Los Angeles Personal Injury Lawyer - housing crisis

Salon: Why Loan Modification Scams are Booming

Paul Kiesel — Thu, 24 Sep 2009 18:28:42 GMT

FYI: Here's a link to a blog I wrote a year ago that portends what's being described in the article below.

During the go-go years of the real estate bubble, shady mortgage brokers thrived, thanks to the sluggish response of regulators and law enforcement agencies. Amid the ruins of the crash, there's a new boom attracting unscrupulous mortgage professionals: "Foreclosure rescue" companies promising -- in exchange for a large upfront fee -- to persuade lenders to modify desperate homeowners' mortgages. And authorities are again finding themselves ill-equipped to deal with the deluge.

In a giant game of whack-a-mole, law enforcement agencies at all levels across the country have filed suit against 150 such companies, but they continue to proliferate, and the number of consumer complaints continues to rise.

"This is a very big scam," says California Attorney General Jerry Brown. "They're all over the place, and as soon as you get one, they migrate to somewhere else."

The case of one particularly aggressive firm, 21st Century Legal Services, shows just how ineffective authorities' moves against the companies often are.

Four states have sued 21st Century, and at least three more have open investigations. Over 150 consumers from more than 30 states have filed complaints against 21st Century with the Better Business Bureau. No active firm has more complaints.

Yet the company forges on. Operating under a new name, Fidelity National Legal Services, it continues to solicit consumers nationwide, even in states where authorities have won court injunctions.

Homeowners do not have to pay a company to negotiate on their behalf: They can always contact their mortgage servicer directly for a loan modification, at no cost. But consumers often find the process frustrating. For those who want guidance, nonprofit housing counselors approved by the Department of Housing and Urban Development will help for free.

Consumers should especially be wary of companies charging upfront fees or touting guarantees. The Illinois attorney general says that her office has yet to see any such company operate within the boundaries of state law.

Click here for the rest of the article.

Originally posted at InjuryBoard by Paul Kiesel

NYT: The Most "Underwater" Community in America

Paul Kiesel — Tue, 11 Nov 2008 13:37:51 GMT

The New York Times published an article today on a struggling California community, Mountain House, where 90% of homeowners owe more money on their mortgages than the their houses are worth: it has the highest concentration of underwater mortgages in the country.

In Mountain House, the average homeowner finds him or herself in about $122,000 of negative home equity. Granted, Mountain House is an extreme case of what's taking place across the country, but if readers of this blog take note, these stories haven't stopped: new ones are written weekly if not daily.

Therefore, when some analysts say, like Redfin CEO Glenn Kelman, that the housing market is close to bottoming out, at least in Los Angeles, and that home prices should stabilize or go up at some point in 2009, I'm a little dubious: we have yet to face the fallout from interest rate resets on pay option ARM loans from late-2006 and 2007. However, Mr. Kelman is less optimistic when it comes to other markets outside of California (markets he wouldn't name), where he thinks 2009, for those unidentified markets, will be a lot like 2008 was for several California housing markets.

California had some of the more grossly inflated housing markets in the country, which led to the housing bubble and its subsequent loud burst, so naturally the state has had one of the hardest falls during the mortgage crisis. Nonetheless, what's taking place in Mountain House, California is hard to imagine: almost the entire town has been swallowed by the mortgage crisis.

Click here for the New York Times story: "A Town Drowns in Debt as Home Values Plunge"

Originally posted at InjuryBoard by Paul Kiesel

FBI: Beware of Loan Modification Scams

Paul Kiesel — Tue, 28 Oct 2008 16:08:26 GMT

According to the Justice Department, San Joaquin Valley has been a hotbed for loan modification scams, as cities like Stockton, Modesto and Merced top the foreclosure rankings among cities nationwide.

Last week, Representative Dennis Cardoza (D-Modesto), urged Attorney General Michael Mukasey to investigate mortgage-reduction schemes that are being marketed to distressed homeowners throughout the Valley.

Most of these scams ask homeowners for an upfront fee in order to start a loan modification program. At best, the homeowners may end up paying for work that is completed by the group asking for the money, however, it's work that likely could have been done for free through other non-profit organizations or loan-modification assistance programs (i.e. Community Housing Council, a non-profit based in Fresno). At worst, the homeowners pay for work that isn't done at all.

Cardoza wrote to Mukasey that it was "imperative" that law enforcement authorities "crack down on these foreclosure scams quickly and comprehensively. Cardoza pointed out that San Joaquin Valley residents are particularly vulnerable because of the region's foreclosure crisis.

The scams are typically initiated over the phone or through the mail, however, the people running the scams sometimes show up at the homes they're targeting. The companies will then offer the distressed homeowner their services to renegotiate the mortgage in exchange for an up-front fee amounting to one month's mortgage payment or more.

Just last week, in Modesto, "some homeowners attended a workshop in which they were asked to pay $3,500 for getting their mortgage woes resolved," (San Jose Mercury News, 10/27/08).

The FBI is aware of this problem, as they report to having 1,569 pending mortgage fraud investigations open as of last month. However, it is clear that number will rise and more resources will need to be poured into combating mortgage fraud, as incidences of it has annually doubled between 2003 and 2007.

The FBI has also been taking some flack recently due to their late arrival to all of the rampant mortgage fraud that's been taking place over the last couple years, but part of that is due to the agency not having enough agents to cover the continuing spread of mortgage fraud, as the housing and foreclosure crisis gets worse. The bureau slashed its criminal investigative work force to expand its national security role after the Sept. 11 attacks, shifting more than 1,800 agents, or nearly one-third of all agents in criminal programs, to terrorism and intelligence duties. Current and former officials say the cutbacks have left the bureau seriously exposed in investigating areas like white-collar crime, which has taken on urgent importance in recent weeks because of the nation’s economic woes.

Originally posted at InjuryBoard by Paul Kiesel

Two Foreclosure Relief Plans that Don't Require a Government Bailout?

Paul Kiesel — Mon, 27 Oct 2008 17:22:49 GMT

As noted last week, the FDIC and Congress both have foreclosure bailout plan proposals that would require the government to buy "under water" mortgages and place those borrowers into government backed mortgages at a fixed interest rate. The main problem with both the FDIC's and Congress' plans is they continue to bailout the lenders and place all of the risk on taxpayer money (the FDIC plan and Congressional plan are uniquely different, but for the sake of your time we'll move on).

There are two alternative plans, amongst maybe a hundred more, to the two government-sponsored plans that take into consideration the next wave of foreclosures. At some point next year, hundreds of thousands of pay option arm loans will have interest rate resets causing mortgage payments to balloon to unaffordable levels for many borrowers. This unavoidable circumstance (unless the lenders are willing to modify the loans beforehand, which looks doubtful based on their current track record) is not addressed in either the FDIC or Congressional foreclosure relief plans.

Below are two alternate foreclosure relief plans. Each plan takes a different approach than the other; however, both plans apply practical solutions to 1. Curb foreclosures and keep people in their homes and 2. Neither requires a government bailout package in order to execute them. Plan 1 includes the dynamic of the investor/shareholder variable to solving the foreclosure crisis. Plan 2 is idealistically clever, but doesn't take into account the fact that investors will have to agree to have their mortgage related investments frozen for almost five years in order to effectively implement this strategy, and it also assumes that the investor will recoup his or her original investment in five years.

Of course after reading the plans, any ideas, thoughts, questions or dissenting views are appreciated in the comments section.

Plan 1:

However, the declining foreclosure statistics do not necessarily prove that the end is near per the foreclosure crisis or credit crisis. It just means that all of the adjustable rate loans that were taken out in 2005 and 2006 have had interest rate resets, and caused this "first wave" of foreclosures. There are still hundreds of thousands if not millions of adjustable rate loans from 2007 that will reset in the coming 12-18 months.

Further action needs to be taken in order to mitigate the next wave of default notices and foreclosures. The FDIC's plan has not worked to the extent it could, contrary to media reports, as they have only successfully modified 4,000 loans and all of those loan modifications were made to people who had not been served with a default notice or were not in the foreclosure process.

Shareholders and regulators need to understand where the value is at in this predicament, and squeeze what they can out of a situation that is not favorable. It'd be better to let a homeowner modify his or her loan at 89% of the original principal balance (not the current negative amortized balance) and wait till the market rebounds in three to five years (remember, these cycles of economic prosperity and recessions are "cycles"), subsequently, the home could then be sold at a price that's equitable or more than the modified loan. The homeowner would not get to walk away with any profits unless the remaining original balance (the 11% that was pared off to help the borrower stay in the home) was recovered by the lender, thus, the investor/shareholder would be able to recoup most if not all of their original investment. (InjuryBoard.com, 10/24/06)

Plan 2:

[. . .] Recently a proposal came across my desk that I believe is so smart, and so sensible, that I hope our nation’s policy makers will give it a serious look. It comes from Daniel Alpert, a founding partner of Westwood Capital, a small investment bank. I have quoted Mr. Alpert frequently in recent columns, because he has been both thoughtful and prescient on the subject of the financial crisis.

Here’s his idea: Pass a law that encourages homeowners with impaired mortgages to forfeit the deed to their lenders but allows them to stay in the homes for five years, paying prevailing market rent. Under the law Mr. Alpert envisions, the lender would be forced to accept the deed, and the rent. After five years, the homeowner-turned-renter would have the right to buy the home back, at fair market value, from the lender.

There are so many things I like about this idea that I hardly know where to begin. Let’s start with the fact that it doesn’t require a large infusion of taxpayers’ money. Indeed, it doesn’t require any government money at all. It also doesn’t let either homeowners or lenders off the hook, as many other plans would. The homeowner loses the deed to his home, which will be painful. The lending institution, in accepting prevailing market rent, will get maybe 60 or 70 percent of what it would have gotten from a healthy mortgage-payer. (Rents are considerably lower than mortgage payments right now.) That will be painful too. Moral hazard will not be an issue.

As Mr. Alpert told me the other day, his proposal “admits the truth: the homeowner doesn’t have equity, and the lender has taken a loss. They should exchange interest, but not in a way that throws the homeowner out in the street.”

Which is the other key part of his plan. It has the best chance of preventing, as he puts it, “the massive disruption of the economy and the social dislocation” that will come from large numbers of foreclosures. And it is the continuing foreclosures that are likely to cause housing prices to fall so hard that they will drop below the real value of the shelter.

That, of course, is exactly what happened during the bubble, albeit in reverse — prices wildly overshot the true value of the home — and it has to be prevented on the way down. Otherwise we face further economic calamity.

Why did Mr. Alpert choose five years? Two reasons. First, he feels confident that housing prices will have stabilized by then. “We continue to have a growing population,” he said. “And there is zero chance there will be a material increase in housing stock over the next five years that will exceed demand. Those two factors alone will cause housing to stabilize.”

Second, he says five years will give the renters enough time to get their financial affairs in order — to pay down their various debts and save enough to make the 10 percent down payment an F.H.A. loan requires. (Many of the homeowners affected by this plan would be eligible for F.H.A. loans, Mr. Alpert believes.)

If they don’t have enough for a down payment, they would have to leave, of course, but it would be far less disruptive to the economy than it would be right now, in the middle of the crisis.

Does the plan have stumbling blocks? Sure it does. One obvious one is that ideologues will view its being mandatory as an improper “taking” of homeowners’ property rights and a violation of the mortgage contract. But, as Mr. Alpert puts it, “the homes involved are economically without value to the existing homeowners.” He adds, “What the plan buys is time to heal for both sides in a fairly equitable and controlled manner.”

(New York Times, 10/18/06)

Originally posted at InjuryBoard by Paul Kiesel

Washington Post: Government and Wall Street Grapple with Finding a Foreclosure Fix

Paul Kiesel — Mon, 27 Oct 2008 16:39:02 GMT

Below is an Associated Press article from Sunday's (10/26) Washington Post. It's a very well written analysis as to why the government and Wall Street have been having such a hard time coming to terms on how to mitigate or fix the foreclosure crisis. Many of the areas of concern for both parties, like the continued declivity of home prices and securitized loan investments contributing to part of the impasse to a foreclosure fix, have been brought up in this blog several times throughout the last six months.

From the Washington Post: Each day from July through September, more than 2,700 Americans lost their homes in foreclosure.

That number, up from 1,200 a day a year ago, is a sign that the mortgage industry and government programs have done little to help troubled homeowners.

The mortgage market's troubles have proved to be far more serious and intractable than most in government or the private sector had predicted a year ago.

"We are behind the curve. We are falling behind," Sheila Bair, head of the Federal Deposit Insurance Corp. told a Senate hearing Thursday. "There has been some progress, but it's not been enough, and we need to act. And we need to act quickly, and we need to act dramatically to have more wide-scale, systematic (loan) modifications...."

More than 4 million homeowners with a mortgage were at least one month behind on their payments at the end of June, according to the latest data from the Mortgage Bankers Association, and a record 500,000 had entered the foreclosure process.

So why is the foreclosure crisis so hard to fix?

There are five main reasons:

Crashing home prices:

A massive speculative bubble in housing prices caused millions of Americans to think of their homes as an investment, rather than a place to live.

Now prices are plummeting, especially in once-sizzling markets like California, Florida and Nevada. And the bleeding might not stop until the end of next year.

The median home price in the U.S. dropped 9 percent in September from a year ago to $191,600, and is down 17 percent from the peak in July 2006, the National Association of Realtors said Friday.

Already, 23 percent of homeowners with a mortgage owe more on their loans than their homes are worth, and that figure is expected to rise to 28 percent by this time next year, according to Moody's Economy.com.

While the majority of homeowners will continue to make their payments and wait for values to recover, some will mail their keys to their lender and walk away, leaving the lender with no choice but to foreclose.

Sophie Lapointe, a mortgage broker and owner of Five Star Mortgage in Las Vegas, has found there's little that can be done to help people who owe more than their homes are worth. "The biggest problem is negative equity," she said.

When homeowners in that position ask her about refinancing, Lapointe tells them to contact their current lender and ask about a loan modification because she already knows no new lender will give them a loan.

Loan modifications vary depending on many conditions, but can include deferring payments, allowing partial payments, lowering the interest rate and lowering the principal balance.

Investor speculation:

Plunging prices have had even more impact on investors than on homeowners because investors have less emotional attachment to a house. They're even more likely to walk away, especially if they've put little money into a property.

Investors purchased one of every five homes last year, and almost one of every three when the market peaked in 2005, according to the Realtors trade group.

They flocked to hot markets like California, Florida, Nevada and Arizona, as television shows such as A&E's popular reality series "Flip This House" touted the easy money that could be made buying and selling homes.

They took advantage of risky loan products that didn't require down payments or proof of income. Other loans allowed the borrower to pay only the interest on the loan, or even less, and none of the principal for a certain time.

Now, more than 30 percent of properties in the foreclosure process are owned by someone with a different address, indicating the home is likely owned by an investor, according to foreclosure listing service RealtyTrac Inc.

Government programs to help homeowners are specifically designed not to help such investors, though in reality it may be hard to weed them out.

Complex investments:

Traditionally, lenders evaluated borrowers carefully because they held onto the mortgages for the life of the loan. That process started to change in the late 1980s, as Wall Street found new ways to package the loans into securities to sell to investors.

Investors were attracted to these new mortgage-backed securities because they paid better returns than government bonds.

At the beginning of this decade, the Federal Reserve started cutting interest rates to historic lows. So investors poured money into the U.S. mortgage market, particularly into securities made up of high-interest mortgages made to borrowers with poor credit records.

The high-interest, risky mortgages, called "subprime," boomed, from $160 billion in new loans in 2001 to more than $600 billion in both 2005 and 2006, according to Inside Mortgage Finance, a trade publication.

Lenders stopped worrying about the creditworthiness of borrowers and offered them ever-riskier mortgages. Most of those loans were made by commission-driven mortgage brokers, who had nothing to lose if the mortgage went bad because it had been resold.

"By the time it defaults, it's somebody else's headache," said Barry Ritholtz, CEO of research firm FusionIQ.

When mortgages are packaged into securities, borrowers' monthly payments are divided up and sent to thousands of investors around the world. With so many owners, helping troubled borrowers is tougher. Many of these investors have been reluctant to agree to drastic loan modifications, such as reducing the principal balance, because they don't want to take a big loss.

"We and others have gone to these investors, and they're just not having it," said Evan Wagner, spokesman for Pasadena, Calif.-based IndyMac Federal Bank, which has been run by the FDIC since July. "They don't want to take more losses than they have to." Without such modifications, many homeowners can't avoid foreclosure.

Democrats on Capitol Hill are frustrated.

On Friday, six House Democrats, including Rep. Barney Frank, D-Mass., accused hedge fund investors in a letter of blocking loan modifications and called them to a hearing on the issue next month.

"For the hedge fund industry, which has flourished for much of the past decade, to take steps so actively in opposition to what is currently in the national economic interest is deeply troubling," they wrote.

Job losses:

The No. 1 reason people fall behind on their mortgage is loss of a job, or some source of income, perhaps from a divorce or death of a spouse. If a borrower is unemployed, lenders don't have many options but foreclosure.

Two years ago, about 36 percent of mortgage delinquencies were caused by loss of income or unemployment, according to research by mortgage finance company Freddie Mac. But that number has risen to 45 percent this year as the unemployment rate has ticked up to a five-year high of 6.1 percent.

Jon Falen, 33, put his four-bedroom house in Olathe, Kan., with high-end appliances, granite kitchen countertops and a landscaped lot, on the market more than two years ago after health problems forced him to leave his job as an air traffic controller.

Falen and his wife, now delinquent on their two home loans, are finally scheduled to sell their house next month.

But there's a big catch: The buyer has agreed to pay only $490,000, which is $70,000 less than what the couple paid for it in 2002.

Making matters worse, Falen and his wife owe $675,000 to two lenders because they used their home equity _ which soared during the housing boom _ to pay off student loans and remodeling expenses.

Though Falen and his family seem to have avoided becoming another foreclosure statistic by cashing out on retirement plans and dipping deeply into savings, he is chastened by the drawn-out experience.

"Any debt right now scares me to death," he said.

Falling behind again:

It's hard to fix something that keeps breaking. Roughly one-third of all subprime loans modified in the third quarter of last year were delinquent again within 10 months, according to a Credit Suisse report released this month.

Maria Martinez, 57, an administrative worker at the county jail in Stockton, Calif., is typical of homeowners who have gotten help, but not enough. She is three months behind on her mortgage, even after receiving a loan modification earlier this year.

Though Martinez bought the house more than a decade ago for only $76,000, she now owes about $230,000 because she refinanced her home loan several times.

"I was trying to borrow some money to pay some bills," said Martinez, who is on leave from her job this month after being diagnosed with cancer. "I didn't really think...that I would get into a bind like this."

Until the summer, she was paying an interest rate of about 8.5 percent on her mortgage. The modification lowered that amount to 7.75 percent.

If she had been given a more generous loan modification, she might be in a better situation. But most efforts to help homeowners have been slow and weak.

So what has and should be done?

The scale of the mortgage crisis became clear in July 2007 when Countrywide Financial, then the nation's largest mortgage lender, reported an unexpected surge in defaults in high-quality mortgages.

Three months later, the Bush administration announced a new mortgage industry coalition _ dubbed the Hope Now alliance. The coalition had an "aggressive plan to reach more homeowners and help them find a way to stay in their homes," Treasury Secretary Henry Paulson said at the time.

The Hope Now group says the industry has modified 765,000 loans since last July, and put 1.5 million borrowers on temporary repayment plans. There are no data on how many of those homeowners have fallen behind again.

Faith Schwartz, the coalition's executive director, said the effort was never meant to be the only solution to the foreclosure crisis. She says there "has been a tremendous effort" on the industry's part, noting that 1.9 million households have received letters urging them to call a housing counselor.

Industry and government responses have also drawn fire from consumer advocates for being too slow and too narrow.

The Federal Housing Administration, a government agency that backs loans to borrowers with weak credit, says it has helped about 400,000 borrowers refinance over the past year, though only about 1 percent were behind on their loans.

This month, the FHA started the "Hope for Homeowners" program, included in legislation passed over the summer by Congress. It is designed to let another 400,000 troubled homeowners swap their mortgages for traditional 30-year fixed rate mortgages , but only if lenders agree to reduce the value of a loan and take a loss.

But there are still questions about how eager lenders will be to participate.

Faced with public outrage that they passed a $700 billion plan to rescue the financial industry, politicians in Washington are going to keep trying to find ways to fix the foreclosure crisis. One promising approach came this month when 11 states entered into a more than $8 billion settlement with Countrywide Financial and its new parent Bank of America Corp.

The settlement, which goes into effect Dec. 1. is projected to help an estimated 400,000 Countrywide borrowers by allowing them to replace risky loans with ones at substantially lower interest rates.

And in Washington, the FDIC's Bair has proposed a plan in which the government would provide guarantees for mortgages that have been reworked by banks, lowering payments to more affordable levels.

All eyes now are on Bair, Paulson and other top officials to see if the government can craft a plan that gets at the heart of the global financial meltdown _ the U.S. foreclosure crisis.

Originally posted at InjuryBoard by Paul Kiesel

California Law Puts the Brakes on Foreclosures... At Least for Now

Paul Kiesel — Fri, 24 Oct 2008 19:05:12 GMT

When a new state law went into effect over the latter part of the summer, California immediately saw a drop in loan default notices, which has also proven to show a drop in foreclosure numbers.

In the second quarter of this year, a record 121,673 default notices were sent out in the State of California. After Senate Bill 1137 went into effect, a law that requires a lender or servicer to contact a delinquent borrower 30 days before filing a notice of default and explore options to avoid foreclosure, the number of default notices fell to 94,240 for the following quarter.

According to today's Los Angeles Times, "Default notices sank to 14,995 in September, after averaging more than 40,000 for each of the five preceding months."

This is good news. And SB 1137, which was introduced by State Senate President Pro Tem Don Perata (D-Oakland) in hopes of averting foreclosures for many homeowners who had been previously unsuccessful in contacting their lenders while trying to achieve some sort of loan modification, is a good law to give homeowners adequate time to negotiate with their lenders and come to terms with a situation that's a win-win for both sides.

However, the declining foreclosure statistics do not necessarily prove that the end is near per the foreclosure crisis or credit crisis. It just means that all of the adjustable rate loans that were taken out in 2005 and 2006 have had interest rate resets, and caused this "first wave" of foreclosures. There are still hundreds of thousands if not millions of adjustable rate loans from 2007 that will reset in the coming 12-18 months.

Further action needs to be taken in order to mitigate the next wave of default notices and foreclosures. The FDIC's plan has not worked to the extent it could, contrary to media reports, as they have only successfully modified 4,000 loans and all of those loan modifications were made to people who had not been served with a default notice or were not in the foreclosure process.

Shareholders and regulators need to understand where the value is at in this predicament, and squeeze what they can out of a situation that is not favorable. It'd be better to let a homeowner modify his or her loan at 89% of the original principal balance (not the current negative amortized balance) and wait till the market rebounds in three to five years (remember, these cycles of economic prosperity and recessions are "cycles"), subsequently, the home could then be sold at a price that's equitable or more than the modified loan. The homeowner would not get to walk away with any profits unless the remaining original balance (the 11% that was pared off to help the borrower stay in the home) was recovered by the lender, thus, the investor/shareholder would be able to recoup most if not all of their original investment.

This is one idea that would cut through the complications that have been created by the fact that most mortgages from 2004, 2005, 2006 and 2007 were packaged and sold as securities, and the investors in those securities may not want loan workouts to happen. However, it's likely better for everyone involved to work together on stabilizing the housing and credit markets, while making compromises, than to continue to be split on who gets what, leaving many parties involved with nothing.

Originally posted at InjuryBoard by Paul Kiesel

Greenspan on the Financial Crisis: "I Made a Mistake..."

Paul Kiesel — Fri, 24 Oct 2008 15:56:14 GMT

The former Federal Reserve chairman Alan Greenspan, who was once considered by many economists and government officials to be an "infallible maestro" of the financial system, was hammered yesterday on the multifarious problems the country faces due to the financial crisis.

Greenspan has been a long supporter of deregulation and brought that ideology to the Fed for 18 years, but is now admitting that he was "partially" wrong in not having tried to regulate the market for credit-default swaps. In a tense exchange with Representative Henry Waxman (D-CA), who is the chairman of the House Committee and of Government Oversight and Reform, Greenspan admitted that, "I made a mistake presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms," (New York Times, 10/24/08).

Greenspan's new, evolved view on free-market ideology (hindsight being 20/20 of course): "I have found a flaw. I don't know how significant or permanent it is. But I have been very distressed by the fact." So he's found a flaw, but he doesn't know its significance (what it really looks like or where it lies in the financial infrastructure) or how long it's going to trouble the U.S. economy. That's like saying I'm aware that treasure is buried under a vast stretch of beach, but I have no map and really don't know the amount of treasure that's buried.

Rep. Waxman, none too pleased with Greenspan's assessment of his failed ideology, responded by saying, "In other words, you found that your view of the world, your ideology, was not right, it was not working."

"Absolutely, precisely [. . .] You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence it was working exceptionally well."

By "exceptionally well," Greenspan must have meant this: "I suspect that we are coming to the end of this downtrend, as applications for new mortgages, the most important series, have flattened out [. . .] There is a good chance of coming out of this in good shape, but average housing prices are likely to be down this year relative to 2005. I don’t know, but I think the worst of this may well be over," (MSNBC.com, 10/9/06).

Or maybe he's so shocked because: "What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so," Mr. Greenspan told the Senate Banking Committee in 2003. "We think it would be a mistake" to more deeply regulate the contracts, he added. (New York Times, 10/8/08)

One of the most influential figures in American economics, for almost the past two decades (since Regan was president), doesn't know how this started? It's too complicated for him? If this is really true, that a man like Alan Greenspan who was revered by four White House administrations doesn't know how we got into this financial mess (granted, it's all very convoluted, but the financial crisis does have a variety of stark originating points: i.e. Gramm-Leach-Bliley Act of 1999, Commodity Futures Modernization Act of 2000, etc.), then this situation has the potential of getting much worse than analysts have been anticipating over the last few months (some predict we should be making our way out of this downturn by 2010), prompting massive layoffs and rising unemployment numbers, all because one of the men involved with dictating our financial system doesn't even know where his own mistake started.

Originally posted at InjuryBoard by Paul Kiesel

Discontent at Mortgage Bankers Association Convention as a Protester Attempts to Arrest Karl Rove

Paul Kiesel — Wed, 22 Oct 2008 16:31:10 GMT

From the New York Times:

SAN FRANCISCO — It was just another business-as-usual day at the annual convention of the nation’s mortgage bankers: a few panels, a few presentations and an attempted abduction of Karl Rove.

Mr. Rove, the Republican strategist and former adviser to President Bush, was accosted onstage during a convention panel here on Tuesday morning by a protester who tried to handcuff and arrest him “for treason.” Mr. Rove tried to elbow her away before she was taken offstage.

No one was injured and no arrests were made, but the stage-storming was just the latest outburst at an event that usually packs all the excitement of a mortgage calculator. On Monday, another panel was interrupted by protesters demanding a moratorium on foreclosures, and hecklers screamed at attendees through bullhorns outside.

The convention was booked for San Francisco well before the national mortgage meltdown, the $700 billion bailout and all the recriminations between. But the rancor of the protests and the general malaise in the mortgage business has left more than a few conventioneers, like Gregory B. Lucas, a mortgage broker from Pomona, Calif., fondly remembering the good old days of the industry’s gatherings.

“We had streakers during the 1990s, but that was a joyful, happy thing,” said Mr. Lucas, who had been coming to such events for 20 years and recalled how a group of inebriated and naked bankers had once entertained the crowd. “But now everyone is blaming us for everything.”

Cheryl Crispen, a spokeswoman for the Mortgage Bankers Association, the convention’s organizer, said she had no regrets about coming to San Francisco, a liberal city where anger about the Bush administration’s financial policies is palpable.

“It was unfortunate that they chose this venue to protest whatever they chose to protest,” Ms. Crispen said. “We believe in free speech, but we believe there is a right time and place for it.”

With about 2,500 attendees, the convention’s attendance was down by about 20 percent this year, Ms. Crispen said, something that “mirrors what is going on the industry.” That new reality could also be reflected in some of the forums being offered, with names like “Eliminating Foreclosure” and “High Speed Legislation: How Congress Is Responding to the Mortgage Industry.”

Not that there weren’t optimists in the crowd. Lalit Maliwal, a salesman from Belle Mead, N.J., said the current economic travails were actually good for his line of work: outsourcing.

“Everyone is hurting,” Mr. Maliwal said. “But I think it seems a little harder than it is.”

Nor were all the conventioneers cutting corners. The comedian Jay Leno and a group of Beatles impersonators were scheduled to perform for the association on Tuesday night — for $1,990 a table.

Mr. Rove was already on a flight to Washington on Tuesday afternoon, according to his office, and could not be reached for comment. But Mr. Lucas, for one, said the networking at the event’s official watering hole at the nearby Marriott hotel was nowhere near as active as the protesting outside the convention hall.

“I’ve cut a lot of deals in those bars,” Mr. Lucas said, chomping on a cigar. “And there wasn’t anybody there last night.”

Originally posted at InjuryBoard by Paul Kiesel

Senator Barack Obama Discusses the Problems with Senator McCain's Mortgage Plan

Paul Kiesel — Tue, 21 Oct 2008 17:38:41 GMT

In Tampa, Florida yesterday, Senator Barack Obama addressed an estimated crowd of 10,000 supporters about his plans to revitalize a sagging economy. He illustrated his plan to fix the foreclosure crisis, which happened to be his strongest point and sharpest attack against the poorly structured McCain Mortgage Plan.

The foreclosure crisis still blankets many parts of the country (Florida, incidentally, along with California and Arizona, has consistently ranked in the top three states with the most foreclosures per month over the past year).

Here is an excerpt of Obama's speech:

The rescue plan that passed Congress was a necessary first step to easing this credit crisis, but if we're going to rebuild this economy from the bottom up, we need an immediate rescue plan for the middle-class -- and that's what I'll offer as President of the United States.

Last week, I laid out a plan that will jumpstart job creation, provide relief to families, and rebuild our financial system. It's a plan that will also help struggling homeowners stay in their homes -- something that's particularly important here in Florida, where foreclosures are up 30% over the last year. All across this state, there are families who've done everything right, but who are now facing foreclosure or seeing their home values decline because of bad decisions on Wall Street and in Washington.

The other week, Senator McCain came out with a proposal that he said would help ease the burden on homeowners by buying up bad mortgages at face value, even though they're not worth that much anymore. But here's the thing, Florida. His plan would amount to a $300 billion bailout for Wall Street banks. And guess what? It would all be paid for by you, the American taxpayer. That might sound like a good idea to the former bank lobbyists running my opponent's campaign. But that's not the change America needs.

Look, we must act quickly to end this housing crisis. That's why last March, I was calling for us to help innocent home buyers. And that's why I fought to make sure the recent rescue package gives Treasury the responsibility and authority to help homeowners avoid foreclosure. But we should not put your tax dollars at unnecessary risk. We should not let banks and lenders off the hook when it was their greed and irresponsibility that got us into this mess. We should not be bailing out Wall Street -- we should be restoring opportunity on Main Street. And that's what I'll do when I'm President of the United States.

If the American people are going to put up $700 billion to rescue our financial institutions, we should make sure those institutions are doing their part for the American people. That's why I've called for a three-month moratorium on foreclosures. If you are a bank or lender that is getting money from the rescue plan, and your customers are making a good-faith effort to make their mortgage payments and re- negotiate their mortgages, you will not be able to foreclose on their home for three months. Now, we've also put in place long-term measures to restore our credit markets and help families refinance their mortgages, but until those measures start working, we need to help homeowners stay in their homes, and that's what this foreclosure freeze will do.

And while we're at it, there's another step we can take to help innocent homeowners that won't cost taxpayers a dime. Right now, if you own only one home, you're not allowed to write down your mortgage in bankruptcy court. But if you own more than one home -- if you own, say, six or seven homes like my opponent -- you are allowed to write down your mortgage. That might help Senator McCain sleep easier at night. But it isn't right, and it will change when I'm President of the United States.

Originally posted at InjuryBoard by Paul Kiesel

Renters Caught in Foreclosure Trap While Federal Government Idly Watches

Paul Kiesel — Thu, 16 Oct 2008 20:51:32 GMT

Below is an interesting Associated Press story from today on the effects the mortgage crisis has had on renters. I wrote a blog about this back in May which portends the severity of this situation for some of these renters, which continues to grow steadily.

Most importantly is the lack of assistance or help from the government during the mortgage mess for renters, when borrowers and especially lenders have received loan modification assistance (even if lenders have been stubborn to do this) and financial bailout packages. Currently, only California, Illinois and Michigan have any laws in place protecting renters from immediate or an undetermined eviction due to the mortgage fallout, requiring at least 30 day notices be given to the renters. Every other state has its own tenants' rights and laws that precede or likely don't take into account a situation like the mortgage mess.

Pay attention to pragmatic logic at the end of the article. It's a shame execs at AIG get to go on an $86,000 hunting trip, with presumably government money (i.e. taxpayer money), yet that same government can't fund a program assisting renters who were not involved in the subprime/mortgage boom, even though they were part of the collateral damage due to Wall Street's avarice.

From the AP: MIAMI - Tita Mendoza and her husband moved into their Miami Beach condo in June and have been dutifully paying the $1,800 rent on time every month. And yet, they could be evicted any day now.

Last month, the Mendozas were served with court papers notifying them that their landlord was being foreclosed on, meaning the couple could be turned out on the street.

“It’s unbelievable to me that people could be so irresponsible,” said Mendoza, who moved to Miami Beach from Chicago, where the couple had owned a home. “We’re just waiting to see what happens next.”

Across the country, thousands of renters have become innocent victims of the mortgage crisis: They have been forced to move because the owner of the property was in foreclosure. Security deposits have been lost and lives turned upside-down as people scramble to find a new place to live on short notice.

A few states recently passed or proposed laws to protect renters by requiring mortgage holders to provide sufficient notice for tenants living in foreclosed properties. Sheriffs in Illinois and Michigan also have stepped in to help.

“It’s a huge issue, and it’s one that until recently has flown under the radar,” said Danilo Pelletiere, research director at the National Low Income Housing Coalition. “Renters haven’t been addressed by some localities because they have been focusing on homeowners.”

Almost 15 million renters, or 40 percent of all renters, live in single-family homes, townhouses, condos or duplexes, according to Census data. While there are no national figures on foreclosure-related evictions, these types of rental properties have been vulnerable to foreclosure because they tend to be owned by small investors.

According to RealtyTrac, about one-third of the 378,250 properties with valid mailing addresses that were in default or waiting for a foreclosure sale in May were not occupied by the owner. That would indicate they are investment properties or rentals.

Last week, Tom Dart, the sheriff in Chicago’s Cook County, drew the ire of landlords and lenders everywhere when he announced he would no longer send his deputies on court-ordered foreclosure evictions because many of the people being turned out on the street were tenants who had faithfully paid the rent.

On Thursday, Dart announced that his deputies will resume taking part in foreclosure evictions next week, but only with stringent legal safeguards worked out with the courts. Among other things, a bank that is foreclosing on a property must prove it informed all tenants of a state-mandated grace period designed to allow them to look for new housing.

In Michigan, Genesee County Sheriff Robert Pickell put a two-week moratorium into effect Monday on evicting renters living in foreclosed homes.

“My sheriff doesn’t wring his hands and gnash his teeth very long,” said Undersheriff James Gage. “He looks at the situation, sees it’s wrong and takes action.”

And last week, Ohio state Reps. Ted Celeste and Mike Foley, both Democrats, proposed the Ohio Renter’s Protection Act. The law would require landlords to tell potential tenants if the rental property is in foreclosure and notify current tenants of a foreclosure within 30 days of the filing. The bill also calls for 30-day notice to the tenant before a sheriff’s sale. It could reach a vote by the end of the year.

“You want to protect the tenant to the degree that they have some notice, should there be a need to have them leave,” Celeste said.

In July, California Gov. Arnold Schwarzenegger signed a law giving a tenant 60 days to leave a rental housing unit after the property is sold in foreclosure.

Illinois passed a measure in August that calls for 90 days’ notice before an eviction takes place — a law that apparently was not being followed too closely because Dart told a judge that his deputies were often evicting renters who had not been given proper notification.

When it comes to tenant laws and renter’s rights, each state has its own rules, and each state legislature is free to add further protections for tenants.

But there are no state or local laws in Miami to prevent the eviction of the Mendozas. They have asked a real estate agent to start planning for that possibility.

Other states — Indiana, Minnesota, Rhode Island and Washington — considered bills strengthening tenants’ rights in foreclosures, but they apparently died in their legislatures, according to the National Conference of State Legislatures.

In Michigan, a bill was introduced to require landlords to notify tenants at least 30 days before a property is put up for auction. But the measure has been in committee since last December.

Renters can forget help from the federal government, at least for now. The National Low Income Housing Coalition tried to get the government to spend $200 million for relocation assistance for renters who lose their homes to foreclosure, but the request didn’t make it into the big bailout of the financial industry.

Sheila Crowley, the coalition’s president, said she will continue to press the issue: “If we spent $700 billion, can’t we spend a chintzy $200 million?”

Originally posted at InjuryBoard by Paul Kiesel