It looks like it is starting with this mortgage debt is not being discharged through foreclosure and instead it is lingering on the ex-homeowners credit, adding up taxes and fees along the way. It should be called “zombie debt” as well as “zombie homes”.
Now with the fraudulent robo-signing scandal being settled and in some cases settled out of court. The banks are feeling like they have a free hand to collect or not on this inflated mortgage debt from the real estate bubble years. I advocated many times, this is why you needed to default this debt and let real estate prices fall to sustainable levels (1.5 – 2 times annual income of your area). We have not only kept real estate prices artificially high, now we have debt attached to people that is artificially high and accruing interest and fees.
Yes, the borrowers are not off the hook, because they did sign the paperwork and took on these bad loans, but in the same token, where did this bad credit for real estate purchases come from??? The banks and other financial institutions. Settling with the Department of Justice or state agencies is one thing, but also we need to settle with the common person, not only borrowers but people who did not engage is this type of borrowing that some day would like to own a home and not have to pay and artificially high price and interest on top of that over 15-30 years.
It is quite funny that the banks can give away bad loans to homes, jack up the prices, foreclose and claim title to the real estate, decide not too and instead stick it to the borrower and get bailed out by the same taxpayers through the government and central bank. This is why precedence is so important and now we have some that are so out of whack that the security of the entire system is at risk. People will at some point say enough is enough and that will be a day you will not want to be on the other side of that collective and popular anger. Greed is not always good.
The Globe and Mail - Joseph Keller doesn’t expect he’ll live to see the end of 2013. He blames the house at 190 Avondale Avenue.
Five years ago, Mr. Keller, 10 months behind on his mortgage payments, received notice of a foreclosure judgment from JPMorgan Chase & Co. In a few weeks, the bank said, his three-story house with grey vinyl siding in Columbus, Ohio, would be put up for auction at a sheriff’s sale.
We should be looking at all creative areas to help homeowners go through this restructuring process with the goal of making it as least painful as reasonable possible. At the same time we want to assist the banks in reducing their debt load. Setting more realistic real estate prices are another effect of clearing all the delinquent inventory.
Even allowing homeowners to temporary rent and repurchase the home at a normalized fair market plan would be an equitable option for people who still want to retain their home. Outside of prosecuting crimes that caused this overhang, getting prices and inventory down is a priority at this point. This is a principle that can be applied globally. This is what I would consider real financial innovation, you need a real problem before you can truly innovate in most cases.
USA Today - The number of homes that received an initial notice of default — first step in the foreclosure process — was 6% higher in July than last year, foreclosure listing firm RealtyTrac said Thursday. Filings of initial default notices have increased on an annual basis three months in a row.
At first I was appalled when I finished reading this article. This action is something that I have considered “could happen” down the road when the collapse was in full swing. Now, after contemplating the idea of this happening, I think there could be some value with the right approach. “If”, they keep the rental rates stable and competitive. This is a much better option than having displaced homeowners hit their local existing rental markets, sucking up all the excess rental unit capacity thus making rents rise due too the increased demand.
Outside of any legal improprieties, this could be good if more rental units can come to market so rental rates can decline. For middle and lower income earners, this increases their discretionary cash. This is a good thing and results in a higher standard of living. This is good. I might add, the property owners that are now gasping because the have to service debt at a higher assumed rental rate. Well don’t worry. The banks should be compelled to re-finance these properties so we can lock-up the new rental rates. The problems you see is when relief is only given to one set of parties when there is always at least two parties (even if its yourself).
There is some substance in this proposal if it was expanded and given across the board. The logically at some point down the road maybe a “lease to own” program could be established to get home purchases to be made at the proper market price. There are areas where you allow the market to determine the outcome and then and only then, you create programs to give the assistance where it is needed to prevent having major breakdowns. Balance is the goal and difficult to find when you are dealing with various parties, I do not doubt this.
CNN - Bank of America has announced a program that will let homeowners facing foreclosures stay in their homes as renters. The “Mortgage to Lease” program will start as a limited pilot program for up to 1,000 homeowners in Arizona, Nevada and New York selected by the bank.
It has been sometime since my last posting. In that time, I had to undergo a major surgery. I am recovering great and should be posting with much more regularity. It has taken a few days to catch up and see whats out there to write about.
I love that the banks are paying $25 BILLION DOLLARS and are still not admitting any wrongdoing. This is just another way to reward the “bad actors” who committed fraud during the U.S. housing bubble. In the end, we deserve what we have gotten. We need to hold our representatives and regulators to account. We should of never let this deal get offered. It is quite obvious that “wrong doing” did happen so why do we allow LIES like this to permeate in our political and business culture?
At this point it is much more likely something along these lines will happen again down the line because we did not enforce our laws. A democracy needs active participation from a large majority of a countries population to be effective. A better outcome from this crisis would of been to see many executives that allowed this to happen, to be put on trial for these financial crimes. Banks that were too big to save would of been brought down to a regulatable size and banks that followed the rules would of gain confidence of the markets and customers. This would of allowed them to prosper and that is a sign of how a market economy would of worked in that situation. We need to realize that the pain is a good part of the process to shakeout the weak links in your market. In the end its all about word I have written over a hundred times…..PRECEDENT
Reuters: A report this week showing rampant foreclosure abuse in San Francisco reflects similar levels of lender fraud and faulty documentation across the United States, say experts and officials who have done studies in other parts of the country. The audit of almost 400 foreclosures in San Francisco found that 84 percent of them appeared to be illegal, according to the study released by the California city on Wednesday.
First GMAC (Ally Financial) and now JP Morgan. This is starting to seem a little epidemic. We should not be surprised if more cases of foreclosures halts come up. During the bubble we had a rush of mortgage lenders packaging these bad loans up to sell to large investment banks to make those CDOs. It is no surprise that many corners were cut in the paperwork when putting these together.
If a borrower is in default then there is a legal remedy for it but the people in the first lien position need to slow down and make sure all their ducks are in order so the borrower and lender are given all their rights in the courts through this process. We have specific rules on foreclosure and a certain burden of proof that needs to be generated to take possession of a home.
Washington Post - J.P. Morgan Chase, one of the nation’s leading banks, announced Wednesday that it will freeze foreclosures in about half the country because of flawed paperwork, a move that Wall Street analysts said will pressure the rest of the industry to follow suit.