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Barclays' View On The GMAC Scandal Underscores The Perceived Fall-Out Severity In Judicial States
From Barclays' Jasraj Vaidya, who states: "At this stage, we are unable to ascertain what that exact issue might be. What is certain is that foreclosure timelines in those states for GMAC loans will be extend further, potentially adversely affecting their eventual severity" which echoes verbatim what Zero Hedge suggested a week ago on the Florida Judge news: "The implications for the REO and foreclosures track for banks could be dire as a result of this ruling, as this could severely impact the ongoing attempt by banks to hide as much excess inventory in their books in the quietest way possible." Jasraj also notes: "Using publicly available data from HUD and RealtyTrac, we have created a list of judicial foreclosure states. These are states where judicial foreclosures are most common and in which the lender has to appear before a judge and obtain a court order before initiating foreclosure proceedings against the delinquent borrower. Such states tend to have much longer foreclosure timelines than non-judicial states. What is striking about the list of states in the GMAC announcement is that all but one (North Carolina) are judicial states. Also, all judicial states in the country but one (Delaware) are in the GMAC list. This would hint at some potential issues with judicial states that is driving the GMAC directive." In the meantime, class actions lawyers across the country will not be sleeping for days.
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Add to list of potential Black Swans?
btw for the science-inclined, court-ordered devolvement of the complexity known as housing fraud seems to qualify as example of 2nd Law Thermodynamics' entropy. Collapse of complex systems proceeds most rapidly if an orderly path is available..
I was leaning more towards chaos theory myself but entropy is much neater.
Phil LeBeau, CNBC, reported GM and GMAC were never in a financial crisis, but pretended to be ailing in sympathy with their customers who are going through repos, foreclosures, and tough times. Phil says GM plans to energize and electrify its customers with its new Chevy Volt financed by a $8,000 gift from taxpayers and a $32,000 GMAC loan...and the kicker to close the deal, GM is offering a free house in Detroit.
1300 listings under $10k
"mild positive in the near-term [for housing]...
Me thinks it is not really sinking in:
1. For those loans that were chopped up into tranches - there might not be one owner that can claim ownership of the mortgage in order to have standing in a foreclosure proceeding.
2. MERS is a mess - can the chain of title be established?
3. How many documents were forged/backdated? What might the impact of that be in the courts, with the trial lawyers?
4. How many more mortgages will FNM/FRE be able to put back on the banks?
5. Will buyers freeze until these title issues are cleared? Will it put a pall on the market?
6. Could it be a window into the fraud and deception rampant in the system?
7. What if 'no one' wants to buy a foreclosed home until this gets cleared up? Will banks continue to eat the expenses, taxes, etc.?
This is not near term positive. That's just more wall street speak for when one of your rivals fail because your industry is dying.
This MIGHT, MIGHT be a HUGE wrench in the operations of the housing and banking industries. Might spike strategic defaults. How many GMAC payers might stop making payments knowing that NO foreclosure would be forthcoming? Oh, mild short-term positive for iPad sales. ;)
Or this could blow over. It's been in the works for awhile. But the monster is showing its face, and more and more people are getting a glance...
+1 - Great observations.
I also like the reference in other parts of this thread to ambiguous issues with Title Companies -- they could be on the hook (they are screwed), or they could claim no liability because it's not their fault someone else committed fraud. However, that *still* undermines their value -- title companies are mostly merely shakedown scams, and people don't yet hate real estate enough (but they will).
Agreeing with traderjoe, let's just jump to the conclusion: It's too big. The courts can't fix this. Expect to see new legislation, back-dated to address these issues. Like traderjoe's point #1, as a result of the tranches, there may not be an owner at all with standing (so it is impossible to establish clear title).
The proper metaphor is to compare the MBS market with property re-assignment after a war: Who owns the house? The previous occupants were killed in battle, and it's possible they have relatives, but maybe not, and we're not sure how to transfer the property. Besides, those houses are now on the other side of a nation's border (which was moved as a result of the war). So, some new fledgling government will make a decision and gift the house to somebody.
Since most of these properties are "owned" by the taxpayer (F&F are the entire backstop, everybody shoveled their toxic crap onto the F&F balance sheet), I expect Congress will cut a check to the tranche owners, or screw them, and then transfer property to some new "owner" in the same manner as seen after a war.
If folks think that a lower interest rate on a mortgage has an effect on house valuation, wait til they see what lack of a clear title does!
Why even ask Barclays' bank whore Jasraj Vaidya for answers?
Consult your far more accurate Magic 8 Ball for your questions, traderjoe...
Wells says "Title problem on buyers, bitchez..."
Wells is already hoisting an amendment on REO buyers at the last minute waving all Wells liability for a bad title...Buyer won't sign? Wells says NO SALE...
Title insurance companies as well are inserting protection language...
More players than GMAC know a rat's a foot...
YOU'RE HONOR...
http://williambanzai7.blogspot.com/2010/09/youre-honor.html
WONDERS OF SECURITIZATION
http://williambanzai7.blogspot.com/2010/09/wonders-of-securitization.html
As the dollar Ponzi continues its terminal collapse...
I wonder how the title insurance companies will hold out. Will there be a sudden avalanche of lawsuits on existing homeowners who didn't know that the foreclosed property they purchased had a defect in the title? It may be interesting to watch these stocks:
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
oh my..i didn't even think of title companies!!!!!
this mine field and this mine field here are actually one huge mine field...you know regular mines...magnetic mines and bouncing bettys...we tagged it and left it to the engineers.
tom hanks to his comanding officer in saving private ryan
But don't forget that virtually all insurance companies have a 'fraud' clause in the policy. In other words, in the event of fraudulent conduct by the insured, the policy is null and void. I would suspect that the title insurers will be looking into this very carefully before any checks are cut.
No way...this is priced in. The market is very efficient at this kind of stuff.
It will be priced in, but it's not fully reflected yet. As I said above, lack of clear title will devastate home prices.
Lets just hope they got the voluntary Title Insurance on their Cash and Equity. Otherwise it is only on the Loan Amount. What if it is due to FRAUD. May not be covered by Title Insurance.
Also, remember that the Banks only give a Special Warranty Deed. That only Guarantees the Title from the Lender and goes back not futher.
As usual in US business: Several will go under or be absorbed and 2 or 3 will remain to dominate the market.
class action lawsuit...what a scam those will be. the greatest financial fraud ever committed...violations of property rights, deeds and titles to property, companies foreclosing that have no standing in court! how many people have been wrongly foreclosed on...millions? do the people who bought a foreclosed house legally own it should the foreclosure prove invalid? property laws dating all the way back to the roman empire have been violated! who the hell owns the mortgage...that is the problem...has your mortgage been prepackaged with hundreds of others...then sold to hundreds or thousands of investors? it appears that carving up a mortgage to several parties violates laws in all 50 states and federal laws. can't remember how many times in the past three years i have read that the mortgage/note must remain whole. the mortgage/note holder must show up in court with the proper documents...no third party can foreclose. zerohedge is correct...this will only get worse. these crooks have falsified loan documents, dates don't jive, the same name can be found on documents that in one case had three different signatures for the same name, notorized documents aren't correct, some homeowners papers should be notorized but aren't...bank shows up with their copies notorized with dates sometimes weeks apart. selling mbs's that are in violation of propery laws...ohhh the stench of it all. i have to laugh, after refinancing the mers corp sends us a letter telling us how legal everything that they do is. however now in california a judge has ruled that mers has no standing in court! i guess their saying it so...don't make it so.....ugly ugly ugly
these crooks have falsified loan documents
yup, that's what the judge in florida said. isn't that a crime? just sayin'. don't peeps go to prison for that? let's see... submit a fake mortgage assignment, foreclose, and keep the loot that belongs to fannie. sounds like a racket to me.
i think gmac should be referred to as g mac; they gangsta, like flo rida --- "a v.i.p. with a guarantee"
http://www.youtube.com/watch?v=WfCtEFWaDKs
Can't be as bad as those BofA gangstas that foreclose on homes that no money is owed on or are current on payments and break in and wreck all your personal property.
http://www.tampabay.com/news/business/realestate/bank-of-america-forecloses-on-house-that-couple-had-paid-cash-for/1072632
http://theweek.com/article/index/200795/repossession-hell-5-extremely-wrongful-foreclosures
And they kidnapped the parrot!
hold on pardner!
it's hard to make a case that someone who has *stopped paying his mortgage* has a right to live in the house!
just think of the collateral damage. Trillions in bank capital wiped out. That's your bank account, and mine, and the bank account of the company who pays your salary and mine...
Millions of homes without a clear title, that's bound to be good for the valuations of all the other houses in the neighborhood, that's your neighborhood and mine...
House with murky titles cannot be sold, and therefore will not and cannot be repaired or maintained, that is bound to be good for squatters and others who will only improve the quality of life in neighborhoods.
This is bad 10 ways to Sunday!
Oh and I forgot. What will this do to lenders' willingness to give loans?
I guess it's just the Feds left in this "market" anyways, so the taxpayers can bear unlimited additional losses, on top of the trillions we already promised to backstop fannie and freddie, and on top of whatever it is we have been committed to regarding the FHA but the number has not been disclosed yet...
Looks like you wrapped it up pretty well there. The unexpected development here will so immeasurable damage to the housing market. Good for lawyers, bad for everyone else.
This story is getting more interesting. MarketWatch had a story that GMAC denied these reports:
http://www.marketwatch.com/story/gmac-denies-reports-of-foreclosure-mora...?
'GMAC Mortgage on Monday denied reports that it was instituting a mortgage foreclosure moratorium in 23 states. "The speculation likely emanates from a direction previously given by GMAC Mortgage to certain of its outsource vendors to allow time to address a potential issue that was raised in a number of existing foreclosures challenging the internal procedure we used for executing one or more judicially required forms," GMAC said in a statement. GMAC said that "all new residential foreclosures are continuing in the ordinary course of business with no interruption in our usual practice."'
Uh huh. Beats me what's going on here, but I'm going to grab some more popcorn. In any case, even if the above story is true, GMAC just screwed up completely by making a lot of people aware of the potential for trouble, and how to fight a foreclosure. Everyone involved in a foreclosure, including the Title Companies, had better start getting their ducks lined up.
Dammit! I thought I was so smart two years ago refinancing that E-Loan internet-closed toxic waste I used to buy the house. Now not only are rates a point lower, but I screwed myself out of the lottery tickets in the process. I went from servicing which was sold first to Aurora and then Homecoming to servicing that my (originating) bank kept.
Whatever other good & bad things this development may mean I don't see how this doesn't retard both the ability of the housing market to reach equilibrium in particular and the de-leveraging process of American society in general.
And that's bad.
Tyler, funny Barclays mentions a discrepancy w/N Carolina as I found as tiny discrepancy w/part of my points made in the "GMAC letter" article, occurs in S.Carolina.
Oh my sweet Carolina, I don't guess I'll ever another woman put together like you are.
I love the wiggle in your walkn' and your big city talkin', and your brand new shinny Plymouth ragtop car.
http://www.youtube.com/watch?v=KlibqhKlWRI
Trust me, I've got an eight grade edumacation.
Don't know what's up in Georgia though. ;)
Don't know what the issue is? He's behind the curve.
The issue is that if the foreclosing plaintiff does not have actual possession of the note or is not a holder in due course with right of possession, then the plaintiff seeking foreclosure lacks standing to even file the foreclosure complaint. Lacks standing completely.
So, GMAC is getting its ducks in a row to be sure that not only does GMAC actually have possession of the original note, it's waiting until those actual docs are in the hands of the foreclosing attorneys before proceeding further.
The next judicial consequence if it does not is judicial sanctions in a magnitude that will gain even GMAC's arrogant attention. Such as nullifying the homeowner's debt to GMAC, quieting title, and monetary sanctions from GMAC to homeowner.
Rinse and repeat a few million times, and pretty soon you're talking real money.
In the world of MERS, the mortgage and the servicing rights are tracked. The mortgage was separated from the note, securitized, sliced and diced and sold into tranches. MERS keeps track of this end. But the note. Ah, the note. They forgot about the note. If they want to transfer the note, they must pay the county recording fee to transfer the note. They never did. Its somewhere back there, but they drove off with the mortgage and left the note, and now they have no idea where they left it. They have to go back and find it. It may still be with the original mortgagee, since it was never assigned correctly. Who knows?
Or get can get the borrower to reaffirm the note.
I suspect that in the next few months or years, as they sort this out, they will attempt to get borrowers to reaffirm the note. Maybe they will dangle a carrot, like an instant refi to current rates or something.
http://www.nytimes.com/2007/11/15/business/15lend.html
"But the note. Ah, the note."
Great catch. Yes, that little thing that the homeowner is thrilled to receive when the debt is paid off. One would think the bankers would care just a little bit about that critical piece of paper. But since "it's just paper", they really didn't care what happened to it.
I paid off a second mortgage some time ago and have yet to receive a satisfied note.
I'm about to cause some trouble for somebody!
Actually, it is that simple. The servicer lacks 'standing' in 'some' judicial foreclosure states ... the lien holder must appear, not the flunky servicer. IF thats FMN or FRM then it's a pretty staight shot to foreclosure continuing (with a bit of delay) ... if the original lien is tied to a commerical store brand MBS however, it's an open question if the lien can be located at all ... many of these ops went tits up in 2007-2009 timeframe and there are all sorts of nasty lawsuits to fight through to get to the original lien.
Of course, there'll never be a clean title on the property but hey, it's free (for the time being).
Well. obviously, this is going to be something "government" must solve on a "federal" level. Can't have all those corporations losing their property, can we?
When all you see is the fee generation, it is easy to lose sight of the documentation. Couldn't happen to a nicer group of bankers. Lawyers should make out ( in service to the downtrodden home occupiers-sarcasm).
There is a problem in banking. A crisis of integrity. An abuse of power and control. Obvious in all it's dimensions. So simple, it sounds imbecilic to mention. Yet, here we are...debating what will happen.
Entropy is the perfect word for this. Well said. Delicious in it's perversity and twisted destructive capability. Put another banker on the barbie...
So is it time to file that quitclaim deed and see what happens?
No. The money is owed to someone.
It's just that the courts are overwhelmed with judicial foreclosures, and they will not tolerate shortcuts.
Even deadbeats are entitled to due process.
If you can get your creditor to break the rules, then you might win the free house lottery. one in a million shot.
Couple of things:
1. Who cares about solely judicial foreclosure states? I can say that I have first hand experience with the messes created by nonjudicial foreclosure (had a second foreclose nonjudicially about a week before the first did)... but, if the rules are not followed, these foreclosures can be invalidated just the same... the same facts that would cause a fraud on the court would cause a nonjudicial foreclosure to be invalidated... very simple concept. Further, even in nonjudicial states, an incredible amount of foreclosures that start as nonjudicial, end up in court... if this is limited to 23 states, they need to expand to all 50.
2. Even if the liens on the property aren't valid, the companies can still get a judgment against the debtors and then foreclose one the homes once the judgment is not paid... the judgment automatically attaches to all real property in the jurisdiction and you have a judgment lien instead of a mortgage... big whoop. The only difference is that there may be some other creditors that wiggle in during the chaos or have 2nds, 3rds, etc. In general, the mortgage document issue will only make a difference if other unsecured creditors have obtained judgment liens on the homes or if there are multiple loans on the home secured by other recorded mortgages. Might make those 2nds and 3rds a good idea, no? Better to be lucky than good.
or banks can simply sue on the (mortgage) note. there's no need to foreclose and take the collateral. that's their decision.
A priori, EVERYONE needs to send a certified letter(s) to their perceived mortgage servicer or mortgage owner and DEMAND to inspect the "wet" or original note and mortgage. The mortgage units at BAC, WF, etc are overwhelmed with all of this nonsense, just like GMAC. At least the consumer should start the above board process of requesting finding and inspection of the REAL docs. The banks will hem and haw and mail you a copy. A copy is not going to fly. Depending on how the note holder acts, this may be the first signal on how to proceed. You may even find out the folks you are mailing money to each month are NOT the HDC. It does not matter if you are in default or not, get ahead of the curve and go on the offensive. Imagine if you can stop paying your mortgage for a year in protest over some problem, then turn around and short your house to get out of that debt, turn around and have the down payment for an OREO. As devastating as all this write-off is to the banks, this was the very concept of (former) helicopter Ben. Put cash in everyone's pocket ASAP. In hindsight, all those TARP banks could have paid-back TARP with a 30% haircut on mortgage principle per family home under $1MM. It would have saved a lot of heart ache, trouble and uncertainty. The alternative is more waffling.
Civil disobediance for the fat, dumb and middle aged such as myself.
First post, so be gentle, but I have to ask a fairly simple question to the smarter whole. Let's assume my mortgage was originated with Chase bank and was then sold as a whole loan to FNM, FRE, etc to make things simple. Given the inefficiences with the servicing of mortgages demonstrated with this case, how do we know the real owner of my 5 year old mortgage doesn't actually hold my note at some new, lower value? My first instinct is that they wouldn't re-value the holding if it was current so that may be the simple answer. Is it even possible that it could be valued by the bondholder at 60, 70, or 80% of the value that I see on the statement that Chase presents to me? Guess I am calling into question the capabilities of servicers but who can blame me now.
You are asking unrelated conditions. Your mortgage has been sold to the agencies, the 'value' is the note's balance due.
That doesn't change.
The bondholder (and there maybe 10s of 1,000s of them) have a slice of a pool of mortgages of which yours is just a teeny tiny bit of ... and the market places a value on those bonds based on the performance of all of those mortgages, not just yours ... so whether the bond holder is seeing 1% or 99% is irrelevant to the specific status of your individual mortgage balance but rather the entire pool's cash flows (or lack thereof).
Hope that helps.
Question withdrawn. I'm a moron whose mind veered away from the basics of securitization for a second.
You're not a moron. The complexity of the situation and the large range of possibilities tends to obscure what should be obvious. As my old high school chemistry teacher said, "The only stupid question is the one not asked."
I comment on the last paragraph: Yes this is a foreclosure moratorium.
I conclude that GMAC has stopped foreclosing because the mortgage was securitized by Wall Street, that is, it was bundled and resold.
And then that paperwork was probably divided and sold.
So the legal issue arises as to who actually owns the mortgage; and can one produce paperwork to document that mortgage ownership; and thus be able to proceed on with foreclosure.
I’m not at all sympathetic to Wall Street Bankers. Rather I’m sympathetic to the “underdog”.
Is it right for the person living in the home to be foreclosed on, if the person taking action can’t produce legal ownership? You know the rule of law is: “if you sell something that is not yours, you go to the state or federal pen.”
If I were a judge in a foreclosure proceeding, I would be concerned that the documents presented by GMAC were fake documents and I would be concerned that GMAC was selling somehing that they cannot document is theirs.
So we have more of a situation where people are living payment free in houses.
Today, Mortgage Bankers, traded by the ETF, KME is trading at 39.85, which is below support of 40 going back to May 2009. It is likely to fall lower this week, as I believe that the FOMC will not provide any hope to Wall Street Traders.
I believe that soon, out of a liquidity evaporation and a liquidity crisis, stemming from a fast fall in bond and/or stock values, that here in the US, a Financial Regulator will be announced who will oversee lending and credit, as well as money market and brokerage accounts.
This person will be what I call a credit boss or credit seignior who funds economic operations with an emphasis on seeing that the strategic needs of the country are met and that monies for food stamps keeps flowing. I believe the government will become the first, last and only provider of liquidity and money.
I believe that here in the US, the Financial Regulator will exercise Discretionary Governance, and announce a Home Leasing/Renting Program administered by the banks on their REO properties and those of Freddie Mac, Fannie Mae and the US Federal Reserve. Mortgage lending and securitization of loans will cease, and leasing of homes will be a public private partnership cooperative endeavor. Companies that have created and serviced mortgage-backed securities, such as Anworth Mortgage Asset Corporation, ANH, and Annaly Capital Management, NLY, will quickly disappear from the economic landscape, as mortgage bond funds such as Goldman Sachs Mortgage Bonds, GSUAX, tumble in value.
And I envision that in Europe, with a fall in the EUR/JPY from 112, there will be stock deflation, with the European Shares, FEZ, falling below 36, and European Financials, EUFN, falling below 22.50. Then a liquidity crisis will emerge, where there will not be enough buyers for sellers of stocks as well as bonds, causing small business failures, and banks to become sorely decapitalized, resulting in the president of the ECB arising to be an “Eurozone Credit Seignior” and provider of liquidity to Europe.
While many write that Ms Warren has been appointed as a lapdog, I believe that Ms. Warren, is more likely to turn out to be the top dog, that is the Seignior, meaning top dog who takes a cut, and be called upon in time of crisis, to assume the role of Financial Regulator overseeing investment, banking, lending, credit, seigniorage and house leasing as her many articles would apparently qualify her for such a role.
Sort of the company store concept on a national level. They just apply all your income to the ledger sheet and you draw to meet daily needs. Never getting ahead of the red ink. I worked a couple of summers at a lumber mill which owned the houses in the town as well as the "store". Folks never got out of that town. It was modern slavery. I went on to college but never forgot those people nor their town.
Or we could be seeing the end of credit.
Yeah, I think I'd prefer that.
http://foreclosureblues.wordpress.com/2010/07/25/foreclosure-defense-the...
Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
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