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Posts Tagged ‘Foreclosures’

The NY Times is reporting that the people who profit from foreclosures see loan modifications as a bad idea. Duh. It’s bad for business. I commented:

The opinion of Mr. Katari, who has a financial interest in more foreclosures (asset managers, folks, are the people who liquidate foreclosed property for lenders) is telling. Of course he’s against loan modifications and people keeping their homes; he profits from them losing them. This is like asking a wolf if protecting sheep is wise. Put the carpenters back to work indeed! We’ve already lost 50% of (admittedly inflated) value in some precincts and 20% or more here in New York. How much bloodletting does he want? Answer: more is never enough.

Call me crazy, but with rare exception, most people would happily keep their homes if their payments were lowered. The banks simply won’t agree to make the modifications permanent because they DON’T HAVE TO. Why is all the TARP money being repaid so quickly? So they can go back to being even bigger SOBs without being beholden to Uncle Sam. Remember “too big to fail?” Bailing them out with our tax money was like sharpening the guillotine blade for our own executioner. Now that they have been sufficiently re capitalized, even the Times has reported that they have positioned themselves to bet against the market improving. Did you think that the people who brought us the sub prime debacle suddenly became good guys?

It would be nice if the administration would show some courage and, once and for all, stand up to the hedge funds and their ilk to foster some real change (wasn’t that why he was elected?). The carpenters can’t go back to work if the housing market, the backbone of our economy, is further weakened. Read the writing on the wall. We should be in a recovery by now, and the real fallout may just be starting without strong leadership. There haven’t been 3 negative years in a row in housing since the Great Depression, which ironically, was also caused by the fox watching the hen house.

I felt better after letting off that steam, for sure.

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When I agree with the NY Times Editorial, it is noteworthy. But for the senate to go on vacation with no comprehensive policy on addressing the mortgage and foreclosure crisis is reprehensible.

By the time the Senate returns next Monday from its July 4 recess, some 55,000 more homes will have entered foreclosure. And that’s hardly the full picture of the growing calamity. More than three million homeowners are currently at risk of default and millions more are expected to join them in the coming year as home prices drop, the economy falters and delinquencies rise. Yet the Senate went ahead with its vacation last Friday without passing a foreclosure prevention measure.

Many of these people are the same hypocrites who decried Bush for not cutting his own vacation short when New Orleans was under water. Since the odds are that whatever they would do might not help anyway this may not be as tragic as the Times says. But for them to not even try, even for appearances sake to act like they give enough of a crap to work a little overtime, tells me what they are truly about.

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The Times has a fairly balanced article on how people are adapting to the down market in NY City’s least-populated and most suburban borough. The upshot of the story is that not everyone can seek relief through a short sale.

John and Dorothy Miele are an example. Two years ago, they wanted to refinance their home, which they inherited in the mid-1990s from Mrs. Miele’s mother. Mrs. Miele is a homemaker and Mr. Miele earns about $70,000 a year as an auto mechanic for the New York City Police Department. But their credit disqualified them from the sort of loan they wanted.

When thousands of people own a small piece of a home loan, it’s unclear who has the authority to make decisions about the mortgage when it comes to things like working out payments.

They refinanced anyway with an adjustable-rate mortgage, they say, because a mortgage broker told them that it was a step toward improving their credit and that in another six months he would give them a loan with better terms. After the papers were signed, the broker stopped returning their calls and the loan never materialized. Mr. and Mrs. Miele are now in a much tighter spot than they were before they refinanced. Nine people, including their children and grandchildren, depend on that house as a place to live.

The bank that gave them their loan, First Franklin, has since sold it — a standard practice in recent years. Now, it is part of a mortgage-backed security sold by Deutsche Bankto investors. The Mieles, who are about a year behind on their payments, are fighting foreclosure in court. Their next court date is in July.

Deutsche Bank, which acts as trustee, said in a statement: “The trustee is not responsible for foreclosures or selling foreclosed property. Such decisions are made exclusively by the servicing companies.” The servicer attached to the Mieles’ loan, Specialized Loan Servicing, would not comment.

Nine people can’t all fit into a 2 bedroom apartment. There is no easy solution here.  The article is unclear as to why they would refinance a home they inherited; some personal responsibility should be acknowledged there. Still, the broker who gave them a song and dance about refinancing in 6 months should be caned in the public square.

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Teresa Boardman says no.

It is a myth that bank-owned properties are a bargain — some are, but many are not. The bank-owned homes that are priced very low often need so much work that the cost of the repairs is more than the value of the home after the repairs are done.

I don’t take issue with her views. I rarely do bank-owned foreclosures but I am very active in brokering Lis Pendens and short sales. They are good deals, but not great deals. Way back when in Rochester I sold quite a few HUD homes (FHA repossessions). The prices more or less equaled the retail value of a fully improved home with the cost of needed repairs subtracted. It was a great way to enter the world of home ownership for your primary residence, but you seldom saw a flip candidate.

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I make no secret that I stand quite a bit to the right of the NY Times editorial board on most fiscal matters. In today’s editorialon the presidential candidates, the Times portrays McCain as a Whig and Obama as a Caped Avenger. Both portrayals are problematic. Most government solutions are window dressing at best and have terrible unintended consequences; the last thing we need is feel good political maneuvering for hard core problems. We already know the solution, and the president who will make the most difference is actually Roosevelt. The FHA made a difference in the 30’s. It will help just as much now.

The government has already expanded the FHA to both cover for the gaps in the credit crunch and ensure that future systemic problems will be avoided. Just yesterday they waived the 90 day waiting period on rehabbed resales (“flips”). I propose that the bulk of government aid be to lenders who responsibly allow for defaulting borrowers to exit via a short sale. That would allow a more organic return to a normal market and minimize the unintended consequences of many government panaceas.

The editors of the Times either don’t know or don’t care that less is more. The damage has been done, and while we need more from Uncle Sam, the focus should be more on the preventative than the curative.

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May 2008 saw over 73,000 home foreclosures, almost trebling May 2007’s 28,548.

This hurts everyone. There will always be foreclosures, repos and REOs going on the market, but those extra 45,000 repossessions flood the already swollen inventory with under-priced distress sales. It will be a while before we wring out the casualties and return to any kind of balance between buyers and sellers.

This is the most slanted buyer’s market of my lifetime. The forecast according to some is not good either. I never bought into the doomsayers predictions of double-digit depreciation, but if we are going to get an extra 10,000-40,000 repos added to the inventory each month it looks bad.

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