Economic Recovery? No Spinning These Numbers – August 2010 Lenders Foreclose More Homes Than At Any Time Since Mortage Crisis Began

US homes lost to foreclosure up 25 pct on year

LOS ANGELES — Lenders took back more homes in August than in any month since the start of the U.S. mortgage crisis.

The increase in home repossessions came even as the number of properties entering the foreclosure process slowed for the seventh month in a row, foreclosure listing firm RealtyTrac Inc. said Thursday.

In all, banks repossessed 95,364 properties last month, up 3 percent from July and an increase of 25 percent from August 2009, RealtyTrac said.

August makes the ninth month in a row that the pace of homes lost to foreclosure has increased on an annual basis. The previous high was in May.

Banks have been stepping up repossessions to clear out their backlog of bad loans with an eye on eventually placing the foreclosed properties on the market, but they can’t afford to simply dump the properties on the market.

Concerns are growing that the housing market recovery could stumble amid stubbornly high unemployment, a sluggish economy and faltering consumer confidence. U.S. home sales have collapsed since federal homebuyer tax credits expired in April.

That’s one reason fewer than one-third of homes repossessed by lenders are on the market, said Rick Sharga, a senior vice president at RealtyTrac.

[The reason only 1/3 of the foreclosed homes are  “on the market” is that the banks are tryoing to protect the value of their inventory of foreclosed homes, by limiting the number on the market thay are artificialy propping up the value of the “foreclosed home market”. The Government tax credit did not create “new housing demand” it simply shifted sales forward … Google: Federal Home Trac Credit Fraud – to read about the mismanagement of that program by the Federal Government – or Google: Mortgage Fraud Continues]

“These (properties) are going to come to market, but very slowly because nobody wants to overwhelm a soft buyer’s market with too much distressed inventory for fear of what it would do for house prices,” he said.

As a result, lenders are putting off initiating the foreclosure process on homeowners who have missed payments, letting borrowers stay in their homes longer.

The number of properties receiving an initial default notice – the first step in the foreclosure process – slipped 1 percent last month from July, but was down 30 percent versus August last year, RealtyTrac said.

Initial defaults have fallen on an annual basis the past seven months. They peaked in April 2009.

Barney Frank - Chairman House Banking Committee - The Man In Charge Of Watching Over Fannie

Still, the number of homes scheduled to be sold at auction for the first time increased 9 percent from July and rose 2 percent from August last year. If they don’t sell at auction, these homes typically end up going back to the lender.

More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to RealtyTrac. The firm estimates more than 1 million American households are likely to lose their homes to foreclosure this year.

[Realty Tracs number are way off, that or the AP is not reporting them correctly – At least 8 million homes have been foreclosed – 2.3 million homes have been foreclosed and placed on the market for sale. More than 2.3 million homes have been foreclosed in the States of Michigan and Nevada alone]

In all, 338,836 properties received a foreclosure-related warning in August, up 4 percent from July, but down 5 percent from the same month last year, RealtyTrac said. That translates to one in 381 U.S. homes.

The firm tracks notices for defaults, scheduled home auctions and home repossessions – warnings that can lead up to a home eventually being lost to foreclosure.

Among states, Nevada posted the highest foreclosure rate last month, with one in every 84 households receiving a foreclosure notice. That’s 4.5 times the national average.

Rounding out the top 10 states with the highest foreclosure rate in August were: Florida, Arizona, California, Idaho, Utah, Georgia, Michigan, Illinois and Hawaii.

Economic woes, such as unemployment or reduced income, are now the main catalysts for foreclosures.

Lenders are offering a variety of programs to help homeowners modify their loans, but their success rates vary. Hundreds of thousands of homeowners can’t qualify or fall back into default.

The Obama administration has rolled out numerous attempts to tackle the foreclosure crisis but has made only a small dent in the problem. Nearly half of the 1.3 million homeowners who enrolled in the Obama administration’s flagship mortgage-relief program have fallen out.

The program, known as Making Home Affordable, has provided permanent help to about 390,000 homeowners since March 2009.

[A program that was touted by Obama as something that would help 9,000,000 home owners at a cost of nearly $700 billion dollars has in fact helped only 300,000 and tens of thousands leave the program every month as their homes sink futher “under water”]

http://www.forbes.com/feeds/ap/2010/09/16/general-us-foreclosure-rates_7933661.html?boxes=Homepagebusinessnews

 

Financial Reform: Mortgage Fraud Continues to Boom

Who paid $300,000 for this "structure".

Special report: Flipping, flopping and booming mortgage fraud

(Reuters) – The house on the 53rd block of South Wood Street in Chicago’s Back of the Yards doesn’t look like a $355,000 home. There is no front door and most of the windows are boarded up.

Public records show it sold in foreclosure for $25,500 in January 2009, then resold for $355,000 in October. In between, a $110,000 mortgage was taken out on the home, supposedly for renovations. This June, the property went back into foreclosure.

To Emilio Carrasquillo, head of the local office of non-profit lender Neighborhood Housing Services of Chicago (NHS), the numbers don’t add up. He believes this is a case of mortgage fraud.

It may not make the blood boil like murder or rape, but mortgage fraud is a crime that cost an estimated $14 billion in 2009 and could be hampering an already fragile recovery in the housing market. The FBI has been fighting back, assembling its largest ever team to fight it. They have their work cut out for them, though, as a tsunami of foreclosures is making classic scams easier and spawning new ones to boot.

“There’s no way any property in this neighborhood should sell for that kind of money,” said Carrasquillo, standing outside the house on Wood Street in this poor, predominantly black area of Chicago’s South Side. “Even if it was in great condition.”

Carrasquillo has identified a number of properties in Back of the Yards that sold for between $5,000 and $30,000 last year and then came back on the market for up to $385,000. He said property prices are being artificially inflated, allowing fraudsters to walk away with vast profits and making it harder for honest local people to buy a home.

Mortgage fraud takes many forms, but a well-organized scam frequently involves a limited liability company (LLC) or a “straw buyer.” In

Who paid $355,000 for this structure?

 this scheme, fraudsters use a fake identity or that of someone else who allows them to use their credit status in return for a fee. The seller pockets the money the buyer borrows from a lender to pay for the home. The buyer never makes a mortgage payment and the property goes into foreclosure.

In other words, the money simply disappears, leaving the lender with a large loss. Since the U.S. government is now backing much of the mortgage market in the absence of private investors, that means “taxpayers are ultimately on the hook for fraud,” said Ann Fulmer, vice president of business relations at fraud-prevention company Interthinx.

Back of the Yards was hit by fraud during the housing boom and Carrasquillo says the glut of foreclosures is now making it easier for scammers to pick up properties for a song and flip them for phenomenal profits.

Drug dealers and gang members have taken over abandoned houses, many adorned with spray-painted gang signs. Prior to touring the area, Carrasquillo attached two magnetic signs touting the NHS logos on his minivan’s doors to show he is not a police officer. He said he also prefers touring in the morning, as drug dealers and “gangbangers” tend not to be early risers.

“These properties are just going to sit there, boarded up, broken into and a magnet for crime,” he said. “And that makes our job of trying to stabilize this neighborhood so much harder.”

CRACKDOWN NETS MORE REPORTS OF FRAUD

The U.S. Federal Bureau of Investigation said in a report released on June 17 that suspicious activity reports (SARs) related to mortgage fraud rose 5 percent in 2009 to around 67,200, up from 63,700 the year before. The number had tripled from 22,000 in 2005 and the number of SARs for the first three months of 2010 hit nearly 38,000.

“We don’t see the number declining while foreclosures remain so high,” said Sharon Ormsby, section chief of the FBI’s financial crimes section.

Robb Adkins, executive director of the Financial Fraud Enforcement Task Force, is known as U.S. President Barack Obama’s financial fraud czar. He describes mortgage fraud as “pervasive” and fears it is exacerbating the nation’s real estate woes. “That, in turn, could act as an anchor on the economic recovery,” he said.

For the housing market to recover, potential homeowners need confidence in home prices and investors need confidence to get back into the secondary mortgage market, Adkins explained.

Since the subprime meltdown, a wide variety of scams have come to the fore. They include big cases like that of Lee Farkas, the former head of now bankrupt mortgage lender Taylor, Bean & Whitaker Mortgage Corp, charged in June with fraud that led to billions of dollars of losses. The scheme involved the misappropriation of funds from multiple sources, including a lending facility that had received funding from Deutsche Bank and BNP Paribas.

That appears to be the scam of choice. On July 22, for instance, seven defendants were indicted in Chicago in a $35 million mortgage fraud scheme involving 120 properties from 2004 to 2008 using straw buyers. Of the half dozen properties listed in the indictment, two were in Back of the Yards.

In the mid-2000s, the availability of easy money, poor due diligence by lenders and low- or no-documentation loans, acted as a magnet for fraudsters, who used identity theft and other scams to bag large sums of cash.

“During the boom it was almost like people in the real estate market could do no wrong,” said Ohio Attorney General Richard Cordray. “As ever more money rushed in, it attracted a lot of people who engaged in shady behavior.”

Instead of leaving them without a market, the crash has instead provided fraudsters with a glut of foreclosures, stricken borrowers and desperate lenders to take advantage of.

“There were plenty of opportunities for fraud on the way up and there are plenty on the way down,” said Clifford Rossi, a former chief credit officer at Citigroup and now a teaching fellow at the University of Maryland in College Park.

Alongside familiar scams like property flipping, the crash has added new terms to the lexicon: short sale fraud, builder bailouts and flopping. Rescue scams targeting struggling homeowners with false promises of help are also on the rise.

If some of the mechanisms are new, a lot of the fraudsters are not: in many cases, they turn out to be mortgage brokers, appraisers, real estate agents or loan officers. “Because they’re insiders, they see exactly what’s happening and they’re able to stay one step ahead of the game,” said Todd Lackner, a fraud investigator in San Diego. “They’re the same people who were committing fraud during the boom and they were never caught or prosecuted.”

BACK TO THE YARDS

Just a stone’s throw from downtown Chicago, Back of the Yards is the setting for Upton Sinclair’s classic 1906 novel “The Jungle,” a tale of grueling hardship and worker exploitation at the city’s stockyards. The book includes an act of mortgage fraud against an unsuspecting Lithuanian family.

“Mortgage fraud is nothing new,” said Christopher Wagner, co-managing attorney of the Ohio Attorney General’s Cincinnati office. “It’s been around for a long time.”

Saul Alinsky, considered the founder of modern community organizing, started out in Back of the Yards in the 1930s. Decades later, a young community organizer named Obama got his start near here.

The neighborhood has always been poor, but south of the old railway tracks at W 49th St, the housing crisis’ legacy of empty lots and boarded-up homes is evident on every block. There are few stores and services available — in four separate visits for this story, no police vehicles were sighted.

“This is what we refer to as a ‘resource desert,'” Carrasquillo said. “When no one pays attention to an area like this, it makes it easier to get away with fraud.”

Marni Scott, executive vice president for credit at Troy, Michigan-based lender Flagstar Bancorp, says there are virtually no untainted sales in the area. “There are no cases of Mr and Mr Jones selling to Mr and Mrs Smith.”

“We see cases of mortgage fraud around the country,” she added. “But there’s nothing out there that could match the mass-production, assembly-line fraud that’s going on here.”

In 2008 Flagstar instituted a rule whereby any loan applications here and in parts of Atlanta — another fraud hot spot — must be approved by Scott and the lender’s chief appraiser. In a Webex presentation, Scott rattles through a number of properties snapped up for pennies on the dollar in 2009 and then sold for around $360,000.

She provides an underwriter’s-eye-view of one property, on the 51st block of South Marshfield Avenue, sold in foreclosure in July 2009 for $33,000. In January of this year Flagstar received a loan application to buy the house for $355,000.

The property appraisal — compiled by an appraiser who Scott believes never visited the area — showed four nearby comparable properties of around the same age (100 plus years) sold recently for around $360,000. The trick to this kind of scheme is engineering the sale of the first few fraudulently overvalued properties to get “comps” — comparable values — to fool appraisers and underwriters alike.

“Miraculously, all of these properties were all within a very narrow price range,” Scott said with weary sarcasm. “This is a perfect appraisal for an underwriter. If you are an underwriter sitting in Kansas or California it all looks fairly straightforward so you can just hit the button and approve it.”

Using a $5 product called LoanIQ from U.S. title insurer First American Financial Corp called LoanIQ, Flagstar determined the application itself was fraudulent and there was a foreclosure rate in the area of nearly 60 percent. What is more, property prices here spiked 84 percent last year after 44 percent and 26 percent declines in 2008 and 2007.  [How mant times have you heard the MSM report that “Housing prices recovered 1% last month”]

“No neighborhood should look like this,” said Scott, who declined the application.

Last April, however, another lender approved a loan application for $335,000 on the same property from the same people.

FORECLOSURE MAGNET

Reports this year from Interthinx, CoreLogic Inc and the Mortgage Asset Research Institute (MARI) — which all provide fraud prevention tools for lenders — show foreclosure hotspots Florida, California, Arizona and Nevada are also big mortgage fraud markets.

MARI said in its April report that reported mortgage fraud and misrepresentation rose 7 percent in 2009, adding fraud “continues to be a pervasive issue, growing and escalating in complexity.”

Denise James, director of real estate solutions at LexisNexis Risk Solutions and one of the author’s reports, said reported fraud will continue to rise throughout 2010.

In its first-quarter report, Interthinx said its Mortgage Fraud Risk Index rose 4 percent to 151, the first time it had passed 150 since 2004. A figure of 100 on the index would indicate virtually no risk of fraud.

Congressman Barney Frank

According to various estimates, the 30310 ZIP code in Atlanta is one of the worst in the country. An analysis of that ZIP prepared for Reuters by Interthinx showed a fraud index of 414, making it the eighth worst ZIP code in the country. Back of the Yards — ZIP code 60609 — had an index of 309.

“In some neighborhoods in Atlanta there hasn’t been a clean transaction in 10 years,” Interthinx’s Fulmer said.

In 2005 local residents here formed the 30310 Fraud Task Force. Members sniff out potential signs of fraud — such as repeated property flipped — and report them directly to the FBI and local authorities. Information from the task force led to the arrest of a 12-member mortgage fraud ring on September 15, 2008 — better known in the annals of the financial crisis as the day Lehman Brothers filed for Chapter 11 bankruptcy protection.

Brent Brewer, a civil engineer and task force member, said the arrests had a noticeable impact on fraud in the area. “It made a statement that if you come here to commit fraud there’s a good chance you’ll get caught,” he said.

But Brewer harbors no illusions the fraudsters are gone. “There’s no way they can catch everyone who’s involved in fraud. But if you’re dumb, greedy or desperate, you’re going to get caught.”

FBI GETTING INTERESTED

Law enforcement has come a long way in combating mortgage fraud, though officials freely admit that’s not saying much.

Senator Chris Dodd

Ben Wagner, U.S. attorney for the eastern district of California, said as mortgages are regulated at the state and local level, for years there was little federal interference. Prior to the recent boom, he said, fraud simply “was not identified as a huge problem.”

“There has been a little bit of a learning curve,” Wagner said. “This was not something federal prosecutors had much familiarity with. Now we’re getting pretty good at it.”

Half of Wagner’s 50 or so criminal prosecutors focus on white-collar crime including fraud. Two new prosecutors will be dedicated solely to mortgage fraud.

Now mortgage fraud is a known quantity, Wagner said all U.S. prosecutors tackling it are linked by Internet groups. The May edition of the bi-monthly “United States Attorneys’ Bulletin” (published by the Executive Office for United States Attorneys) was devoted entirely to mortgage fraud.

The FBI has more than 350 out of its 13,000 agents devoted to mortgage fraud. There are also now 67 regular mortgage fraud working groups and 23 task forces at the federal, state and local level. “This is the broadest coalition of law enforcement ever brought together to fight fraud,” Adkins said. He admitted, however that limited resources to fight fraud still pose a challenge.

Attorney General Eric Holder

In June U.S. authorities said 1,215 people had been charged in a joint crackdown on mortgage fraud. Many of the charges were for crimes committed years ago.

Latour “LT” Lafferty, the head of the white-collar crimes practice at law firm Fowler White Boggs in Tampa, Florida, said fraud in the boom was so pervasive that many crimes will go undetected and unprosecuted. “Everyone had their hands in the cookie jar during the boom,” he said. “Lenders, brokers, Realtors, homeowners … everyone.”

OLD DOG, NEW TRICKS

A new mortgage scam born out of the housing crisis is short sale fraud. Short sales are a way for stricken homeowners to get out of their homes, whereby in agreement with their lender they sell their home for less than they paid for it and are forgiven the remainder.

But they have also proven a tempting target for fraudsters, usually involving the Realtor in the deal. Lackner, the fraud investigator in San Diego, described a typical scheme: “Let’s say you have a property up for short sale that you know as a Realtor you can get $350,000 for,” he said. “But you arrange a low-ball appraisal of $200,000 and have someone make an offer of that amount.”

Tont Rezko - Convicted Felon - Real Estate "Development"

“The Realtor says to the bank this is the best offer you’re going to get, take it or leave it,” he added. “Then they turn around and flip it immediately for $350,000. In cases like this, the lender is probably already stuck with a lot of foreclosed properties and doesn’t want more. So they go for it.”

Where the process of fraudulent appraisals overvaluing a property for sale is “flipping,” deliberately undervaluing them has become known as “flopping.”

Bob Hertzog, a designated real estate broker at Summit Home Consultants in Scottsdale, Arizona, says he gets emails from unknown firms offering to act as a “third-party negotiator” between the seller and the bank with what turns out to be a grossly undervalued bid.

Hertzog has tried tracing some of the LLCs, but describes a chain of front companies leading nowhere.

“The problem is it is so cheap and easy to set up an LLC online that sometimes they are set up for just one transaction,” Flagstar’s Scott said. “And if they’re set up using fake information or a stolen identity, it’s very hard to trace who’s behind them.”

Many web sites boast they can help you form an LLC online for under $50.

Another common target for fraud is the reverse mortgage. Designed for seniors to release equity from a property, according to financial fraud czar Adkins, they have been used to commit a “particularly egregious type of fraud.”

Fraudsters commonly forge their victims’ signatures and, without their knowledge or consent, divert funds to themselves. The scam is worst in Florida, a magnet for American retirees.

“Unfortunately it is often not until the death of the victim that their heirs realize that all of the equity has been stripped out of the property by fraudsters,” Adkins said.

But Arthur Prieston, chairman of the Prieston Group, which sells mortgage fraud insurance and has launched a patented system to rate lenders on the quality of their loans, said most mortgage fraud he comes across consists of ordinary people fudging figures to get a loan. “The vast majority of the fraud we see is where people intend to occupy a property, but can’t qualify for a loan,” he said. “They’ll do anything to get that loan approved.”

He added this is achieved with the active collusion of Realtors, brokers and lenders looking to make a sale and keep the market moving. Before his firm issues fraud insurance it reviews a lender’s loans and between 20 percent and the 30 percent of the loans reviewed so far have had “red flags.”

The problem with assessing the extent of the damage caused by mortgage fraud is that it’s not just the dollar amount of the fraud itself. It also hits property values, property taxes and often causes crime to rise.

“Most people interpret white collar crime as a victimless crime, where the bank pays the price and no one else,” said Andrew Carswell, associate professor of housing and consumer economics, University of Georgia. “This is a mistaken perception … neighborhoods and homeowners pay the price.”

UNCOVERING THE SCAMS

Companies like Interthinx, CoreLogic and DataVerify all have data-driven fraud prevention tools for lenders. Interthinx’s program, for instance, identifies some 300 “red flags” including a buyer’s identity and recent sales in a neighborhood, while CoreLogic uses pattern recognition technology. CoreLogic also aims to bring a short sale fraud product to the market soon.

Interthinx’s Fulmer said regardless of the source, on average solid fraud prevention tools can be had for as little as $10 to $15 per loan. “The tools out there enable us to see what’s going on out there right now in real time,” she said.

Apart from fraud insurance, Prieston Group’s new credit rating system for lenders should have enough data within the next year to start providing valid ratings.

Prieston said the firm’s insurance product is growing at more than 100 percent per month, while CoreLogic’s Tim Grace said the firm’s fraud prevention tool business was booming.

Many lenders are also sharing more information about bad loans, though LexisNexis’ James said it is not nearly enough. “If lenders don’t start to share more information then fraudsters will continue to go from bank to bank to bank until they’re caught,” she said.

The University of Maryland’s Rossi said what the industry needs is a “central data warehouse” to combat fraud. “There has been a failure of collective data warehousing across the industry,” he said.

Mortgage Bankers Association (MBA) spokesman John Mechem said members have no plans for a central database, but added “we view our role as being to facilitate and encourage information sharing in the industry.”

The U.S. Patriot Act of 2001 allows lenders a safe harbor to share information, but does not mandate it. “We always encourage more information sharing,” said Steve Hudak, a press officer at the U.S. Treasury Department’s Financial Crimes Enforcement Network, or FinCen. “As of now, however, this is an entirely voluntary process.”

But Rossi said the government should step in. “The Federal government is probably going to have to take the initiative because I don’t see the industry doing this one on its own,” he said. “I am personally not a fan of big government, but we need more information sharing.”

Ultimately, the expectation is lenders will be forced either to improve due diligence, or face being pushed out of business as investors burned by sloppy underwriting during the boom urge them to adopt fraud prevention tools.

“Investor scrutiny is going to be higher than it ever has been,” Rossi said. “The days of a small amount of due diligence are gone.”

Many investors are also investigating their losses and forcing lenders to repurchase bad loans. This is resulting in “thousands of repurchases a month,” according to Prieston.

“When it comes to small lenders with only a few million dollars of loans, ten repurchases will absolutely put some of them out of business,” he said.

The government now guarantees more than 90 percent of the mortgage market and forms almost the entire secondary mortgage market, as private investors have not returned. The FHA, Fannie Mae and Freddie Mac are thus seen as playing an instrumental role in pushing improved due diligence to clean up the government’s multi-trillion dollar portfolio.

FHA commissioner David Stevens was appointed in July 2009. Since then the FHA has shut down 1,100 lenders, after decades in which the government closed an average of 30 lenders annually. He says most lenders he deals with are of a “very high quality,” but that “there are still lenders that either don’t have controls in place or are proactively engaging in practices that pose a risk to the FHA.”

Stevens does not expect to shut down lenders at the same rate as the past year, but added “the number will be much higher than the historical average.”

CoreLogic’s Grace said most large lenders have the tools in place to combat mortgage fraud, but admitted he was concerned about some smaller lenders. “The next shakeout of weak lenders will take place over the next 12 to 24 months,” he said.

The MBA’s Mechem said the U.S. mortgage market must be cleaned up if it is ever to return to normal. “The one thing private investors need to get back into the secondary market is confidence,” he said. “And investors won’t risk buying mortgages if they don’t have confidence in the quality of the loans. Restoring that confidence is going to play a pivotal role in restoring the markets.”

In the meantime, mortgage fraud is expected to cause more problems in areas like Back of the Yards in Chicago.

Three doors down from the boarded-up, foreclosed property that has aroused Carrasquillo’s suspicions, father-of-three Oti Cardoso says he and his neighbors try to cut the grass at the abandoned properties on his block and to keep thieves out. But he has heard most empty houses end up occupied by gang members.

“I want my children to be safe, I don’t want drug dealers here,” he said. “I have tried to find the owner of these houses so I can work with them to help keep their homes clean.”

“If they only knew what was happening here,” he added, “I’m sure they would want to do what was right.”

http://www.reuters.com/article/idUSTRE67G1S620100817

Investors Row - half million dollar houses in a row ...

Here We Go Again – Obama & Democrats Push For Increase In The Worst Of Risky Mortgages

I can hardly believe it when I read it.

As we all know the were two things that created our current economic turmoil, reckless government spending that we couldn’t afford and reckless lending in the mortgage market.  The bad mortgages were then packaged and sold as investment securities destroying 401’s and bank accounts all over the world.

Every day you’ll hear about the need for more regulation – That simply isn’t so – what we need is less Government spending and an end to reckless mortgage lending.

Get ready for the next round of “sub-prime mortgages”, Obama and the Democarts want to “double down” and increase the number of “high risk” mortgages funded through Fannie Mae and Freddie Mac.

Freddie Mac and Fannie Mae were the first of the bailout babies – you and I and all of the other taxpayers in this Country have been gouged for about 7 Trillion dollars to buy up the earlier batch of “bad mortagges” these entities created.

So what is Fannie Mae and Freddie Mac up to now?

Obama Seeks To Refinance More Underwater Mortgages    

July 1, 2009 1:04 PM EDT

According to various reports, the Obama administration is stepping up their efforts to stem foreclosures and will start refinancing mortgages with a loan-to-value of as much as 125% through Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). The previous loan-to-value was 105%.
President Obama’s Making Home Affordable program sought to help up to 5 million mortgage holders refinance, but to date only 80,000 have been refinanced. (Sadly, of the 80,000, close to 50,000 have already  re-defaulted – what a failure). http://www.streetinsider.com/Economic+Data/Obama+Seeks+To+Refinance+More+Underwater+Mortgages/4767278.html
Consider this example – straight from the White House press release:
REFINANCING EXAMPLE
If your loan is held by Fannie Mae or Freddie Mac and you are current on your mortgage payments, you may be eligible to refinance your mortgage loan even if your LTV is up to 125%. LTV, or loan-to-value-ratio, is a measurement that compares the principal balance of your loan (the amount you currently owe) to the actual value of the house. For example, if your loan amount is $300,000 and the current value of your home is $240,000, your LTV is 300/240, or 125%. http://www.streetinsider.com/Economic+Data/FHFA+Releases+Details+Of+Plan+To+Allow+Refinances+Up+to+125%25+LTV/4767700.html
So, now the Government plans on leneding up to $300,000 on homes worth only $240,000. (Plesae note that the average price of a U.S. home this month is $178,000).
 
Where does this money come from – Your Tax Dollars.
 
For those of you who are asking, “So what does this mean?”, the answer is this. The Government will now fund mortgages to those who are underwater or indefault, with taxpayer funds, and allow the individuals to obtain loans that are, as the example above states, worth substantially more than the homes being mortgaged are worth.
 
The riskiest of all of the sub-prime mortgages were those made with no down payment and where the loan to value was above 80%. The very worst were the 125% LTV loans.  
 
Are you asking, and what happens when the person re-defaults in 6 months and walks away with the $60,000 above the home’s value? Answer – THE AMERICAN TAXPAYER IS ON THE HOOK FOR THE MORTGAGE.
 
This is a receipt for deepening the current crisis – not resolving it. 
 
The answer isn’t additional “regulation”. The Government is “regulating” that this be done.
 
The answer is in electing Politicians with an ounce of common sense.    

Obama puts critics of financial overhaul on notice! Just more of the same old ****. Video of “Regulators reporting to Congress”

Have you read this …….

WASHINGTON – President Barack Obama said Saturday that current financial rules exploit consumers and he put critics of his proposed overhaul on notice: “While I’m not spoiling for a fight, I’m ready for one.”

Obama used his weekly radio and Internet address to defend his recent proposal, which is intended to prevent a repeat of the breakdown that has sent the U.S. economy reeling. But such major changes face a fight in Congress and opposition from some leaders in the banking and insurance industries.

In the address, Obama focused on a consumer watchdog office that he wants to set up.

“This is essential,” Obama said. “For this crisis may have started on Wall Street. But its impacts have been felt by ordinary Americans who rely on credit cards, home loans and other financial instruments. http://news.yahoo.com/s/ap/20090620/ap_on_go_pr_wh/us_obama_consumers

It is generally agreed that the current financial crisis started in the mortgage industry and the primary entities responsible for the collapse were Fannie Mae and the Federal Reserve. Yes, the same Federal Reserve Obama wants to give more power too.

Do you know how many “Federal Regualtors” were employed to “over see” Fannie Mae in the last deacade?  Two hundred, full time regulators. Were they asleep at the wheel?  Heck No! They did their jobs and then were ignored by Congress when they reported the misdeeds they uncovered.

The video below is a sample of one group of regulators reporting to Congress on this very issue ……

Franklyn Raines – CEO of Fannie Mae, later entered into a plea deal on charges of cooking the book …..

Note that a question was asked in the video, “why should Congress trust OFEO?” (the Regulatory Agency) who both discovered and alerted Congress to the misdeeds  – The real question is can the people trust “politically motivated” Polticians who ignore the Regualtors who are already in place.  

What did the Congress suggest – changes in Fannie Mae?  Heck No. Listen to Congresswoman Maxine Waters – the Regulators were “to blame” for trying to stop Fannie Mae – yep tose are Rep. Waters word the Regulators were to balme for trying to Fannie from starting this crisis. Presented with evidence of the problem Barney Frank denies a problem existed – listen to his words above and listen to him later try to deny these very same words below …

Take this article, from the Boston Globe, as a uniquely honest example of reporting on the topic ….

 The Boston Globe

Frank’s fingerprints are all over the financial fiasco

 

‘THE PRIVATE SECTOR got us into this mess. The government has to get us out of it.”

That’s Barney Frank’s story, and he’s sticking to it. As the Massachusetts Democrat has explained it in recent days, the current financial crisis is the spawn of the free market run amok, with the political class guilty only of failing to rein the capitalists in. The Wall Street meltdown was caused by “bad decisions that were made by people in the private sector,” Frank said; the country is in dire straits today “thanks to a conservative philosophy that says the market knows best.” And that philosophy goes “back to Ronald Reagan, when at his inauguration he said, ‘Government is not the answer to our problems; government is the problem.’ “

In fact, that isn’t what Reagan said. His actual words were: “In this present crisis, government is not the solution to our problem; government is the problem.” Were he president today, he would be saying much the same thing.

Because while the mortgage crisis convulsing Wall Street has its share of private-sector culprits — many of whom have been learning lately just how pitiless the private sector’s discipline can be — they weren’t the ones who “got us into this mess.” Barney Frank’s talking points notwithstanding, mortgage lenders didn’t wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so – or else.

http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/09/28/franks_fingerprints_are_all_over_the_financial_fiasco/

For a history of the Federal Reserves’ active participation and the Feds “active regulatory activity” that started this mess see this article: http://johnrlott.tripod.com/op-eds/FoxNewsMortgagesReg091808.html

The last thing America needs is more regulation from the same people who “regulated” the colapse into being in the first place. Amercia needs to get the Politican out of our wallets and 401ks and let America get back to work. Higher taxes and additional, corrupt regulation, won’t create more jobs. It will mean a weaker economy.

Additional Regulation won’t work if Congress can ignore the Regulators who are already in place …… while they take cash from the regulated ……..

and using their offices to work sweetheart deals (Senator Chris Dodd and Countrywide Bank) with those being regulated ….

Before you respond that Fox News is biased – check out this report from NBC …

Angello Mazillo, CEO of Countrywide has been charged with fraud and insider trading …..

http://money.aol.com/article/sec-charging-ex-countrywide-ceo-mozilo/481893?bId=MoneyBoard&tId=mfida481893&bpId=%2F&sort=3&pg=4

We don’t need more regulations that the crooked Politicians refuse to enforce …. We need fewer crooked Politicians.

“Subprime lending is back with a vengeance” – Government Programs Behind New Wave of Reckless Lending

Just when you thought it was safe to go back in the water… Subprime lending has come roaring back.

But this time, reckless financial innovation isn’t being hatched on Wall Street. Instead, state governments are angling to “monetize” first-time homebuyer tax credits so borrowers can purchase homes with little or no money down.

If this sounds eerily similar to the type of lending practices that got us into this mess, well, it should.

The federal government, as part of the recently passed economic stimulus package, will refund first-time homebuyers up to $8,000 if they meet certain eligibility requirements. The program is frequently cited as one of the myriad reasons a bottom in the housing market is imminent.

Critics, however, argue that rebates don’t end up in a buyer’s pockets until his or her 2009 tax returns are filed – even though rebates are credits, not just deductions.

Homebuilders like Pulte Home (PHM), Lennar (LEN) and KB Home (KBH), along with their lobbying arm, the National Association of Homebuilders, have thrown their full weight behind the rebate program, but say it still doesn’t go far enough.

In an effort to boost home buying — even for marginally qualified borrowersa number of states are finding creative ways to advance the tax credit to buyers on the day they get their new keys, rather than having to wait for next year’s refund check. This allows buyers to pay for things like closing costs, mortgage points – or even the down payment.

States are employing schemes whereby they offer prospective buyers low or no-interest loans for the amount of the tax credit, due upon of receipt of their money from Uncle Sam. If the borrower doesn’t make good, the loan becomes a junior lien on the property, with an interest rate that is far from usurious – usually just a bit over the prime lending rate. Missouri was the first state to launch such a program, and has since been joined by Delaware, New Mexico, Pennsylvania, Tennessee and others. States are even lobbying the IRS to deposit the refunds directly to the states, rather than to the home buyers, in order to circumvent non-payment. The IRS, for its part, “is reviewing” this idea.

In Washington, the state Housing Finance Commission runs a tax credit bridge-loan program, which it hopes will grow in the coming months. Not surprisingly, local real-estate professionals are behind the initiative. Washington Association of Realtors president Bill Riley told the San Francisco Chronicle he believes around half of would-be first-time buyers in his state “cannot save enough money for the down payment and closing costs.”

Exactly. That’s the point. This is precisely what differentiates a “would-be” home buyer and a home buyer. And that’s the way it should be.

If the federal government wants to subsidize home ownership, fine. It’s already proven unwilling to learn the lessons of Fannie Mae (FNM) and Freddie Mac (FRE) about the costs of jamming borrowers into homes they can’t afford. But these rebates should at least be limited to borrowers that meet even the most modest requirements to buy a home in a responsible manner.

The Federal Housing Administration — another vehicle for government-backed mortgages where taxpayers bear all the risk — gives out loans that require borrowers to post a meager 3% down payment. If a “would-be” homeowner cannot scrape together this amount of cash, that person should rent and save their pennies. They should not receive a no-interest loan from the state government. This is not discrimination, this is not redlining, its common sense.

In a rush to prop up home prices and delay the ultimate day of reckoning for the vast majority of US real-estate markets, the federal government — and now state governments as well — insist on coercing taxpayers to over-leverage themselves and take on a debt burden they cannot truly afford.

From the looks of it, Washington is leading by example.

Top Stocks blogging partner Todd Harrison is founder & CEO of Minyanville.com. This post was written by Minyanville Contributor Scott Andrew Jeffery.

http://blogs.moneycentral.msn.com/topstocks/archive/2009/05/08/subprime-lending-is-back-with-a-vengeance.aspx

McAuleys’ World: Once again the Government is behind these activities … just how short can our collective memory be …….

Fannie Mae & Freddie Mac – New Bailouts In Hand – Announce New Round Of Employee Bonuses – Will This Never End

The Wall Street Journal

MARCH 18, 2009, 4:54 P.M. ET

Bonuses Expected at Fannie, Freddie

More financial companies that are being propped up with federal money are facing political heat over bonus payments to executives.

Fannie Mae is due to pay retention bonuses of as much $470,000 to $611,000 this year to some executives despite enormous losses at the government-backed mortgage company. Fannie’s main rival, Freddie Mac, also plans to pay such bonuses but hasn’t yet provided details.

The Fannie bonuses are still considerable and come at a time when Fannie and Freddie are receiving increasing amounts of funding from the Treasury. For 2008, Fannie and Freddie reported combined losses of about $108 billion,  stemming from a surge in home-mortgage defaults. The U.S. Treasury has agreed to provide as much as $200 billion of capital apiece to Fannie and Freddie in exchange for preferred stock.  [By comparison AIG has received $180 Billion total – less than half the Fannie/Freddie payout] The two companies have said they will need a combined $60 billion of that money to cover their losses so far.

James Lockhart, director of the Federal Housing Finance Agency, of FHFA, which regulates Fannie and Freddie, said the bonuses they are paying are “critical” to retain people needed to support the mortgage market and work on foreclosure-prevention efforts. [Haven’t we heard this before? The only people who can fix the problem are the ones who created it!] After the companies’ chief executives were ousted in September, “it would have been catastrophic to lose the next layers down and other highly experienced employees,” he said. Mr. Lockhart added that compensation has declined for many employees because other types of bonuses weren’t paid last year and “past stock grants are virtually worthless.” [Lets not forget that the stock is worthless because Fannie & freddie lost 100’s of billions of dollars – bonuses were not paid as Companies that lose hundreds of billions of dollars are “bankrupt” and have no money to pay bonuses. The problem is obvious – the “entitlement philosophy” that assumes employees deserve bonuses even when they bankrupt the company that employs them] 

A recent Fannie securities filing says that Michael Williams, the company’s chief operating officer, is due to receive cash retention awards of $611,000 this year, atop a similar award of $260,000 in 2008. His base salary is $676,000 a year.

The company also disclosed plans to pay retention awards this year of $517,000 to David Hisey and $470,000 each to Thomas Lund and Kenneth Bacon. All three of them are executive vice presidents.

The bonuses this year are to be paid in two installments, one in April and the second in November. Those installments are to be paid only if the executives remain in their posts at the payment dates.

Hundreds of other Fannie employees also are eligible for retention awards, but the company disclosed only the largest of the bonuses. It said there are no plans for a retention bonus for the chief executive officer, Herbert Allison, who elected to serve without any salary or bonus in 2008.

Freddie has a similar retention-bonus plan but hasn’t yet disclosed the amounts due to be paid to its top executives. That disclosure is due by the end of April.

A Government Regulator seized management control of Fannie and Freddie in September under a legal process called conservatorship. That resulted in a crash of the companies’ stock prices to less than $1 as investors concluded that the companies will be unable to pay dividends to common shareholders again for years, if ever, as they struggle to support preferred-stock dividend payments to the Treasury. Until last year, Fannie and Freddie executives were compensated largely in the form of common stock, no longer an appealing option. [Past Executives received payments in excess of $20 Million Dollars a year plus bonuses – leading some of those very same executives to “cook the books” to maximize their bonus payouts while hiding the true financial results of the sub-prime mortgage crisis, the very crisis that lead to our current financial collapse].

Of Bailouts & Bonuses – Fannie & Freddie To Pay Bonuses – When Will This End

The Wall Street Journal

MARCH 18, 2009, 4:54 P.M. ET

Bonuses Expected at Fannie, Freddie

More financial companies that are being propped up with federal money are facing political heat over bonus payments to executives.

Fannie Mae is due to pay retention bonuses of as much $470,000 to $611,000 this year to some executives despite enormous losses at the government-backed mortgage company. Fannie’s main rival, Freddie Mac, also plans to pay such bonuses but hasn’t yet provided details.

The Fannie bonuses are still considerable and come at a time when Fannie and Freddie are receiving increasing amounts of funding from the Treasury. For 2008, Fannie and Freddie reported combined losses of about $108 billion,  stemming from a surge in home-mortgage defaults. The U.S. Treasury has agreed to provide as much as $200 billion of capital apiece to Fannie and Freddie in exchange for preferred stock.  [By comparison AIG has received $180 Billion total – less than half the Fannie/Freddie payout] The two companies have said they will need a combined $60 billion of that money to cover their losses so far.

James Lockhart, director of the Federal Housing Finance Agency, of FHFA, which regulates Fannie and Freddie, said the bonuses they are paying are “critical” to retain people needed to support the mortgage market and work on foreclosure-prevention efforts. [Haven’t we heard this before? The only people who can fix the problem are the ones who created it!] After the companies’ chief executives were ousted in September, “it would have been catastrophic to lose the next layers down and other highly experienced employees,” he said. Mr. Lockhart added that compensation has declined for many employees because other types of bonuses weren’t paid last year and “past stock grants are virtually worthless.” [Lets not forget that the stock is worthless because Fannie & freddie lost 100’s of billions of dollars – bonuses were not paid as Companies that lose hundreds of billions of dollars are “bankrupt” and have no money to pay bonuses. The problem is obvious – the “entitlement philosophy” that assumes employees deserve bonuses even when they bankrupt the company that employs them] 

A recent Fannie securities filing says that Michael Williams, the company’s chief operating officer, is due to receive cash retention awards of $611,000 this year, atop a similar award of $260,000 in 2008. His base salary is $676,000 a year.

The company also disclosed plans to pay retention awards this year of $517,000 to David Hisey and $470,000 each to Thomas Lund and Kenneth Bacon. All three of them are executive vice presidents.

The bonuses this year are to be paid in two installments, one in April and the second in November. Those installments are to be paid only if the executives remain in their posts at the payment dates.

Hundreds of other Fannie employees also are eligible for retention awards, but the company disclosed only the largest of the bonuses. It said there are no plans for a retention bonus for the chief executive officer, Herbert Allison, who elected to serve without any salary or bonus in 2008.

Freddie has a similar retention-bonus plan but hasn’t yet disclosed the amounts due to be paid to its top executives. That disclosure is due by the end of April.

A Government Regulator seized management control of Fannie and Freddie in September under a legal process called conservatorship. That resulted in a crash of the companies’ stock prices to less than $1 as investors concluded that the companies will be unable to pay dividends to common shareholders again for years, if ever, as they struggle to support preferred-stock dividend payments to the Treasury. Until last year, Fannie and Freddie executives were compensated largely in the form of common stock, no longer an appealing option. [Past Executives received payments in excess of $20 Million Dollars a year plus bonuses – leading some of those very same executives to “cook the books” to maximize their bonus payouts while hiding the true financial results of the sub-prime mortgage crisis, the very crisis that lead to our current financial collapse].

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