Matt Weidner – Fighting With The American People

Posts Tagged ‘mortgage’

Fannie Mae and Freddie Mac are the two largest insurers and underwriters of residential loans in the US.  In the wake of the mortgage meltdown, the Federal Government (that means you and me), pumped $400 billion into these institutions to prevent them from going bankrupt.  Now the reason they were (and are) in such trouble is the mortgage brokers and lenders from whom they were purchasing loans were committing gross fraud and misrepresentation on the loans Fannie and Freddie were taking responsibility.

Fannie and Freddie Will Continue to Take Huge Losses

The portfolio of loans held by Fannie and Freddie are huge, totaling $1.6 trillion and the $400 billion pumped in is a security blanket to cover losses if borrowers continue to default on the loans. Unless major changes are made in the systems used to consider and process loan modifications and if something is not done to improve the unemployment situation in the US, borrowers will continue to default, Fannie and Freddie will continue to take huge losses and the US taxpayers will continue to bear the burden for all this.  Based on my first hand experience with homeowners facing impossibility of getting modifications, shorts sales or deed in lieu of foreclosure, I predict we will continue to see massive losses in the residential mortgage market.

Give the Bankers Billion Dollar Bonuses!

These same institutions benefitted enormously from the bailout in the form of preferred loans and financial incentive and now they’re making record profits and want to pay their executives more in the year after the crisis than they made during the crisis.  Maybe the companies and their executives are entitled to such incredible bonuses.  After all, they were able to shift much of their losses and bad loans onto Fannie and Freddie, then march ahead to profitablity….that’s damn good work.  Problem is you and me, the taxpayers and consumers, continue to pay for all this while the fat cats laugh all the way to their well-capitalized banks.

The Second Inning of This Ball Game

No one is really sure just how long this mortgage meltdown ballgame will last, but it seems nowhere near the end and shows no signs of letting up.  Foreclosure filings are up all around the country, and Pinellas County posted 1500 November 1, December 1, 2009.  Until something is done to inject common sense solutions into the crisis and better systems are put in place to address problems faced by homeowners, the problems will only continue and get much worse.

Don’t go it alone.  If you’re in trouble with your mortgage or need advice contact Matt Weidner at www.mattweidnerlaw.com

Today’s St. Petersburg Times quotes an article that I first wrote about yesterday which suggests that more than 46% of homes in the Tampa bay have mortgages on them that total more than the value of the homes.  While the article, and the study in the Wall Street Journal do not report exactly how they came up with the value of the homes, I rather suspect the value of the homes is overstated and that as a result, ther are ore than 50% of homes that are underwater.

For decades Americans worked hard to pay their bills and protect their credit.  Certainly part of the motivation for this behavior was good old fashioned value and morality, but a big motivation for many people was so that the consumer  could continue to access credit to buy all the things that are required to be a good American consumer.  With the consumer credit market across the country very much locked up and consumer’s buying and borrowing habits changed, this motivation may no longer be as important.

As reported earlier, lenders are faced with very few options when a consumer fails to pay their mortgage and the reality is if your credit is already tanked, the consequences for walking away from a mortgage may be acceptable when compared to the alternative of slaving away making payments to creditors that your income can no longer support. Make no mistake, this is not advice or a suggestion to stop paying bills, it’s merely a practical reflection of a judgment many consumers are already making!

For more information visit my website at www.mattweidnerlaw.com

In the heyday of the mortgage refinance market, lenders were closing billions of dollars of loans across the country.  Major lenders in far flung places were agreeing to lend hundreds of thousands of dollars against properties based on representations of loan officers, agents, appraisers and sales people that these lenders knew almost nothing about.  In the years leading up to the crash a phone call and a few short applications were all that was required for a con artist, criminal or capitalist to become an agent of a lender and then have access to start throwing millions of dollars of that lender’s money around.

THE LOAN APPLICATION PROCESS- THE BEGINNING OF THE LIE

After the lender accepted the lies on the application, appraisals and contracts that their loan officer sent them, the lender emailed a mountain of documents to a title company. Someone (sometimes a criminal, sometimes just an employee who had every incentive in the world to close the loan and no incentive not to close it) would plunk the mountain of papers down before the borrower and get them to sign no matter what it took.

INPUT THE LIE (LOAN) QUICKLY- WE’VE ALREADY SOLD THE LIE TO SOMEONE ELSE!

After those documents were signed, the entire package of original documents were sent back to the lender.  When the original documents were received by that lender, data entry clerks inputted basic information such as the borrower’s name, amount of loan, interest rate on loan and property address into a computer system.  In some cases some of the documents were scanned in so that they could be accessed later, but from my experience, (based on the fact that I’ve rarely had a lender produce the important documents) I don’t think this was done in most cases.  At some point both before the documents were scanned and inputted or after many of these loans were already sold to third parties.  The original documents were either shipped off to third parties or in some cases destroyed or lost in the orgy-like rush to close and sell as many loans as possible as quickly as possible.

NO REAL PAPER TRAIL CREATES REAL PROBLEMS

The deal makers, brokers and con artists were more than happy to close loans, package them and sell them time and time again with no concern for the consequences of the failure to confirm the location and existence of the documents because once they sold them, they got their money and the next party was on the hook.  The real problem is that many of the documents signed by the borrower are essential and necessary if the Plaintiff wants to foreclose the mortgage.  The pages of disclosures and other documents that a borrower signs at closing represent literally hundreds of years of real property law and state and federal protections that were developed to protect both the borrower and the lender.

LENDERS- YOU MADE YOUR LIES, NOW LIE IN IT!

It was reckless and irresponsible for these lenders to ignore the fact that these documents were important and they cannot now claim the documents just don’t matter.  Across the country judges are recognizing this fact, but were all struggling to decide just how to deal with the consequences…..stay tuned!

Visit www.mattweidnerlaw.com for more information.

So you’re a homeowner and you’ve sold your home.  If you’re one of the thousands of people who sold your home in 2008 or 2009, it’s likely that your sale was a “short sale” or a transaction when the lenders accepted less to satisfy the lien than was owed on the underlying debt.  Likewise if you are one of the 1658 homeowners who the Pinellas County Realtor Organziation lists as a “Pending/Distressed” sale in their September Foreclosure/Short Sale Activity Report (the full text of which can be found here at http://tampabayrealtor.com/images/stories/statistics/distressed_properties/sep09/foreclosure-short_sales_monthly_activity_report.pdf it’s likely that your transaction will involve a short sale transaction.

The Lender Will Release the Lien!

In each of the short sale transactions that I’ve reviewed over the last several months, the lender will issue a payoff letter which states generally, “The lender agrees with this short sale transaction and will release the lien on the subject property upon receipt of $150,000.”  The problem with this letter is that while it clearly states the lien will be released it is absolutely silent as to whether the lender will hold the borrower liable for the difference between the payoff funds received pursuant to the letter and the balance due on the mortgage.

The Borrower Is Still Liable on the Note!

If the payoff letter does not explicitly state that the borrower is released from all further liability, the borrower may be surprised to find the lender actively pursuing the balance owed immediately or up to five years after closing.  If there is a foreclosure case, the borrower may be surprised to find that the case was not dismissed and the lender just keeps right on pursuing them.  In most cases, the lender is perfectly within its rights to do so because the payoff letter was absolutely silent as to the lender dismissing the case.

The bottom line is if you’re a homeowner considering a short sale, you need the skill of an experienced real estate attorney to advise you in the transaction.  If you’re a realtor or other professional involved in short sale transactions, you owe it to yourself and your clients to obtain the advice of an experienced attorney.  I remain concerned that many consumers are being convinced to accept short sale transactions without understanding the consequences of the language as cited above.

For more information contact Matt Weidner at www.mattweidnerlaw.com

The information contained in this blog is taken directly from “Chain of Blame”, http://www.chainofblame.com/a fascinating commentary on the meltdown of the American financial system which was named one of the ten best business books of the year by Bloomberg News. http://www.bloomberg.com/apps/news?pid=20601088&sid=am5wffhiJV9c

The current meltdown of the American economy began in Southern California in the late 1980’s. Southern California remained the epicenter of the meltdown in 2006 when eight of the nation’s top 15 subprime firms were headquarted in Southern California.  Seven of the 15 that survived were nonbanks that survived on wharehouse lines of credit from Bear Stearns, Credit Suisse, Lehman Brothers and Merrill Lynch.  After Savings and Loans crashed, a variety of mortgage brokerage firms sprung up to fill the void in lending left from the S& L crash.  Countrywide Home Loans began as a tiny player in the residential lending market but by 1991 Countrywide was the largest lender in the United States.

When the S & Ls failed, Countrywide and other mortgage lenders stepped in to pick up the pieces.  In 1991 there were 14,000 brokerage firms in existence.  By the end of 2006 there were 53,000 loan brokerage firms operating in 50 states, employing an estimated 200,000 people. By comparison, the Mortgage Bankers Association (vestiges of the old S & L’s) had just 2,300 members.

Between 2004 and 2007 Countrywide had originated $150 billion in subprime loans in the US and in 2006 alone, Countrywide was the largest option ARM lender in the country, originating $11 billion each quarter.  There were 44,000 brokers in the US and 38,000 were approved and signed up to do business with Countrywide.  Countrywide was focused on churning a massive volume of loans, without regard to the quality of the loan or the borrower—the fees were being made when the loans were closed and sold.

The Time Before SubPrime

For well over 50 years, savings and loans financed most homes purchased by Americans.  Non-bank mortgage lenders like Countrywide were limited to making FHA/VA loans which had higher delinquency rates than the loans written by the Savings and Loans, but because the delinquent loans were underwritten by the US government, the risk to lenders like Countrywide was relatively low.

In the early eighties a powerful alliance was created between the National Association of Home Builders, the National Association of Realtors, Fannie Mae, Freddie Mac, and the National Mortgage Bankers Association.  These groups pushed for deregulation at the state and federal level of the Savings and Loan industry.  When the regulations fell, the S&L started an orgy of irresponsible and sometimes outright fraudulent lending.  The resulting collapse of the S& L’s cost American taxpayers more than $150 billion.

In Steps Countrywide

In 1981 before most S&L’s failed, Countrywide raised $3 million in an IPO.  After mass failures in 1983 Wall Street titans had nowhere to go with their money and Bear Stearns sold $11 million in Countrywide preferred stock.  The Money Store, Beneficial, Associates First Capital and Aames Financial and Household Finance were all involved in making small second mortgage loans in the 1980s.  There numbers were tiny, but the percentage yield (in the neighborhood of 14%) on those loans was tantalizing.  Wall Street briefly got into the game of funding these pools of loans in 1996-1998, but the market shut down and the money disappeared for these types of loans during the Russian debt crisis of 1998.  (While these rates in general were high it is important to keep in mind that when Reagan took office in 1981 mortgage rates were in nosebleed territory—14%, a year later the rate would rise to 16%.)  Other larger lenders (Like Countrywide) eventually took notice of the yield on these riskier loans and between the early nineties and the crash, the existing lenders and hundreds of others began creating business models based on the larger yields of riskier loans.

Between 2002 and July 2007, home lenders had originated $2.6 trillion in mortgages to people with bad credit but loan delinquencies were rising to 20 year highs.

The Role of Wall Street

The biggest names on Wall Street, Citigroup, Lehman Brothers, Merrill Lynch, Credit Suisse, Bear Stearns, were all making massive amounts of money trading on subprime mortgages.  It seems counter-intuitive that big firms would make more money on “bad” mortgages, but the higher interest rates on those mortgages commanded higher fees…..for every player in the game.  From the broker who sold the loan to the homeowner, to the Bear Stearns manager that sold the pool….the worse the credit, the higher the risk of the loan, the more money there was to be made.  A consumer loan broker could make three or four thousand dollars on a $100,000 loan, but a bond salesman from a Wall Street brokerage house could make $62,500 on a $50million bond.

As the 1990s progressed, Countrywide and other lenders grew rapidly.  Concurrent with this growth, Wall Street firms like Bear Stearns, Lehman Brothers and Merrill Lynch grew rapidly and were making massive profits.  The subprime lenders could not close and fund the volume of loans they were writing—they simply didn’t have that kind of cash. The lenders closed billions of dollars in loans a month.  These loans were bundled into Mortgage Backed Securities, which were sold to the Wall Street firms who in turn replenished the lender’s capital so the cycle of loan making could continue. The Wall Street firms took a massive commission on the Mortgage Backed Securities when they sold them to investment outlets like Police, Fire and Teachers union pension funds.  The Mortgage Backed Securities were not just sold to U.S.-based investment outlets, but to unions and the like all over the world.

In 2000 Wall Street firms had securitized $74 billion in subprime loans or just 7 percent of all loans originated that year.  Two years later that figure had more than tripled to $233 billion.

The Fall of Countrywide (and the crash of the subprime industry)

In a conference call to investors on July 24, 2007, Angelo Mozillo said, “We are experiencing a huge price depression, one we have not seen before….not since the Great Depression.”  The next day, Countrywide stock dropped 11% and the stock market dropped 226 points.  Despite the fact that Countrywide had made $2 billion the year before, his comment was the concrete indicator that something was wrong in Countrywide (and the subprime industry as a whole) and neither ever recovered.

Bank of America Purchases Countrywide

With Countrywide in trouble, a bailout was absolutely necessary and Bank of America became the only real suitor.  After analyzing the purchase however, an independent research firm (Friedman Billings Ramsey) predicted that Bank of America would have to write down the value of Countrywide ‘s Mortgage Holdings by up to $30 billion because of delinquencies and defaults.

On January 11, 2008, Bank of America announced that it planned to purchase Countrywide Financial for $4.1 billion in stock. On June 5, 2008, Bank of America Corporation announced it had received approval from the Board of Governors of the Federal Reserve System to purchase Countrywide Financial Corporation. On June 25, 2008, Countrywide announced it had received the approval of 69% of its shareholders to planned merger with Bank of America. On July 1, 2008, Bank of America Corporation completed its purchase of Countrywide Financial Corporation.

If you have recently been served with a foreclosure case or know that your lender is about to file a foreclosure case against you, you undoubtedly have many questions about what will happen to you, your family and your home.  As an attorney who has been practicing foreclosure defense, mortgage modification, civil litigation and real estate law in the St. Petersburg area since 1999, I have many years of experience which I am happy to share with you.

If you do not hire an attorney immediately after you are served with foreclosure, the lender could set a foreclosure sale of your home in as little as 20 days after you were served, with the sale of your home on the courthouse steps occurring as soon as 30 days later.  This is obviously a stressful and scary prospect for a homeowner and family, but if you hire an attorney, the bank may be unable to set a foreclosure sale for a very long time, if ever.

I say the mortgage company may never be able to set a foreclosure sale because the reality is foreclosure cases are very difficult for lenders to win in the current environment and the lenders are often forced or agree to modify your loan rather than take the risk of losing their case.

If you have questions, please take the opportunity to contact my office at 727-894-3159 for a free no-obligation consultation regarding your case.