Charting 2010, Part 3: Fraudclosure, Halted Traffic, An America Divided: A World Stuck In Its Tracks

Tyler Durden's picture

Continuing with the key words to describe 2010's New Normal, promptly after "Jobs" (and the lack thereof) and "Currency" (it is a very fitting metaphor that recently terrorism takes place in the form of weaponized printer cartridges), the 3rd one that should come to mind is "Stuck" - as in the quicksand the economy has found itself, whereby it sinks with every second there is no fiscal and monetary stimulus, and all other primary aspects of the new normal that are going nowhere fast. One of the better illustrations of this newly-found immobility has to do with the Fraudclosure scandal that sizzled in October and November, then fizzled as the banks and the media have done everything in their power to keep it out of sight and out of mind. And Stuck describes far more than just a state of pervasive mortgage insolvency (and bank undercapitalization): it has become a state of mind, whereby the entire nation is seemingly permanently divided on virtually all key issues. We review some of the more salient 'adhesive' trends in the past year.

Probably nowhere is the fraudclosure scandal better encapsulated than in the case study of the Ernie and Teri Hassell. BusinessWeek's Devin Leonard summarizes how their life has recently gotten stuck in fraudclosure limbo hell, and how they are coping:

Ernie and Teri Hassell are currently in a place millions of Americans call home: mortgage hell.

In 1997 the couple used their solid credit rating to buy a house in St. Petersburg, Fla., for approximately $200,000. After Teri became sick with a gland disorder, the couple refinanced twice—once in 2003 and again in 2007—taking on additional debt to pay for her treatment. In 2008, Ernie Hassell, 62, lost his full-time job as a risk-management consultant, and the couple fell behind on mortgage payments. As a result, they tried to sell their home, on which they then owed $537,000. The best offer they got was for $259,000. The deal fell apart, and their lender tried to foreclose.

By that time the Hassells' mortgage was already making the rounds. Their most recent lender, American Brokers Conduit, transferred custody of the loan to Mortgage Electronic Registration Systems, a digital database owned by huge lenders such as Bank of America (BAC). When the Hassells defaulted in 2008, MERS kicked the debt to American Home Mortgage Servicing, a company that specializes in handling subprime mortgages. AHMS filed a foreclosure suit against the Hassells—admitting in court papers that the couple's promissory note had been "lost, stolen, or destroyed."

AHMS now says it has rediscovered the document. A company spokeswoman blames the mishap on AHMS's own financial woes: The firm's parent filed for bankruptcy in 2007. Yet Matthew Weidner, the Hassells' lawyer, is still fighting the claim. "This is a microcosm of the financial crisis," he says. Meanwhile, the Hassells' debt is again on the move. In November, AHMS passed the debt to Residential Credit Solutions, a Texas operation that buys busted home loans. For now, the Hassells aren't budging. "We own this home," Ernie says. "Even if they say we don't."

The chart below shows how one mortgage in a declining price environment may still be feasible, how two HELOC piggbybanks is stupid, and how three is suicide for all involved, and why rising rates, contrary to what Goldman would like the general peasntry to believe, is pure weapons grade semtex for the economy.

But being stuck is far more than just a side effect of pervasive banker fraud. It has become a national state of mind. Americans are terminally divided on issues from security, to the military, to immigration, healthcare, and, of course, the economy itself. The divide and conquer plan is working.

And far from purely philosophical, being stuck was a very physical reality for many: in China, 10 day traffic jams are becoming an accepted part of the new normal. LA drivers rejoice: your horrendous commute times are only 7th in the world in terms of going nowhere fast. Beijing, Mexico City and Johannesburg round out the top three cities for worst commute times.

Stuck will also be a very sad reality for thousands of east coasters trying to depart by airplane over the next 24 hours as most airports in the tristate area are now closed indefinitely. We got an appetizer of how reliant on air traffic the world is earlier, when resurgent Iceland volcano Eyjafjallajökull halted all traffic in and out of Europe for nearly two weeks.

And while discussing the global stickiness in 2010, here are some other adhesive fun facts:

  • U.S. Postal Service volume declined 3.5 percent, to 170.6 billion pieces; operating revenue fell 1.5 percent
  • Average cost of a wedding increased 21.9 percent in the first half of 2010, to $23,867, up from $19,581 in 2009.
  • Sugarless gum sales grew at 3 percent, to $2.3 billion; a slower growth rate compared with recent years.
  • The U.S. Army's decision to use buttons instead of Velcro on uniforms will save the military nearly a buck per outfit.
  • Oreos: The sandwich cookie's 2010 sales reached $290.5 million, an 11 percent gain from 2009 sales.
  • The Band Aid economy: Johnson & Johnson saw sales of wound-care products paradoxically decline by 9 percent in the first nine months of 2010.
  • The average retail price of honey per pound grew this year. In August the price rose to $5.04, a 44 cent year-over-year increase.
  • The tape and Post-It Notes manufacturer (3M) posted a sales increase of 17.4 percent in the first nine months of 2010.
  • Salmonella fears receded and total U.S. sales of peanut butter rose 2.1 percent, to more than $950 million in the first half of 2010.
  • Big Adhesive is up 4 percent in 2010, says market research firm
    IBISWorld. And duct tape—known as Jesus tape in Sweden—has become
    particularly trendy. Avon, Ohio, the self-proclaimed "Duct Tape Capital
    of the World," is the home of Duck Tape. Duck sponsors an annual
    contest in which students make prom attire out of tape. (It also has
    3 million friends on Face­book.) Stuck at Prom rewards kids for their
    creativity with a college scholarship.

    Cash prize awarded to each of the two winners: $3000
    Number of hours spent by winners creating their duct tape outfits, which included hair extensions: 300
    Weight in pounds of this year's winning prom dress: 50
    Number of couples submitting prom duct tape entries in 2010: 240
    Votes cast in this year's contest: 44,000

All in all, look for more stickiness in 2011, as the most important number, the unemployment one, continues to be superglued to 10%.

All charts courtesy of BusinessWeek

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Byte Me's picture

Before I finish reading TD,

is pure weapons grade semtex

Surely this is an oxymoron...

Temporalist's picture
Millions of shoppers flooded Britain's stores searching for a Boxing Day bargain before the VAT rise kicks in


People getting dumber globally..."stuck" in line at a retail store for more items that will wind up in a landfill.

Byte Me's picture


Truly a fun, fun, fun article - but:

Average retail price per pound grew this year. In August the price rose to $5.04, a 44 cent year-over-year increase., of what again??

Byte Me's picture

Oh honey ...

Well, isn't that sweet! +9%?

mraptor's picture

I think it is more... I remember buying honey 6-7m ago.. the giggest size at walmart ~$5-6 now I think it is $9+..

Byte Me's picture

Obvious high yielders this year will include Rendering Plants.

Damn, and I was sooo into Biscuit Factories, how did I missthe obvious.

JW n FL's picture

your new cloud security play didnt fly? or float? for you?

Byte Me's picture

Unfortunately they did not.

However, these 'red sky' polyderivative plays don't risk much capital and just look at the size of the potential returns..  never say never....

TradingJoe's picture

Oh Well Another GoldenShill "Analysis"!

fiftybagger's picture

 "Meanwhile, the Hassells' debt is again on the move. In November, AHMS passed the debt to Residential Credit Solutions, a Texas operation that buys busted home loans."


Hmmmmm, sure would like to know how much they paid for that loan eh?

Oh regional Indian's picture

These charts are AWESOME.

The divided nation one is really something. It tells me that divide and rule is workign very well, thank you very very much.

Red, Blue.... what white? Eh?

And close to 50% feel the Iraq war is going well? Hmmmm, that is scary. Wonder what they have to say about the other war, AfPak.

Stuck, stuck, stuck.

Sadly, it usually takes a hard whack to get things unstuck.

iPad your bottoms people, the whack is a-coming.

h/t to chart creators.


snowball777's picture

They made one mistake with the 'control gun ownership' handle of the pistol not being 'pinko', but otherwise illuminating of the fun-duh-mental divide.


xenophobe51's picture

The 47% side on health care is bigger than the majority side. Could that be a bit of a subliminal message?

Jay Gould Esq.'s picture

This is the nation where one half of the populace derive their "news" from the likes of a penny-ante comedian, Jon Stewart...the other 49.9999% are too busy playing Madden 11 or Super Smash Bros. Brawl on their Wii. The remaining 0.0001% read ZH, or reside in a comfortable, remote cabin deep in the Rockies.

MilleniumJane's picture

Thank god the holiday season is about over.  I don't know about you guys, but everyone in my area seems to suffer from a general malaise, myself included, that appears to be worsening.  I think this article points to the primary cause of it...we are stuck, stuck, stuck.  Those of us who have jobs are stuck in them as most cannot move horizontally or vertically to better opportunities.  Those on unemployment are stuck.  Credit from the banks is stuck inside some dark, whirling vortex of debt that I can barely comprehend.  Congress is worse than ever as no commonsense solutions are proposed but the Jackboot Agenda continues moving forward.  Most people feel angry but powerless about what is happening.  To borrow from WWI, we are a powderkeg ready to explode.  I keep wondering what event is going to take us to the next level...   

MilleniumJane's picture

P.S.  How many of you received gifts of food rather than plastic crap this year?

Our family received more food gifts than ever.  I prefer it this way and hope this trend continues.

Diogenes's picture

Let's see. The Hassels used their "solid credit rating" to buy a house for $200,000. Then they drew out another $327,000 in cash and spent it. Now the bank has lost their note.

So, they put nothing into the house, drew out an additional $327,000 and now the bank can't foreclose plus they have been living in the house for 10 years.

So, what is their problem? They seem to be ahead of the game every step of the way, and still have the chance to live in the house rent free for another year or 2.

trav7777's picture

yet now they claim they OWN the fuckin house?

They appear to be a proper foreclosure irrespective of the lost paperwork.

GreenSideUp's picture

Well, there is that pesky little thing called the law in which only the note holder has legal standing to foreclose.  They didn't hold up their end of the contract, sure, but really and truly, should the banks get a pass on this?  I think not!!!  (although I predict that CONgress will pass an ex-post-facto law to absolve the banks of all responsibility, and to give servicers standing to foreclose.)






Bob Sacamano's picture

Agreed.  This philosophy that one should not be responsible for money they borrowed and nothing should go down in value is sadly pervasive in the U.S.

Most ironic is the fact Mr. Hassel was a risk management consultant.  Hilarious.  Could not even begin to understand the risk he was taking.  Might explain why he is out of work -- he is a really bad risk manager.

wagefreedom's picture

no shit, I thought I'd popped over to The Onion for a minute.....

Burnbright's picture

Agreed.  This philosophy that one should not be responsible for money they borrowed and nothing should go down in value is sadly pervasive in the U.S.

You know what is even more ironic is you could be talking about the FED, a Bank, or the people mentioned in this article. Although you would have to replace the word "borrowed" with the word "created".

Bearster's picture

So the Haskell's don't have the money to actually, you know, pay their mortgage bill.  But they have the money to hire a lawyer to fight to prevent being foreclosed from a house they have stopped paying to be in!

You could add another "stuck" here.  Some are more concerned with wreaking vengeance against the banks, others are more concerned with economic progress and justice, both of which demand that people who don't pay their obligations give up the asset and everyone can move on.

blindman's picture

@" In 2008, Ernie Hassell, 62, lost his full-time job as a risk-management consultant,...."



Seasmoke's picture

play and delay is the new game ....i would have thought my gut reaction would be to rip the Haskells, but strangely it is NOT

Bob Sacamano's picture

Anytime prior to say 1990, most would have been inclined to "rip the Haskells" (some of us are still inclined so).  But the majority of Americans now believe they have very little personal responsibility for themselves nor any of their actions -- even if evil lurks in every corner like many here subscribe to.  

gwar5's picture

Opinion split 50/50 in spite of propagandavision working overtime

Website pat downs by the FCC internet police will convince the cynical 50% the necronomy is just fine



NumberNone's picture

I can't decide if I like this article or not.

blindman's picture


[OTE88] On the Edge with Danny Schechter


stuck in a model of fraud

ejhickey's picture

I think i have a solution to the hassell's problem. their problem is they can't afford their mortgage but they can't sell their house for the amount of the mortgage. At one time their house was worth $537,000 , the amount they borrowed. Now the best offer they can get is $259,000.  solution:  the federal government bails them out buy guaranteeing the value of their home at $537 K .  If they sell the house for less, the Federal government writes a check for the difference between the sale price and the guaranteed value, payable to the Hassells and their mortgage company.  Bingo!  the "stuck" problem is solved.  they can  sell their house and move on to a more affordable house.  someone else can buy the house for a more reasonable value.  the current owner of the mortgage does not have to take a hit.  Even the Hassells benefit because they had the use of the money in prior years.


Now repeat this process for every home in the United States.  Pass a law that guarantees the price of every home for either the purchase price or the home's estimated value between 2005-2007. If there is a sale for less than this guaranteed value, the federal government writes a check to the home occupier and the mortgage holder for the difference.  Homes would start selling again, real estate agents would be busy, tax revenue would be generated from the sales, banks could move their inventory of currently unsaleable real estate and there would be NO need for things like the HAMP program.  No need to modify your mortgage if you can't pay.  Just sell  your house.  I call this plan the Home Value Guarantee Plan.  the Fed Gov. already guarantees bank accounts but that is not where most people have their largest asset which is their home. 

I know I lot of people will say we can't afford this plan .  it will cost too much and we have already spent too much.  While this is correct, it is also unrealistic.  we are already in so deep that there is no way out except to spend even more.  We are stuck halfway across the "big Muddy" and there are three ways to go:  forward, backward  or sink.  there is NO possibility of going backwards by reducing spending and letting individuals and banks fail because of these unrealistic mortgages.   the longer we argue about this problem and it unresolved , the greater the danger our economy will sink from the weight of this and other unresolved problems.   I say we move forward by guaranteeing home prices.   No complicated infrastructure plans to get shovel ready. we already have the guy who can print the money.  All we have to do is hire enough people to shovel it out the door directly into the hands of people like the Hassells.

MachoMan's picture

Or we could "unstick" ourselves by removing the bailouts and not engaging in another ridiculous "plan" to prolong the pain.

The only people that benefit from that situation are the middle men...  and, even being one of these middle men, I would prefer to simply remove governmental involvement from the equation.

Fuck these idiots for spending like wild banshees "in the ass with a big rubber dildo"...  and I'll be damned if they use the threat of the gun to pay for the difference.  See you in galt's gulch.

Bob Sacamano's picture

But why would one then "move on to a more affordable house??"   No incentive to do that.  Live as large as possible because we (the 50% of us who pay federal income taxes) will solve the problem if they are over-extended. 

And for others who lost money in say the stock market, they get a Stock Value Guarantee from the government.

And for those who did not over-extend themselves, lived well below their means, were frugal and saved, etc.-- sorry suckers.  Get with the program and be irresponsible like everyone else.

And, we can let banks fail -- wiping out all debt and equity holders.


ejhickey's picture

the incentive to move on would be that the current occupants of a house cannot afford the current mortgage payments. under this plan they would have two choices:  sell or get foreclosed upon.  Problem right now is when people like the hasells sell , they are stuck with a huge debt or can't get what they paid for the house and take a loss.  this plan gives them an out IF they can't make the payments.  


As for those people who lived within their means and say bought a house for cash and have no mortgage , the plan would apply to them as well. If you bought your house in 2006 and now it is worth less and you wanted to sell, you could sell it for less and get a check for the difference.  

I never thought about applying it to stocks , but it is a possibility .   Sure we should let the banks and people like the hassells fail and go through bankruptcy, but do think that will ever happen.

One more thing:  If a plan like this was proposed, I would bet my still intact 401k that a lot people would jump on it like a drowning man grabs a life preserver.  I am talking about homeowners, real estate agents, banks .  the only people who would be against it would be a foreclosure attorneys and the few austrian economists left in the world but no one is listening to them anyway. 

Raymond K Hessel's picture

That would be the worse thing we can do.  Bailing out banks, bailing out governments, bailing out homeowners.....

It's all a mistake.  We have to stop with the bail outs.  Get back to capitalism.  If you fail, you fail.  No more too big to fail, too small to fail, too dumb to fail, too pathetic to fail... just man up and stop spending your future earnings on shit you don't need.

I bet you own a fucking duvee, don't you?

ejhickey's picture

No matter what we "should" do, we ain't gonna do it. so you man up and face the reality that every time we are faced with the reality of what we should do , there is a whole chorusof "yes, buts" that stop us in our tracks.   we have no choice but to keep on spending.  by the way, what is a "duvee"?

alexromanl's picture

None of the people getting bailouts are dumb; actually, I believe they are the ones who have played it perfectly.  Why not overextend and live large?  Why be constrained by your current income?  Spend now, tomorrow will be better than today so there is plenty of time and opportunity to repay!  Materialism (i.e., the pursuit of happiness) coupled with lax credit standards is sinking this country... 

It is just human nature, unless you receive negative feedback for your actions you will indeed repeat them.  Corrupt politicians that keep getting elected, crooked banks that keep stealing money, disgusting companies that keep polluting the environment, etc., are our reality.  Can we get better by doing more of the same?  Unfortunately, the changes needed are profound and significant.  Who the hell wants to feel pain today if there is an option to delay pain to the future with an option of not feeling any pain?  But that is what character is all about, making the tough choices.  Then again, with a split country, how do you get consensus to administer pain?


Midas's picture

I also would like to know what a duvee is.  Is that your spelling of duvet?  And if so, I still don't get it.