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Massive Mortgage Mess Update: Title Companies Stop Insuring Foreclosed Properties
Today's latest chapter in what is now known as the new 3M: the Massive Mortgage Mess, is that Fidelity National has told lenders to halt foreclosures, and to stop sales of bank owned properties. The reason, and this should be no surprise to anyone, is "possible document flaws." Fidelity is merely the next of, well, all. And while the WaPo reports that the John Walsh, acting director of the OCC has reached out to seven lenders including Chase, Bank of America, Wells Fargo, Citi, PNC Bank, U.S. Bank and HSBC, to review their foreclosure processes in light of the Ally and JPM Chase situations, the news of the day comes from the NYT that Old Republic National Title has stopped insuring title to Ally-foreclosed properties "until further notice." And once the insurers lost faith in the product they are supposed to have 100% confidence in it is game over: virtually no foreclosure transactions will take place going forward. We hope RealtyTrac will provide an update on what they may be seeing in foreclosure trends in the past two weeks : we are confident these have plunged off a cliff across the land.
From the NYT:
As more defaulting homeowners become aware of the lenders’ problems, they are expected to hire lawyers and challenge the proceedings against them. And if completed foreclosures were not properly done, families who bought the troubled homes could be vulnerable to claims by the former owners.
Apparently alarmed about such a possibility, one of the major title insurance companies, Old Republic National Title, has sent a bulletin to agents saying that “until further notice” it would not insure title to properties foreclosed upon by GMAC Mortgage, the country’s fourth-largest home lender and one of the two big lenders at the center of the current controversy.
GMAC declined to comment, and Old Republic representatives did not return calls.
As we have long expected, this merely means that as the foreclosure pipeline gets clogged beyond repair, and as mortgage losses accumulate at an exponentially growing pace, stocks of financial companies will likely surge as very soon their survival will become a binary bet on TARP 2. Very soon the investing public will realize that they are worth either nothing or infinity, which is what we affectionately call the Fed's price target for the US financial sector.
h/t Keith
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Can we say "impairment," equity tranche holders?
Old Turk,
I buy foresclosures at Trustee Sale in Nevada, so all of this has me wondering.
Could you elaborate on why think non-judical foreclosures will be OK?
Thanks
When I ran land title from 2000-2006, I saw so many GMAC second mortgages that wer for 80% of the property's value, irregardless of how much the first mortgage was for. The first mortgage could have been for 125% of the property's value or it could have been for 60% of the home's value. It didn't matter. GMAC (n/k/a Ally) was always going to have that second mortgage for 80%. How could they even pretend that was going to end well?
Tyler, here's something that hasn't been mentioned:
Plaintiff's attorney's are now more likely than anyone to stall this process. Their fiduciary responsibility to the Court, under these circumstances, as attorneys for Chase, GMAC, etc, is to ask for more thorough documentation by the plaintiff, or the Court is likely to hold them liable. This suits them just fine thank you very much, leading to a more drawn out process, and more fees for them, suits the homeowner who gets to stay free for a while longer, suits the Bank who doesn't have to put it on the books, and since the FED is buying the paper suits the noteholder as we're [EVERYBODY] the only ones getting screwed, in a "backhanded" boomerang way.
I know for a fact smaller firms will hesitate with some of these clients and are probably the CAUSE of the recent halts, and very specifically the above mentioned unwillingness to secure title. Seeing a push of cases being consolidated into the Mega Firms in NY/Miami/LA, etc, would be indicative of the Banks intending to push them through, and not wishing to take this "delay option."
Would the homeowner who is defaulting still be liable for back taxes. If they choose to live in the house even though they have stopped making payments....they are still the owner technically until the bank repossess the house. So it may be wise to at least pay the property tax?
If you're living in the house, yeah you BETTER pay the property tax. Or county will take the house free and clear and screw everybody.
I think someplaces in the US you can be late 3 to 5 years before the county acts, otherplaces maybe 1 year.
Worse, the title and load paperwork of foreclosed properties are being sent to law firms who are paid a bounty to find any legal or technical defect that can be turned into a title insurance claim. This has resulted in a great increase in claims that must be responded to and that are ripe for denial.
The law, custom, and lender regulations require title insurance to cover all the risks in a real estate deal that are not directly accepted by the parties involved. The entire real estate industry will screech to an instant halt should that product not be available. Chalk this mess up to yet another unintended consequence of the brilliant progressive academics who were confident that their "smarter" policies would bring the little people instant prosperity and thus restore the ocean of tax revenue for government to spread around.
Good. I hope it screeches to a halt. And I hope mortgage lenders and the National Association of Realtors membership gets thrown out on the street and have to live in tent cities next to railroad tracks and swamps where these thieving liars and frauds belong.
Dianna Olick on CNBC. Man she is a beauty and brains-what is she doing hanging out with CNBC? Better yet, why am I watching CNBC? (Blush). Waiting for Erin B to get DD's.
Smaller flat sales in Manhattan declining, but higher end homes rebounding. Those high end Wall Streeters are flush with cash. The pions who got laid off had to leave their flats.
I just realized this could affect me and my wife. We bought our dream home (well, a run-down old apartment building that WILL be our dream home when we fix it) at a foreclosure auction here in Indiana, back in June. Got it for so cheap we paid cash, and now we own it free and clear.
Or so we thought . . . man, it would suck if it turned out to have unclear title due to some bank's screw-up. Especially since we've been pumping money and elbow grease into it to fix it up.
You have title insurance? Never too early to hire a lawyer to look at your paperwork.
ZH commentators,
1. You are not getting the picture. The debt based monetary system is a fraud. They get you into fraudulent contracts with YOUR credit, so who do you think should have proper title? The answer is: you. However, you have to claim yourself as the owner of everything you have and that you owe. So file that UCC 1 Financing Statement.
2. The Modern Money Mechanics posted at the Federal Reserve is only half of the story on how our monetary system works. The other half is described in the Uniform Commercial Code posted on the Cornell Law University website. Under the UCC, you must discharge your debt with 3 pieces of paper. That is the law of a good citizen in a debt based monetary system. You must not dishonor your debt. You discharge a loan with more fake paper. Get it?
3. You talk about refinancing without considering the consequences of a nonrecourse vs recourse loan. They´ve been touting their bullshit programs, but thank god not too many people are affected. If you have a 1st time mortgage on a house, it is classified as a nonrecourse loan. OK, nonrecourse means they can only take the house as collateral for the loan. But under a refin, you have a recourse loan, which means if you default, they can come after any other assets you own like bank accounts, stocks, cars, personal items like furniture, jewelry, and so on. Are you sure you want to sign a recourse loan? Why would you let them get you in deeper if you are going to loose a house anyway?
4. The surest way to get out of the mess is to file the UCC 1, discharge all debt correctly under UCC and send the paper work at least three times, and send the bank a 1099OID claiming you are the owner of the debt. Send them the 1099C, which is the abandonment form too, indicating they are abandoning your credit.
Write letters to the Office of the Comptroller of the Currency stating that the bank withheld your credit and failed to report the taxes properly to the IRS. This is the real crime that they have committed. They have permission from the gobermint to handle our credit.
I once read Al Capone was taken down on taxes. Well, maybe we can take down the banks by ratting them out to the IRS.
One more point to make. Article 9 of the Uniform Commercial Code was revised in the 90s to change the way ownership is documented. Read: they were preparing the way to legalize the whole MERS thing, so that the foreclosures would be legal.
I think a lot of the foreclosure fraud is coming out because the revised Article 9 doesn´t cover their asses.
To discharge any debt, tax or otherwise: sign the coupon. Write on the presentment (the top portion of the tax bill):
Accepted for Value and Returned for full Discharge, Settlement, and Closure.
Then fill out the 1040V form, the voucher. It instructs the taxing body to use your pass through credit account at the Treasury to discharge the debt.
Make sure you send these 3 pieces of paper back to the county for property tax, franchise board or whatever. This is how you discharge debt under UCC.
Why wouldn't title be at risk in an existing home for that matter- shit before these home were foreclosed on, the mortgage had already been sold and repackaged, the same as any other existing home - except for those banks that PORTFOLIO the mortgages - what a weird concept - rather than sell em to GS CDO/CLO/MRBS or some other rocket scientist's financial engineered wet dream.
It IS at risk--you could pay for next 15 years and at the end, the servicing bank shrugs their shoulders when you want to have a mortgage note burning party.
Think diabolical. Obama needs to stop the housing smash up before it takes his presidency, so a manufactured way of keeping people in their homes and maybe rewriting all the loans as well is created. Machiavellian I say. By way of analogy, I see the housing foreclosure crisis like a car plunging off a cliff and our fearless leaders of finance, law and politics thinking they can just turn off the ignition and all will be well. Fuck, they can't even find the ignition, let alone question their own logic.
When I worked in mortgage software I figured out that operations is just a cost center in banking. I knew there must be tons of mortgage files in boxes in the janitor's closet, waiting to be processed for real someday.
It never occurred to me that they would do the same with foreclosures. Silly me.
Updated GOLD monthly chart:
http://stockmarket618.wordpress.com
great news, foreclosures slow, time to congratulate the incumbents. stocks rally again on this news!
( there go more of my puts )