—only 10 of the 120,000 loans modified during the second quarter of 2010, according to the Office of the Comptroller of the Currency.

"We have historically counted on the fact that the vast majority of borrowers-even borrowers who are underwater-continue making their payments," said Don Bisenius, a Freddie Mac executive vice president.


Weitz – The question is how long people will continue to pay full price for a house that has dropped significantly in value. I’ve read articles that indicate when the home drops to 70% of the mortgage value, the chances of default rise dramatically…only time will tell.

Fannie Mae and Freddie Mac are reluctant to reduce principal because it limits their options to recoup losses. Typically, the companies collect claims from mortgage insurers or force banks to buy back certain loans when a loan defaults. Those options are relinquished when writing down loan balances.

In addition, Fannie Mae and Freddie Mac, along with other mortgage investors, are reluctant to approve principal reductions if banks that own second mortgages on the same properties also don't take losses.

Weitz – good point on this one. What’s the point of lowering balances on a first when a second still exists on the property that would keep the homeowner 'underwater'?

Unlike most loan-modification efforts, the FHA program is open only to borrowers who aren't behind on their payments.

Weitz- that I really like. An incentive that doesn’t benefit only those who default.

The Treasury Department initiative to reduce loan balances builds on HAMP, in which banks reduce monthly payments for distressed borrowers by lowering interest rates and extending loan terms.Starting in October, banks were able to receive additional subsidies if they first write down loan balances for borrowers owing at least 15% more than their home's current value. Fannie Mae has said it won't participate in the Treasury program. Freddie Mac says it is still reviewing whether to join.

Weitz - This is an interesting development that I will definitely keep track of and update the blog accordingly.

For more information on your options with distressed real estate, consider contacting a Seattle Strategic Default Attorney.

Our Firm:

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

weitzlawfirm.com

Banks Benefits extend beyond TARP

Whoa!...this is big. A recent article from CNN-Money.

The Federal Reserve made 9 Trillion in Emergency Loans to banks during the Crisis.

Weitz - Yes, that would be Trillion (with a 'T')...Gee, I wonder how they paid back the 700 billion that Congress "loaned" to them via the TARP Program!! 700 billion looks like peanuts compared to this. I'm going to copy the text of this article below, and give a lot of my thoughts (and I've got many) throughout.

NEW YORK (CNNMoney.com) -- The Federal Reserve made $9 trillion in overnight loans to major banks and Wall Street firms during the financial crisis, according to newly revealed data released Wednesday.

Weitz – First, it is important to note that the “Federal Reserve” is not a truly government agency. It is actually a private organization that was created by powerful bankers. More importantly, we have NO IDEA what is actually on their books. They typically do not allow audits of the Fed so there is no way to truly know what they have “lent” out and what has been repaid.

The loans were made through a special loan program set up by the Fed in the wake of the Bear Stearns collapse in March 2008 to keep the nation's bond markets trading normally.

The amount of cash being pumped out to the financial giants was not previously disclosed. All the loans were backed by collateral and all were paid back with a very low interest rate to the Fed -- an annual rate of between 0.5% to 3.5%.

Weitz – This is just the beginning. The Fed makes HUGE loans everyday via at a interest rate which has been close to 0 for several years (See Fed Fund Rate). There is no way of knowing exactly how much the fed has lent out to the big banks.

Still, the total amount was a surprise, even to some who had followed the Fed's rescue efforts closely.

"That's a real number, even for the Fed," said FusionIQ's Barry Ritholtz, author of the book "Bailout Nation." While the fact that the markets were in trouble was already well known, he said the amount of help they needed is still surprising.

"It makes it very clear this was a very serious, very unusual situation," he said.

Weitz – the problem remains very serious. If forced to actually report the current valuation of assets (see easing of 'Mark to Market'), many economists believe the big banks would be forced into bankruptcy.

Sen. Bernie Sanders, the Vermont independent who had authored the provision of the financial reform law that required Wednesday's disclosure, called the data that was released incredible and jaw-dropping.

Weitz – Good for you, Bernie Sanders!! The fed would never have released this without you!!

"The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution," Sanders said.

He said that even if the Fed was right to make the loans to keep the economy from toppling into a depression, it should have made stronger demands that the banks help American consumers and small businesses.

Weitz – Absolutely right. Amazing how the economy (see employment rate, record foreclosures & bankruptcies) is still in the dumps, yet the banks are paying record bonuses again.

"They may have repaid their loans, but that's not good enough," he said. "It's clear the demands the Fed made were not enough."

Weitz – there is zero chance they have repaid this. What actually happened is that the banks went directly to the real US government (the US Treasury), and let the government borrow the money from them….only the govt (taxpayers) have to pay the banks a higher interest rate.

The Wall Street firm that received the most assistance was Merrill Lynch, which received $2.1 trillion, spread across 226 loans. The firm did not survive the crisis as an independent company, and was purchased by Bank of America just as Lehman Brothers was failing.

Citigroup which ended up with a majority of its shares owned by the Treasury Department due to a separate federal bailout, was No. 2 on the list with 279 loans totaling $2 trillion. Morgan Stanley was third with $1.9 trillion coming from 212 loans.

"As we have previously disclosed, Morgan Stanley utilized some of the Federal Reserve's emergency lending facilities during a time of immense financial turmoil throughout the banking sector and the broader market," Morgan Stanley said in a statement Wednesday. "The Fed's actions were timely and critical, and we commend them for providing liquidity and stabilizing the financial system during that period.''

The largest single loan was by Barclays Capital, which borrowed $47.9 billion on Sept. 18, 2008, in the days after the Lehman bankruptcy. The loan financed Barclays' purchase of Lehman's remaining assets.

Weitz – Barclays?!?! They are a foreign bank (UK)!! Terrific, we paid $50 Billion to a foreign company to buy a crappy US company.

Some Wall Street firms disputed the way the Fed reported the numbers. An executive from one of the firms said that many of the overnight loans were rolled over for days at a time, and that each day it was counted as a new loan. "It's being double, triple, quadruple counted in some cases," said the executive.

Not all the major banks needed much help from the Fed. JPMorgan Chase received only three loans from this program for a total of $3 billion.

Weitz – No, Chase just does it every day from different, more ordinary programs.

The last loan was made under the program in May 2009, and the program, known as the primary dealer credit facility, was officially discontinued in February of this year.

The Federal Reserve revealed details of that program as part of a large scale release of data on all the steps it took to stabilize the nation's financial sector during the markets crisis of the last few years.

The central bank posted details of more than 21,000 transactions with major banks and Wall Street firms between December of 2007 and July of 2010. In addition to the loan program for bond dealers, the data covered the Fed's purchases of more $1 trillion in mortgages, and spending to back consumer and small business loans, as well as commercial paper used to keep large corporations running.

Weitz – this is ‘code’ for handing money to banks and other corporations by buying their crappy assets at full price. Think of it as someone voluntarily paying you $100,000 for your 2002 Hyundai…not a bad deal if you can get it (ie. Hidden Bailouts) .

The rescues of the investment bank Bear Stearns in March of 2008, and insurance behemoth AIG in September of that year, were also revealed in far greater detail, as were programs to make dollars available to foreign central banks in return for their currency, in order to keep international trade flowing.

Most of the special programs set up by the Fed in response to the crisis of 2008 have since expired, although it still holds close to $2 trillion in assets it purchased during that time.

Weitz – Shocking…maybe because the assets they ‘purchased’ are worthless.

The Fed said it did not lose money on any of the transactions that have been closed, and that it does not expect to lose money on the assets it still holds.

Weitz – To be closed, the account would have to be paid back…isn’t this obvious?? To clarify…the Fed hasn’t lost money on the accounts that have been paid back. As for the ones that haven’t been paid back?....those aren’t important;)


The details of which banks participated in the Fed's emergency programs, and how the banks benefited from the transactions, had never before been revealed.

The Fed argued that revealing the information could cause a run on the banks that needed to draw cash at the discount window. But under the financial regulatory reform act that was passed in July, the Fed will reveal future discount window transactions following a two-year lag.

Weitz - Here's the bottom line - with so many folks enduring so much pain, I find it incredibly difficult to see banks giving out record bonuses and not doing a darn thing to benefit the country or home owners in this foreclosure/ small business crisis. Simply put, it's inequitable and unjust the banks have received so much from the taxapyer with no strings attached. There is no easy solution to the problems we face, but I propose we force our leaders to at least be HONEST and TRANSPARENT about this financial issues in front of us... We can't fix what we don't acknowledge.

Existing Home Sales Fall - Shadow Investory looms

Yikes. A report from CNBC on October Home sales.

Important Stats:
Sales fell 25% from last year
Inventories rose to 10.5 months




More tough News: Shadow Inventory estimated at 2.1 Million...and this only looks at distressed property!

Fannie and Freddie Update - Jame Lockhart

An interview with James Lockhart with Dylan Ratigan, who has intimate knowledge of Fannie and Freddie.

An Overview:

1) underwriting standards were lowered due to political demands
2) these government agencies were leveraged at 100-1. (ie. lending money they did not have)
3) Fannie and Freddie are requesting and actively pursuing having banks buy back these bad loans that were fraudulently transferred to Fannie and Freddie (this is really bad for banks).

Visit msnbc.com for breaking news, world news, and news about the economy

Homeowners vs. Banks

A clip from the Dylan Ratigan show interviewing some Foreclosure attorneys from Florida. Remember, Florida has a different foreclosure process than Washington, but its an interesting video nonetheless.

Visit msnbc.com for breaking news, world news, and news about the economy

If you'll note, the segment specifically points to Washington as one of the fastest growing areas in terms of those stopping payment of their mortgage....better pay attention folks. Its going to get interesting around here.

Washington Short Sale Law - An overview

So you want to do a short sale?

Short sales are becoming more and more necessary in this world of no-equity real estate.

Here are some typical questions and answers regarding the short sale process in Washington State:

Q: What exactly is a short sale?

A: A short sale is the sale of a property in which the proceeds that are available from a sale are less than the amount owed on the loan.

Q: I hear short sales a huge headache. Is that true?

A: Yes and No. Short sales require more paperwork to be given from the borrower -typically tax returns, pay stubs, bank account information, and financial statements are requested by the banks in order to approve a short sale. Additionally, the time frame of short sale is typically much longer than a typical sale as the banks do appraisal work on the property, and there is a period of negotiation. If the above two issues are not overly burdensome in your mind, then the short sale is nothing to fear.

Q: What happens to the potential deficiency? (amount owed (less) proceeds from the sale)

A: In our opinion, this is by far the biggest issue in short sales. IF THE BANKS DO NOT WAIVE THEIR DEFICIENCY RIGHTS, YOU WILL STILL OWE THE MONEY.

That said, banks are often willing to reduce the entire deficiency or a part thereof.

** This is truly a point of negotiation and every case has different arguments as to why the deficiency should be waived - whether it be potential bankruptcy or foreclosure protections allowed in your state. There are numerous arguments that can be persuading to the banks to waive or lower these deficiencies.

Bottom Line: short sales can be a terrific tool to assist you in getting out of your 'underwater' mortgage in a fashion you may not have expected. It could save you from bankruptcy, and/ or foreclosure.

The key is to fine a competent Realtor and/ or Short sale facilitator to protect your best interest, and push the deal through as effectively as possible.

For more information, consider contacting a Seattle Short Sale Attorney.

Our Firm:

Weitz Law Firm, PLLC

5400 Carillon Point

Kirkland, WA 98033

(425) 889-9300

weitzlawfirm.com

scottweitz@weitzlawfirm.com

Quanative Easing - A Cartoon Overview

These are entertaining videos regarding the Federal Reserve's Quanatative Easing, and past history.

Quanative Easing Explained:



A (Mock) interview with Alan Greenspan and Ben Bernanke:

Foreclosure Video Clip - Some fighting back

As he often does, Dylan Ratigan had a nice segment on the foreclosure issues faces the U.S.:



Highlights:
1) The foreclosure problem is growing
2) It is moving into higher wealth neighborhoods
3) Some governmental law officials at the local level are requiring higher standards for the foreclosure

Mortgage Modification Effectiveness - Update on HAMP

An Update on the Modification issue in the WSJ today:

The Obama administration's program to help struggling borrowers keep their homes is being hurt by the same miscommunication, botched documents and other snafus that caused the original foreclosure crisis.

After J.P. Morgan Chase & Co. agreed in January to her trial loan modification under the Home Affordable Modification Program, Stephanie Lulko made six $767-a-month mortgage payments, even though the bank said it had no record of her loan and then warned in a letter that she would be foreclosed on unless she paid $4,091.94.

The 44-year-old Ms. Lulko, of Oklahoma City, says bank employees told her to ignore the letter. Their tune changed in June, when J.P. Morgan said she earned too much to qualify for a permanent modification. The problem this time: The bank's numbers were wrong. "I wish I had never applied for this modification," she says.

In September, the bank rejected her request for a permanent loan modification for a second time. She faces foreclosure unless she pays nearly $5,000—the difference between her original and modified loan payments, plus late fees. Ms. Lulko has been unemployed since her temporary job at the U.S. Census Bureau ended in August.

Weitz - I see this ALL THE TIME. The modification allows for lower payments for a period, but if the loan is not approved for permanent modification (only 29% are approved for permanent modification), the bank will pursue the amount that was deducted from the original mortgage amount to create a modified payment. (ie. 2000/ mortgage is reduced to 1500/ month for the modification - If, after the trial period, the permanent modification does not go through, the bank will pursue the 1500 difference)

J.P. Morgan denies any wrongdoing related to Ms. Lulko's loan. "We worked with the borrower over a number of months and communicated the status of the loan modification during that time," spokesman Tom Kelly says. He adds that the lender has converted 29% of temporary modifications into permanently reduced payments as of September. Weitz - 29% seems outrageously low to me. Why let the trial payments begin in the first place?!

The foreclosure-paperwork furor is deepening criticism of the U.S. government's high-profile mortgage-restructuring effort, which has fallen short of its goal of helping three million homeowners. More than half of the 1.4 million borrowers approved for temporary modifications have fallen out of HAMP because they didn't qualify.

The program "has undoubtedly put people into foreclosure," says Neil Barofsky, the special inspector general overseeing the Troubled Asset Relief Program, which funds HAMP. "It's a parade of documentation horrors."

In a report to Congress on Oct. 26, Mr. Barofsky concluded that some borrowers seeking loan modifications through HAMP might wind up "worse off than before they participated." Back payments, penalties and late fees triggered when homeowners are rejected for a permanent fix can push some borrowers over the edge, he said.

As part of HAMP, mortgage servicers and investors get financial incentives to modify a borrower's loan payment to 31% of monthly gross income. Servicers typically hit that number by lowering interest rates or extending a loan's life. Borrowers must make at least three "trial payments" to be considered for a permanent fix.

Weitz- reduction of principal is often sought by clients, however, it has been extremely rare in my experience.

Borrowers who miss a payment or otherwise fail to win a permanent modification essentially are stuck with the original terms of their mortgage.

"The trial period provides homeowners an immediate reduction in payments at no expense to taxpayers," says Andrea Risotto, a Treasury spokeswoman. "It is the gateway for many homeowners to get the help they need."

The Treasury Department doesn't record how frequently errors occur with documentation on home loans submitted to more than 2,500 financial institutions and servicers empowered by the U.S. government to grant and reject HAMP requests. An outside review of borrowers denied permanent modifications disagreed with the servicer's decision in 4.8% of the loans during the fiscal quarter ended in August.

Meanwhile, anecdotal evidence points to a modification process at least fraught with miscommunication and misunderstanding.

Bank of America Corp. says it "inadvertently verbally reviewed" a loan-modification request by Lindsey Farnsworth of Sugar Hill, Ga., who started making reduced payments to the Charlotte, N.C., bank in May after being told she was "preapproved" for HAMP.

Loan servicers are required to follow government guidelines on loan modifications. Last month, the Treasury Department sent a notice "reminding them of their requirement to comply with all applicable state and federal laws," says Ms. Risotto, the Treasury spokeswoman.

Mr. Barofsky says the oversight is toothless, noting that no servicers have been fined for bungled paperwork or improper foreclosures. At the request of nine U.S. senators, Mr. Barofsky is auditing whether servicers in HAMP are correctly following Treasury's guidelines when deciding whether borrowers should get a loan modification. The inspector general also is scrutinizing how borrowers are notified that they failed to qualify.

Sometimes, it can be hard for borrowers to tell if a servicer is putting them through HAMP or its own loan-modification process.

Mr. Barofsky, a frequent critic of HAMP, says the foreclosure furor that erupted in mid-September convinced him even more strongly that mortgage servicers have wrongly denied permanent loan modifications to deserving borrowers.

"If there are problems like we've seen on one side of the shop, why would we expect anything different on the modification side?" Mr. Barofsky says in an interview.

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

Our Firm

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

Seattle Real Estate Recovery?

CNN MONEY recently called Seattle the 2nd best market for a real estate recovey.

Here's the article:
Seattle has become a world-class city with a diverse, vibrant economy. As a home to manufacturers such as Boeing and software providers such as Microsoft, the job market has held up better than average, with a current unemployment rate of 8.8%.

Home prices had a softer landing as well, dropping just 15.2% over the past three years, about half the national average. However, prices do tend to be volatile, according to Mark Fleming, chief economist for First American CoreLogic. The lack of available land for development is one reason for that volatility, as are political restrictions on growth.

After another modest price decline of 2.3% in the next eight months, the market should begin to turn up. Between June 2010 and June 2011, the city should see a gain of 6.2%. Averaged out, that means a 3.8% gain over the next two years*.

And while that may not sound all that robust for those jaded by the annual double-digit returns recorded during the boom, that performance will be one of the best of any large city during that period.

Weitz - If you'll notice, this article has no statistics whatsoever to back up their their claim. In the hopes of being a realist (rather than a pessimist), I will simply point out that Foreclosures continue to rise dramatically, the number of sales is very close to post WWII lows with closed sales in October (down 25% from last year), and bankrtupcies still continue to rise (up 18% from last year)....not exactly the fundamentals of a solid recevery. In my opinion, this is a poorly thought out, poorly researched article. Be careful putting to much faith in the prediction of CNN-Money.