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Loss Given Default: From Madrid to Los Angeles Foreclosures Set to Crest in 2011-2012
I recently caused a fuss by predicting the default of the Golden State during a conversation with Henry Blodget. The perspective which informed that outburst came partly from my experience watching both CA and NY, partly from the work on my book,
"Inflated: How Money and Debt Built the American Dream,"
which is now shipping from Amazon and other online outlets. In particular, the period of state debt defaults in the 1840s seems to be instructive, both for the actual examples of default and how that period effected attitudes toward taxes in many other states.
When people differ with my view of the forward outlook for state and municipal credit in CA, NY, IL, I start with the banks and real estate. Most states and localities base their revenue on a combination of property, sales and other taxes and fees. Unless you are fortunate enough to live in Alaska along with Sarah Palin and her fellow citizens, real estate and related services figure large in the equation that makes your community function financially. We first talked about the ad avalorem tax base two years ago in
The Institutional Risk Analyst
thanks to a good friend in Laredo, TX, who worked for decades as a banker along the border with Mexico.
Next year, IMHO, we are going to see a further sharp decline in residential home prices as the tide of foreclosures begun in the past year starts to clear the courts and move to market via involuntary sales. The same thing is happening in Spain, by coincidence ("Foreclosed Homes May Flood Spanish Market as Banks Offload Unwanted Assets").
Like many of you, I was head faked in 2010 by the apparent stability in residential prices as measured by things like Case-Shiller. I participate in the
Macro Markets
forward suvery of US housing pices and was way too bearish vs. this widely followed index. As I told Bob Shiller last week, the carnage in the loan servicing channel was not showing up in the retail index -- largely due to the lack of capacity to deal with the forclosures.
So after being down 10% for 2010 earlier in the year, now down 5% for 2010 and -10% in 2011. Hold on tight to your nappies, children. The "resolution" of a lot of assets currently marked as "in transit" through the GI tract of the proverbial beast is going to reveal some currently hidden truths on the balance sheets of the banks. The good news is that the industry's apparent performance is improving, but this is just one view of the world. An "entry" valuation rather than exit, if you follow.
Even as the Fed continues to manipulate the markets via QE, all of the assets and exposures not on Uncle Ben's menu are going to widen IMHO. And the spreads in and around the homes of many of the homes of the readers of ZH are going to widen too as the number of involuntary sales grow and these far-below "market" transactions pull the comps down toward the cash price liquidation level.
When you factor in how the "shrinkage" of housing is already affecting the related sectors of the economy, the outlook for the other source of state and local revenue -- namely sales taxes -- does not look so rosy either. Let's hope that flat to down just slightly is the rule. Even then, automatic growth in public sector mandates in 2011-2012 forces even more cuts in public sector jobs and services. And then you potentially create a feedback loop of deflation.
To address this issue, I think we are going to need both public and private vehicles to take ownership of foreclosed properties and manage these assets. As one of my mentors in the banking world told me last week, we first have to figure out whether any private investor will take the first loss position in any vehicle, then we should worry about whether it is an REIT or some other structure.
In any event, we are going to need to apply leverage to this growing volume of foreclosures. Otherwise we sit back and watch the largest asset liquidation in history, a process that may well take the pricing for residential properties down double digits next year. If you think that this view is too pessimistic, ask yourself what the proportion of total homes sales will be involuntary this time next year, when Bank of America plans to have ramped its special servicing capacity.
-- Chris
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Imagine poor Bob Shiller.
The man is intelligent enough to realize that his index depicts and predicts
NOTHING.
I can't help but chuckle to myself when I read about how you all "need" another bailout of the housing sector. Go for it, you wimpy, weak losers. Oh boo hoo your house isn't worth what you paid for it! Oh why oh why can't the government fix that already?! Oh boo hoo hoo, the buzzards are eating your neighbor, what will this do to home prices on your block?
Yeah, go on, throw more borrowed money down that housing bail out hole! Teach those prices how to defy gravity! And while you're at it, create a nice big gap between the distressed market and the "normal" market. Yum, yum, gotta love that subsidized arbritrage, especially when thanks to all you boneheads who support bail outs, this arbitrage has democratic legitimacy! Go on, throw more, more, more, till suddenly you discover no one will lend you a penny. That way even more of you will foreclose in the long run.
There are no coincidences.
Read my book on "The End of the World December 2010".
( available jan.2011)
When you read this ( from Latimes) you have to wonder if Sheila Blair has a death wish
Federal Deposit Insurance Corp. Chairwoman Sheila Bair would seem to have enough to worry about, with 149 bank failures so far this year and 860 more on the agency's "problem" list.
But in an op-ed piece in the Washington Post on Friday, Bair railed against the federal government’s debt load under the provocative headline, “Will the next fiscal crisis start in Washington?”
She wrote:
Can anyone actually understand Chris Whalen's garbled thinking/writing? All opinion, no supporting fact. He jumps around from issue to issue without tying them together.
He admits he was "head faked" but blames it on capacity constraints. Hey Chris, did you sleep through all the housing tax credits? What kind of idiot would buy his book?
The BANK RUN Dec. 7,2010 will happen were i live it is the talk of the town. Everyone i work with are planning on taking out all extra money and leaving only enough to keep the acc. open on Friday the 4th of Dec. Everyone who i work with does not want to be the one who left there money in the bank when the Bank run starts. To be the only one left holding the bag. Two words to live by.... Food & Ammo ...bitches
Chris, excellent article.
I have enormous respect to Chris and his analysis. I only have one thing to say: the banks will not involuntarily sell anything at this point, and they have re-capitalized and fixed their balance sheets enormously comparing to 2007. The accounting rules were changed to the benefits of the banks not to take their losses. The banks will not take huge loss all at once. they have bought all the political powers on their sides. Human history is always a sad history.
There is a very serious possibility we have a BANK RUN December 7th. Please watch and share this video with the people you care about (http://youtu.be/U0KGv3Xw0KY).
Anonymous-
This is really scary guys, people are already talking about it and it has spread from France to the UK and now coming to the United States.
.....worse than....ever thought, DOES include Europe...getting your book ASAP for the in depth dismal details...analogous to 1931 fake-out, second wave of, too-clever investors being wiped-out....
worth contextualizing, however, how REALLY bad, WHAT really bad was...and how overall today...regards world-cooperation/progress, shows that our childrens children are not doomed, world history Hegelian version SEEMS to evolve long term favorable...
http://news.yahoo.com/s/afp/20101126/wl_afp/russiapolandwwiimassacre
Least we forget this chart. With lower home values, 2011 could be somewhat problematic even with no mark to market and the feds printing presses.
http://consumerist.com/2008/01/monthly-mortgage-rate-resets-2007-2016.html
RIGHT! (slaps his head) duh...I forgot all about the re-set tsunmai. Notice how much attention this gets from MSM
There is one thing that has happened that will reduce the severity of the reset event, which is that many of these notes have already blown up. Still though, it will probably take out the remainder of those foolish enough to bet their life's wages on interest rate speculation.
I'll bet most all of those people have heard the adage, "A fool and his money are soon parted." What most failed to realize though, is that credit based debt is the money easiest to part, as no one can properly budget fixed expenses for very long in an inflationary environment of non-fixed expenses, such as food and energy. Eventually, the choice will always come down to debt service vs. dinner.
True. I first saw this chart more than a year ago and it does not seem to have changed any. The landscape (bad pun) has changed and this may not depict the actual numbers.
and yet no one ever puts RISING (and fraudulent) property taxes into the mortgage crisis equation !
Property tax adjustments vary wildly from count to county. My own county lags 2 years behind in reassessments. When the assessed values finally start to come in line with market value there will be some very distressed county revenues. That's one BIG turd yet to hit the fan.
I'm happy to report that where I am property taxes have decreased. Of course, folks around me didn't want to believe it possible, but after my call that property values were going to drop (I sold in the middle of 2005), there was acceptance of it being a possibility. And then just this last year they did go down. Pretty easy to figure, actually...
When banks, the same ones that have been twisting govt arms for more and more money are on the hook for taxes on foreclosed property, well, pretty easy to figure the trend...
But, I suspect the real/primary reason for the decline was because of the drop in assessed values. Property that I recently purchased was revised downward by about 42%. And, for me, having property zoned Ag means that I'm taxed lower (the "agreement" is that I maintain my property for Ag- no problem for me!). NOTE: decrease was only about 12%, but when everyone was saying that it wasn't possible, then I believe that this is pretty substantial! (devil's in the details!)
So... I made the call years ago that prices would drop. And, almost 2 years ago I called out the potential for reduced property taxes.
Sorry, Chris, but I find this to be a really bad article. The "we will have to apply leverage" conclusion is just way, way off. Leverage is what has gotten us into this mess, and it needs to be eliminated, not encouraged.
Credit is also in the process of collapsing, which isn't addressed. So, fortunately for the sake of future generations, your solution just isn't going to work.
Also, many here at ZH weren't "head faked" by what happened in 2010. Indeed, Reggie Middleton quite clearly called it out. Many times. Some of us have made, or preserved, money by not being fooled by this "head fake". Personally, I thought it was clear as a bell.
Reggie Middleton thanks you for your ardent memory :-)
The Truth Goes Viral, Pt 1: Housing Prices, Economic Sales and the State of Depression
Tuesday, October 5th, 2010
The 3rd Quarter in Review, and More Importantly How the Shadow Inventory System in the US is Disguising the Equivalent of a Dozen Ambac Bankruptcies!
Wednesday, November 10th, 2010
Reggi,
As a realtor and real estate investor in the Baltimore metro area for over 30 years I found your links and comments interesting and appreciated. From 2005 to 2007 I owned several NVR models which I rented back to NVR as they used them as their sales model. Once they were finished the development I sold the unit. In the summer of 2006 as things appeared to me to be getting carzy my last model was vacated by NVR (after telling me they would continue the lease through Jan 08). The real tell came that summer July 30, 2006 when I learned NVR had dropped it's option on adjoing property that was slated to be their next "big" project. That was the day i began to sell everything and damned glad I did.
So here is my question to you, What is the shadow inventory for MD. Considerering OZ is n our backyard.
Who else has been "head faked" by Ministry of Truth's spokesbeings? Did someone else think strategic defaults and fraudclosure weren't hurricane warning flags of a sea change in residential RE values? Did you need 30-some states' AGs to tell you the whole MBS MERS process was rotten from the start? The ongoing bust means both Jim Sinclair and Robert Prechter will be able to claim they are right. The ongoing inflation/deflation cross-currents in the economy are two sides of the same coin: ongoing destruction of wealth from too much debt.
When Spain flooded Europe with the New World's plundered silver and gold, inflation accelerated and the era of revolutions was begun. The previous inflation of the world's global money supply ended in the collapse of Rome. Big reserve currency inflations aren't everyday events and we should be thankful for that.
China and India's population boom is putting enormous pressure on the world's resources and real world prices for basic commodities have to rise, crushing the least productive poor everywhere on earth. The marginal wage earners will see lower incomes, a situation that has happened since the Middle Ages. This time, it would be nice to try something other than war to resolve the imbalances. The age-old dream....
Ah, my first double post. Now I'm in with the "in" crowd.
We breeze up an down the street
We get respect
From the people we meet
They make way day or night
They know the in crowd is out of sight
Sorry FR, I couldn't help it
Shucks, finger slipped.
Anyone not listening to Chris Whalen intently does so at his/her own peril. The man has proven to be one of the best macro analysts on housing, banking and the general economy, so I generally trust his analysis.
He might have wanted to mention the massive resets occurring in 2010-2011, primarily in Alt-A's and Option ARMs. See the chart at the link:
http://www.realestatedecline.com/mortgage-loan-reset-chart-2007-2015-pai...
This wave of resets is as large or larger than the Sub=prime era from 2007-08, and will cause as much or more pain because RE prices are already far lower than they were when sub-prime went bad.
One has to consider the effect this is going to have on RE prices in general as well as what it's going to do to (mostly) BofA, JPM and Wells-Fargo. Bank of America, via Countrywide, will be hardest hit, already insovent and considering spinning Countrywide out to the bankruptcy plantation.
QE2 and Bernanke's games aside, one has to question just how much pain the banks can endure before "GAME OVER" flashes on their Nintendos. We have a do-nothing congress, a do-damage president and an inflate at all costs Fed, creating the world's laziest, but still grandest clusterfuck of all time.
If RE prices generally don't fall by another 20% in 2011, I'll be shocked and amazed. All the artificial stimulus in the universe can't hide the fact that the banks are largely ruined and will be deeper into insolvency no later than April-May 2011.
If you hold real property of any value, i.e., you live in it, hold on despite massive devaluation, because there really won't be any other assets worth much, except, PMs, though if deflation really triumphs over QE2, they're going down with all other classes.
Good luck next year. We'll all need some.
PM's will not go down with all other classes. This is because this market responds to "fear". The kind of situation you have in mind will cause "losses"; even amongst well-off people; the contagion of fear of loss is very fast. PM's are not a "pure play" on currency value; they offset fear of loss and uncertainty of outcome.
first off we need to outlaw "IMHO." When last i checked "being right had nothing to do with being humble" and certainly "the folks who have opinions the opposite of this aren't humble." I don't feel the need that's for sure. Obviously I've been an uber property bear for over two years--and right about--never really thought it was a big deal since "falling prices in real estate aren't a crime"--provided "taxpayer dollars aren't used to support them." And of course "taxpayer dollars are used to support them" and so we yet again have the worst of all worlds of "prices still falling while valuable tax dollars get thrown in the furnace." Should we be surprised that REITS are the best performing asset class then? Obviously not--"bit it's a Faustian bargain" for the government supporting the private real estate industry this way, though. Real benefits at risk by the federal government to the American people to support "the property industry"? Here we go again. I will grant this: it is Wall Street's job and they do it well. Insofar as "the foreclosure process" is concerned I must say the term "renegade foreclosure" which was introduced in the lexicon in few months back is a new one. Basically "unless State AG's find cause to sue" then 3/4 of the country (and I do include the entire Northeast outside of Philly with particular emphasis on DC as "doomed") is looking like Hooverville and their tax receipts will collapse accordingly. The only safe real estate "speculations" as it were that I see are in Florida and the West Coast. The reason I am arrogantly certain about this is because i treat real estate as no different from any other market and "the tendency of high prices to be confirmed higher as well its opposite, too."
I wish the truth about all these foreclosures would come out. There's been no money in the United States since 1933. Therefore, a debt-based monetary system was needed to support commerce. Nobody informed the people how the debt-based money system worked. Money is paper. Every demand for payment can be returned for value with more paper.
Every promissory note signed was the form of money used to purchase the house. See UCC Article 3 Negotiable instruments. The house was discharged at the time of closing. The proof of discharge is on the bank's balance sheet. I'm doing a lot more investigating into the Financial Standards Accounting Board (FSAB) and the forms it uses to report commercial transactions. (FASB forms 125, 133, 140, 5, and 95) This is the money trail to show the house was closed and discharged, and then sold into the securities and derivatives market. The initial loan was already satisfied.
Look through the FASB website for the ongoing changes in GAAP that are used to sustain the fraud. A fascinating area of knowledge.
http://www.fasb.org/cs/ContentServer?c=Page&pagename=FASB%2FPage%2FSectionPage&cid=1176156316498
The banks have contracts, but they have no standing to foreclose unless you fail to rebut the assumption that they can foreclose.
A typical Administrative remedy, which is simply sending correspondence to the banks, consists of the following steps:
1. Release the government lien. SF90, SF91, SF28.
2. Send a letter of Intention to Modify the Deed of Trust.
3. Revocation of Power of Attorney.
4. Substitution of Trustee.
5. File modification of Deed of Trust with new Trustee at the county.
6. Send instructions to the Trustee to release the bank lien and reconvey
the property.
Most of the forms to do this process are found in the County Recorder Office Handbook. Now there's a book with information. California's handbook is a treasure trove of forms.
Posting a Surety bond is required too. So learning about this aspect of business is needed.
There are a lot of people who are smart and capable to do the study and write up those letters correctly. You have to understand all the concepts to participate in the commerce game. If you make a mistake, they will take you down. But hey, any person with a profession is just as capable. Regard this as a sporting event.
Make sure to include the Notary Public's address for the return correspondence. When the banks don't respond, then you will have the Notary Public, a witness, to show that your letters were dishonored.
The banks will have proven through the correspondence that they are in dishonor. You don't owe them any money, and they don't have the power to foreclose.
The banks and the lawyers know everything about this process. They are practicing fraud in the inducement and will try to get away with it. So if you have a foreclosure, time to prove your meddle.
In this process, attend to your personal business first. The society as a whole will change.
@K
you're posts are interesting, but for the average non legally trained individual, you're talking about trying to overcome a lifetime of experience in the officially sanctioned economic and legal system. Short of going to law school, are there any websites or books that you'ld be willing to put your ZH reputation on the line for, that could allow your nuggets of advice to be put to practical use?
and, are these court proven methods, or just wishful observations?
IMHO that lead on beard's american constitution and economy-gold thx
robo--
Unfortunately, I don't see a simple, procedural method. I don't have confidence in any websites except the law websites.
I do use comparative analysis to study the law and compare it with the foreclosure self-help sites now after two years of study.
Inside or outside of court people and consultants meet with the same resistance and difficulties.
The problem in court is about jurisdiction. If you file a commercial claim under Admiralty, the judge cannot make a ruling. He is arbitrating only. You are faced with dueling it out with your opponent in court.
If you are in a foreclosure court, the judge just rules against the debtor by default. Why? The debtor traded sovereignty for rights and privileges. The judge has jurisdiction and cleans up.
The high priests of law and business have scattered the information:
Federal Law code USC and legislation JHR 192 and RESPA Title 15;
Uniform Commercial Code (which is different for each state; always take the state links. Cornell Law UCC is model code only);
FASB codes (GAAP business accounting);
And insurance (Surety Bonds).
The banks employ experts in every field. The lawyers and judges rule the courts. And city hall employs the gatekeepers. This is the pyramid.
I'm a veteran technical writer, and I invested conservatively with 20% down in two rentals for retirement, modest homes that needed minor renovation. Now they are in strategic foreclosure since I clearly saw the 10-year pump and dump in 2009. I wanted to know exactly what was happening and jumped in.
What are the fundamental banking and law systems?
First, I looked back historically to history and law. I read Charles Beard, the founding fathers, and "Practice and Jurisdiction of the Court of Admiralty, John E. Hall 1809. This book is a translation of Clerks Praxis with notes, a book written by a clerk of the court of registrar under Kind Edward I. It really describes the relationship between claims and bonds.
I also read all I could on the Bankruptcy of the US in 1933. Joint House Resolution 192. Wold conference of western countries for 5 years leading up to 1933.
Second, I started to learn the law. The UCC is operating under color of law. This means essentially that what you write down and swear to under an Affidavit is the truth of the matter. It's a paper battle between two opponents. And whoever stops pushing the paper first looses.
Essentially, you are taking your power to contract and turning it back onto the banks. There is no short cut to learn how to do it.
History points to an isomorphic structure from centuries ago-- Claims and bonds, honor and dishonor. And it also points to the same pattern of social disruption--bankruptcy of the nation, war, and transfer of wealth away from the people.
This process keeps happening because We the People don't learn the law and the monetary system. The laws and the words used in law date back to Roman law. "Ius civile vigilantibus scriptum est." (Civil law is written for or by those who are vigilant.)
All the voting and institutions are forms of control. Bottom line: I think we are living in a feudalistic society. Everything operates on fielty within a hierarchy of power and money.
It is the capabilities and knowledge of each person in law and banking that will determine the outcome. Overall the tide is turning. People know there is no money--Only debt-notes and the discharge of debt. The mortgage loans were all fake, and the foreclosures are fake. We can use an Administrative Remedy to notice our servants if we can tell them what to do to unwind the contracts inside or outside of court.
Recommended reading:
Cornell Law USC United States Code website
Cornell Law UCC website, definitions, and papers website
Secretary of State UCC filing tutorials and instructions (UCC Article 9)
St Thomas Business School UCC notes website
Financial Accounting Standards Board website
State of California Document Reference and Indexing Manual (Google online posting)
Any County Recorder's Manual (Google online posting)
Surety Bonds (Google books online)
Practice and Jurisdiction of the Court of Admiralty (Google online posting)
No affiliation or vested interests of any kind.
Your narratives give an indication of the depth of the artificial construct that has been perpetrated on the American people. My interest is based in my desire to find an avenue for "we the people" to extract themselves from the predicament that we are currently caught. The republic is on a path to failure. The finding of holes in the system where an occassional individual may find some relief is encouraging, but falls far short of remedy that is needed, as time is running short.
You have spent considerable effort in researching this topic. It would be a shame if it can only be used on unique circumstances, rather than as a means to completely repudiate the system.
You have a large source of knowledge and some encouraging theories, but the proof will be seen by your success in court. Many people have thought that they were armed with the magic bullets to take on TPTB, and so far they have all been ruined. You have provided considerable reading materials that will require significant time to review. thank you. I hope that you continue to share your experiences.
robo, thanks for your comment.
The artificial construct goes very deep and around the world. The UN Convention oversees the development and adoption of the UCC worldwide.
The United Nations Convention on Contracts for the International Sale of Goods (abbrev. CISG)[1] is a treaty offering a uniform international sales law that, as of August 2010, has been ratified by 76 countries.
The CISG was developed by the United Nations Commission on International Trade Law (UNCITRAL) and was signed in Vienna in 1980.
Yet, knowledge is key. Short term the systemic damage has been done to the economy and the livelihood of millions. Long term, the next generation of professionals, our children, must be informed.
The simple act of refusing to fill out a birth certificate for a newborn becomes revolutionary in our time.
Kayl, I've read many of your notes and believe you are overcomplicating the issue for all practical purposes. Once ensconced within a particular jurisdiction (court), appellants and litigants must argue their cases on the merits. Changes of venue would be met with significant resistance from both your opponent and the courts, who have certain rules by which they command conduct.
I've done some cursory reading of UCC issues and believe that the amount of process would preclude most ordinary people from proceeding along that route; besides, most judges wouldn't even understand what you were trying to do and would simply throw the matter out of court on grounds that it was either an incomprehensible or inconsequential argument.
Your admission in the comment above that you have two rentals upon which you have "strategically defaulted" argues that you, a. can make the payments, and b. that you are trying to use the general malaise as cover for your own enrichment.
As such, until you can prove otherwise, I would advise most people reading your garbled interpretations of the law to do so with as many grains of salt as can be thrown over the should of a small pet.
What a laugh!
It is the banks who have enriched themselves by stealing away the labor of working people. And they enriched themselves 10 times over by reselling and securitizing mortgages, and then gambling on them in the derivatives market. Lay the fraud upon the feet of the banks where it belongs.
The UCC and the judges operate under color of law, and the monetary system is operating under color of law as well. Empty shadows floating on the wall of the cave.
There's no morality card that you can pull out now that keeps the good people in line. You've inspired an environment of lying, cheating, and stealing.
It suffices to say I am discharging all debt and returning for value without dishonor all the presentments that the banks have sent me. I am a good citizen and feel it is my duty to discharge all debt for the contracts that I've entered into.
Discharging debt is all I can ever do in this debt-based monetary system. I just don't want to be tricked into discharging with my hard-earned cash anymore-- at least, not to the banks. I financed the transaction with my credit, I keep the rewards of my labor.
If the banks had so much power, they wouldn't need our acceptance. It was easy enough for me to send a letter of objection to the bank within 20 days, recognize the insurance letter, and so on. The Administrative Remedy will have its way.
Here's the model code.
UCC Article 9-620. ACCEPTANCE OF COLLATERAL IN FULL OR PARTIAL SATISFACTION OF OBLIGATION; COMPULSORY DISPOSITION OF COLLATERAL.
(a) [Conditions to acceptance in satisfaction.]
Except as otherwise provided in subsection (g), a secured party may accept collateral in full or partial satisfaction of the obligation it secures only if:
(1) the debtor consents to the acceptance under subsection (c);
(2) the secured party does not receive, within the time set forth in subsection (d), a notification of objection to the proposal authenticated by:
(A) a person to which the secured party was required to send a proposal under Section 9-621; or
(B) any other person, other than the debtor, holding an interest in the collateral subordinate to the security interest that is the subject of the proposal;
(3) if the collateral is consumer goods, the collateral is not in the possession of the debtor when the debtor consents to the acceptance; and
(4) subsection (e) does not require the secured party to dispose of the collateral or the debtor waives the requirement pursuant to Section 9-624.
(b) [Purported acceptance ineffective.]
A purported or apparent acceptance of collateral under this section is ineffective unless:
(1) the secured party consents to the acceptance in an authenticated record or sends a proposal to the debtor; and
(2) the conditions of subsection (a) are met.
(c) [Debtor's consent.]
For purposes of this section:
(1) a debtor consents to an acceptance of collateral in partial satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated after default; and
(2) a debtor consents to an acceptance of collateral in full satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated after default or the secured party:
(A) sends to the debtor after default a proposal that is unconditional or subject only to a condition that collateral not in the possession of the secured party be preserved or maintained;
(B) in the proposal, proposes to accept collateral in full satisfaction of the obligation it secures; and
(C) does not receive a notification of objection authenticated by the debtor within 20 days after the proposal is sent.
Absolutely agree re the feedback loop. If shadow inventory is ever released onto the market, those homeowners that are sitting at breakeven will be forced underwater as market prices are depresed further. This will just create another wave of foreclosures. We've had a slight reprieve in 2010, but judging by Oct/Nov figures, it looks like we are headed back down.
bottom line, median housing prices need to drop to 3x median income, i.e., income reduced by household debt. Both housing prices and household debt. Home prices are about 195k, income is 50k. Therefore, another 20% drop in housing prices is expected (not even thinking income will grow because it needs to be netted against household debt reduction). This will bring everything back into line with 1996. When? 2012 maybe?
So 15 years of re-setting. Then everyone should be ready to start swiping credit cards again......
We've lost a generation of wealth. Those responsible should pay.
Dr. Bubble thinks the shadow inventory is closer to 5 million units nationwide, more than double the numbers used by industry " experts ". It comes down to the definition of what constitutes " shadow inventory ".
Regardless, there's a lot of involuntary sticks and bricks to move through the pipeline.
www.doctorhousingbubble.com
Soon even smart analysts will figure out that mass foreclosures is suicidal for the banks. The banks already know this, but they must maintain a "credible threat" of foreclosure to stem the tide of defaults.
RC, why don't you put together a study comparing the % equity in homes that have been foreclosed, versus the % equity in homes that are in default, but haven't been foreclosed on.
How about a real-life example: The home in which I live, inherited upon my father's passing in July 2009.
July 2007: $87.5K Countrywide re-fi, based entirely on fraudulent $120K appraisal (to this day has never been produced), then lowered at closing to $116, for somewhere between 72-75% LTV. After reviewing documents, I, as administrator of the estate, decided not to make any further mortgage payments, and especially reinforced my view when home was appraised in August, 2009 for $81,500, in one of the most stable RE areas in the country (Monroe Co. - Rochester - NY).
So, I would have, if the CW appraisal had been real, about $35K in equity, but we all know the appraisal - done by Countrywide's own hand-picked scum - is bogus, so I'm at maybe even money. My own analysis, knowing the structure and market intimately and having been a real estate agent some time ago, puts the house at about $70-75K true value, due to some major repairs needed. Add in a now-declining market - subtle, yet steady - drops it to maybe $60-65K, maybe even less.
Bank foreclosed (MERS, I should say) in March, 2010, I answered, denying all, point by point. Crickets since. Bank does nothing. Lawyers on hook now in NY, due to a new rule of the SC, that they have to verify all documentation, including the bogus assignment made after the FC filing, complete with robo-signature and three different dates (all bogus).
So, this particular property hasn't even hit the foreclosure status because in NY they have what's call a RJI (request for judicial intervention) to move the case off square one and the lawyers haven't budged and I certainly am not going to force the issue.
The shocker for the bank and their attorneys comes when I pay the property taxes. This will indicate to them that I'm serious about ownership and they're SOL because they know they have no valid title, note, etc.
If I keep paying taxes, occupying property and maintaining it, 8 1/2 years from now the property becomes mine via adverse possession, and I'm more the willing to wait the bastards out for what amounts to a $60-80K windfall. So, let them play their games and stall the foreclosure process. Buys me more time.
So, you have a property on the books at $116-120K, but really worth $60-75. Hope that helps.
Too bad Maryland (where I live) requires 20 years for adverse possession. Interesting aside---I think Louisiana has only a 5 year period to establish adverse possession. From what you say, New York is 10 years, I'm pretty sure West Virginia also is 10, and there are some others. That's short enough (especially in Louisiana) to make your story a viable strategy. Are there any ZH readers from Cajun country? Are the banks sitting on foreclosures down there as well? Might be a pretty risky game for them. These criminals richly deserve the losses, I'm hoping there's a wave of "show me the note, motherf--ker". . .
Thanks for the anecdote Rick. Sounds like you're handling the situation just fine.
I'm already well aware of the fact that banks are foreclosing first on homes that have the most equity, because it's profitable for them. They have no problem with throwing out a family who has paid down 90% of their mortgage, but due to job loss, etc finds themselves facing foreclosure. That family gets tossed so the bank can take their equity, while the underwater speculator sits tight because the bank doesn't want to take a loss on that one. Fucking criminal and it's a very unreported story.
I wish RC would have the balls to write about that type of behavior by the banks. RC needs to choose if he's a bankster apologist, or an American patriot. We're rooting for you buddy!
I don't think it's everywhere; I must be in one of those nice pockets where housing values have stood their ground.
Same here, I could sell at a nice profit.
But, I live in one of the top counties in Texas.
I also could take an equity loan, (if the SHTF),to a degree I am not comfy with, @80% of value (already established in a contract),and walk. It's free and clear.
Which I would never do,unless I see leaving the US is last option.
I saw yesterday (as you did), Panama has caved to the Beast, and now expats banking,and records are available at the request of the PTB.
So,bye bye another (one of few remaining bastions of privacy).
Blackmail I am sure was used..........(trade), imports.
if you aren't in exurbia, part of the shrinking urban sprawl of the last decade, and your city can afford basic services, and fill a few potholes, you are definitely better off. Also if you neighborhood is older, and there are few or no post 2003 mortgages attached. You know this is true, if your property title is clear, and I mean really clear, then your property is worth more than the guy next door, (same house) who bought during the MBS period.
The house I mentioned was on an older, clear mortgage.(like the car only driven on Sunday by a little old lady). Makes a difference
In SD county median prices AND sales both dropped. The only ones spending (on property and property development) are municipalities. Anecdotally a house was sold in our neighborhood, and the new owners are working full time (latino labor) to clean and repair. So there are people doing things, but sometimes it is deceiving, they may be very much downwardly mobile, but when you have farther to fall than the rest of us, it looks like up to me.
once again DEFLATION for assets and INFLATION for things we need
stonliegh...
http://theautomaticearth.blogspot.com/
Like most property owners I’ve been watching home prices fall and new market dynamics evolve in the communities where I live. It’s amazing, not to mention extremely disappointing, to see how one foreclosure or short sale in a neighborhood can ruin the market for everyone. It doesn’t just produce a sharp decline in prices; it also tends to break up deals in progress and bring all negotiations to a halt. It’s like a poison pill.
Once again, Wall Street trumps Main Street. The Fed and the major banks have done a great job of propping up mortgage assets. Meanwhile, they seem hell bent on trampling physical real estate assets into the very ground they are built on. And now, the banks are all advertising how they are focused on rebuilding America – yea right!
Yep :( don't do a deal with the devil lol you can always tell where they're coming from by the faint Sulfur odor on them lol
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