Are The 250,000 Foreclosure Sales From Q2 About To Be Reversed, As Fitch Prepares To Downgrade Foreclosure Fraud Companies

Tyler Durden's picture

Minutes ago RealtyTrac has released its Q2 summary snapshot. In summary, Q2 saw 248,534 properties in some stage of foreclosure (default, scheduled for auction or bank-owned) sold to third parties. This represented a 5% increased from Q1, and a 20% decline from Q2 of 2009. The average sales price of a foreclosure property was 26% below the average sales prices of regularly sold homes. “While foreclosure sales increased in the second quarter, non-foreclosure sales increased even more, spurred on by the homebuyer tax credit that expired during the quarter,” said James J. Saccacio, chief executive officer of RealtyTrac. “That had the net effect of lowering foreclosure sales as a percentage of total sales during the quarter, but that may be a temporary dip as the removal of the tax credit could drive more buyers back to discounted short sales and REOs.” Ah, but herein lies the rub: with pretty much everyone now halting evictions, and foreclosure themselves, all those who are looking for foreclosure bargains will be very, very disappointed. Because while the actual market is digesting the implications of what the recently announced JPMorgan moratorium on foreclosures means (very bad things), Fitch has already fired the first shot and announced it would downgrade mortgage companies engaging in foreclosure fraud. Well, that means preeeetttty much all of them. And the most troubling implication: all those who bought foreclosed properties may soon be facing a transaction unwind, once it becomes clear that there isn't a clear title owner.

From the NYT:

Fitch Ratings said that Wednesday it was asking mortgage companies about their internal processes for executing foreclosure affidavits. If it finds the processes lacking, Fitch will consider downgrading the company’s rating.

The agency also said if the issue is widespread, the resulting delays and extra costs to foreclose could increase losses related to residential mortgage-backed securities.

Bottom line is look for RealtyTrac's foreclosure numbers to take a sharp turn lower in coming months as the foreclosure fiasco hits near and far, and all those banks holdings trillions in RMBS to renew their push against the FASB's recent MTM initiatives. Because as Bruce Krasting pointed out earlier, the 1,500 or so people that are sweating like a Wall Street whore in church and have chopped their left testicle off to never, ever allow the general public to catch a glimpse of the radioactive effluvium gracing the "asset" side of their balance sheets, have just upped the ante and are now throwing the right testicle in the pot as well. The reason is simple: suddenly banks will be stuck with properties which are technically on their books, but to whose cash flows they have no  recourse, and no recourse to kick out their vagrant squatters! This means that until the foreclosure crisis is resolved, and that could take years, suddenly hundreds of billions in RMBS paper will have to be marked not at par, but at zero.

Furthermore, the 250,000 or so people who bought their foreclosed home in Q2 (not to mention the millions over the past two years) will be sweating bullets that the previous owner doesn't come back and demand a cease and decist on the transactions, as well as a full unwind and give up of all equity rights until the rightful owner of the underlying debt is identified. And since one doesn't exist, hundreds of thousands, if not millions of foreclosure transactions will suddenly become null and void, and nobody will be paying any mortgage on them, resulting in billions of incremental writedowns.

P.S. Homebuilders may well be the biggest losers in all this, as the end of foreclosures means someone will need to step in with a price point that is 26% below the prevailing one.

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SheepDog-One's picture

The banksters are now in trouble. Be very afraid hold on tight when the banksters are in deep shit thats when the bad things happen.

Problem Is's picture

The fascist Roberts will step in and overturn anything that threatens the Wall Street TBTF's to this degree...

Being the corporate, fascist, treasonous worm that Roberts is...

Bringin It's picture

Good point SDO, but what are they going to do?  More and more they looked backed into a corner.  I mean take the false-flag gambit for example.  Unlike past successful turns with this ploy, this time, many many people are wide awake, with their eyes open and watching.

I read GeoPols thoughts about the benefits to TPTB to the $500/barrel oil that war on Iran might cause, [everyone will need dollars] but I don't see how they make it happen.   There's already dissention on the home front.

Fascinating.  I'm just fascinated.


blindfaith's picture

au-contraire, my friend....the government has the paper remember, and we are the government.  Bad things happen to us when we don't ask questions and investigate especially when we trust thieves twice.


And, now lets hear a big round of applause for the winners...dada, the lawyers!  And, a wee small tear for the wonder the mega rich are fighting like hell for the tax freeze.  Everyone please use their brains...taxing the upper 2% has no effect on small business, it is bull.

Mako's picture

It's planned FUBAR.  All the lemmings have been led to the black pit.  You have been living in fiction.

1.) an attorney in court foreclosing or collecting a debt is a debt collector and has no standing

2.) a trustee, nominee, servicer, etc have no standing because they are NOT the holder in due course

3.) even if the note could be found

4.) assignments are messed up

5.) although the mortgage docs say a loan was given, no loan was given and matter of fact it would illegal for the banks to give you a loan... bank don't and can't lend their own credit

6.) banks can't show a loss because there was nothing for them to lose, they do not lend their own credit

READ the Modern Money Mechanics by the Federal Reserve

Very few debts can be reduced to judgment if you know how fiction of the system works. 

blindfaith's picture

please site references for all to see...someone may need them.

Mako's picture

Heintz v. Jenkins, 514 U.S. 291 (1995)

An attorney who regularly collects a debt is a debt collector and can be sued if they do not comply with Fair Debt Collection Practices Act.   A bank is a fiction and has to be represented but an attorney is a debt collector.  You can actually sue the attorney declaration and damages if the attorney does not follow the act.   I don't know how an attorney can serve you motions when you can tell them to stop contacting via the Act.

Standing is fundamental Law, party A can't sue on behave of party C.   Only the holder in due course can sue. 

Holder in due course can't convert a non-payment on a contract into damages, the holder must prove damages.  No damages were cause because banks don't lend their own credit. 

Read the Modern Money Mechanics.  The easiest way to fight all this is challenging standing first and foremost. 

1.) no party that has standing

2.) attorney is a debt collector and has no standing and can be sued via the FDCPA.

3.) possibly missing note or incomplete assignment and recording of assignment

4.) even if they get by all that, no loan was given

5.) you can't simply convert a non-payment into damages, no damages will be found because a bank does not lend it's own credit

If they start foreclosure you can move in a few different fronts,  1.) show plantiff and attorney have no standing 2.) move an action in USDC as to the status of the plantiffs as debt collector and/or 3.) if the county court is rubber stamping foreclosures, file for bankruptcy and when the planitiff comes there make them prove standing that they don't have

Spalding_Smailes's picture

Please, everyone keep moving, nothing to see here..

Price slide likely to continue as shadow inventory comes to light

For Cook, DeKalb, DuPage, Grundy, Kane, Kendall, McHenry and Will counties, the shadow inventory number translates to 22 months of distressed housing supply. The combined shadow inventory for Lake County and Kenosha County, Wis., where the delinquency rate is 18.4 percent, is more than 22,000 homes, or a 23-month supply.

"A fifth of people (in the Chicago area) aren't paying their mortgage," said Wayne Yamano, a vice president at John Burns. "Next year is when you're going to have the most competition in the market and the proportion of distressed sales will be the highest."

Some snapshots:

•In Evanston's 60202 ZIP code, for example, only 0.55 percent of homes were foreclosed upon and reclaimed by lenders in June. However, almost 7 percent of mortgages were at least 90 days delinquent, putting the future of those homes at risk.

•In Chicago's 60611 ZIP code, part of Chicago's affluent Streeterville and Gold Coast neighborhood, only 0.52 percent of properties were bank-owned in June, but 5.31 percent of homeowners hadn't paid their mortgages for 90 days.

•In Montgomery in June, less than 1 percent of properties were bank-owned, but almost 13 percent of mortgages were seriously delinquent.

Overall in Illinois, the drumbeat of foreclosures has continued. In August, according to RealtyTrac, foreclosure proceedings were initiated on 6,912 homes; 5,412 homes went to court-ordered foreclosure sale; and 4,484 homes were taken back by lenders. One in every 314 homes with a mortgage received some sort of foreclosure filing in Illinois in August.

euclidean's picture

Look, the whole thing is just another hoax. The NYT article is obviously fabricating another story. Since when would Fitch be doing any background checks for instance? It's 3 years too late!!

But I do like the fact it helps sell a higher USD, what with all those other positive indicators spewing out of well founded research. I'm still waiting for GS to go long the EU. Wait ... f**k! I've got my charts upside down.

Double down's picture

Now that is nice, no longer a need for MTM.  What is the definition of an asset, had something to do with control? 

TheManagement's picture

We are asking that you not reinforce the negative stereotypes regarding the ongoing challenges to the mortgage industry -- remember, now is a great time to buy.



Spalding_Smailes's picture

In Miami, Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors, predicted that a limited supply of land coupled with demand from baby boomers and foreigners would prolong the boom indefinitely.

"South Florida," he said, "is working off of a totally new economic model than any of us have ever experienced in the past" according to a realtor who predicted that a land shortage will support higher prices indefinitely."

"Trading Places: Real Estate Instead of Dot-Coms", in the NYT.

March 29, 2005
Steaming_Wookie_Doo's picture

Mommy, what's a realtor?

That's like someone who sells cars when there's no more gas left.

bronzie's picture

"Mommy, what's a realtor?

That's like someone who sells cars when there's no more gas left."


that's subtle, SWD - I like it!

realtors are far worse than used car salespeople

what's the worst a slimy car salesman can do to you?  sell you a lemon?  cost you a few thousand bucks?

a realtor pushes you to enter into a transaction that can lead to:

> being a debt-slave to a declining asset for the rest of your life

> being tied to an illiquid asset with high transaction costs

> bankruptcy

> foreclosure

> loss of significant-other and children (significant % of divorces occur over financial matters)

realtors are the lowest of the low

davidsmith's picture

Well, the sales may be unwound for title issues, but they will certainly be unwound for conversion, and that will be based on title problems, but also fraud and conspiracy.


Let's just hope the idiot lawyers are smart enough to sue for fraud and conspiracy (and RICO!!) and make sure the United States is a defendant. 


Or will that scum cave out of cowardice, greed and simple ignorance of the law.  We'll see!!

Bringin It's picture

RICo!!! I want perp walks.

Careless Whisper's picture

apparently perjury is not a crime for banksters and lawyers in duval county, florida. if you're roger clemens, well sorry.


Everyman's picture

The banks will also have to reveal what crap they have on their balance sheets.



This decimates the REITS, and ALL the banks holding the paper.  I cannot comprehend the costs in BILLIONS just to verify the paper.

The only thing that scares me about this is a "FIX" by CONgress which would go something like:  "It is easier to do away with property rights because everything is fouled up so much, and these bankers can't be allowed to fail."

I think this is going to go to shooting.

Conrad Murray's picture

The riots were on in Europe again today.  Your congressional fix scenario could quite possibly be the one thing that would get Americans in the streets.

Mr Lennon Hendrix's picture

The big bad one is a comin', and all of Europe knows it.

Spalding_Smailes's picture

Wait till joe six pack watches inside job' in a few days ... extra butter with that popcorn.!


UPDATE~ What is FAZ trading at?I know vxx is set for liftoff.

StychoKiller's picture

If the general public even knew/read what's in "The Big Short", pitchforks would have already been deployed!  "Inside Job" looks like what 60-minutes should have been doing for the last three years!

Caviar Emptor's picture

Full GM-style nationalization might be on the table: bondholder haircut, loan foregiveness, then issue stock on "First American Realty"

Problem Is's picture

Obummer-nomics: No Banker Left Behind (NBLB)

  1. Bondholders made whole; (Think Gross in the WH)...
  2. Geithner announces new HUMP program to help the "little people";
  3. Record Wall Street bonuses;
  4. Tax payers eat another giant shit sandwich and austerity...
Spalding_Smailes's picture


Moody's rates servicers on a scale of SQ1 as the strongest, to SQ5 as weakest. Currently, the JPMorgan Bank primary servicer rating is at SQ1 on residential and subprime loans. Its primary servicing portfolio totaled roughly 6.8 million loans for an unpaid principal balance of roughly $1.2 trillion as of June 30.

Moody's will assess delinquency transition rates, foreclosure timelines, loan cure rates, recoveries, loan resolution outcomes and REO management of both JPMorgan Chase and Ally. All factors are potentially affected by the foreclosure suspensions.

bronzie's picture

"Think Gross in the WH"

that's gross!!!

vachon's picture

 I was a title searcher for a title insurance comapny in Florida for 10 years and people like me verified foreclosure docs and chain of title requirements.  When the market fell apart, I and 90% of my fellow title insurance workers were laid off.  I subsequently went to work for a very large title chop-shop in Tampa.  What I saw was so horrifying, I quit after a month.  

So like, yeah, I'm shocked...shocked.  Right.

Number 156's picture

I dont know.. I think this will only support housing prices for some time, due to the fact that many homes will be taken out of inventory. 

bob_dabolina's picture

Bank balance sheets will new loans = lower prices

This also means lower M2/3, which means, gold prices will get hammered, however relative to other assets it's still the best investment.

Number 156's picture

What about the title insurance companies?

Will they provide a back door bailout to the banks ala AIG?



Market Share 2007

FAMILY                                   SHARE

First American Corporation    30.04%

Fidelity National Financial      26.40%

LandAmerica                         19.34%

Stewart                                11.73%

Old Republic International    05.48%

Other Regional Companies   07.01%

TOTAL 100.00%

Source: American Land Title Assn

traderjoe's picture

Can't wait to see CNBC spin this as positive for consumer spending. iGadgets to the max!

Oh, has had some good articles on this as well...

bob_dabolina's picture


This is gona be a problem...BIG TIME

I am pulling the remaining funds I have from my bank in the A.M.

I am depositing into a well researched credit union. Enough is enough.

Clampit's picture

Man I LOVE my short sale ... ;-)

Caviar Emptor's picture

With foreclosures frozen and people not paying mortgages, the next step in the progression will be renting and subletting parts of homes by deadbeat borrowers. That will keep the 99-week crowd afloat, lower neighborhood rents and reduce demand for housing. It's "House Pooling" and it sure can be fun. 

Mr Lennon Hendrix's picture

I thought this would start years ago, but pride has a way of messin' with people.  No one wants anyone else to know that they're foreclosing.  They would rather wilt and go bankrupt.

Caviar Emptor's picture

But starting today they never need to tell anyone because of the foreclosure moratorium. Deadbeats can now be landlords and make income while living rent free. 

Arkadaba's picture

No idea how this will play out but I'm guessing yeah could be big. Stockpiling popcorn!

Mentaliusanything's picture

“Oh what a tangled web we weave, When first we practice to deceive” Sir Walter Scott

I have to write it, i just have to.

Freeze bitcheez

snowballs chance in hell of winding this web of lies and deception. 

frankTHE COIN's picture

The MERS system, plus the fraud, could result in 65 million home owners, having their once pre, or  forclosed home, free and clear. The other side that THINKS they have title is fucked.

Oh regional Indian's picture

Clearly, moving from over-regulation to under-regulation to massive over-regulation will have such effects.

I remember, when I first landed in America, in 1995, I thought I'd landed in paradise. Coming from a chaotic India, everything seemed so smooth and effortless. And of course I believed the rhetoric of the US being the least corrupt nation on earth.

Fast forward to 2006 (when I left), the wool had been pulled firmly from my eyes. Stints in upper management of one of the largest Defense(Ha!) contractors, a wild ride up and down the .con revolution, a close-up and personal view of the housing fiasco, where a broke and actually illegal (shhhhhhh!) me could land a million dollar Ninja loan. In Kullyfornia of course.

Ahhhhhh.....the slow, painful shedding of inner-eye cataracts, one at a time. Painful but I'm grateful.

Feeling nostalgic!


JLee2027's picture

Corruption is a side effect of fiat's gotten progressively worse...try us again after the system'll be amazed.

Oh regional Indian's picture

I hear you JLee. It's never the people. 

Awesome people, awesome land. 

Totally screwed governance and of course the web of deceit, now openly unraveling.

If I ever dream of being back there, it is with the good memories.


anonnn's picture

Thanks your fine post.

The .con revolution. Precious viewpoint  and probably not typo.

The.con BlackSwan


Oh regional Indian's picture

.con indeed! No typo there!