Opinion

Felix Salmon

Counterparties

By Felix Salmon
November 24, 2010

SEC Allows Asset-Backed Issuers to Omit Ratings Required by Dodd-Frank Act — Bloomberg

SAC tells investors it got government subpoena — Marketwatch

Will DOT eliminate parking spaces to make way for bike sharing stations? (The problem is getting the street hardware out of the way for the ploughs and sweepers) — Gothamist

The utterly horrifying story of Imogene Hall, defrauded out of her home in the dreadful Florida courts — Miami Herald

“It’s like being taken shopping at Spatula City with the world’s most sophisticated personal shopper. At the end of the day, you still end up with a spatula” — Atlantic

The magazine designer’s guide to magazines — Flickr

Hey Apple, change the iPad switch back to screen lock! — Gizmodo

Corporate Profits Were the Highest on Record Last Quarter — NYT

Comments
21 comments so far | RSS Comments RSS

“The nation’s workers may be struggling, but American companies just had their best quarter ever. ”

CEO pay continues to rise and hasn’t stopped rising in spite of the recession and bonuses are still excessive. No wonder they are saying what’s the problem… what recession?

Posted by hsvkitty | Report as abusive
 

Actually the courts didn’t “defraud” Ms Hall out of her home, a convicted fraudster did.

The article is another one that simpy begs for questions to be answered:

1) The article suggests that she did a fake sale to another person who raised a mortgage based on that fake sale. It seems clear she wasn’t aware this was the case and it would be interesting to know why. I assume she simply was told the papers she was signing were boilerplate for the equity release loan.
2) It is not clear if the “buyer” “bought” the property why she got the deed back. Nor is it clear if the bank tried to chase after the “buyer” first – which would explain why the first contact she apparently had with them was the eviction notice.
3) Deutsche Bank presumably has a fiduciary requirement to maximise the cashflow in the defaulted loan. Again it would be nice to know if fraud is alleged why they didn’t try to put back the mortgage to the originator. I assume it is because it was “simpler” to foreclose.
4) It also seems to me the real villains here were the fraudulent broker and the scumbag defence lawyers who milked her. Weird with all this false emphasis on how originators supposedly are making money hand over fist with foreclosures that that no one has pointed out the people who are REALLY making money here – the defence lawyers dragging out foreclosure cases. Not sure why you are blaming the judge here. Am not a lawyer but if there is a loan collateralised against a house and that loan is not paid then the bank should be able to seize the collateral. If so then the second judge was doing her a favour by not ramping up her costs defending a hopeless case. If not then she should be appealing. If this git can stay in his home for nearly a decade without paying then surely she could:

http://www.bloomberg.com/apps/news?pid=n ewsarchive&sid=aejJZdqodTCM&refer=home

All in all a deeply frustrating article.

Posted by Danny_Black | Report as abusive
 

Ye Dan it was frustrating as hell to read how she was duped out of her home by so many people. BTW fraud IS a reason to delay foreclosure, so the judge was ultimately wrong.

That you would compare a deadbear…lents, who hasn’t been paying his mortgage at all… to this woman is quite frankly ridiculous. Sure, you can blame some people for being deadbeats… but most people were paying and still are being foreclosed upon.

The reasons vary as much in each circumstance and it is that individuality that a judge is supposed to look for in the paperwork… not just robo foreclosure.

Sadly the different laws mean the deadbeat is protected yet the true victim is being foreclosed upon.

Posted by hsvkitty | Report as abusive
 

deadbeat ooops

Posted by hsvkitty | Report as abusive
 

Just to be clear, I wasn’t calling her a deadbeat. I was saying a world where Lents – who is – gets to keep his home and she loses hers is deeply unfair. Of course, as I am not a 3 year old this didn’t surprise or shock me.

I am not sure the fact SHE suffered fraud IS a reason. The bank had a perfectly good mortgage and as I said it is not clear exactly what happened. It seems to suggest somehow that she “sold” her house to this guy, in which case she would just be a tenant – one of the questions that made the article frustrating.

Posted by Danny_Black | Report as abusive
 

Also the vast, overwhelming majority of people being foreclosed on are NOT paying their mortgages. This is not under dispute.

Even in this case she was not paying her mortgage. Of course in this case she didn’t realise she actually had a 180,000 USD mortgage…..

Posted by Danny_Black | Report as abusive
 

Actually Danny, if you have been reading about forclosures, you would know the vast majority are and were paying BUT they were duped as well

Mortgage servicers are telling homeowners not to pay their mortgage payments because they are not allowed to modify their mortgages until they are three months delinquent. Then, when a consumer tries to modify, they are told that they do not qualify because the home is no longer worth what is owed on the home.

http://www.wave3.com/story/13485698/fbi- investigating-companies-charge-thousands -to-renegotiate-mortgage

Posted by hsvkitty | Report as abusive
 

Read your article again. The servicers are not saying anything like that, it is some “renegotiation” companies. It also is clear these people were NOT paying their mortgage. Some 4million people are being foreclosed on. Care to show some proof that say 2 million were perfectly up to date with their payments?

Why would a servicer deliberately foreclose on someone servicing their mortgage. Those people are the sweet spot for servicers, where they make money for old rope. People who are being foreclosed on COST the servicers money.

Posted by Danny_Black | Report as abusive
 

@Danny_Black

This says why it happens (the 3 month non payment is erroneous)…. and please stop asking for proof (although I am happy to provide links) when you are the worst offender here for saying people are wrong without an iota ‘proof’ yourself!

http://noompa.wordpress.com/2010/11/24/t he-homeowner-as-victim-not-deadbeat/

http://www.rollingstone.com/politics/new s/17390/232611?RS_show_page=0

There are few people who are helping homeowners. Surely Hamp isn’t! If anything lawyers, serviders and others are screwing them over.

http://www.ftc.gov/opa/2010/06/countrywi de.shtm

http://articles.moneycentral.msn.com/Ban king/HomeFinancing/one-familys-desperate -fight-for-its-home.aspx

Posted by hsvkitty | Report as abusive
 

Something else to chew on
http://www.parallelforeclosure.blogspot. com/

http://www.propublica.org/article/invest ors-join-outcry-against-mortgage-service rs

The problem here is it is one family at a time with different mortgages, degree of missing paperwork, salaries, banks, people, lawyers, state laws and ethics…

Posted by hsvkitty | Report as abusive
 

How many families are defaulting on their mortgages

Many people who are being foreclosed on have actually paid their bills and followed all the instructions laid down by their banks. In some cases, a homeowner contacts the bank to say that he’s having trouble paying his bill, and the bank offers him loan modification.

But the bank tells him that in order to qualify for modification, he must first be delinquent on his mortgage. “They actually tell people to stop paying their bills for three months,” says Parker.

The authorization gets recorded in what’s known as the bank’s “contact data­base,” which records every phone call or other communication with a home­owner. But no mention of it is entered into the bank’s “number history,” which records only the payment record. When the number history notes that the home­owner has missed three payments in a row, it has no way of knowing that the homeowner was given permission to stop making payments.

“One computer generates a default letter,” says Kowalski. “Another computer contacts the credit bureaus.” At no time is there a human being looking at the entire picture.

Posted by hsvkitty | Report as abusive
 

So in other words they are in default? Not paying for three months is default. Learn english.

Posted by Danny_Black | Report as abusive
 

Ok clearly you have difficulty reading english:

from http://www.ftc.gov/opa/2010/06/countrywi de.shtm:

“When homeowners fell behind on their payments and were in ***default*** on their loans,”

from http://noompa.wordpress.com/2010/11/24/t he-homeowner-as-victim-not-deadbeat/:

“The idea is that when a homeowner ***defaults**** on his payments,”

from http://articles.moneycentral.msn.com/Ban king/HomeFinancing/one-familys-desperate -fight-for-its-home.aspx:

“When their debts grew too heavy, the Gentrys declared Chapter 7 bankruptcy. “Of course I feel bad we ****weren’t able to meet our obligations***,” Marianne Gentry said. “But we never had a problem until we started having our financial issues.”

http://www.propublica.org/article/invest ors-join-outcry-against-mortgage-service rs doesn’t say anything about the status of the loans in foreclosure.

The last article says nothing. It is just a multi-coloured version of the BS you sprout.

Just for the record simply linking to http://www.randomangryarsehole.com is not “proof” and where you someone inclined to a tiny bit of shame then linking to not one but 3 articles that say the opposite of what you claim would normally be cause to re-evaluate your claims.

Posted by Danny_Black | Report as abusive
 

hsvkitty, the only FRAUD that I see is in your first link. And the perpetrators of that fraud are the “debt renegotiation” companies, not the banks.

As for the rest of the stories, I would love to cross-examine some of the deadbeats.

You write, “In some cases, a homeowner contacts the bank to say that he’s having trouble paying his bill, and the bank offers him loan modification.”

What most likely happens is that the homeowner contacts the bank *asking* for a loan modification. The bank tells the homeowner, correctly, that they don’t even consider such requests unless a homeowner is three months in default. The homeowner thinks, SCORE! All I have to do is to stop paying my mortgage for three months and I get reduced principal and a lower payment.

The problem is that there ain’t no such thing as a free lunch. The mortgage modifications are able to help a few people, but obviously it is best to follow the original contract than to take your chances on a modification being granted.

And a loan modification truly is a “free lunch”. The borrower is asking the bank to take a large haircut on the mortgage. Why? Because the borrowers are such nice people and they love living in the home that they can’t afford to pay for?

I feel some sympathy for people who lose their homes when they lose their jobs and can no longer pay the bills. I feel no sympathy for those who got themselves into trouble through an attitude of entitlement.

Posted by TFF | Report as abusive
 

The first link was incorrect. I had copied and pasted it for another site comment and the one I thought I had pasted wasn’t. So I apologize for that.

TFF, do you really think as a responsible homeowner that I am on the side of the deadbeats who defaulted or walked away just because they could? I am not. Do you know how FEW loan mod have actually occurred? Unless a person can afford a lawyer and most can’t, people are taking the advice of banks. Loan modifications are NOT for people unable to pay for 3 months! That is erroneous!

Modifications are for those with reduced income OR have suffered hardship that has increased expenses such as medical bills. There is also debt coverage ratio that homeowners had to qualify for to be eligible. Banks are not supposed to tell clients to default to show eligibility for HAMP modifications!!

I guess you can’t quite place yourself in the position of those who are honest, but what you both seem to be doing is playing into the blame the victim and never the banks.

I am on the side of homeowners who are doing everything in their power to keep their homes, including making payments (and some being foreclosed upon even when they did!) That there are those hanging onto their coattails who DO NOT deserve consideration should not sway you from believing there are victims that have no recourse as they can’t afford lawyers.

Have any of you renegotiated/renewed a mortgage lately? I am in Canada and the spillover from your defaulting has panicked the banks here. I have over 800 credit rating, a steady income, 200+k equity in my home, and 200k assets and at the time zero debt other then my mortgage.

Even after shopping around I was unable to get a mortgage without placing 25k more down and taking a 2 year extension. Why ? Because I am a credit risk for default as a single mother! (PS: I was single when I bought this house as well…)

The biggest joke is my ex never owned a house in his life and I have paid off 2 houses mortgage free. As a responsible homeowner who has never been a credit risk and never miss payments on anything, should I not have gotten individual consideration for that? Nope, because banks are using that single credit red flag to negotiate mortgages. And to reiterate, I AM IN CANADA!!

I also do not like deadbeats, but NO ONE is on the side of the homeowners who are honestly paying their mortgages and wish to stay in their homes. Do you have trouble with my sense of entitlement TFF? If you do, you better pray you don’t lose your job! Or have the family all get sick with some chronic illness or you will be using those funds you put away for retirement a little early to stay in your house. Can you imagine that?

I would find out who has your mortgage note as well, just in case. There were very few banks willing to pay the county fees to follow through with the correct mortgage note procedures. They didn’t have to because ‘everybody was’ doing it.’

Posted by hsvkitty | Report as abusive
 

Danny Black I have never heard you say anything bad about Wallstreet or banks even though they surely had a very large hand in what has happened to the economy and real estate. That is your right of course, but you seem more a wall street insider and Goldman apologist then a normal commentator. AT least others reply with some meat.

You keep calling me out as though I have a hand in this. I don’t. I am merely interested in keeping the information afloat, being most everyone else wants it all to just slip away as though it never happened. It will not for a very long time.

Mortgage defaults are going down because the spotlight is going back on the banks, where it belongs. Unless someone tells the homeowners NOT TO DEFAULT EVEN though the banks are telling them to, If the banks are defaulting illegally, whether it be through fraud, the missing notes, improper procedures then the public has a right to know.

How can there be actual proof unless you are sitting right there watching it happen… like those who were cited in the articles I gave you. If banks are erroneously telling people they have to be 3 months into default to qualify for a modification then THEY ARE NOT following the correct PROCEDURE for modifications.

Although rolling stone may not be considered a very credible news source, most of the MSM media ‘journalists’ are like you and are painting the homeowners as the bad guys and not concentrating on what is happening overall and WHY. I applaud the man’s work and find it more credible then the MSM quoting banks saying all homeowners should just be paying their f**cking mortgages. (the same banks who ‘lost’ the mortgage notes and never followed up with mers procedure and county law.

The man was in the ‘courtoom’ watching the judge as he became part and parcel of the foreclosure mill. If the banks cannot look at each case individually (or have the proper documentation to even have a legal standpoint) and the law cannot take a look at each case individually then who is left to help the homeowners?

Danny Black I linked to the pieces because those are the few who are on the side of homeowners. The Government has abandoned them as well… as HAMP is the miserable failure it seemed to be be set out to be; helping banks but not homowners and as usual having no followup to be sure it is proerly implemented and isn’t abused.

Posted by hsvkitty | Report as abusive
 

hsvkitty, I do sympathize with those who are working hard, playing straight, and doing their best to keep up. I especially sympathize with those (like a neighbor) who have lost a good-paying job and are doing everything they can to keep the bills paid.

Unfortunately, those are outnumbered by people who just got greedy. And in reading a newspaper or blog column, there is never sufficient detail to differentiate one from the other. So I tend to lump all the sob stories into the “no sympathy” bucket. Guilty until proven innocent?

I agree that loan modifications make sense for a family with reduced income or other temporary financial hardship. The whole idea of a loan modification ought to be to find a way to make BOTH the bank and the borrower whole, by adjusting the payment schedule. Unfortunately the concept of “principal reduction” has slipped in, which is a clear bonus for the borrower. The flip side of that is that somebody else ends up paying.

If I understand HAMP, homeowners must provide “evidence of financial hardship and the *inability* to meet the current loan payments.” They need not be delinquent, but in that case there should be some other “trigger event” such as medical costs, job loss, or an interest rate reset that can be expected to push them into default. Merely having a hard time paying your mortgage is insufficient.

Our mortgage note is not in the hands of any bank, and soon enough it will be paid off entirely (could refinance at a lower interest rate, since we have well over 50% equity by now, but I’d rather be debt free).

My job? Year by year, could disappear at any time, and barely pays enough to cover the child care. My self-employment income could also shrink rapidly (it was down 50% the last two years). All the more reason not to rely on it for debt service.

Posted by TFF | Report as abusive
 

hsvkitty, I am not sure what media you are reading but I must have missed the wave of pro-bank propaganda you seem to think the world is awash in.

Not only do you comments not have any “meat” in them, I have yet to read one that is not simply factually incorrect. Again it may be the pedant in me but I happen to think facts are important.

For the record, I worked in the City – the UK equivalent of Wall Street – and retired some 5 years ago.

Posted by Danny_Black | Report as abusive
 

TFF, to be fair I believe most of the people defaulting nowdays are doing so as a result of changed employment circumstances not because they over-reached.

Also my mum recently took out an equity release on her fully paid off property. It was at an obscene interest rate, with outrageous fees and she was only taking out 30%LTV loan. I also have zero sympathy for her because I told her to sell the place repeatedly for the last 3 years. ‘Fraid to say some people are just financially incompetent.

Posted by Danny_Black | Report as abusive
 

Danny_Black, at least half the “fraud” charges that I’ve seen accuse the banks of giving somebody a mortgage larger than they could afford (as if that is solely the banks’ fault). Then, on top of that, I keep hearing of strategic defaults — with default rates rising for the largest mortgages.

If you are right and everybody (who hasn’t already defaulted) is in a mortgage that they were able to comfortably afford, then we will hopefully be nearing the end of this wave. And that will be a huge piece of getting the economy back on its feet.

Posted by TFF | Report as abusive
 

TFF and Danny, the only thing that is keeping this quiet is the fact that few are speaking for the little guy. They have been lost in the shuffle. There is too much business and money to be had for lawyers to also take advantage or this would have blown sky high. As it is, I guarantee you have not seen the last of it. Sadly the defaulters who are sticking it to the banks will be the ones we mostly hear about, but there will be repercussions.

And yes, many people are incompetent with money, but that doesn’t mean they should have been sold mortgages that they could not afford and at inflated prices. The banks had to approve the assessment and loans!

The loans were never meant to be given to people who COULDN’T pay. You are both in your 50′s and 60′s and perhaps have never been sold a bridge, but few people are immune to being duped, no matter how smug you are that you are financially savvy. (but I still won’t wish it on you)

And sorry Danny, calling everything I write bull **** is odd coming from you when that is 99% of what you do… call bull with nothing to back it up except your having worked in the field. Pulling out the lingo sounds good, but you had nothing to back up siding with the banks other then your bias.

There were mortgages that were made to fail and some of the banks knew exactly which those were and where they were coming from. The banks KNEW where the bad mortgage deals were whether they had a hand in it or not

They fostered the environment that made the loans even riskier. Have you actually forgotten they were also selling the homes to the poor and homeless? Anyone with a pulse? How much financial savvy does a homeless or poor person usually have???

Posted by hsvkitty | Report as abusive
 

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