May222012
California downgraded loan owners, diverted bank extortion booty to others
Many loan owners made mortgage payments over the last few years when they would have benefited more from strategic default. Many of those loan owners were motivated by the false hope of a government bailout bringing principal reduction or other goodies. California led these sheeple down the path and garnered much public attention for the tough stance the Attorney General took in favor of loan owners.
Everyone rejoiced. Loan owners could taste the debt relief. Kamala Harris stoked her political ambitions as a pandering lefty. The banks got relief from further lawsuits.
There was only one problem. Governor Jerry Brown and others in the state legislature decided giving money to loan owners wasn’t the best use of taxpayer funds — thankfully. The State is diverting the extortion booty it garnered from the bank settlement to others leaving loan owners with nothing but their denial and false hope. Loan owners got screwed.
~~ giggles to self ~~
Needy States Use Housing Aid Cash to Plug Budgets
By SHAILA DEWAN — Published: May 15, 2012
Needy states? The only thing needy about the State of California is our overblown sense of entitlement. How does the seventh largest economy in the world get classified as needy? I suppose since the entire economy depends on HELOC abusers, we need house prices to go up to fuel consumer spending.
Hundreds of millions of dollars meant to provide a little relief to the nation’s struggling homeowners is being diverted to plug state budget gaps.
This is a huge slap in the face to loan owners. Hopefully, this will wake them up to their sheeple status. Politicians don’t give a crap about loan owners. They never did. They are interested in saving the banks and banker’s bonuses, but the State couldn’t care less about loan owners.
In a budget proposed this week, California joined more than a dozen states that want to help close gaping shortfalls using money paid by the nation’s biggest banks and earmarked for foreclosure prevention, investigations of financial fraud and blunting the ill effects of the housing crisis. California was awarded more than $400 million from the banks, and Gov. Jerry Brown has proposed using the bulk of that sum to pay the state’s debts.
Loan owners were mere pawns in the game of politicians and extortion. Now that the State has its money, the pawns are expendable.
The money was part of a national settlement valued at $25 billion and negotiated with five big banks over abuses in their mortgage and foreclosure processes.
The settlement, reached in February after a year of talks and intervention by the Obama administration, was the second-largest in history involving the states, trailing the tobacco industry settlement, and represented the first large-scale commitment by banks to provide direct aid to borrowers.
And now they are getting shafted.
As part of the settlement, the banks agreed to pay the states $2.5 billion, money intended to help homeowners and mitigate the effects of the foreclosure surge. But critics complained that this was the only cash the banks were required to pay — the rest comes in the form of “credits” for reducing mortgage debt and other activities. Even that relatively small amount has proved too great a temptation for lawmakers.
The drop in the ocean — the root of false hope for loan owners — was so tiny it would never have materially impacted foreclosure rates, but it was a large enough chunk that politicians wanted to steal it.
Only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group. So far about 15 states have said they will use all or most of the money for other purposes.
In Texas, $125 million went straight to the general fund. Missouri will use its $40 million to soften cuts to higher education. Indiana is spending more than half its allotment to pay energy bills for low-income families, while Virginia will use most of its $67 million to help revenue-starved local governments.
Like California, some other states with outsize problems from the housing bust are spending the money for something other than homeowner relief. Georgia, where home prices are still falling, will use its $99 million to lure companies to the state.
“The governor has decided to use the discretionary money for economic development,” said a spokesman for Nathan Deal, Georgia’s governor, a Republican. “He believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”
For as dirty and underhanded as this bait and switch is, the policy is the best use of public funds. Loan owners should never have been given this money. The false promises were a ploy to extort the banks and get loan owners to make a few more payments.
Andy Schneggenburger, the executive director of the Atlanta Housing Association of Neighborhood-Based Developers, said the decision showed “a real lack of comprehension of the depths of the foreclosure problem.”
No, the decision not to give loan owners free money shows a great comprehension of the moral hazard of principal forgiveness.
… In California, Attorney General Kamala D. Harris had played hardball in the settlement negotiations, holding out until the very end for a deal guaranteeing that a large share of the benefits would go to California, and then trumpeting her success in a news conference and a flurry of interviews with national news outlets. So Mr. Brown’s revised budget put her in an awkward position.“While the state is undeniably facing a difficult budget gap,” she said in a statement, “these funds should be used to help Californians stay in their homes.” Both officials are Democrats.
When asked if Mr. Brown could legally appropriate the money, which is supposed to be held in a special fund “for the benefit of California homeowners affected by the mortgage/foreclosure crisis,” a spokesman for Ms. Harris declined to comment.
There’s no way she is going to challenge Jerry Brown. She might bluster for a photo-op, but she will do nothing substantive to make up for this severe embarrassment — which is fine. I don’t want her to succeed in bailing out loan owners.
Just last week, Ms. Harris announced plans to give about half the money to groups that provide housing counseling and legal assistance to homeowners — groups whose budgets have shrunk while demand for their services grows. The other half would be used primarily for investigation of mortgage-related crime.
So much for how she wanted to spend the money.
… Using the money for other purposes is shortsighted, housing advocates warn. “If you leave homeowners hanging out there to dry, then in the short term maybe you help to meet the budget gap this year,” said Maeve Elise Brown, the executive director of Housing and Economic Rights Advocates, based in Oakland. “But in the long term the more people we have going through foreclosure, the worse it’s going to be for our economy as a whole.”
These people just don’t get it. Foreclosures are essential for the economic recovery. The main reason our economy is still sputtering six years after house prices topped is because lenders have consistently delayed the cleansing foreclosures that need to occur. If lenders had foreclosed and cleansed the system of bad debt and pushed prices to very low levels, a new crop of buyers with less debt would be in at lower price points. The recovery from an oversold position is stronger, so those who bought at the bottom would quickly acquire move-up equity, and their move-ups would support the rest of the market. This process was aborted, so instead we have a slow loss of equity, falling prices, and no viable move-up market. Contrary to popular belief, foreclosures are good for the economy, and lower prices would stimulate home sales, and free up disposable income for other expenditures.
The trend is your friend until it ends…..
LPS: Mortgage delinquencies in April increase for the first time in 9 mos.
http://www.housingwire.com/news/lps-delinquencies-april-increase-first-time-9-mos
Despite the anecdotal reports of rising prices, the stuff that is actually closing isn’t rising as rapidly as realtors say it is
Prices Fall in April, 2-3 Bids Per Property: HousingPulse Survey
If the buzz about bidding wars is true, Campbell/Inside Mortgage Finance HousingPulse Tracking Survey reported those accounts did not boost prices in its findings.
Homes are selling below the list price, and if a home is subject to a bidding war, the high offer becomes quashed by lower appraisals. According to the report, homes sold in April received only two or three offers, and average home prices declined slightly from March to April.
For non-distressed properties, the average price declined 1.5 percent from the previous month of March, while the average price for short sales slipped 1.7 percent. For damaged REOs, the average price dropped 1.4 percent and for move-in ready REOs, the average price fell 0.3 percent.
The high share of distressed properties continued to drag prices down, according to HousingPulse statistics, which showed the average ratio for sales price to listing price stayed below 100 percent in April. For example, non-distressed properties sold for 95 percent of the list price in April – a metric that has not changed much over the past two years.
The share of distressed properties in the housing market in April was 47.9 percent using a three-month moving average. The figure marked the 26th consecutive month that the share has been above 40 percent.
The average number of offers for non-distressed properties sold in April was 1.9, according to the nationwide sample. Distressed properties received more offers, with damaged REOs averaging 3.5 offers, move-in ready REOs 3.1, and short sales 3 offers.
Even when potential homebuyers actually bid above the list price, appraisals prevented such transactions from closing.
“Yes, we are experiencing bidding wars on desirable properties, but many times the appraisals don’t come in at the [contract] price. The appraisers are keeping the [transaction] prices down even when buyers see the value and are willing to pay more,” said one real estate agent in the survey.
The HousingPulse Survey includes information from approximately 2,500 real estate agents each month.
Yes, this sort of becoming the Facebook of recoveries.
“Even when the buyers see the value and are willing to pay more…”
What a load of $hit! Amazing what happens when you don’t have the loan officer/appraiser/escrow officer/realtor/title insurance clerk all in the same “one stop shopping” office.
If the buyers are “seeing” so much more value, then why aren’t they dipping into their savings to make up the difference between their bid and the appraised value…that’s right, what savings? They are probably stretching to come up with the 3.5% down!
You nailed it. Buyers see what they want to see. The value most erroneously perceive right now is that they are buying at the bottom, and if they get in now, HELOC money is right around the corner.
Well, most of the current bidding wars are being waged by hedge funds and insider PE groups who’re both leveraged to the hilt. Then, toss-in a few narcissistic realtor hacks and you have a speculative landscape that’s becoming more volatile by the day.
Accordingly, if you’re a couple who recently lost-out on a deal because of a bidding war, consider yourself lucky because once margin calls begin to commence, the stampede to the exit will NOT be an inflationary event.
Actually, the hedge funds aren’t leveraged yet. Most private equity groups buy with cash, and some put debt on after the properties are rented.
I just got word of a friend who closed on a short sale in Las Vegas last month for $73,000. He decided he didn’t want the property, and a hedge fund just paid him $98,900 cash for the property.
Silly Larry, of course most HF’s are leveraged to a certain extent, especially those with AUM >$billion (ie., JPM’s CIO unit in London LOL).
While much of their cash on hand is amassed via seeding, some have access to the discount window; borrow $’s essentially @0 cost and now parking huge chunks of that borrowed cash in RRE holdings. Same scenario applies to many of the newly formed, insider PE vulture groups who’re now playing in the sandbox as well. Glad I could clear that up for ya 😉
I see. Yes, hedge funds themselves use leverage, sometimes a lot of it, but the ventures they fund treat the leveraged hedge fund money as cash equity. These ventures buying REO right now are not highly leveraged — yet.
Well played, Kamala….well played. She is “upset”, but I have to believe that this was the plan all along. Now watch Jerry Brown become the biggest advocate for Kamala Harris to become Governor or Lt. Governor in the near future.
What is on her forehead?
I looked up the Chinese characters for deception and got creative in Photoshop.
Where is Planet Reality? Everyone (except me) hated on that guy. Arrogant, condescending, but…..he was right.
Mortgage rates will drop into the 2% range as a final gasp to bring us to the Japan 20-30 year property flatline. Maybe a good ol’ depression would galvanize people in this country to actually t ake care of themselves and to hell with their banking cabal slave masters.
Nah, [email protected]#$ it, let’s all go shop at Wal-Mart, put the boob job on the credit card, and watch cable TV for intellectual stimulation.
Right about what? Interest rates declining? Yes, but many here agreed with him on that.
He was saying in mid-2010 that the bottom was in… this was the main focus of people’s disagreement with him, and he WAS totally wrong about that.
Yep. He was correct about rates, but he was too early with his calling the bottom. He wasn’t alone in that one either. Everyone calling the bottom today may get steamrolled by inventory when the banks get around to liquidating.
He was DEAD WRONG about a bottom in housing. IE – Cheaper money has fooled everyone into believing we are at/near bottom.
He was correct about interest rates falling further. The bull market in bonds may have a year or two worth of steam in it, as scared money flocks here from EU and Japan driving rates lower, but once the tide turns on the bond market, look out. What can the Fed and Gov do to stop it? Print.
There goes the banking cabal…or we are looking at another false settlement
JPMorgan Among Banks Sued For $1.8 Billion Over Mortgages
By David McLaughlin on May 22, 2012
JPMorgan Chase & Co. (JPM) (JPM) and Goldman Sachs Group Inc. (GS) (GS) are among the banks that were sued in New York for $1.8 billion over the sale of mortgage-backed securities.
The banks made misrepresentations about the loans backing the securities, according to a summons filed today in New York State Supreme Court. Morgan Stanley (MS) (MS), Credit Suisse Group AG (CSGN), Royal Bank of Scotland Group Plc (RBS) and Bank of America Corp. (BAC)’s Merrill Lynch unit are also named as defendants.
The plaintiffs, which include Phoenix Light SF Ltd. and Blue Heron Funding II Ltd., are seeking a total of $1.8 billion in damages, according to the court filing.
Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment immediately on the filing. Steven Vames, a spokesman for Zurich-based Credit Suisse, declined to comment. Representatives of the other defendants didn’t immediately respond to e-mails seeking comment.
The case is Phoenix Light SF Ltd. v. J.P. Morgan Securities LLC, 651755-2012, New York State Supreme Court (Manhattan).
To contact the reporter on this story: David McLaughlin in New York at [email protected]
To contact the editor responsible for this story: John Pickering at [email protected]
The settlement deal doesn’t protect banks from suits like this one. These plantiffs are alleging the banks put loans into MBS pools that didn’t meet the standards specified in the documents. If true, the banks are liable for damages.
The settlement might have been a home run by the banks. Get rid of all the lawsuits while enriching their friends. Very much like the price fixing suits and settlement of baby formula by the wholesalers and retailers. The wholesalers and retailers got the money. The damaged consumer got discount coupons to but more at the inflated price. Judge ruled that the consumer actually had no standing to sue — be happy that you got the coupons. The lawyers got a percentage off the top including the coupons. What makes you think that the lending would be any thing different. This settle looks like blocking suits from borrowers, but suits from the investors can go forward. The govt via FHA is busy converting those bad loan to non-defective later non-preforming loans so the can is kicked down the road and to remove liability from the banks.
I admit that I was wrong on interest rates. I still expect the rates to go up, but BHO has done a good job in global destabilization to have money flee to a safe political environment, the USA. US interest rate has been decoupled from the inflation rate, at least for now.
You have a clear view of the situation. Interesting how the little guy always gets the shaft.
At least for now, exactly. Lower rates only means more rope with which to hang ourselves. And once a country has done that, no one will lend them money for single digit returns. There will be some spectacular can-kicking in the meantime.