This first sign came from the Presidents’ speech. He spoke of a ReFi. But he had not one word of detail. Still there are clues:
My administration can and will take some steps to improve our competitiveness on our own.
We’re going to work with federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4 percent.
I know you guys must be for this, because that’s a step that can put more than $2,000 a year in a family’s pocket, and give a lift to an economy still burdened by the drop in housing prices.
The WH provided a breakdown of where the new stimulus money would be spent. There was not a nickel in the proposal to cover the cost of any new ReFi program. Note that O states that he can do a big ReFi “On our own”. This means that he has the money in his pocked to do something. He does not need congress to okay a new plan. (There is $25+b of old TARP money, there is an additional $35b available from the previously funded “Hope Now’ program.) The point is that there is money around with no string attached for the President to pursue a ReFi.
The second thing of note is that late Friday afternoon a was letter released by the FHFA. There was a very significant softening of the language regarding the terms for refinancing:
FHFA is also considering the barriers to refinancing mortgages that would otherwise be HARP eligible but for having a current LTV above 125 percent.
Our objective is to provide borrowers in high-LTV loans who have a history of making on-time mortgage payments with an opportunity to refinance, resulting in reduced credit risk to the Enterprises and added stability to housing.
Bingo! The current ReFi restrictions that require a borrower be no more than 25% underwater and have a 780 FICO are about to be waived.
The final bit of data comes from the CBO. They did an analysis of what the implications are of big refinancing might be. I contacted the CBO on this and they were very clear that the work they did on this topic was not a report on a specific proposal, but rather a generic review.
It is probably correct that any plan that the administration comes up with will vary in scope from the review by CBO. It is also correct that this review has been done in anticipation of a specific proposal. Therefore the review and the conclusions are worth noting. The key assumptions used in the analysis:
(1) Eligibility includes existing loans guaranteed by Fannie Mae, Freddie Mac, or FHA.
(2) A borrower must be current on an existing mortgage and must not have been more than 30 days late on any mortgage payments during the prior year, but there are no limits on the borrower’s current income or on the loan-to-value ratio of the new loan.
(3) The new loan has a fixed rate of interest, at the prevailing market rate, and a term of 30 years.
The CBO has concluded that there are $4.3 trillion of mortgages that broadly meet the above requirements. These mortgages have been converted to Agency MBS. The report looks at what were to happen if 10% in that universe were restructured. The following chart looks at the results.
The bottom line is that 2.9mm homeowners would get a benefit of $7.5b (each year) and the net cost to the government would be a one time hit of only $600mm. A nice trick. Note the individual gain and losses. The losses come from a write down of the value of MBS held by both the Fed and the GSEs.
So how can this be? Where does the money to achieve these results actually come from? That’s easy. It comes from the poor bastards outside of government who own the Agency MBS. From the CBO:
Those investors are expected to experience a disproportionately large fair-value loss of $13 to $15 billion.
Ah! It all makes sense now. Savers are going to pay for the ReFi. The CBO makes this fact very clear:
Most of that wealth would be transferred to borrowers.
Based on all of the above I believe that there is a ReFi plan in our future. This is what I think it means:
I) We get a program that targets $800b to $1 trillion of mortgages.
II) The program will start on 1/1/2012 and end 12 months later.
III) The consequences to the MBS market will be deferred for 4 months. Thereafter the increased monthly redemptions will flow through the MBS market at a rate of 70-80b per month. While painful, this will not result in a collapse of the MBS market (but it could…)
IV) If $1T of Refi were accomplished, it would result in increased demand for yield curve protection by all participants in the mortgage market. This would, by itself, tend to push up interest rates in the 10-30 year maturity.
V) To offset the market implications of #IV the Federal Reserve could respond by absorbing the risk. This could easily be accomplished with “Operation Twist”. If the Fed were to sell some of its shorter maturities of Treasury bonds and simultaneously purchase coupons with an average 15-year maturity, the market implications of the Mega ReFi would be neutralized.
We are going to see a ReFi proposal along the lines described above announced in the next few weeks. This will justify the Fed to initiate $1 trillion of Operation Twist. That announcement will come on September 21st.
MBS holders will get hit on the head to the tune of $25b. But no one cares about them any longer. Punish the savers.
.
You are correct.
It's a given that Obama will take action in regard to the housing situation prior to the election....the country be damned.
The author, playing "pin it on the donkey", should have noted this action should have been done much earlier. Doing too much is not a valid knee jerk criticism.
Maybe this question has been asked and answered so I apologize for asking it again.
If a person's home is worth less or a lot less than the mortgage, what good will it do to refinance the mortgage at any interest rate even zero? that person is still looking at owning an asset that is worth less than the obligation. they cannot get out from under the debt even if they sell the house unless they pay an extra sum to the bank over and above the value of the house. even if they chose to stay in the house for the life of the mortgage, they face the prospect of owning a house that is worth less than they paid for it. Their house , a vehicle to build equity , will have become a car, except it doesn't move.
If you don't believe in a huge appreciation in house prices in the future (fewer of the non Realtor crowd believes in this), "homeowners" who are substantially underwater >25% are really renters with a really long lease so reducing their interest rate has the same effect as lowering rent. In the big picture, the winners are the orignators (who in many circumstances committed fraud) who are now excused from misdocumentation, and debtholders who won't find themselves with another house they can't do anything with.
If you are >25% underwater and continue to pay your "rent" faithfully because of honor or sense of obligation, you probably should get to pay prevailing market rates rather than suffer the double indignity of being underwater AND paying much higher than market interest rate.
How can the USA do this? They are out of money?
LOL!!!!!!!!!!!!!!!
Bill Haley... Come on lets twist again...Twistin' time is here...
Bill Haley? That's for rocking around the clock. I think you mean Chubby Checker. Study your history, my man.
Agreed Chubby invented it but Bill Haley joined in also : see the list below of his 1961/1962 hits :
1961 "Honky Tonk" / "Flip, Flop and Fly" (Warner Bros. 5228) "Riviera" / "War Paint" (Gone 5116) "Twist Español" / "My Kind of Woman (Spanish version)" (Orfeon 1010) [May 1961] "Cerca del Mar" / "Tren Nocturno" (Orfeon 1036) "Florida Twist" / "Negra Consentida" (Orfeon 1047) "Spanish Twist (English version)" / "My Kind of Woman" (Gone 5111) [September 1961] 1962 "Caravan Twist" / "Actopan Twist" (Orfeon 1052) "La Paloma" / "Silbando Y Caminando" (Orfeon 1062) "Bikini Twist" / "Rudy's" (Orfeon 1067) "Mas Twist" / "Tampico Twist" (Orfeon 1082) "Twist Lento" / "Sonora Twist" (Orfeon 1100) "Martha" / "Tacos de Twist" (Orfeon 1132) "Jalisco Twist" / "Pueblo del Twist" (Orfeon 1169)
There have been a lot of artists who sang the song later on. None of them were nearly as popular as Chubby's original version. No one identifies the song with anyone else but Chubby Checker. It is the classic rendition.
Now, some food for thought. Back in the 1960's, you had a fat black guy doing the Twist.
Fast forward 50 years, and you have a lot of fat, white bankers doing it. That would be a memorable video.
Chubby was way ahead of his time. :)
and... a lot more talented!
Agree there is massive FRAUD on the part of the banksters and MBS holders. Instead of giving them a new 'wet document' via ReFi, CHALLENGE IN COURT your current loan.
1. FORCE the holder of your loan to show up in court, because if they do not then you get a 'free and clear' home.
1a. If they do show up in court (highly doubtful at this point because few know who may actually hold your loan,force them to show that legal transfer of title has been done at EVERY step.
2. If they actually have done all of proper legal steps, which affects perhaps less than 1% of loans from 2004 through 2008, then you are out some court and legal fee. For the nearly 99% of you, congratulations you own your home free and clear and thus....
3. You then own your home 'free' and clear and with title due to FRAUDULENT banking and/or investment firms breaking the law. A home contract is CONTRACT LAW and if one party breaks that law, they lose and you win.
IMPORTANT: Why finance to save a few dollars when you can own your home without ever needing to make another payment again?
DO NOT ReFi AND THUS GIVE THESE BANKSTERS A FRESH WET DOCUMENT!!! GO TO COURT NOW!!!!
I'm on board with this.
I've already checked, and my original mortgage documents were assigned a MERS number, so there's a decent chance that I'm part of the 99%.
But here's the real question- how do we do it? I'm willing to go first, but I need some legal advice before going for the gold here. I'm not a lawyer, and paying for one out-of-pocket would be more expensive than just paying off my home, so the only rational route is to represent myself pro se.
Any chance you have some resources that might help get the ball rolling? I've spent some time looking into it, but it's a tangled mess of legalise, and there just aren't enough hours in the day...
If you are one who meets the qualifications I would sit back and wait. If this happens you will get a letter in the mail. That letter will say:
You are eligible for a refi at 4% sign here and it's done. The Government will pay the cost of the Refi ($2000).
Good luck.
It's amazing how people bitch about others getting something for nothing on their dime until they get a whiff of a game they can get in on. . .
First off, the success of this scheme really depends first and foremost on the state the house is in. Second, while it may appear plausible, it is a fallacy to think that millions of borrowers will wind up with "free" houses following your plan. Third, you cite these same claims over and over but provide no cases in which this legal precedent has been used, much less succeeded. I know it sounds great, but I hope people are not buying this because at the end they will end up on the street looking for new place to live.
Deadbeats need to get over the wet dream of free houses due to problems with securitization, IT AIN'T GONNA HAPPEN! Mark my words, short of a few that slip through, IT AIN'T GONNA HAPPEN!
I think the outcome of defeating an invalid foreclosure due to the failure of the plaintiff to demonstrate that it is the party legally entitled to enforce the mortgage is that foreclosure is dismissed, and then the lien can be discharged by a separate action to clear title. But the note remains "out there" as an enforceable instrument, it's jsut no longer secured by a first lien. Even here, your dream scenario comes true if no one can step forward with the original note, or a plausibe story as to why they do not have it. But if the note is good, an action on the note can lead to a judgment, the judgment upon filing becomes a lien against all property owned by the debtor, and various forms of foreclosure actions can then proceed on the judgment. Laws differ in the states, so there may be variations on this theme.
I also think the GSE mortgages do not suffer, by and large, by failures in the documents or securitization. Rather, they suffer from fraud in the inception (unqualified borrowers who falsely misrepresented themselves with the wholehearted assistance of bankers and brokers.) It is private label RMBSs where not only was there fraud in the inception, but also fraud/sloppiness in the securitization that has led to those RMBSs being difficult to enforce. It is there that one should ask some hard questions.
For those who asked...
ANSWER: Check http://4closurefraud.org/ as they have this situation and legal steps needed down to a science.
As for the owner of the loan, which is probably now #4 or more, they will have to sue everyone UP the chain of title UNTIL it was NOT broken legally to THEN come after you. That could take MANY years to... forever.
The chain of documents is broken due to their faulty operations and NO you WILL NOT be held liable for the financial balance. THEY broke contract law (read: you do not owe them money). THEY broke the law, you did not and this is why YOU are going to court becuase THEY did an illegal act(s). THEY broke contract law and/or DID NOT file properly with your city the transfer of title, which THEY are obligated to do BY LAW
PS: Beware, some lawyers 'work' for the banksters/system's interest and NOT yours. So interview lawyers VERY carefully, they are not equal in who they REALLY work for per se.
If only it were so simple.
Contract law is not THAT complicated per se. Ask yourself why are banks so very egar to AVOID court when YOU DEMAND all the documented proof.
EVERY...STEP..OF..THE..LOAN... proof as they are required to do in a court of law.
Do you even know who REALLy owns your home loan? It could be an investment firm in Denmark for all you know. Good luck having them show up in court once you file.
Have you been paying attention? The banks are not shy about manufacturing fake paperwork, and judges aren't exactly thrilled by the prospect of giving away free houses. Unless you've got a bulldog of an attorney who is well versed on these issues, AND you get a judge who knows his ass from a hole in the ground, AND you're willing to spend ten grand MINIMUM just to take a shot at this... don't bother. Believe me, I've been looking into this issue extensively. If you fight it in court there's a chance of stalling foreclosure proceedings, but stopping them is unlikely – most foreclosure defense attorneys are looking for leverage to negotiate a mortgage mod, not get you a free house. The best advice I received: Don't submit yourself to the jurisdiction of the court by fighting the foreclosure, as it just exposes you to other potential liability (deficiency judgement). Try to avoid getting served in person, stay in your house as long as possible, and just walk away. It's a rigged game – the only way to "win" is to not play.
I have been thinking about this for a while and I thought it was limited to MERS home mortgages. Is there any precedent for this? Any case/statutory law you could point me towards? Thanks.
4closurefraud.com has knowledge and resources on how to challenge your mortgage. Citizens challenging their banks and winning. It is a war but the citizens have made progress. This is why the banks have tried to get a settlement via the Congress, The POTUS, the State AGs and now the Fed Courts. The banks have a problem and know it.y
Much Thanks. I'll keep everyone posted.
+++++
If your numbers and facts are even close to true, you have just saved a whole bunch of people a whole bunch of money. I know nothing about this topic, but if there is enough of this fraud that has happend then your suggestion could save a LOT of people from new slavery by freeing them now throught the courts! Ha! A justice system that might work!
Excellent analysis, I hope that others who know more than I do about this can get the word out.
Well, with all due respect, he's incorrect due to incompleteness. The debt obligation doesn't go away. You may have the Title, but you still also have the loan. If you fail to pay that, then either the Bank or Bankruptcy Court can come after the house.
He did raise one great point though, which Bruce left out. Bruce's article was excellent, but these refi's are going to be RECOURSE LOANS.
This time, it will be the Feds who come after you. And my bet is that the loans will eventually be as tough as Student loans to discharge. I wouldn't be surprised to see them raid Retirement Accounts if those get nationalized.
Beware of Uncle Sam bearing gifts, unless you're a Banker.
I suspect that anybody who strategically defaults on any mortgage loan (maybe any loan) will spend the rest of their lives looking over their shoulders. They may not be looking now, but if they ever start to accumulate assets, they'll get a tap on the shoulder.
Only in recourse states.
In non recourse states they can only take the property to satisfy the judgment, nothing else.
The bank needs to be able to prove in court they HOLD the loan. It gets a little ontological at that point.
If a loan is made, then all the debt-holders forget who is owed, does it still exist?
Recourse is a state law issue. That can't be changed. If a borrower had a recourse loan in the past, they will have it post the refi. If the borrower did not have recourse originally, the would have the same status after a refi.
Even Obama can't beat state laws.
Good point, and true enough.
Here in California, refi's are recourse. The law is written such that only the original mortgage is non-recourse.
I don't know how many other States have similar laws. But California is one of the main places of underwater mortgages.
The bottom line is that I expect a very good percentage of these refi's to eliminate the State protections against recourse. But I don't have a specific number, nor have I seen such an estimate published.
Not true of the one state I have researched, Bruce. Florida is non-recourse only on original purchase money, first mortgage, owner occupied loans. If you refi, you are toast, and any seconds or HELOCs would not be covered in any case.
You better find a new source for legal citation because Florida is full recourse. The lender has 5 years from the date of foreclosure to sue for deficiency and must reserve the right to do so during the foreclosure.
Reading comprehension skills are good to have.
Florida is consistently listed as a non-recourse state, but that protection is allowed, not guaranteed by state law. It must be in the original loan docs, and my comment referred to how easy it is to mess it up.
Correct.
Indeed. The lien does not magically disappear. And you're spot on about the recourse aspect – this is one consequence of a re-fi that no one will tell you unless you specficially ask. Take it from an underwater homeowner who has been looking into this mess for a couple years now – there are no good options, only varying degrees of bad.
Sounds like something for nothing, to the deeply undeserving, to me. How exactly does this help everyone else?
It would help housing prices correct for anyone who doesn't already "own" a home. Of course, if you DO own a home, you'd want to prevent housing price correction, because you benefit from the current overvaluation.
Markets. Can't please everyone, you know. :)
The banks go... *KABOOM*
Fraudulent financial practices are punished and a new, hopefully less fraudulent, financial system emerges.
And of course deeply buried in the fine print, these loans will magically transform from a "non-recourse" to a "recourse" loan. Which simply means you'll never be able to just "walk away".
And what's the remedy for everyone who had their home stolen by the "robosigners"? The fraud runs deep.
This is exactly what I told a friend of mine when we were discussing one of Bruce's earlier articles. I'm not sure why the banks haven't done this for all new mortgages already. They're certainly not worried about writing fewer mortgages; they're making their money through other scams now (student loans, subprime auto loans).
This looks good for PMs. It appears to be a sweeping systematic move against contracts and it appears that it may put more raw currency where the rubber meets the road. Look out gold 3k.
The idea is to free up disposable income of the serfs otherwise committed to debt service, in the hope that they use these extra funds to buy iPads and such. Although I hear the argument about punishing RMBS holders/savers, in the big picture this may be a way to limit their eventual losses (from waves of foreclosures yet to come if the economy heads in the direction I think it is heading) by realizing them now and getting it over with, and heading off the depression with a capital D by making available additional cash to consumers to spend. I think RMBS holders should have seen this or similar problems coming (the Fraudclosure Gate issue), I think they've had plenty of time to make a reasonable exit (if holding a good tranche,and GSE guaranteed obligations are by defintion money good, and have been very liquid, have they not?), and so my sympathy for them is muted. Many holders of troubled traunches, I suspect, have bought at a discount.
I was under the impression that the suing of the 17 banks was to unwind all of the faulty RMBS and that the banks would then be bailed out and the investment funds would be made whole and end up with a lot of money to invest.
jal
I can't agree on Obummer's refi plan or Bruce's take on it.
I posted this elsewhere on ZH but it is now buried pretty deep.
Let's Play "Find The Fraud"! What's Wrong With This Assignment?
From one of the comments at the OP:
So Janice works for Franklin American Mort Corp. in Flint, MI and Assigns the Mortgage as an Asst. Sec'y for MERS to Wells Fargo in Des Moines, IA and she had the Assignment Notarized in Dakota County, Minnesota...
Then, on the same day, she also works for Wells Fargo in Des Moines, IA and Assigns the Mortgage to Fannie Mae in Philadelphia, PA and has it Notarized again in Dakota County, Minnesota?
First, Lets just assume that it's legal to have an Assignment of Mortgage from a company in Flint, MI to be Notarized in Minnesota for a Company located in Iowa. And then let's also assume that a company in Iowa can have an Assignment of Mortgage Notarized in Minnesota for a company in PA.
Is this sort of behavior legal? Or could it be FRAUD? Hmmmmmm, Flint, MI to Dakota, MN, a mere 581.8 miles apart. That's nearly a 12 hour drive w/o any highway mishaps, oh, and you better have the ability to walk on water, otherwise, its a 688 mile drive under Lake Michigan and over 12 hours. Typically, Banking hours are between 8am & 5pm. That's a total of 9 hours. Maybe she should have saved gas and just drove to Iowa. It's only 10 hours away.
Pretty neat trick huh? I've got one coming (just waiting for the lawsuit to be filed) that clearly shows a pair of banking execs insist they signed a document used in a foreclosure action - now get this - a full 23 days before they had the document in their possession. Further, the magic documents were notarized 40 days before that!
Their is something very sinister about this amazing time travel. It is my belief that these individual mortgage obligations live in more than one savvy MBS investor's "book". Each manifestation of the obligation is insured against default for the full outcome based appraisal "value".
Each investor is made whole via insurance and thanks to AIG, who of course was caught by surprise, has no choice but to dump the whole mess on the taxpayer. Meanwhile, the "servicer" purchases (for pennies on the fiat) the right to pursue the extinguished debt and seek as many deficiency judgments as possible.
Not to mention the fact that clear chain of title on millions of homes (in default or not) are destroyed. Further, if the obligations fail to make their way to the trusts within the REMIC window, no taxes are paid.
Rather than throw mountains of money at TBTF banks maybe we should have "bailed out" the millions of lousy middle class. Enough money has vanished in this effort that something equitable could have been done for people who have paid off their mortgages as well.
Now that would have been a good stimulus.
FRMBS. Fractional Reserve Mortgage Bull Shitting. God forbid all the investors show up to the shop at the same time wanting to take account of the individual mortgages backing their "investment."
Gold and Silver ETF = Not enough PMs to deliver to all who have contracts.
CDS/CDO = Not enough reserves to pay off all those who think they are insured.
Banks = Not enough money to pay off everyone who showed up for cash.
Is it just the case that folks cannot resist selling more than they have if they know folks don't, hardly ever, demand to see proof that the asset underlying the "product" is really there? This is stealing/Ponzi scam. Always has been.
OBJECTIVELY - THIS IS A GOOD STEP. 1. MBS investors know pre-payment risks and can handle this (prepayment is superior to default). 2. Consumers will save money via reduced mortgages and this should stimulate the economy. 3. New mortgage paper will be signed (reducing claims) and hopefully new paper will be properly securitized and assigned.
I believe this is a good step away from the brink. Just speaking objectively. No dissent or scarasm.
A step away from the brink? Didn't you mean to say it allows the can to be kicked farther down the road? That road is narrowing and the can is getting heavier. Beware the ditch on both sides. Monoloco hit the mark in his comment above.
I don't see how loaning more money to underqualified borrowers on overvalued real estate is going to help matters.
The real estate may be overvalued, but I fail to see how anyone who is still current on their mortgage after the last three years is "underqualified" by any metric.
Or are you drinking the ratings agencies' Kool-aid?
For myself, it doesn't matter in any way, shape or form. I got in with a low fixed rate, am not underwater, and see no need to refinance to save a whopping $50 a month. I'm going to hold out and see if I can do anything with the fact that my property title was sold in tranches via MERS. I'd like to do it all myself, but there's no money for lawyers, and no time for me to DiY.
This refinace move smells like a bait with a hook in it to me. I'll see how it works out for the people around me before I bite.