It’s Monday, and we are waiting to see if the markets continue to hammered this week. In the meantime, here’s a new glimpse into the fraud that helped bring on this collapse: [Thank you Vegas RE]
So just how extensive was the fraud anyway? Feel free to chime in with your four cents worth [Trite phrase adjusted for inflation.] or share your links ideas and stories- anything housing related.
This is an open thread, so the floor [or whatever you happen to be on at the moment] is yours.
Foreclosures are up in the Phoenix area- way, way, up.
Last June Doom looked at the Notice of Trustee Sales [NOTs] and Cancellation of Notice of Trustee Sales [CNOTs] issued in Maricopa County. [Phoenix area] Our data includes both residential and commercial property.
There was a record 2325 NOTs issued is June 2007. As of last Frday, there were 6668 NOTs issued in Maricopa County for the month of June, and there is still one business day left. At the height of the S&L crisis in the 1980s, the record month for NOTs was March 1988 when 1431 NOTs were issued. Here’s the historical graph:
Just when I think I’ve seen every possible home buying incentive:
PALM BEACH GARDENS, Fla. - She has tried nightclubs and online dating sites, but now a 42-year-old single mother is looking for love where everyone else’s heart is breaking: the real- estate market.
After a year of trying to sell her four-bedroom home and eight years of singledom, Deven Trabosh is offering her Florida home and a shot at marrying her on the Internet.
"Marry a Princess Lost in America," Trabosh wrote in the ads she posted on eBay and Craigslist last week. She describes a life of romance and travel and a home that features vaulted ceilings, upgraded tile and a soaking tub in a gated community with a pool and tennis courts.
"I’m struggling . . . I don’t want to lose my house, and I want to find somebody," said Trabosh, who changed her name in the ad to Traboscia to keep people from finding her in the phone book. "So I came up with this dream plan because I’ve always dreamt about being a fairy-tale princess."
In January of 2007, Doom was reporting that a mortgage lender that had gone out of business had apparently left files and computers in the office. Our principal worry at the time was the potential theft of personal data. John however, pointed out another problem with sloppy paperwork earlier this week to me:
Looks like that blizzard of paperwork and files (electronic and otherwise) lost in the meltdown of the subprime originators could conceivably come back to bite bondholders in a way we didn’t anticipate. The short story is that default servicing gets problematical if you’ve lost all the paperwork on a mortgage, and this happened a lot in the chaos of crumbling initiators and over-complicated structured finance.
The quote below from this OpEdNews story also suggests that there could be horrible problems in Q-election with their QSPEs. Once again the story from years back about Fannie’s sloppiness with SFAS 140 is rearing its ugly head.
"The investors have another problem: the delay in assigning particular mortgages to particular investors means there was no "true sale"of the security (the home) at the time of securitization. A true sale of the collateral is a legal requirement for forming a valid security (a secured interest in the property as opposed to simply a debt obligation backed by collateral). As a result, the investors may have trouble proving they have any interest in the property, secured or unsecured.
This is not an uncommon problem. Back in February Bloomberg reported:
Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven’t been able to prove they own the mortgages. The confusion is another headache for U.S. Treasury Secretary Henry Paulson as he revises rules for packaging mortgages into securities.
“I think it’s going to become pretty hairy,” said Josh Rosner, managing director at the New York-based investment research firm Graham Fisher & Co. “Regulators appear to have ignored this, given the size and scope of the problem.”
So who is hurt when these foreclosures don’t go through? According to the OpEdNews:
On our masthead is the quote from Churchill "A nation that forgets it’s past is doomed to repeat it." By extension we could add "A nation that doesn’t learn from the mistakes of other nations is doomed to repeat their mistakes."
An article from today’s Vancouver Sun should sound familiar to Doomers. It is discussing how the Victoria housing market is cooling- and the article could have been lifted from a 2006 Arizona Republic, Las Vegas Review Journal, Sacramento Bee, etc. [Bubbleheads know the cast of characters]
VICTORIA — Real estate sales are down in the provincial capital. The number of sales and the total value are lower, and the real estate industry is seeing signs that Victoria’s housing boom is over.
"We are definitely seeing a shift in the marketplace, although it’s certainly not a time for panic," said Victoria Real Estate Board president Tony Joe. "For people hoping home values will be plummeting any time in the future, I don’t think that’s going to be happening any time soon."
Joe said the market has been cool so far in 2008, but that’s in comparison to 2007, an "exceptionally busy year when we exceeded all the numbers." "We’re also looking over the last five or six years and what we’re finding is things are just coming back to normal," he said.
Compare that to this 2006 USA Today article discussing the Phoenix market:
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We’ve got some smart readers out there, and we have a question for you.
Prior to the Mortgage Forgiveness Debt Relief Act that was enacted in December of last year, lenders could issue a 1099 as a result of modification of the terms of the mortgage, or foreclosure on your principal residence. This is not true for all mortgages however.
I received the following question:
It’s my understanding the Mortgage Relief Act only applies to purchase loans for owner occupied properties. The following loans are excluded:
-second homes
-investment homes
-cash out refis of any type(over the original mortgage balance)
-HELOCs
I’ve seen agents soliciting investors to short-sell their rental homes. If an investor is going to "give up" on a property wouldn’t he be better off just letting go into foreclosure? Arizona uses Trust Deeds and I believe the banks have no recourse for any deficiencies(excluding fraud). Will the bank will issue a 1099-C to the owner for the bank’s loss in a foreclosure? I believe they will issue 1099-Cs for a bank’s loss in a short-sale(including all closing costs and commissions).
I’m assuming all these scenarios happen without bankruptcy protection.
I fear that an investor, thinking he’s doing the "right" thing by short-selling, will get hit with 1099-C. If the bank’s total loss is 150K, he will owe $45,000, assuming 30% total tax liability.
So as an investor, are you better off walking or trying a short sale?
L is currently on vacation, so I couldn’t pester him on this one. An online search, though, seemed to generally concur with this posting by a short sale negotiation company:
Amount of Debt Canceled
This is not your loan balance. It’s your loan balance, plus every single little nit picking fee the Lender can tack on. Add penalty and fees too!
In a Foreclosure, these fees and charges are pretty much left unchecked by anyone from the homeowner’s side.
In a Short Sale, either the Listing Agent or a Negotiator can help negotiate a reduction of these charges. In fact everything in a Short Sale is negotiable including the very issuance of this 1099.
Remember, the Lender is reporting this to both you and the IRS as "income". While you may or may not fall under the protection of the Mortgage Forgiveness Debt Relief Act (HR 3648), there is also the State tax consequences to be considered.
From the desk of the System Administrator (not Twist):
HousingDoom has been under assault from spammers the past few days - if you use our handy RSS feeds, you might have noticed some of the spam.
We have upgraded to the newest version of WordPress, and it should prevent exploits of this kind.
Please let us know if you experience any issues (or notice ads for pharmaceuticals showing up all of a sudden).
Thanks to John Hernandez for this story of foreclosure and "counter-foreclosure":
Condo associations that are in a financial bind from mounting foreclosures are now targeting lenders who have taken back units from owners in default but are themselves failing to pay their share of maintenance fees.
As more units end up in the hands of lenders, the banks and mortgage servicing companies are responsible for maintenance payments for those units. But administering the growing pool of real estate has proved challenging for lenders.
The Residences at the Bath Club Condominium Association in Miami Beach is pressing a foreclosure action against Wells Fargo as trustee for an investment pool that owns the mortgage on a unit that isn’t paying its maintenance fees.
The lender owes $32,252 in late maintenance fees on the unit it took back more than a year ago.
If that doesn’t sound complicated enough, it gets even more complex:
Determining exactly who is on the hook is itself difficult. The original mortgage was issued by Mortgage Loan Specialists of Irvine, Calif. A spokeswoman for Wells Fargo said it was only the trustee for the bondholders who invested in a securitized mortgage pool. The servicer of the loan is Impac Funding Corp. of Irvine, Calif., which shares the name with the company that issued the mortgage-backed securities and is also named in the foreclosure suit, Impac Secured Assets Corp.
The lender needs to come up with the past due maintenance fees by Friday morning or it could lose the oceanfront condo in a foreclosure auction. The unit sold for $1.45 million during the height of the condo boom, according to Miami-Dade County property records.
The highest bidder would get the two-bedroom condo at 5959 Collins Ave. free of a mortgage.
Recently, lender’s have started a pattern of not paying maintenance fees:
FYI…
I was surprised a couple of days ago when I didn’t see the Relevant Articles section on our sidebar. It seemed that sometimes it was there, sometimes it wasn’t. I complained to our sys admin, who assures me the sidebar isn’t going anywhere. The Relevant Articles now only appear on the homepage, and not on individual posts.
