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Foreclosure Stuffing

Tyler Durden's picture


Back in November 2010, the robosigning scandal hit in which it was made clear that when it comes to keeping track of mortgage titles, nobody really knows what belongs to whom, except maybe for Linda Green. The immediate result of this was a complete collapse in the foreclosure process as banks no longer had leverage to evict those who don't pay their monthly mortgage bills, since the banks couldn't confirm they actually had rights to the underlying mortgage, and the total monthly foreclosure total dropped from a ~330,000 average houses/month to roughly 250,000. Then in February, to much administration fanfare, the banks, and the attorneys general, signed what we dubbed the Robo-settlement: an event which was supposed to be the "resolution" to the robosigning scandal, and which should once again unclog the foreclosure pipeline. This did not happen. Instead, as RealtyTrac has been diligently reporting month after month, the monthly foreclosure total has continued to decline, and in August hit a level of 193,508 total foreclosures. The immediately spin is that this was a 1% improvement from July's 191,925. The reality is that it was a drop of 15.1% from a year earlier. As the chart below shows, ever since the advent of fraudclosure, the average monthly foreclosure total has dropped from a 330K/month average to just 219K. And declining.

So why did the robosettlement not undo the robosigning foreclosure crunch? Simple - foreclosure stuffing.

What happened is that since the properties not entering the foreclosure pipeline are effectively kept out of inventory, even shadow inventory, and thus the distressed end market, the monthly drop in foreclosures has acted as a form of subsidy to the housing market, as month after month less inventory than otherwise should, enters the market.

As the chart above shows, there is now a 2.5 million "backlog" of properties that should be foreclosed upon based on historical trendlines, but which are being completely ignored by banks. A stuffed foreclosure channel, if you will.

What this has resulted in is a logical increase in prices of the properties that are on the market. The trade off, naturally, is that there are millions of properties, not only in shadow inventory, but in this sub-shadow pre-foreclosure space, where the tenants live mortgage-free as the banks refuse to begin the foreclosure process (which already takes a record length of time - think years - to go from issuance of Default Notice until a new tenants buys and moves into the property). It is these beneficiaries of bank generosity that are to "thank" for the fact that houses are rising in price, or, in other words, less affordable for everyone else.

Because while the number of houses where the equity is underwater may have declined, what has also declined is the number of actual buyers who may purchase said suddenly more expensive houses.

Finally, what hasn't declined, is the number of people who now and going forward will live completely mortgage free just to perpetuate the illusion that "housing has rebounded." Consider them sunk costs in this latest attempt to reflated housing. Also, thank them if suddenly that home you have wanted to buy is once again just out of purchasing reach.

As for those who have a mortgage, and are wondering if they should continue paying it or not: why pay? It is now not only the administration, but the banks who are effectively handing out free housing.

Remember: in this New Socialist Normal, "just say no" when asked to pay for anything.


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Thu, 09/13/2012 - 11:18 | 2789721 Lost Wages
Lost Wages's picture

Been living mortgage free for over a year and just got my Notice of Default last month.

Thu, 09/13/2012 - 11:25 | 2789741 MachoMan
MachoMan's picture

Not to nit-pick, but you still have a promissory note, you're just not paying it...  Further, unless a Court of competent jurisdiction has declared that you do not have a mortgage, then you still have one...  if you try to sell your house, the closing agent will withhold the remaining balance on the note...  if you try and sell directly, you'll likely break the law if you fail to pay the lienholder the sale proceeds.  You are not living mortgage free.

PS, kudos on not paying...  hope it works out for you.

Thu, 09/13/2012 - 11:43 | 2789826 banksterhater
banksterhater's picture

Either walk away or I hope the state you live in GARNISHES EVERY BIT OF INCOME YOU MAKE, FOREVER! GFY!

Thu, 09/13/2012 - 11:52 | 2789869 chunga
chunga's picture

With all due respect, I think you need a new screen name.

Thu, 09/13/2012 - 12:12 | 2790004 larz
larz's picture

with absolutely no respect I agree give the name up to a real warrior

Thu, 09/13/2012 - 21:49 | 2793112 AmericanBulldog77
AmericanBulldog77's picture


Thu, 09/13/2012 - 22:09 | 2793175 neidermeyer
neidermeyer's picture

G'Day Chunga ,,

Pinged you on FR ... Did you see the news where the FDIC was suing over empty/never funded remics? It was on Matts site a few days ago ...

The big news is the Bernanke funding title whitewashing @ $40B/month forever to enable title insurance companies to resume coverage on post foreclosure bank owned ...

Thu, 09/13/2012 - 11:44 | 2789828 Rentier
Rentier's picture

To add to that, down the road when the bank forecloses and sells the house if the bank so chooses they can drag you into court and get a judgement against you for the difference you owed on the mortgage to them and the price they sold the house for.  It is no different then defaulting on an auto loan.   Even if the bank doesn't go after you for the difference the IRS will expect you to pay taxes on the difference if the bank doesn't make you pay it since the IRS views that as a capital gains and tax you accordingly.

Thu, 09/13/2012 - 13:16 | 2790535 eatthebanksters
eatthebanksters's picture

It seems to me that banks want it both with everything else they do they ignore the moral hazards of their actions (while warning the same of others) and manipulate markets for their own benefit, to the detriment of everyone else. Where is our principled leader to give us direction....Vegas Baby!

Thu, 09/13/2012 - 13:38 | 2790718 Calmyourself
Calmyourself's picture

IRS does not go after you for the difference, I will not bother looking up the law Bush signed..  You do it..  Non-recourse state ditto..  Get your facts straight, not saying I agree but this is ZH get your facts straight..

Thu, 09/13/2012 - 14:18 | 2791026 WillyGroper
WillyGroper's picture

if you do not do a short sale by EOY or file bankruptcy, you bet ur boots toots they'll tax you. 

Thu, 09/13/2012 - 22:11 | 2793182 neidermeyer
neidermeyer's picture

That IRS exemption on forgiven debt ends at end of 2012.. so if you're looking to short sell you're too late although you could probably negotiate a cash payment to walk out with the house in good condition by then.

Thu, 09/13/2012 - 13:41 | 2790733 Piranhanoia
Piranhanoia's picture

Only in select states and only if you walk away from the house before it is sold. (again,  depending on your state)  What you have stated is not accurate to most people.  Mortgages are different from auto and other loans entirely.

Thu, 09/13/2012 - 11:54 | 2789875 TheCanadianAustrian
TheCanadianAustrian's picture

I'm probably missing something, but I interpreted his comment as meaning that he finished paying off his mortgage a year ago, and now they're trying to tell him that he's delinquent.

Thu, 09/13/2012 - 12:11 | 2789992 MachoMan
MachoMan's picture

The odds of that happening are incredibly small at best.  In the event that does happen, then what bank would be stupid enough to take that to the jury?  Not that it would ever get to the jury given it's summary judgment material...  but still.

Thu, 09/13/2012 - 22:58 | 2793339 StychoKiller
StychoKiller's picture

The wife and I only have around two payments left, what kinda Paper is BofA supposed to send us?

Thu, 09/13/2012 - 13:35 | 2790684 Lost Wages
Lost Wages's picture

We surrendered it under Chapter 7 bankruptcy, so there will be no deficiency judgement or tax penalty. The bank is still taking its sweet time to foreclose, since we were discharged in November 2011.

Thu, 09/13/2012 - 11:24 | 2789744 Dr. Richard Head
Dr. Richard Head's picture

I have a neighbor who divorced his wife a year and a half ago.  They stopped paying the mortgage about two years ago now.  The guy still lives in the home and his girlfriend has moved in.  The house is up for sale, but no buyers.  His girlfriend now has a Benz in the driveway.  What a life.

Thu, 09/13/2012 - 18:32 | 2792402 unununium
unununium's picture

When he finally get the boot he'll get another $10K from the bank just so he doesn't steak the copper and glass.

Thu, 09/13/2012 - 22:16 | 2793201 neidermeyer
neidermeyer's picture

Tell your neighbor to rent the house to his GF ASAP and record the lease at the county ... insert some language where it automatically renews... If the lease is recorded then the foreclosing entity has to honor it.

Thu, 09/13/2012 - 11:45 | 2789787 samcontrol
samcontrol's picture

non payers in Argentina got an awsome deal.

You have balls!

Thu, 09/13/2012 - 11:38 | 2789796 Urban Roman
Urban Roman's picture

To paraphrase what they used to say toward the end of the USSR:

"We pretend to pay and they pretend there is a mortgage."


... In real life, I paid my mortgage off a couple years ago -- lucky enough to inherit the cash to do that. Of course, it wouldn't keep them from taking the house ...

Thu, 09/13/2012 - 11:54 | 2789876 greyghost
greyghost's picture

i am wondering where we can find the info on bank non or low default regions around the country? as hard as our region has been hit, our home prices have risen in the past year....hmmm. have noticed for years now that the banks put a house on the market for maybe sixty days and when it doesn't sell they yank it and another one takes it's place. just constant rotation into and out of the market.

Thu, 09/13/2012 - 13:40 | 2790614 eatthebanksters
eatthebanksters's picture

Think about it, taxpayer money used in government approved bailouts has given banks (which should have failed) enough financial strength that they can sit on distressed inventory so they can limit supply and drive home prices up...that way when they foreclose they don't lose money on underwater homes. I'd say we're getting fucked twice.  If the shit ever does hit the fan like some are saying, I won't shed a tear or come to the aid of any government official or bankster where  a mob is readying him or her to be an ornament on a lampost.  This shit is just wrong and pisses me off to no end. Criminal market manipulation in the wide open, breaking laws with no concern for prosecution...what is this country coming too when TBTF banksters do what they want and our government smiles and stands by?

Thu, 09/13/2012 - 12:11 | 2789971 brokenclock
brokenclock's picture

Depending on where you live it might takes years. 


I have a friend in Orlando Florida that has been living mortgage free for 5 years in a 500K home, (now only worth about 230K).  He has not paid insurance, taxes, or HOA dues either.  He said, "by the time he moves out he will have enough money to buy another house cash".

With that said I'm wondering who the smarter person is. He refinanced his house to the hilt during the boom using his house as an ATM (size player). Now he is saving money and living rent free (size player). He is even renting 3 of the 5 bedrooms out bringing in over 1,200.00 a month( size player) . So not only is he not paying but receiving money. If you ask me I call him "SIZE PLAYER!!!!"  He basically robbed the banks doing a NINJA loan. Now the banks are eating the interest lost, the depreciation, expenses, & foreclosure costs. After all is said and done he will buy another house cash without even dealing with the banks.







Thu, 09/13/2012 - 12:15 | 2790024 MachoMan
MachoMan's picture

If it's been that long, the banks may be impotent to foreclose on him...

Thu, 09/13/2012 - 17:17 | 2792115 blunderdog
blunderdog's picture

   He basically robbed the banks doing a NINJA loan.

Er, but...taking out a loan isn't "robbing" the bank.  It's giving them an asset.  The money for the loan was never THERE.

Anyway, you know the deal.  He made some risky and speculative financial decisions. 

Greater risk, greater return.  All's right in the world.

Thu, 09/13/2012 - 22:50 | 2793314 MachoMan
MachoMan's picture

This is true for the money printer, but in all likelihood, he got a loan from a financial institution that had to answer to another institution, who borrowed the money, from another institution, who borrowed the money, and so on.  The money might have never been there per se (although it was, given the check was probably written by the local institution), but there was an obligation for that lender to repay another lender on up the chain.  Now, this scenario gets a little fuzzy once you hit the stopwatch on the time it took many of them to assign and sell the loans downstream... 

The only way to really find out is to cause massive put-backs.  Then we'll get to see who rightfully must eat the turd.  My guess is that the money creator will not have to be the turd eater, although it will opt to gobble it down by design.

Thu, 09/13/2012 - 12:37 | 2790186 prodigious_idea
prodigious_idea's picture

If/when the bank gives up trying to collect the deficiency, you in all likelihood will get a 1099 for foregiveness of debt for the difference.  The only way to avoid that (and perhaps prolong your stay in the home) is to file bankruptcy.  That will likely postpone the foreclosure process, but won't end it.  It will, however, prevent you from getting a loan modification because the Trustee would have to approve the reaffirmation of the debt.  And that isn't going to happen in 99% of bankruptcy cases.  If you file bankruptcy and get a 1099, it will be a 1099A, which is informational only and has no tax consequence.

Thu, 09/13/2012 - 12:48 | 2790300 jowenchrist
jowenchrist's picture

you can thank us later.

Thu, 09/13/2012 - 12:48 | 2790304 jowenchrist
jowenchrist's picture

you can thank us later.

Thu, 09/13/2012 - 11:18 | 2789723 Winston Churchill
Winston Churchill's picture

Is the moral hazrd of none payers any worse than the moral hazard of

allowing banks, who have been paid multiple times alredy,gettring paid

yet again ?

Thu, 09/13/2012 - 11:27 | 2789764 MachoMan
MachoMan's picture

What I don't understand is how the banks can get paid multiple times for these turds and STILL be bankrupt...  further, if banks have the largest cash balances evar111!!!111rawr, then why the fuck can't they push through some of the shadow inventory?  Clearly, they're leaking elsewhere or are being set up for something to which we are not privy.

Thu, 09/13/2012 - 11:28 | 2789768 Dr. Richard Head
Dr. Richard Head's picture

Debt Jubilee?  Digital wealth and digital debt will disappear?

Obviously, I have been drinking.

Thu, 09/13/2012 - 13:39 | 2790720 JLee2027
JLee2027's picture

I agree that "Digital Wealth/Debt" (great phrase btw) is in danger of extinction should the meteor hit the markets. Correction: When the meteor hits.

Thu, 09/13/2012 - 11:34 | 2789791 Winston Churchill
Winston Churchill's picture

Because the money that funded the RMBS bonds never went there.

A good portion was sucked off into the Caymans thru' overseas branches

of TBTF.The balance was levered up 40 to cover the missing money.

Each forecloseure for 200k actually is a hidden contingent liability for


Thu, 09/13/2012 - 11:47 | 2789842 Rentier
Rentier's picture

From what I have read they don't want to release to many at once, because it will drop prices even more and could crash the housing market.  So, they are choosing to release them in measured amounts to try and keep prices propped up some while they unload their sh*t properties.

Thu, 09/13/2012 - 12:07 | 2789969 MachoMan
MachoMan's picture

I don't really see this activity in any material way.  Basically, if the house has net equity, it will be mercilessly foreclosed upon...  if it is going to be an obvious loss, then the bank sits on it.  I do not see bona-fide plans to rid shadow inventory from locals, regionals, the GSEs, or anyone in between.  Why would you recognize the loss at all?  You can get a bigger bonus if you pretend it doesn't exist.

Thu, 09/13/2012 - 12:49 | 2790303 prodigious_idea
prodigious_idea's picture

Pretty certain banks don't push them through for a couple of reasons.  They have almost zero-cost of keeping the asset on the books, even if they have to provision for a loss.  And the cost of a sale usually includes RE commissions and other closing costs which can amount to 5% or more of the value.  But of course there's the hope that values rise, borrowers start paying again, etc.  However, when they do sell them (presumably at a loss), the actual loss is recorded, and banks, like many entities with loss reserves, can produce complex calculations to support reserves that are lower than the actual losses that may be incurred.  The reasons are varied, but usually because the loss reserve is on a pool of assets but once the asset sells there is a specific asset identification and associated loss.

Thu, 09/13/2012 - 13:33 | 2790692 MachoMan
MachoMan's picture

Actually, this isn't true at all...  there is an incredible cost to banks for not foreclosing sooner, but this cost has not been realized yet because it will only be realized upon sale.  The deterioration of vacant homes combined with vandalism, theft, and the dangers of being a haven for drug users/vagrants all have a significant toll.  Further, tack on property insurance, taxes, HOA fees, etc. and you've got some significant carrying costs.  Realistically, I have to doubt that many of the organizatons are earning juice on the money saved (deferred recognition) in excess of these costs.  It's just a waiting game. 

Thu, 09/13/2012 - 15:26 | 2791540 prodigious_idea
prodigious_idea's picture

"Isn't true at all."  Love superlative statements.  We were talking about occupied homes - not vacancies.  So that takes out the drug use and most likely the vandalism.  Insurance is cheap - about $75/mo for a home valued at $400k.  And only a fraction of homes are in HOA areas.  But you might ask a banker about the losses I described.

Thu, 09/13/2012 - 16:42 | 2791989 MachoMan
MachoMan's picture

Looking back through the thread, I see nothing specifying occupied homes...  Obviously omission of vacant homes would lead to inaccurate conclusions as to holding costs of shadow inventory...  it's relevant and material.

Any comments regarding property taxes?  What about the fact that the statute of limitations is now beginning to run on many of the underlying promissory notes?  Each month that goes by is another month that is objectively no longer collectible, even if a deficiency judgment could be had (from a turnip anyway).

Also, even as to occupied homes, the level and degree of maintenance required to keep a home habitable is different than that necessary to keep it in tip top shape...  I'll posit that if one is simply biding his time in a home until forced to leave, that maintenance will be performed with the former in mind moreso than the latter.

Thu, 09/13/2012 - 22:01 | 2793155 AmericanBulldog77
AmericanBulldog77's picture

Where's the NOTE?

Thu, 09/13/2012 - 11:55 | 2789888 nowhereman
nowhereman's picture

Quite simple really, as the article notes;

"Back in November 2010, the robosigning scandal hit in which it was made clear that when it comes to keeping track of mortgage titles, nobody really knows what belongs to whom, except maybe for Linda Green."

When they failed to attach the note to the RMBS and let MERS rip-off the local real estate authorities by avoiding transfer taxes and such, they can only foreclose in areas where the local judiciary is bought and paid for.

Thu, 09/13/2012 - 12:05 | 2789955 MachoMan
MachoMan's picture

This is complete and total bullshit.  Not only do foreclosures happen everywhere, but most jurisdictions passed uniform law allowing the assignment of notes to be excepted from the recording requirements.  This is why the lawsuits from county clerks seeking recoupment of transfer taxes are going to go nowhere.  Assuming arguendo you are correct, then the penalty for failing to partake in the recording acts is simply to lose priority, not to lose the lien, given even an invalid mortgage is good as to the person who signed it.

If you want to talk about bought and paid for, go to the legislature...  no reason laws like that should have ever been passed.

Thu, 09/13/2012 - 13:10 | 2790494 nowhereman
nowhereman's picture

Sounds like you've never heard of Florida.

Thu, 09/13/2012 - 15:04 | 2790701 MachoMan
MachoMan's picture

So florida doesn't have foreclosures?  You can only bring suit where you paid the transfer taxes?  Give me a break.

Thu, 09/13/2012 - 22:12 | 2793186 AmericanBulldog77
AmericanBulldog77's picture

1... "When they failed to attach the note..."  The NOTE is GONE. No connection/attachment was ever made to the RMBS.

2..."they can only foreclose in areas where the local judiciary is bought and paid for..."  BS.

Most Banksters are allowed to slide FC's thru the Courts because most Americans are Sheeple and dont try to save their own homes.


Thu, 09/13/2012 - 14:14 | 2790990 PKF
PKF's picture

So now The Fed is going to buy $40 Billion/month of Mortgage Backed Securities.  From who?  Fannie?  Freddie?  Or their good buddies the TBTF Banksters?  Is that where all the Stuffed Mortgages are going to go? 

And people living 'free?'  At least they could give some homeless family shelter.  Something is just morally wrong with this...because someone who played by the rules is paying for this jerk to live 'free' in a big house in FL. 

America....the Land of the Scam, Home of the Greed.  

Thu, 09/13/2012 - 22:20 | 2793220 neidermeyer
neidermeyer's picture

MachoMan ,

What set of books are you looking at when you declare the banks to be bankrupt... You need the Cayman and Bahamian info to get the whole picture.

Thu, 09/13/2012 - 11:29 | 2789769 Essential Nexus
Essential Nexus's picture

Yes and no.

Thu, 09/13/2012 - 11:28 | 2789770 donsluck
donsluck's picture

The death of the economy by a thousand cuts. Moral hazard is the the RISK of encouraging immoral behavior. We are way past that and experiencing the death of morals (financially). Accept only cash, pay only cash.

Thu, 09/13/2012 - 13:03 | 2790426 Ricky Bobby
Ricky Bobby's picture

Totally agree, call me idealistic but the foundation for sustainable prosperity is shared ethics. Transactions sealed with a handshake and the inherent social agreement to deliver, actually an imbedded need to deliver. It's called character, it’s cultural, it's historic and it works. Break it and you enter the valley of darkness where tyranny, lies, deceit and war reside.

Thu, 09/13/2012 - 11:41 | 2789783 TruthInSunshine
TruthInSunshine's picture

This will go on (the ability of the banks to withold foreclosure actions or to refrain from HAVING TO list & sell already foreclosed homes) until  a)  the banks quit getting paid interest to stuff their gills full of excess reserve fiat, and b)  the banks are forced to face reality and mark their assets (i.e. liabilities) to values that even approach fair market values (rather than unicornium fantasies suspended in the ether that is allowed by Congress, the White House, and fractional reserve banking Zombie-propping up).


Of course, the GSEs like FANNIE & FREDDIE have already bought many foreclosed homes from the banks at way-above-FMV value on the taxpayer's dime, and in fact, they're RENTING them out (check out HUD's website) instead of listing them for there's that...too.....


Freaking Bernank'd (i.e. Broken) Markets everywhere, bitchez.  Hell yeah...

Thu, 09/13/2012 - 11:52 | 2789870 Winston Churchill
Winston Churchill's picture

It cannot go on forever.

Statute of limitations starts ticking from the date of non payment.

Varies by state,but generally its five years, and then the debt is non enforcible.

Thu, 09/13/2012 - 12:01 | 2789926 MachoMan
MachoMan's picture

Yep.  Here it's 5 years on written contract, 3 on non-written.

What is fairly hilarious is that if the note is unenforceable and the mortgage is invalidated/no one knows who the hell is the holder, then what legal recourse do creditors have to oust the debtors?  Obviously courts of general jurisdiction have equitable powers, but the creditors would surely have slumbered on their rights or otherwise done wrong through the process.  I see them getting no sympathy from courts...

Thu, 09/13/2012 - 12:28 | 2790055 TruthInSunshine
TruthInSunshine's picture

My response and yours crossed in the mail, so to speak.

The statute of limitations for breach of contract, if that's what you peeps are referring to, is typically six years in many if not most jurisdictions (IIRC).

That would mean that the party wishing to sue for breach of contract (in this case, non-payment), would literally have six years from the first date of non-payment (or SUBSEQUENT non-payments; it's just that non-payment suits initiated after the requisite period given the applicable statute of limitation could not seek money damages that arose PRIOR to the cut-off date mandated by the statute of limitations), to initiate an action for non-payment of a debt.

As an example, purely for theoretical purposes, if someone has failed to make any payments for 10 years, and the statute of limitations is six years on a breach of contract claim, barring any superceding legalities that would nullify the ordinary statute of limitations, the party seeking money damages for breach of contract could still initiate suit, but their claim for money damages would only "date back" to the first non-payment that the statute of limitations limits them to (6 years back, and not 10 years back; 4 years of non-payment damages would be barred).

I could be missing something that specifically applies to mortgages and mortgage debt, that would alter this general rule, and if so, am receptive to whatever that might be.

Thu, 09/13/2012 - 13:56 | 2790844 MachoMan
MachoMan's picture

No, I believe you are correct based upon my comment below.  Each required payment (typically mothly) is in essence a separate cause of action.  A failure to make one payment will not negate your requirement to make subsequent payments.  These contracts also almost universally include a non-waiver clause, further firewalling the effects of non-payment for the creditor.  The statute of limitations begins to run for each required payment upon a failure to pay by the due date.  The creditor typically has the option of suing for those amounts presently past due or accelerating the entire remaining balance. 

The only way I see this being an issue for the entire note would be if the creditor exercised its right to accelerate the debt and then sat on it for the requisite period of time without filing suit.  I've never heard of this...  but, who knows...  especially in the era of computer generated correspondence.

But, the other issue is that we're at the 5 year mark for defaults on home loans.  I'm not sure when the defaults started racking up proper, but I'd guess 4-6 years ago.  The shadow inventory will now begin having an even larger carrying cost in that portions of the notes underlying the mortgages are time barred.  Obviously banks find a way to tack on fees to make up for this deficiency, but you can't get blood from a turnip.  At this rate, it's ~3%/year.  The creditors aren't making that up on the spread with ben's funny money.  Tick tock.



Thu, 09/13/2012 - 12:20 | 2790016 TruthInSunshine
TruthInSunshine's picture

Obviously, matters pertaining to real estate and mortgages are in rem, and highly dependent on state law, unless there's a federal issue that's significant enough to place proper venue for adjudication of these matters in federal, rather than state, court (and even then, state law is given great deference by federal courts).

There are also complexities you've failed to mention.

There are things such as anticipatory breach, laches, tolling statutes (based on conditions precedent or subsequent, granted by statute or within enforceable provisions of the contract/mortgage itself), re-affirmation of indebtedness, etc.

It can go on for a long, long time (I'm not saying I know for how long it will, but just that from a legal standpoint, this shadow inventory can exist and even rise for a while).

In most jursidictions, once a judgment is obtained, it is good for at least 6 years, and can then be renewed by the judgment-creditor by the filing of boilerplate, until satisfied and/or discharged (whether by payment, forgiveness, bankruptcy, etc.).

Thu, 09/13/2012 - 12:23 | 2790082 MachoMan
MachoMan's picture

It's axiomatic that statutes of limitation begin to run when the creditor has a cause of action against the debtor.  Literally every single case, regardless of jurisdiction, uses this definition.  When the debtor fails to make a monthly payment, the creditor has a cause of action against the debtor to recover the payment (or accelerate the total).  Now, the question then becomes is it a cause of action for that single month's payment, or a cause of action on the entire note/mortgage?

Anticipatory repudiation is irrelevant in a case with an actual breach...

Laches is an equitable remedy and is irrelevant in a case with a legal cause of action...  (and the banks aren't going to get any equitable love anyway)

Tolling of a cause of action typically only occurs in cases of fraudulent concealment...

Thu, 09/13/2012 - 12:39 | 2790126 TruthInSunshine
TruthInSunshine's picture

You keep repeating that the statute of limitations begins to run upon the non-payment event.

In a situation where a debt instrument such as a mortgage note is involved, ANY non-payment event, whether the first, or subsequent ones, can be cited by the party initiating a claim as the date of non-payment, for purposes of not being time-barred by the statute of limitations.

So, again, if Bank A decides to sue a mortgagor for non-payment, they aren't compelled to initiate suit based on the first non-payment event as that which has started the clock in terms of the relevant statute of limitations (though the amount of monetary damages they are seeking could be partially time-barred).

Laches is typically an affirmative defense, and yes, it arises in equity, so to speak, but it can serve to defeat legal claims for monetary damages.

Courts have broad powers to craft outcomes based on equitable claims/defenses. Quantum meruit is probably one of the best examples of this very broad power.

Thu, 09/13/2012 - 17:11 | 2792095 Praetorian Guard
Praetorian Guard's picture

I hear you. A family member is PISSED that HUD is now allowing Section 8 homes in an HOA community. Pretty much everyone is upside down in this community and with welfare people moving in, this upscale community will head south. Everyone gets fucked, unless of course you are the broke dick getting a free ride with tax payer $$$$$$

Thu, 09/13/2012 - 23:13 | 2793378 StychoKiller
StychoKiller's picture

Section 8 homes with a HOA -- Bwahahahahaha!

Thu, 09/13/2012 - 11:19 | 2789725 mick68
mick68's picture

Another ticking time bomb.

Thu, 09/13/2012 - 11:28 | 2789767 MachoMan
MachoMan's picture

The only question is who eats the turd...  apparently municipalities are wanting to take a nibble via "eminent domain" (sick desperation/cronyism). 

Thu, 09/13/2012 - 13:31 | 2790672 eatthebanksters
eatthebanksters's picture

I already gave back my house so I have no vested interest in what I say at this point. Everything governments are trying to d at this point is to buy votes...if they just follow laws already on the books and prosecute the banksters, enforce FASB accounting rules, and stop the bailouts, this shit would work itself out real fast.

Thu, 09/13/2012 - 14:00 | 2790864 MachoMan
MachoMan's picture

Actually, probably not.  Some of these problems would be worked out rather quickly, but they would also create additional problems.  The largest predicament then is deciding whether the existing monetary regime is just enough to outweigh the risk of an unknown successor.

Thu, 09/13/2012 - 17:25 | 2792131 blunderdog
blunderdog's picture

By "work itself out," I guess he meant "collapse the international financial system."

Yep, WWIII would definitely be a solution of sorts.

Thu, 09/13/2012 - 11:19 | 2789728 dick cheneys ghost
dick cheneys ghost's picture


Thu, 09/13/2012 - 11:23 | 2789738 mickeyman
mickeyman's picture

We are all Linda Green. Practice your signature.

Thu, 09/13/2012 - 11:31 | 2789782 Urban Roman
Urban Roman's picture



Thu, 09/13/2012 - 12:26 | 2789962 RobD
RobD's picture

LoL I received a letter from my mortgage servicer the other day acknowledging that they ad received my short sale request package and it was signed by.....wait for it...Linda Brown.


Thu, 09/13/2012 - 11:20 | 2789732 john39
john39's picture

timing of foreclosure varies a great deal from state to state....  judicial vs. non-judicial foreclosure is a big factor here, but not the only one...   if you are in a state where foreclosure happens quickly, watch out...  the banks will take your house quickly, and there is very little legal recourse... and the cost of fighting is very high.

Thu, 09/13/2012 - 11:30 | 2789779 MachoMan
MachoMan's picture

I live in a state where the foreclosure process can happen very quickly.  However, practically speaking, the biggest factor is whether or not you're underwater.  If you have ANY equity in the house, it will be taken from you immediately.  If the bank will have to eat the loss on the sale, then you'll get to hang out a while.  Ergo, for those with any equity, you might want to reposition.

Thu, 09/13/2012 - 11:41 | 2789814 john39
john39's picture

very good point.

Thu, 09/13/2012 - 12:06 | 2789961 Seasmoke
Seasmoke's picture

Yes a good point that makes sense However in real life I know a close friend who had over 50,000 in real equity and still strategic defaulted and 3 years later his equity is all gone but he is still in the house and looking to stay for a very long time. Something else is clearly at play.

Thu, 09/13/2012 - 23:15 | 2793382 StychoKiller
StychoKiller's picture

The phrase "Clogged pipeline" springs to mind...

Thu, 09/13/2012 - 12:01 | 2789930 Amish Hacker
Amish Hacker's picture

Once the bank owns the house, aren't they responsible for the maintenance, security and taxes on the place? I would think that this would be one reason for the banks' lack of eagerness to foreclose.

I'll also ask you this, MachoMan, since you sound like someone with knowledge of real estate law: When the house was sold originally, the mortgage loan became an asset of the bank. But when the buyer defaults, the house is effectively "deposited" on the bank's balance sheet as a liability. Wouldn't it be better to mark down the value of the house immediately to a fair market price? (Full disclosure: I have never owned a house and probably never will.)

Thu, 09/13/2012 - 12:47 | 2790291 Urban Roman
Urban Roman's picture


And in some districts, the banks have been similarly careless about maintenance and municipal taxes and fees and HOA dues.

Which leaves the municipalities, counties, states, and HOAs to sue them -- and how do you suppose that works out?

Thu, 09/13/2012 - 14:36 | 2791150 MachoMan
MachoMan's picture

No.  The short answer is that each loan is different and rests upon its own facts and circumstances.  As a result, why a bank would foreclose on one and not another similarly situated is anyone's guess.  The long answer has to do with securitizing the loans, bundling them, packaging them, getting nasa to run the numbers that they look good, selling them multiple times throughout the world, and getting countless hacks to sign linda green's signature on documents created after the fact.  In essence, the potential loss on a single loan is not limited to the amount of the loan...  it is hopelessly bootstrapped with countless other instruments and derivatives.  The practical answer is that avoiding recognizing losses this year means better performance numbers, which means bigger bonus/hamptons/jack-off motion.

Also, the security holder is ALWAYS responsible for the maintenance, security, taxes, etc., regardless of whether there is someone living in it.  Sometimes someone agrees to pay for those things...  and does pay for them...  but the lienholder has a duty to mitigate its damages and, thus, must pay for these things in the event someone else doesn't.  Take the property taxes for example.  Let's say that J6P doesn't pay them.  Eventually, the property gets certified to the state, who conducts an auction...  all interested parties are notified of the auction and the state's intention to sell.  There is a limited window following the sale in which the interested parties may "redeem" the property by paying the outstanding taxes (and many fees by this point).  A failure to redeem the property results in the auction winner getting title free and clear of the encumbrances.  Who do you think picks up the tab for the taxes?  The guy who is broke or the lienholder?  Same process for HoA (who have been winning a bunch of suits in FL I believe). 

Thu, 09/13/2012 - 11:21 | 2789736 newworldorder
newworldorder's picture

Ahh............. The virtuous cycle at work. Courtesy of the US need to maintain the ZIRP status quo.

Thu, 09/13/2012 - 11:24 | 2789747 uncle_vito
uncle_vito's picture

Economy would be much better off if houses dropped in value.   More folks could afford to buy and housing sales would get moving again.  Not sure why they want housing prices to reflate again.  We saw what that caused.

Thu, 09/13/2012 - 11:39 | 2789808 MachoMan
MachoMan's picture

I don't think you can make this statement in a vacuum (e.g. interest rates have plenty to do with the price of housing).  The problem with forcing sales at this juncture is that it ignores the volume of people living rent/note free.  It isn't going to help the economy when mindless consumers are forced to pay rent/notes instead of igadgets.  Clearly, this is incredibly perverted, but it is the current state of our affairs.

Also, you have stagflation staring at you...  the cost of living is increasing while wages remain stagnant.  This is not a recipe for increases in housing sales.  There is simply no capital from which any semblance of down payments could be made...  nor in credit worthiness of borrowers.  Not only does no one have any money to purchase houses, but they have no prospects in duking it out for 30 years trying to get the thing paid.

I think the crash of prices is inevitable...  however, I dispute that this would necessarily yield anything worthwhile as far as the plebs are concerned.  Realistically, in my neck of the woods, the monthly note payment on a single family ~1,200 sq. ft. 3/1 is ~$450/mo.  If this is presently unaffordable, then we probably have some bigger fish to fry. 

Thu, 09/13/2012 - 17:30 | 2792152 blunderdog
blunderdog's picture

   The problem with forcing sales at this juncture is that it ignores the volume of people living rent/note free.

Ok, but no one's really ever mentioned all the folks who WANTED to buy houses over the past 30 years and were priced out due to the leverage-induced skyrocketing RE "values."

So...are there more people living "note free" at the moment?  Or more people stuck in shitty rentals who'd jump at the opportunity to get into their own house if there were ever one offered at a realistic price?

Thu, 09/13/2012 - 22:43 | 2793288 MachoMan
MachoMan's picture

Right, but at the present time, everyone gets to rack up debt without having to recognize it and/or account for it.  I'm not sure this scenario isn't better than the alternatives.  Of course, equity theory kicks in and we feel cheated because others benefit far more from fiscal/monetary largesse, but I have serious reservations about whether we're better off in bliss atm than having drawn the curtain back and revealed the wizard...  actually, toto had to fucking do it, we were too chicken.

Of course, this entire discussion is academic given housing prices WILL fall...  it's inevitable.  Ultimately, there has to be some semblance between housing prices and wage levels...  of which, the latter are stagnant to declining, at best. 

PS, people will jump at the chance to make virtually any material improvement in their standard of living, often times regardless of how temporary.  This is the fundamental foundation and driver of the credit system.  So, to answer your question, it depends on whether the house is nicer than the rental ;) [of course, there is that contingency of holdouts who think that in all circumstances, buying a house is cheaper than renting...  regardless of how much evidence to the contrary is presented].

Fri, 09/14/2012 - 00:07 | 2793490 blunderdog
blunderdog's picture

I agree with everything except: "everyone gets to rack up debt without having to recognize it and/or account for it."

Where would you ballpark the PERCENTAGE of American citizens who could TODAY get a new mortgage for $250,000?  How about $150,000?

It ain't everyone. 

And that's why Bernanke announced that he's prepared to do ANYTHING to prevent deflation.  Credit can't expand when there just aren't enough economically-viable* risks out there.

Personally, I say you're looking at less than 15% who can get the $250K mortgage, and less than 40% can get $150K.  How many houses does anyone need?


* Props to Falling Down.

Fri, 09/14/2012 - 11:25 | 2795077 MachoMan
MachoMan's picture

Everyone is a bit broad.  In my neck of the woods, a new 1500 sq ft house, 3/2, decently appointed, on .2 ac (probably a 20 mi. round trip daily commute) probably costs $140k-150k to buy, $125k-$140k to build.  It is NOT particularly difficult to get loans...  Further, the 1200 sq ft, 3/1, older model homes are $75k-$100k...  they are stuffing every tom, dick, or harry that can sign on the dotted line into these things.  The monthly payments are probably $450 or less... 

I definitely agree that above a certain threshold, home loans are very difficult to obtain...  but in areas where the average house cost is roughly 3-4x the average household income, the difficulty in obtaining credit really doesn't hit hard until you get housing costs of more like 5-6x avg. household income levels.  (of which, you'll have a myriad of homes to choose from because they DO NOT MOVE unless absolutely perfect).  Basically, the low-medium end of the market moves quickly, sometimes mercilessly bid (again, stuffing everyone they can into them), while everything over the 4x avg hh income level is likely to sit and rot.

Not sure this is everywhere, but definitely what my boots see on the ground.  Here anyway, the amount of folks that could get a $150k loan is vastly higher than the amount that could get a $250k loan...  $250k here will buy you a really nicely appointed and constructed 3k sq ft house w/ walk out basement and a few acres.

I was also referring to debt in general, e.g. credit card, student loan, etc.  But, obviously, home loan debt is a higher weight in the total outstanding debt...

Fri, 09/14/2012 - 14:48 | 2796332 blunderdog
blunderdog's picture

Hrm...this leads me to speculate:

Could there be a useful relationship between the relative importance of gas prices vs. the availability of reasonably priced homes (or mortgages)?

Here's my thinking...

In the really densely-populated areas, houses tend to be more expensive and work opportunities tend to be located closer (in miles) to the residential areas.  Thus the commuting expense is likely to be lower relative to the mortgage expense than it could be in more distant suburbs. 

But the commuting expense has become a serious factor for the majority of the population.  So being able to get a $500/month mortgage would be terrific if the monthly commute was going to cost $180.  But when the monthly commute costs $400, that perfectly reasonable mortgage becomes a lot more difficult for the average earner.

I forget where you're located--was it MO?  FL?  Anyway...thoughts?

Fri, 09/14/2012 - 15:57 | 2796717 MachoMan
MachoMan's picture

NE Arkansas.  I'm basically living in one of the cheapest places to live in the country...  so, my observations are more valuable as a "what X state could have looked like had it not overbuilt" than as objective truth.  We're also adding jobs/stagnant rather than shedding them...  also very strange.  Although I think our population is increasing at a rate greater than the number of jobs we're creating...

And yes, absolutely, commuting costs affect home prices.  Unless you actually work in the suburbs, there is a real cost to that commute every day.  For me, it's about $3-4...  for others, it's more like $30+...  and countless time away from the family sitting in carcinogen filled traffic lanes...  but I digress.

As far as observations of this effect go, even here, literally as cheap of a place to live in the country as there is, our sales tax falls to shit when gas increases in price.  We're basically the central hub (BFE) for a 60 mile radius...  the rest being really really BFE...  you know the places...  gas station/grocery store/place to eat + post office + stop light and that's it.  As a result, "the hills" tend to rustle on the weekends and mosey on down here to the "big city".  Well, when gas is $4/gal., that shit stops really, really quickly.  Tax receipts fall off a cliff.  Did the last time anyway, we'll see where this bout takes us.  Obviously less tax receipts = less wage = less ability to pay notes = downward price pressure.

We've got a secretary here at the office that commutes about 45 miles each way...  I'm not sure how much she makes a day, maybe $150 gross (not including employer perks), but she's probably paying $25+ in gas+$X in maintenance.  It doesn't take too long before it's not even worth it to go to work.  

It's also my experience in larger cities (been to most all of the notable ones in the country) that property values tend to be pretty patchworked.  Some neighborhoods get upkept and spruced up, while others just a street over fall into disrepair and attract unsavory characters.  I would agree with the concept that the land value around a job creation center is typically more valuable, but there are plenty of job centers surrounded by slums...  just depends.  I think some degree of it is cheaper commutes (not just in gas saved, but in less opportunity cost/time wasted) as well as prestige.  Many old town centers/business districts tend to carry some semblance of prestige in owning homes around them...  high prices tend to weed out the trash...  some have enough money to consider this cheap security.

America has been designed with cheap oil as a necessity (compare our urban sprawl to say a lot of european cities)...  as oil increases in price (dollars), the suburbs will need to become job creation centers or else face significant downward pressure on housing prices, probably lockstep with increases in the price of gas.  Hedge accordingly.


Fri, 09/14/2012 - 16:56 | 2796972 blunderdog
blunderdog's picture

Gotcha.  Thanks. 

I had to research the meaning of BFE--my mind kept locking onto "Base Filtering Engine," but I'm a computer geek by trade. 

Looking at a map I was delighted to find a "Lake Dick Road" to your south.  Hee hee.  A perfect place to go parking in BFE.

Thu, 09/13/2012 - 23:19 | 2793395 StychoKiller
StychoKiller's picture

The "intent" of QE3 is to reflate the housing market, but how?  Those that have ruined credit are out of the game, people sitting on underwater mortgages are out of the game, refinancing won't get yer head above water...time to sit back and watch the $/Toz of Au/Ag go up (and up, and up...)

Thu, 09/13/2012 - 12:18 | 2790042 Morrotzo
Morrotzo's picture

Plus, all the real estate workers and construction guys could be renovators, debt collectors and foreclosure facilitators and realtors.

Shadow inventory in the millions, nobody has any money, people still building houses at artificially inflated prices! Madness!

Housing and the financial fraud and swindling connected to the "derivatives" is by far the most costly and pernicious scam wrought upon mankind. Well, maybe religion gives it a run for the money.



Thu, 09/13/2012 - 11:25 | 2789750 Snakeeyes
Snakeeyes's picture

Its true that the backlog is about 2.5 million (although estimate vary). It puts a cap on house price increases, for sure.

Thu, 09/13/2012 - 11:55 | 2789890 JR
JR's picture

Anthony Sanders on this link shows how housing is really localized and reports the “negative equity by county showing that the problem is somewhat limited to certain counties, mostly in the sand states of California, Arizona, Nevada and Florida.”

This supports Marc Faber's investment opinion in February when he said that houses in the south of the U.S.were a good buy in that many were priced at a 40  to 50 percent discount to construction costs.

In addition, here is supportive transcript provided on the Marc Faber Blog of an August 3, 2012 video entitled Marc Faber: Buy Real Estate for Cash:

Marc Faber : I would Buy (Real Estate) for Cash , you understand my view is this , I think investors over last thirty years certainly since the low of the stock market in august 1982 when the Dow Jones was at 800, I have become accustomed at asset crisis whether it is real estate or equities or bonds always go up and I think we are in a period which it will end and I do not know when it will happen whether it happens tomorrow or in five years or in ten years but at some stage there will be a huge wealth destruction

now as an investor, of course I have also long positions in equities not so much actually hardly in the US but equities here in Asia I have real estate in Asia and I have some cash and bonds and of course a large position in gold but basically I believe that we have to start to think what will protect us best from a complete wealth destruction

in other words if the credit bubble really burst and everything collapses what is relatively safe , so I look at say , I was in Atlanta and I was in Phoenix, I look at homes they're selling say 70% below construction cost , yes they can still go down in value and may be they will but all I am saying is in a complete collapse they'll still have some value because people will have to live somewhere they won't be all empty where as equities and bonds who knows?

may be a lot of bonds will default and will pay you back in money that is worthless that's the real threat say in the United States, the US will always be able to print money and so if you buy a treasury for sure you get the money back the question is what will the value of that money be ? because as you may know Janet Yellen another genius that is at the federal reserve vice chairman she said it is possible we would take interest rates into negative territory I would be voting for that,

well interest rates are negative inflation adjusted , your inflation is I think between five and ten percent per annum


Thu, 09/13/2012 - 12:24 | 2790089 uncle_vito
uncle_vito's picture

When you own RE, you are continuously leaking money.  Insurance, property taxes, upkeep.  RE cannot be moved or hidden.   Your area gets hit by rioters, nuclear fallout, fire, biotoxins, you are screwed.

Thu, 09/13/2012 - 14:32 | 2791114 WillyGroper
WillyGroper's picture

got friends that own about 8 rent houses. some are not paying. they're sweating bullets.

Thu, 09/13/2012 - 14:42 | 2791209 MachoMan
MachoMan's picture

This is why Faber says pay cash...  if you don't have any interest clicking away, then delinquent rent payments have a bit of a different impetus.  Pretty much everything here is set up for a 10% return.  Factoring in a few bad months, you're still beating the shit out of treasuries or CDs...  however, where you position yourself in the market is going to determine how much work you have to do to collect that rent.

Thu, 09/13/2012 - 11:25 | 2789752 daneskold
daneskold's picture

BAC hasn't foreclosed yet despite not having made payments for over two years.


Moreover, BAC said it'll pay me $5k - 30k if I'll stay in the house until it shortsells.  It's been  under shortsale contract for about a year now while the creditors decide who'll get what out of the sale proceeds.


In the meantime, I pay only utilities.

It's not right.  

But it is what it is.

Thu, 09/13/2012 - 11:30 | 2789777 Dr. Richard Head
Dr. Richard Head's picture

Right or wrong?  Moot really in the land of fractional debt and fractional ledger sheet assets.

Thu, 09/13/2012 - 11:47 | 2789843 MachoMan
MachoMan's picture

Clearly, wrong given the only way a creditor could be incentivized to behave this way is moral hazard (i.e. on my back as a taxpayer)...  but, in the scheme of things, probably not a wrong worth quibbling over...

Thu, 09/13/2012 - 11:42 | 2789820 samcontrol
samcontrol's picture

Another with balls.... i paid cash only to see my neighbors get a 40 -60 percent discount afterbthe default for not paying. I used to hate them, now i hate how stupid i was.

What the fuck is Greece / Greeks waiting for ?.. all they have to do is rush the government house and it,s all over. It took three days in Argentina beore the fucker left in a helicopter.

Lucky for me we have Christina now...... and you guys are complainning about Obaney ?

Thu, 09/13/2012 - 11:50 | 2789856 Rentier
Rentier's picture

better be saving your pennies to pay the IRS once it does sell(that's if the bank doesn't sue you for sales price judgement), because if your mortgage is for say $400k and the house sells for $280k you are on the hook for captial gains taxes for the $120k difference...enjoy...

Thu, 09/13/2012 - 11:56 | 2789893 RobD
RobD's picture

No tax on cap gains if it is your primary res and you have been in it more then two years and current tax law(expires at end of year) keeps the IRS off your back for the debt forgiveness. If you are not foreclosed on or close the a short sale by the end of the year your 2013 tax bill may be a dozy.

Thu, 09/13/2012 - 13:21 | 2790585 Winston Churchill
Winston Churchill's picture

But there is income tax due on the "gift" of the loss on the loan

Thu, 09/13/2012 - 16:42 | 2791987 RobD
RobD's picture

Not true since 2007, but the law expires at the end of the year:


Thu, 09/13/2012 - 12:27 | 2790106 jowenchrist
jowenchrist's picture

You can thank all of us later for carrying you through this.

Thu, 09/13/2012 - 11:25 | 2789753 yogibear
yogibear's picture

LOL, the studen loan pile is starting to smell. Also plenty of empy store fronts being added to monthly.

Thu, 09/13/2012 - 11:25 | 2789754 crusty curmudgeon
crusty curmudgeon's picture

When the banks are forced to pony up capital, they will withdraw the excess reserves and end the foreclosure stuffing.  It will be double the fun.

“Mystical references to "society" and its programs to "help" may warm the hearts of the gullible but what it really means is putting more power in the hands of bureaucrats.” —Thomas Sowell

Thu, 09/13/2012 - 11:30 | 2789781 vote_libertaria...
vote_libertarian_party's picture

I wonder if the dam has broken.


Our local paper used to run foreclosure announcements 2-3 times a week.  Over the past 4-6 weeks it has exploded to 10 a day.


(St. Louis area)

Thu, 09/13/2012 - 11:32 | 2789785 impermanence
impermanence's picture

It's all about gaming markets, ALWAYS has been, ALWAYS will be.

Thu, 09/13/2012 - 11:35 | 2789792 quietdude
quietdude's picture

I worked a temp job cleaning and securing foreclosure houses. The idiot banks will not pay enough to properly secure and preserve the homes. As a result, the vacant foreclosures are being destroyed by metal thieves, water leaks and mold. It is probably better to let the homeowner live there for free rather than have a vacant home rot. If you are not paying the mortgage, you can afford a blue tarp or two when the roof leaks.

Thu, 09/13/2012 - 12:17 | 2790041 jimod
jimod's picture

You're absolutely right.

When the abstractionists here and elsewhere talk about shadow inventory, they have no fucking idea.  They must be picturing the houses their real estate agent took them to last time they shopped.

People giving houses back to the bank are pissed and stick it to the man.  They take/sell anything of value and leave junk for the next guy to clean up. They have months/years to do so.

Paying people to stay in the house until the short sale finishes it the bank's smartest move.   Unless they're sticking the losses to the taxpayers. (and unless the mortgagee loosing the home has no conscience whatsoever, which there's a percentage who don't.)


Thu, 09/13/2012 - 11:35 | 2789794 Piranhanoia
Piranhanoia's picture

Socialist?   Following the rule of law is socialist?    The bank not being able to prove you owe them anything is socialist?

This is the embarrassing Tyler.  The one that doesn't really understand what the hell the foreclosure fraud is about.  It might be about slavery,  just saying.

Thu, 09/13/2012 - 11:54 | 2789873 MachoMan
MachoMan's picture

Actually, the rule of law states that the mortgage might be invalidated, voided, or otherwise unenforceable, but that the debtor still owes on the note (unless voided, the lien/mortgage is still likely enforceable as against the debtor, and his successors, but no other, even if invalidly executed).  At the end of the day, you gave your word that you would pay.  If you were under duress, did not have the capacity to enter into a contract, or somehow fraud was committed against you during your purchase, then you may have legal redress.  Otherwise, you need to admit that you're simply taking advantage of the fact that the banks have been backstopped by the federal government (and taxpayers, although taxpayers cannot possibly pay for all of it).

I realize that over the course of our lives, uncle sam is going to break it off in our asses and many of us will pay in far more than we ever receive.  And, further, that getting anything back, however small, feels like a victory.  But please do not confuse that for being morally correct.  It's simply longer down the chain of moral hazard. 

Thu, 09/13/2012 - 12:20 | 2790064 Winston Churchill
Winston Churchill's picture

There was no contract.

The source of funds were promised something completely different from

what the borrower undertook.

The Notes are a fraud ab initio.

The real creditors ,who are unsecured, dare not come forward because of the

legal and tax consequences of doing so,TILA,RESPA ,REMIC status etc.,

That leaves  the loans in a vacuum which the banks are taking advantage of.

The fact that they will be paid yet again,and cover their contingent liabilities by

cramming these bad loans into the trusts long atfer the trusts cutoff dates.

Thu, 09/13/2012 - 14:55 | 2791319 MachoMan
MachoMan's picture

Not a chance that the loan you sign with your local bank (who is simply going to sell it up the chain) is void ab initio...  please explain to me the facts that would support this argument.  The debtor does not benefit from the subsequent assignment of his note...  now, the creditors may shoot themselves in the foot by failing to assign properly, but this does not absolve the debtor of the responsibility to pay...  it simply renders the mortgage void and the creditors are then unsecured or, alternatively, lose their priority among secured creditors.  If the mortgage was all that was backing your financial instrument, then oops.

The notes are not fraudulent...  the trusts, securitized bundles, and other financial instruments derived from the notes might be (are) completely fraudulent...  but the notes are not, or at least the vast majority.

Thu, 09/13/2012 - 18:07 | 2792310 Winston Churchill
Winston Churchill's picture

The money,so the banks want us to believe now,came from the REMIC trusts.

It was supposed to be negiotiated through three or more parties who were supposed

to fund it at each stage before it got to the trust.All before the cuttoff date.

The  note can only be negiotated by the beneficial owner.

That did not happen.In most cases the money came straight out of a comingled trust account.

The banks therefore had no skin or "consideration' in legal terms.

No consideration,no contract.

The money in those comingled trust accounts was lent at 5 % fixed in most cases.

That was not the interst rate on the note.That it a documented fraud on both party's.

The real lender and the borrower.

A fraud ab initio.There is already recent case law on this.


Thu, 09/13/2012 - 22:25 | 2793234 MachoMan
MachoMan's picture

If you have a cite, I would love to see it.  My guess is that you're using it far too broadly.  We also appear to be talking about two different things.  The note itself is not fraudulent...  the note represents the initial promise to pay...  the debtor...  the homeowner...  now, what happens after J6P signs on the dotted line is anyone's guess, but any guess short of a total clusterfuck will not be remotely close.  I have no doubt that there are decisions regarding invalidation of financial instruments that rely upon assignment of the note and its corresponding mortgage(s).  In fact, I know there are many and they range in scope and reasoning.  However, I would be incredibly surprised to hear about a bona fide appellate decision (even on a state level) that somehow invalidated a home loan to a borrower because the "bank didn't have any skin in the game" in the traditional home loan scenario.  If so, the entire premise of banking has been thrown on its head...  or, at least, the loan to the initial borrowing institution/member bank.

Thu, 09/13/2012 - 12:33 | 2790136 btdt
btdt's picture

rule of law?

A bill comes in the mail - sez you owe us this much. first question: yeah, who are you? if it turns out that this is an imposter demanding payment, then do you pay?

perhaps you would. most do.

so let's say you pay this impster month after month. and it turns out this outfit had no legal right to the payments, and worse, they stiffed someone else who was due the payments, and perhaps the imposter has even been paid all that is owed several times over from guv bailouts, insurance, etc.

now let's say you are an upright old fashioned kinda guy like you appear to be. and after paying the imposter for years, another guy comes to your door and says, I'm the real creditor and you owe me for those payments you made to the wrong guy.


foreclosuregate is so far down the rabbit hole at this point, that you cannot draw simplsitic conclusions from standing around on the surface of the earth.

Thu, 09/13/2012 - 14:47 | 2791245 MachoMan
MachoMan's picture

The scenario you're suggesting not only hasn't happened yet, but has a lot of practical safeguards in the law...  Aside from the fact that as soon as an unfamiliar company wants to collect, then any reasonable person is going to question them.  This is why you get a "notice of assignment" explaining to you who your loan has been assigned to...  e.g. local bank>bank of america>fannie.

If the closing agent pays the wrong company at closing, who is on the hook?

The bill comes in the mail because you have privity of contract with them...  you promised to pay them...  and now they are billing you for that house you bought.  You're getting carried away.

Thu, 09/13/2012 - 19:42 | 2792688 Winston Churchill
Winston Churchill's picture


Several well publicisied forecloseures have happenened here in Florida where

the homeowner was evicted owing nothing to any bank/trust.

Fraudulent certificate of service were entered ,so the homeowner

never even knew about the court case/date to defend it.

Thu, 09/13/2012 - 22:34 | 2793257 MachoMan
MachoMan's picture

Now you're being unconstructively argumentative.  Please stay on topic.  Read the post I replied to, my reply, and then please review your post to see if it has anything to do with the discussion.

Yes.  I understand that some homeowners (an incredibly small %...  as in handfuls of people out of millions of foreclosures) have been foreclosed upon having paid off all encumbrances on their properties.  Clearly, they should be able to remain in the homes that they paid for...  no problem there...  but, let's look at this from another angle.  How much do you think a jury would award you for even a temporary ouster by a foreign bank who stands to repeat this process on other unsuspecting local homeowners?  I'll put it this way, I'd be happy to give them the opportunity with my house and take my chances with the jury that my temporary stay elsewhere would be worth it.  Clearly, they do not have the right to do so, but many of us would love to never have to work again for a few days?  weeks?  of inconvenience.  At worst it's worth six figures.  I could never be so lucky.

PS, this wasn't what the thread was about.

Thu, 09/13/2012 - 11:40 | 2789810 banksterhater
banksterhater's picture

These SQUATTERS are going on 5 YEARS FREE RENTS! Romney said he'll " LET MARKETS CLEAR", another LIE, after the banksters have a little talk.

The US is totally based on FRAUD, TOP TO BOTTOM!

Thu, 09/13/2012 - 13:03 | 2790422 btdt
btdt's picture

who are the squatters?

is it the mortage servicer who can't prove they are a legal agent?

or the trusteee who can't prove the mortage is in their pot?

or the investor whose claim was wiped out and has been paid off?

or the nominee like MERS who has faciilitating the mess and ripped off county recorders for billions?


or do you mean the homeowner / renter / sucker sitting in the hosue - who if he had any smarts funds and if the legal system were not corrupt - would demand to see title and proof that these squaltters have a legal right to be demanding money from him.

by law in many - like millionsif not more - cases the homeowner can get a jjudegment givnig him free and clear tittle.

foreclosuregate is a metaproblem. the land title system has been corrupted (and intentionally) this system goes back to day one in the courntry and evolved in English law for 500 years at least before that.

this problem is like corrupting the boot and indices tracks on a DOS hard disk.

Thu, 09/13/2012 - 13:16 | 2790544 Winston Churchill
Winston Churchill's picture

Established by the Doomsday book in 1070 AD, to be exact.

So nearly a millenia of property recording precedent trashed in a decade.

Thu, 09/13/2012 - 11:42 | 2789822 DavosSherman
DavosSherman's picture

What a fucking mess.

Thu, 09/13/2012 - 11:44 | 2789830 Everybodys All ...
Everybodys All American's picture

The same thing is going on in commercial real estate as well. That's what happens when marked to myth accounting prevails. That is what happens when zombie banks are supported by constant bailouts. Bankruptcy has for some reason is no longer an option. Thanks to Bernanke the new norm. What an idiot.

Thu, 09/13/2012 - 11:46 | 2789840 Dr. Engali
Dr. Engali's picture

Don't worry the fed will buy up some of these "good assets" on to it's balance sheet to relieve the pressure on the I meant housing market.

Thu, 09/13/2012 - 11:50 | 2789858 RobD
RobD's picture

This is what is happening in Reno Nv. We put our house up for short sale a few weeks ago. On the first listing day we got an above list offer, our agent stalled the acceptance to allow another party to look at the property and the first party upped the offer another 10K. Our agent said we have very low inventory on the market currently. Funny though if you drive around our neighborhood about every 3rd or 4rth house is vacant, and obviously should be up for sale by the lean holder and yet there are no signs. Lots of inventory hidden in plan sight.

Thu, 09/13/2012 - 11:54 | 2789882 A Man without Q...
A Man without Qualities's picture

How they have been able to cover up what is without doubt the largest securities fraud in history staggers me.  A few journalists and bloggers ran with the whole story of imperfected securities about 2 years ago and then it simply vanished.


Thu, 09/13/2012 - 11:57 | 2789898 Chain Gun Smoke
Chain Gun Smoke's picture

Look at all of the deadbeats in this thread who happily admit to not paying their mortgage.


You're part of the fucking problem. 




Thu, 09/13/2012 - 12:00 | 2789924 El Hosel
El Hosel's picture

Ahhhh, Channel stuffing... "Bullish contarian indicator", BTFD... Home builders "look cheap" "unlock the value"....... Bitchez.

Thu, 09/13/2012 - 11:59 | 2789912 MedicalQuack
MedicalQuack's picture

Well obviously this is one beyond what the Quants can fix:)  They wrote the original plan for the money and now we all pay for fiction in the form of math and coding.  The banks created it.  I read somewhere too that banks 10 years ago made around 10 million a day on returned check fees and if that is true, imagine what they are making today and keep in mind it's the algorithms modeled by Quants that move the money around. 

If you have not seen the documentary video about Quants being the Alchemists of Wall Street, watch it, excellent.  You have two guys here, one a former Quant who teaches it and the other a programmer that worked for a bank that is no longer around.  The one Quant is fried and the programmer is trying to get a job as a Quant and has invested 60k in a course to learn how to become one.

Those who write code and math rule sadly, flawed data and all so we are all Algo Duped somewhere along the line.  The pressure the programmer talks about is true whether you are writing good or bad code with errors.  Give that some thought and consideration and this is why I don't write code any longer, even though I was not writing any financial code but rather in healthcare but still you have to be accurate and we are not getting that today with credible data being queried and matched with non credible data and we get incredibly flawed data that people use for decision making and profits.  Remember Jamie Dimon who could not even begin to explain the JPMorgan model?  Again more proof to the fact that code and algorithms are moving and shifting the money to those who have the talen to hire the folks that know how to manipulate code and math.   They did a very good job with the video for sure.

Thu, 09/13/2012 - 12:02 | 2789937 Cole Younger
Cole Younger's picture

I see allot of people trash people for not paying there mortgage on that..I say fuck off..the banks did not do due dilligence (liars loans, no doc loans, etc) and sold those loans rated at AAA to wall street. They committed fraud in the process..The banks would give loans to dogs..or don't you remember..this created a home price bubble which fucked all who bought at all time high those people are fucked and have lost tons of money...fuck the banks..don't pay them..they created the problem..let them eat shit......

Thu, 09/13/2012 - 13:45 | 2790756 Chain Gun Smoke
Chain Gun Smoke's picture

Oh, those banksters did some shady stuff. That means I'm entitled and don't have to pay my mortgage. Boo fucking hoo. 

Thu, 09/13/2012 - 12:08 | 2789976 mag8500
mag8500's picture

I live in Morris county, NJ, one of the most expensive counties in the world. I'm 27, college graduate who has a full time job and is currently looking for a townhouse. I personally know two people who have $500k+ who have not paid their mortgage or property taxes in 2+ years and they are stilling living in their houses. These two people are my barometer for when I buy a house. How could I with a good conscience buy a house today when I know the price of the house isn't accurate since the market is being manipulated. I'm staying on the sidelines until the true value of the market comes around, if ever. Sad sad time for young Americans.

Thu, 09/13/2012 - 12:19 | 2790044 Northeaster
Northeaster's picture

We just sold a house down there for $500k (cash to NYC IB) in Chester. You are correct, it is expensive as hell down there, $13k a year in taxes for 2 acres? WTF? In-laws (not in County) lived over 2 years mortgage free, went BK, and then got a mod. /facepalm

Thu, 09/13/2012 - 15:52 | 2791696 redd_green
redd_green's picture

11 years ago, I held down two jobs, while going through chemo and surgery, my wife lost her job the week I started Chemo, and my son was just 2 years old.   I kept that up so we wouldn't lose our house.   guess I got sick at the wrong time.

Thu, 09/13/2012 - 13:59 | 2790861 My Days Are Get...
My Days Are Getting Fewer's picture



consider moving to Summit, NJ - you can buy a condo or a duplex here, starting at about $325,000.  I have lived here since 1974 - a lot of "young people" in your age group, who grew up in Summit, have moved back.  I wish you all of the best.

Thu, 09/13/2012 - 17:33 | 2792160 Praetorian Guard
Praetorian Guard's picture

Sadly, it may NEVER happen. Prices may NEVER come back down... they do not want them to and they will manipulate the markets to get what they want. Do you really think those running the show won't hold on tooth and nail, to hold their assets close to the heart, with no significant drop? All the while the common man gets fucked????

Thu, 09/13/2012 - 12:10 | 2789987 cdude
cdude's picture

In a sence, the banks are being held hostage by FSBY dropping Mark to Market. With the voodoo of Mark to My Guess accounting, most of these underwater mortgages can actually show as a positive asset. Whereas, if the banks were to liquidate the property, they would have to take (show) a loss. Part of the never ending game to keep insolvent financial institutions appear as if they are solvent.

Thu, 09/13/2012 - 12:14 | 2790017 Northeaster
Northeaster's picture

Interesting post. I follow foreclosures in my city and within the past month just over forty homes disappeared off the foreclosure list (Realty Trac). I checked for sales and it wasn't there, The RoD says the banks still own them. Not sure why they would pull them off the market en mass like that.


Thu, 09/13/2012 - 12:30 | 2790115 yogibear
yogibear's picture

Banks are attempting to limit supply. If they flood the maket with the huge backlog of forclosures it would lower prices further. They let the people live in them for free to keep the buildings occupied.

Bernanke and the banksters want to control the burn rate. Since mark-to-fantasy is used they can cook the books.


Thu, 09/13/2012 - 17:42 | 2792187 blunderdog
blunderdog's picture

I have a completely uneducated guess...

In my neck of the woods, there are dozens to hundreds of ads for "rent to own" opportunities for foreclosed houses.  Perhaps the banks are setting up these offer themselves now?

Thu, 09/13/2012 - 12:29 | 2790111 rosiescenario
rosiescenario's picture

Having been through the short sale process with BAC in CA, I would advise anyone reading the above thread to carefully do their own homework.....there is as much disinformation as useful information conatined above.


One thing you can count on BAC is totally screwed up....after the short sale was done, they were still asking us to provide loan modification information, after having previously declined same 3 times before......


A last piece of advice....if you are dealing with BAC, be sure and get a RE agent who has done short sales before with the bank....the process is byzantine....logic is not included.

Thu, 09/13/2012 - 12:44 | 2790264 bankonzhongguo
bankonzhongguo's picture

At this point it is in everyone's (as in actual human beings) to try to file as many un-earned re-conveyances with the county recorder as possible.  If the banks are going to be this out of touch with their own shadow OREO, then who is to really say who owns anything anymore.

The banks are also facing a structural labor problem in terms of institutional memory.  This house scam has been going on since 2008.  Think of the thousands of script-reading mortgage service call center people than can only answer basic questions and otherwise type a few words in a client's record about late payments.  These people and the management above are; all regionalized, quit, move-on, get promoted to a new unit all under the ever-changing federal free-for-all and MBS title suits AND they and their families are underwater and disaffected as well. The new normal is now an unknowing institution.  People will not remember what a pre 2006 market ever looked like.

Yep.  Saunter down to your county recorder's office and title companies.  What does a re-conveyance from your lender "look like?"  Buy chocolate for title secretaries and recorder staff.   Type one up.  Mail it in, or better yet stick it in a pile of title documents to be filed at 8AM at the county when they stop the clock.  Better odds than a lottery ticket.  2 or 3 arms length transfers and presto!

The cost to litigate a "fraud" case is more than the value of the housing asset.  It's cheaper for the banks to completely abandon the "tough" cases and otherwise take the QE to the casino.  Housing is actual work.  At this pace, a little time on a federal farm might be better than being out in the wild.  Free housing, health care, education.  Lose your gag reflex.

Thu, 09/13/2012 - 12:55 | 2790357 The Navigator
The Navigator's picture

Here's 1 piece of the puzzle - part QE3, part 'hide-the-house' in the mortgage mess, and part 'relieve the banks of bad loans'

Fed Plans to Buy $40 Billion in Mortgage Securities a Month


Thu, 09/13/2012 - 13:01 | 2790411 RalphJolly
RalphJolly's picture

I'm surprised by this article. Where I live in the IL suburbs, I have noticed home prices make new lows in the last few months. Activity is up because of the new prices. (We are well below half price from the highs)

Also foreclosure notices are increasing in the local rag, and I think it is the release of these foreclosed properties that has brought the market to new lows.

Thu, 09/13/2012 - 13:47 | 2790766 pazmaker
pazmaker's picture

It will be two years now that my wife's ex hasn't paid his mortgage,  I keep wondering when they will foreclose on him but it doesn't look like anytime soon. 

Thu, 09/13/2012 - 14:40 | 2791194 MattWeidner
MattWeidner's picture

Robo signing was just the distraction in the AG settlement, what everyone misses is that the biggest claims in the ag lawsuit were the billions of dollars in false insurance claims submitted to fannie, freddie, usda, etc..

The banks are just debt collectors, they don't own the mortgages, they have no interest in them except to scrape off a few points for collecting the payments....down here in the swamp called floriduh, good foreclosure defense attorneys (ok, even marginal, really bad defense attorneys too) are getting foreclosure cases dismissed as a matter of course....and here's the really fun part.....THE BANKS ARE PAYING GREAT ATTORNEY'S FEES AS A CONSEQUENCE FOR THEIR INCOMPETENCE.

The mess will only get much, much worse....Robo signing was just one layer that caused the foreclosure mill machine to grind to a halt....we come up with new ones every turns out most of the banks did not mail correct papers before they filed their suits....and all these cases are getting dismissed.

And just forget about foreclosure trials....properly defended they stand no chance.

I wonder every month why i stil pay my own mortgage.....

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