New Orleans

The arguments were clear and concise from Goodman:

• Of 55 million mortgages more than 10 million she reckons are likely to default, largely because they are underwater…in other words the borrower owes more than the current value of the property.
• Supply is going to “outstrip demand.”  Goodman estimates a glut as high as 6.2 million properties over the next 6 years, largely because the economy (add changing social mores in my view) are slowing “household formation.”  Young people without jobs are not making commitments backed by real estate.
• She argues that only principal reduction can save the market because, as we have argued, “A borrower will make a decision to default if it is in his or her best interest.”  Hello!

Line forms in the rear, but let’s move it along before another million or two lose their homes!

New Orleans

It’s something, I guess, but it’s not much, and it certainly doesn’t address the real crises for families facing foreclosures or the desperate shape of the home housing market.  In fact all of the flaws in the existing programs that have been terrible failures are carried forward in this latest “initiative.”

The program is based once again on a “voluntary” set of agreements with banks.  The mortgages under discussion would all be Freddie Mac and Fannie Mae qualified.  The loans would all have to predate a fixed date in 2009.  The last six payments for potentially eligible refinancers would have to have been paid timely and successfully.

The new program, like all of the old programs, continues to be a boon for the bankers and mortgage holders because once again nothing is being done to right size the outstanding market value of the home with the stated value of the original mortgage amounts.  For some people this new program might save them some money on their monthly payment, but may not change the fact that the homeowners might be crazy to continue to make payments on a home that will never recover the original loan value in their lifetimes.

HUD and the President’s continual unwillingness to facedown the bankers and reduce the outstanding balances in order to bring mortgages holders back to dry land from the underwater deep sea where so many sit especially in Florida, Arizona, Nevada, and other areas where real estate values have totally tanked.  This program continues to look, feel, and taste like a bank bailout footnote, rather than a homeowner relief effort.  Banks are still trying to pretend their portfolio is intact despite all of the evidence to the contrary.  The Administration has become codependent on this crazy strategy by encouraging refinancing at false values to help the banks and allowing them to make some fees, even though less, on the deal.

This is a rope for homeowners, not a lifeline, and without reconciling loan amounts to real values; it could be a hanging noose rather than any kind of salvation.  Eventually someone somewhere in this Administration is going to have to give homeowners and their beleaguered communities some relief by embracing reality rather than continuing to finance the pre-recession fantasy.

New Orleans

According to these reports, Bank of America, its lawyers and strategists have spent time and money making sure that they contained the Countrywide operation as a separate entity.  The Bloomberg report notes:

“Countrywide has $11 billion in assets that could be depleted through demands to repurchase defective mortgages,” Jonathan Glionna of Barclays Plc said in an Aug. 31 note. After that, Bank of America may not have any obligation to pay claims from Countrywide’s creditors, he said.

Typically, a corporation that acquires another firm’s assets isn’t liable for the seller’s debts, unless the transaction is considered a de facto merger or there was fraud in the takeover, Robert M. Daines, a Stanford Law School professor, wrote in a legal opinion prepared for BNY Mellon, trustee for the Countrywide mortgage bonds. Daines analyzed whether Bank of America would have to pay bond investors if Countrywide couldn’t.

American International Group Inc. (AIG), the insurer that sued Bank of America last month to recoup more than $10 billion in losses on Countrywide mortgage bonds, argued that the bank is a legal successor to the unit. New York-based AIG cited a series of transactions by Bank of America in 2008 that “were structured in such a way as to leave Countrywide unable to satisfy its massive contingent liabilities.””

Obviously one reason all of the big whoops suing Bank of America from Freddie to Fannie are making sure in any litigation or settlement that BofA is on the hook for Countrywide is their fear that the company will finally jettison this toxic nightmare.  But for poor, working homeowners the problem in getting modifications and preventing foreclosure is that Bank of America clearly has to continue to play pretend and pump up the fake value of Countrywide mortgages that are still on the books at the loan terms rather than the underwater value.

In Phoenix where values have been halved and Arizona Advocates and Actions has been mired in the modification process with Bank of America few if any modification offers make financial sense for homeowners because the bank continues to pretend that houses now worth little more than $100,000 are still holding the $250,000 loan value of the original mortgage.  Restating the mortgage to the actual value would save millions of homeowners.  Unfortunately, injecting reality might bring the whole house of cards down, not just the Countrywide unit, but all of the nation’s largest financial institution, Bank of America.

What a mess!

Lafayette

No one can puzzle out whether or not homeowners facing foreclosure or owing more than 125% of what is now the current value of the house would be allowed to refinance, thereby making their homes affordable again.  I suspect not.  This would knock too hard on the door that the banks have continued to fortify which would involve writing down the value of the properties to the market, rather than continuing to pretend to modify at the wildly inflated pricing.  The Times article in its last line importantly noted:  “American homeowners currently owe some $700 billion more than their homes are worth.”  My god in heaven until that issue is addressed there is no plan for beleaguered homeowners facing the threat of foreclosures.

A refinancing program that focuses on other homes than represented by that $700 billion problem would give banks and the housing industry a shot in the arm on closing costs and fees in the moribund housing market.  This is all window dressing, not housing policy!

A Treasury Department official was quoted revealingly that Treasury was now hoarding more than half of the money allocated by TARP for foreclosure relief (almost $25 billion!) which has been an abject failure on all counts saying they wanted to save it to help pay down the deficit.  What patsies:  this is more chicken feed for the chickenhearted!

As a footnote to all of this we have to read about Warren Buffett being a “white knight” trying to prop up Bank of America still wallowing in its mess, and a new debate over whether or not Capital One might be getting “too big to fail.”  These are not the real issues, friends.

The other proposal has to do with renting out homes facing foreclosures but that would require some money to operate, some concessions from the banks which have not given an inch yet, and some recognition that tenancy is part of the future paradigm of citizen wealth, just as home ownership has been in the past.

Unfortunately no political or financial figures have been willing to walk that bridge to the future yet, so we’re still all falling into the ravine.

One thing is clear.  These things have gotten huge!   The article documents this well:

“…one in five US homeowners is subject to the will of the homeowners’ association, whose boards oversee 24.4 million homes.  More than 80 percent of newly constructed homes in the US are in association communities.  And of the nation’s 300,000 homeowners’ associations more than 50 percent now face ‘serious financial problems,’ according to a September survey by the Community Association Institute.  An October survey found that 65 percent of homeowners associations have delinquency rates higher than 5 percent, up from 19 percent of associations in 2005.”

Damn!  This is the equivalent of a private government where god knows what might happen.

It isn’t hard to understand why their feet are pinched.  As banks foreclose on mortgages and people walk away, the association would be trying to service the same units and common space with fewer fees, so something is going to give.  Where foreclosures used to be rare and based on more extraordinary problems, it’s off the chain now.  The AP cites a Houston area number where association triggered foreclosures have gone from 500 in 1995 to 2200 in 2007 at the beginning of the downturn, and that is only a fraction of what’s shaking in Texas since these were only the ones that went through the courts!

Even falling behind a couple of hundred dollars on fee payments can put a homeowner up against the wall.  One expert referred to the associations’ power as equivalent to a “banana republic.”  Utah and Arizona have pushed legislation to prevent debt collectors from strong arming these often elderly folks from wild fee collection tactics.  If Arizona stepped up, you know it must have been horrendous.  The reporters told a story from Fort Pierce, Florida where homeowners had begun to boycott fee payment to protest against bad management and extravagant expenditures which were leading to special assessments of thousands per year, and for their trouble were being foreclosed.

Maybe we should have been organizing in these communities after all to help people hold their associations accountable and help them to work well.  It is a cinch that this is a crisis that has been bubbling  beneath the surface that is boiling over now and needs attention immediately.

New Orleans

Even though it is not important or much of anything, unfortunately, other than another press conference, it would seem.

This announcement and program cost no money.  Remember Congress in the original bailout set aside $46 billion for foreclosure modification supposedly to help 3 to 4 million homeowners facing foreclosures.  Months and years go by…tick-tock, but so far only $2 billion has been spent in this regard and only about 730,000 have won permanent modifications.

Of course a homeowner would have to be eligible, and eligibility is determined by the banks and servicers, and of course their participation in this program like all others is “voluntary,” and don’t forget that eligibility could also be impacted by other regulatory requirements or investor restrictions.  Make no doubt about it, it is much easier for a rich man to get into heaven, than for a poor working – or unemployed –  stiff to get a loan modification under HAMP.  That was true before, and it is just as true now.

This new “program” is a mandatory extension.  Mandatory though fits in the same sentence with voluntary participation and arbitrary, discretionary management of the “program” by the banks and their servicers with virtually no federal supervision or accountability.

Next month, HUD and the President are going to announce another new program.  In this one foreclosure victims will have a “pray for the files” day, where they pray that their foreclosure files will be lost yet again by the banks and servicers.  This is a prayer that statistics would establish is virtually a sure thing, and when assisted, advocates almost always find that this happened somewhere along the chain.

The month after that HUD and the President are going to announce another new program.  This one will be a raffle held on “Modification Mondays” throughout September.  Any homeowner whose name is drawn on Modification Mondays will win a review of their foreclosure case, which will guarantee a six month forbearance on their foreclosure.

Eventually, maybe they will run out of ideas for fake programs and press conferences and really create a mandatory program that is run by the government, spends the money allocated, and guarantees real relief for homeowners facing foreclosures.  Not yet obviously, but hopefully some day in our lifetimes.

New Orleans

Here is what we have for our morning trifecta:

• Bank of America had to pay another $8.5 billion for misleading investors about mortgage portfolio issues springing from their Countrywide purchase.   Estimates now best $30 billion dollars for the real costs of Bank of  America’s $4 billion dollar purchase of  Countrywide, which might compete on the list now for the most expensive “bargain” deal in banking ever.  On this one we can easily say, “we told you so” to every B of A executive who asked us whether the purchase was wise, but they really didn’t want advice, they wanted unemployment checks, I suppose.
• Jamie Dimon, the arrogant and avaricious CEO of JP Morgan Chase, was zinged hard for hypocrisy of collosal proportions and called a “one of the great welfare queens in America” by Jesse Eisinger of ProPublica in the DealBook section of the New York Times. I love the rich irony that ProPublica is funded extravagantly by Herb and Marion Sandler, who are no strangers to the banking and mortgage game.  Eisinger nails Dimon and the rest of the banking industry for the bigger-than-oil-company-and-farmers subsidies that include federal guarantees on deposits, interest premiums on the Federal Reserve lending window, not forcing banks to write down their portfolio to true value, and implicitly guaranteeing their derivative business.  The new slogan of all government, including the Obama Administration, has been “billions for banks,” so this is just the fine print on banking bull.
• And, today was the day that the Federal Reserve finally implemented the Dodd-Frank provision and cut the ridiculous fees they were collecting, essentially for nothing much from retailers when consumers used debit cards for a purchase.

Now, if there could just be some real progress on regulating bank ripoffs on foreclosures and remittance fees, it would have been a historic day, but a little truth in banking is a good start for a change.

New Orleans

Springfield is at the top of the list for foreclosures in Massachusetts and sitting with the redoubtable Congressman Barney Frank, banking expert and one-man accountability squad, but people are still demanding a moratorium during the crises for foreclosures and have yet to win it, despite the Springfield City Council joining the call and FHA saying they are ready.  A federal disaster has been declared.  Occupancy for housing units was frightfully low (about 6%) before the tornado, yet no action.  Why after Katrina is this not automatic?  Why do families and their organizations have to start from scratch here?

Housing can’t be found.  There is still no moratorium stopping evictions for families still living in houses that have been foreclosed during this crisis.  What the frick?!?

This morning I have been listening to a video of interviews with survivors.  I did not need to watch.  I’ve heard all the stories before from different faces.  We are almost 30 days out from the disaster and people have their famous FEMA letters, but no money yet.  It seems that the emergency payments that helped us survive post-Katrina have not been issued.  The Red Cross has announced that it is closing shelters today and some of the survivors who were interviewed talked about the crushing indignity of having their cots and gear moved out yesterday as they got the notice.  Why do we still let the Red Cross muddle through the mess?  They are good at giving out water and food, waving their flag and raising money, but they don’t know how to handle housing or survivors once the first punch has been taken and the long sloughing fight to rebuild sets in.  Why are we still not being better?  This is a congressionally authorized corporation with virtually no accountability in Washington that preys on disorganized and panic victims thankful for any help.  Listening to one woman talk about how she felt Puerto Ricans and African-Americans faced discrimination at the hands of the Red Cross was just flat over the line for me!

Hotel rooms are going begging for guests in Springfield now, and there is word that survivors unable to locate housing may be relocated to some, but in a typical disaster catch-22, FEMA says it will reimburse the survivors for their lodging which means these poor, working families would have to come up with the money now on the front end and get reimbursed who knows when?

And, working, forget about that even though protecting livelihoods is lifeblood for families and for the community.  One woman talked about having lost her car and having no way to replace the transportation so knowing that her job was going to be the next thing she would lose and then she would have to “start all over.”

In New Orleans we had to learn how to organize to win on all of these fronts after Katrina and we’re still paying the price.  Now almost six years after Katrina where are new communities and new victims and survivors of disaster still facing the same maze of obstacles and obstinacy in the face of tragedy when our national and local policy should be an open and helping hand?

West Palm Beach The boosterish headline in the West Palm Beach paper was curious and somewhat contradictory. They were trumpeting the fact that the “values” of houses were “bargains” and should be swiftly picked up because the comparable available prices in this normally high flying market had not existed for 15 years or more. Not many writers can spin a full-on recession front page story and a graph that must be gut wrenching to many homeowners and foreclosure resisters into something that pretends to be good news all around. The real estate market and homeownership in Florida may be in the dumps, but hucksterism is still alive and well, so Florida has a future.

More sobering were some notes I exchanged with a good friend in the Tampa/St. Petersburg area, who has been following the housing market up there in one the nation’s top foreclosure hotspots with a close eye, while I was passing through the state over the last several days. In detailing the disaster she was seeing in her area, she made the following points, including a telling description of her area as “Detroit with palm trees,” which says it all in my book. Here are some of her points from the front line observation post:

….the shadow inventory of foreclosed homes in Florida is being snapped up at an alarming rate by cash buyers (investor flippers) so the whole cycle appears to be poised to start again. The City of St. Pete renovated a buncha single family homes in distressed neighborhoods with the NSP funding — guess what; there are no buyers in those neighborhoods who can qualify with lenders right now; and the state program (SHIP) which used to provide down payment assistance is all over also.

….Pinellas County has a twenty percent vacancy rate for single family homes. We are Detroit with palm trees. Meanwhile the homelessness population has jumped astronomically, particularly homeless families who could live in those homes.

….We have a mobile home park down Fort Myers way right now that houses every farmworker within like a 200 mile radius that is in the process of being shut down. The greater community is just starting to figure out they won't have anybody to pick the crops.  No dinner, oops!   

…once the "Hardest Hit" funding is used up that appears to be the end of the federal government's contribution to foreclosure prevention.  The "new" philosophy being espoused by the industry (and I think the government, too); is let the foreclosures all happen; and then we can begin to come up with a system for valuation of real estate again.

When it comes to housing, housing policy, foreclosures, bank supervision, foreclosure prevention, foreclosure modifications, there is simply nothing going on anywhere. What I watched close at hand in the Phoenix area over the last year is happening the same way in Florida.

It is not just a matter of “who is on first, what is on second,” but more disturbingly, no one in the federal or state government seems to even been suiting up to play in the game. President Obama may think Arizona is a lost cause, but Florida is still one that he needs.

Standing under a palm tree with the beach at his back, when the President and his yes men and women look out and see the For Sale signs, abandoned houses, and soaring numbers of homeless squatting in what used to be their own homes, and he realizes he’s in Detroit, as my friend notes, it may be too late for find his way back in good graces.

Hmmmm…gee, let’s think about this and maybe even mine the evidence from the gold nuggets planted in the Bloomberg News article by Kathleen M. Howley. It seems homes have lost more value (32% compared to 28%) that occurred in the first 5 years of the Great Depression. It seems that we still have 11,000,000 families whose homes are underwater, meaning they owe more than the value of the home, and another 2,400,000 with “less than 5 percent equity, meaning they’ll be underwater with even slight price declines….the two categories add up to 28 percent of residences with mortgages.”

All signs also continue to point to another lame, half-assed effort to thwart foreclosures. Even holding out hope, as I had, for some relief from the deal made with loan servicers, consensus is heavy that banks got off the hook yet again. There has simply been no failure by the Obama Administration as universal or devastating as the rollover to the banks and the lack of any real assistance for homeowners trying to save their houses from foreclosures.

It’s hard for a working family not to get the message that right now you have to be crazy to buy a house.

But, it’s more complicated than that really. Not only are banks not helping families keep their homes, they are also not helping people buy new homes. The Bloomberg piece seems to forget that even if prices are dirt cheap the standards for getting loans now are steep and the down payments are large. One thing that is universally required for a loan now is a virtually a rock hard guarantee that the your jobs are stable and sure, and that’s not easy to find for many families in the current recession.

There’s nothing wrong with renting. We need a lot more of it. At the same time watching my daughter’s joy at her new home in New Orleans or visiting with the brother-in-law and his family ecstatic with their dream place after more than 25 years renting which they were fortunate to grab right before foreclosure and after the previous owners arrest for growing illegal weeds under the house, makes you wonder if any of this is really about “investment” or instead is simply a forced alienation of affection for many whose dreams have been crushed and are now finding no help and no hope in homes anymore. To turn around homeownership again the real attitude readjustment is going to have to come from government and financial institutions, not families. That’s the real deal.

New Orleans

Here are some of the likely elements of the deal:

• Foreclosure staff will finally have to be properly trained which seeks to correct the problem of hiring, literally, from Burger King drive-by windows.
• Third-party groups, including the shyster “mod-shops” and law firms.  I know Phoenix and there will be a lot of folks in this sub-industry looking for new jobs!
• Every homeowner in default will have one “single point of contact” which would finally put an end to the anarchic madness and referral phone banks from Guatemala used by Bank of America for example.

All of that is nice and there’s an indication that there might be fines in the future for the scofflaws who don’t mend their ways, but there are two ingredients that made a profound difference for the victims and could be game changers if there is finally a fair deal for the beleaguered folks trying to hold onto their homes and in some cases having them stolen from them.

• I’ve talked endlessly over the last year about the case of Frances Gomez in Phoenix.  While in the process of negotiating and being approved for a loan modification on her family home of 30 years, Bank of America foreclosed on her home and took it out from under her.  With pressure from the media, Advocates & Actions, and others, Bank of America admitted publicly that they had made a mistake.  They claimed that they bought the house back from foreclosure. They assigned it to a law firm in Phoenix to supposedly return the home to Ms. Gomez.  Now moving on almost a year later, Frances still does not have her home and has been caught in an endless “catch-22” which I have often shared with her as she has tried to get the “old deal” revived and seen Bank of America and its agents try to restore the original loan terms, pretending that this is a modification, that are almost three times the current value of the home.  Sure she could have the home back, but she would have to be crazy or rich, and she’s neither, so she continues to rent with her daughter and son-in-law and mourn the loss.  Well, this agreement may finally provide some relief, even if not her home!  The servicers will be required to employ an “independent consultant” who will review foreclosures over the last two years (why two?!?), and if homeowners were ripped off by predatory practices and fees or errors, incompetence, and theft as Frances experienced, then “they will be compensated.”  Let’s fight for that, Frances!
• Furthermore, this agreement reportedly will prevent there being more “Frances Gomez” cases in the future.  It will bar servicers from being able to foreclose while home owners “are pursing loan modifications that might allow them to stay in their homes.”  That’s what we’re talking about, and that will make a difference in dealing with these scalawags.

At least maybe it will.  Nothing has worked so far and no promises have been kept to date by any of these bums from the street to Pennsylvania Avenue.

The difference could be that finally there may be some real weapons we have to fight with to force a fair deal and a little justice for homeowners trying to hang on, and that’s hope that can fuel a plan!