State AGs Getting Almost Ready to Sell Homeowners Down the River on Foreclosuregate

(Also check out my April 1 post, about the federal regulators ready to come in to the rescue of TBTF banks... And see my vid on foreclosuregate!)

As Matt Taibbi said in his last piece in The Rolling Stone magazine, no one, absolutely no one in TBTF Wall Street banks goes to jail.

From Bloomberg (3/7/2011):

State attorneys general and federal officials hope to reach a final settlement with banks over their mortgage-servicing and foreclosure practices within two months, a person familiar with the negotiations said.

The officials, who submitted a 27-page settlement proposal last week to start negotiations, aim to reach an agreement with the banks in six weeks to two months, said the person, who didn’t want to be identified because the talks are private.

Oh great. They are cutting deals without telling us. What else?

Attorneys general are meeting today in Washington, where they are scheduled to get an update on the investigation into the mortgage-servicing practices of banks and the efforts to reach a settlement that could overhaul their procedures. The states began the probe last year after complaints that financial institutions submitted faulty paperwork in foreclosure cases.

Faulty? You mean FRAUDULENT.

Homeowner activists protested outside the meeting of the attorneys general, criticizing banks and demanding state and federal officials reach a tough settlement with the companies. They also called for criminal prosecutions.

So these state AGs are settling on behalf of ... exactly whom? It's decidedly not the homeowners who have been foreclosed fraudulently or are being foreclosed fraudulently. If they live in judicial states they may have some recourse. If they live in non-judicial states, everything conspires against them, including the court systems and attorneys, if they dare want to contest the fraudulent foreclosures.

Therefore, my conclusion is that the state AGs are settling for the banks, and give them the best deal they can come up with, at the further expense of homeowners.

No one goes to jail, not if you are bankers and politicians.

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Obama Busy Selling Out Troubled Homeowners to the Foreclosing Banks

Obama is pushing hard for a $20 billion "settlement" with the TBTF US banks so that these banks will be able to foreclose without inconvenient encumbrances like having to prove the ownership of the notes properly and timely endorsed and transferred. Never mind that almost all mortgages securitized in the last 10 years or so have been improperly transferred or not at all, and foreclosures have been done by entities with no standing to foreclose. Never mind that every single foreclosure-related documents may have been signed by so-called "robo-signers" who simultaneously work for all servicers in all states. And never mind that states and counties have been missing a significant chunk of revenues in recording fees (and it's not just MERS).


From Business Insider (2/23/2011):

The Obama administration wants to push through a massive settlement over mortgage-servicing breakdowns that could force the nation's biggest lenders to shell out more than $20 billion in fines, or to at least fund the same amount in loan modifications for troubled borrowers, the WSJ reports.

According to Reuters, the terms of the proposal, which would obviously require a commitment from the mortgage servicers themselves, have not yet been presented to the banks.

The White House hopes such a deal would allow the foreclosure process to start ramping up again.

Yeah Barry, good job, you've shown your true colors. Always help your biggest supporters. Just don't pretend it is for "working-class homeowners".

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"Instarefi" Coming Our Way?

Automatic refi as a housing market stimulus. They sure are creative. A political coup right before the November election, with probably little substance. Perfect for the Washington politicians, isn't it?

Zero Hedge reports:

Already Bought A 3D LCD In Anticipation Of QE "Instarefi" 1.999? You May Want To Consider A Refund (Tyler Durden, 7/29/2010 Zero Hedge) [Emphasis is mine.]

Earlier today we noted that the biggest buzz on Wall Street is the recent suggestion by MS and ML's Harley Bassman that the GSEs should provide some form of autorefi program to take borrowers to market rates. As this would impact a vast majority of the 37 million of mortgages outstanding backed by the government, not only would this housing stimulus have a huge impact on consumption appetites, but it would be a political coup as all of a sudden the administration would find tens of millions of giddy homeowners who are paying far less monthly, and quite satisfied with the way Obama has handled things. It is thus likely that this program will take off shortly (if at all) just before the mid-term elections to neutralize all the pent up discontent focused on the administration. Yet there may be less than meets the eye. As Market News points out, over the past 24 hours Wall Street has gone into overdrive analzying the consequences, both positive and negative, of such a move. Below are the conclusions.

First, here is how the pricing action in various MBS tranches occurred:

Premium MBS bonds went down in price because this refi concept stoked speculation that primary mortgages with higher rates will get paid off soon and the higher coupon MBS that backed those mortgages would be called back. This paper would be replaced with lower coupon MBS that would then be backing primary mortgages at lower rates.

And here is the prevailing Wall Street sentiment on what seems quite certain to become the Treasury's latest stimulus:

Many mortgage analysts said the concept sounded good but there would be many hurdles to cross before this could get done.

Still, mortgage strategists at Credit Suisse said the idea is "appealing in principal" but there are many barriers. Some of these are:

1) Program would have to be structured as a refinance not a modification because the former costs investors and the latter costs Fannie, Freddie and Ginnie;

2) Eligibility decisions would have to be simple to execute "en masse" and in some cases government might be "over-subsidizing;"

3) In order to use the current system, the housing agencies would have to "indemnify" lenders against put backs;

4) Refi costs would have to be rolled to get around borrower cash constraints;

5) Might have to be origination fees and loan level pricing adjustments (LLPAs) would have to be dropped, reduced or rolled in;

6) Agencies might end up charging higher guarantee fees to compensate for higher Loan-to-Value or LTV;

7) Assuming all borrowers with 6% or higher mortgage and current LTV>80% from '05-08 are refied might create $750 billion in lower coupons and Fed's balance sheet might have to called upon again, with likely opposition in Washington;

8) MBS market would be disrupted again as tradeable float taken from market;

9) It could take 6-9 months to process the loans. They estimate $10-15 billion in incremental annual savings for homeowners, much less than other estimates in Street.

Citigroup mortgage strategists said the chance of this program coming to fruition was "remote" and highlighted the costs.

Citi says a program that would refinance all GSE loans with a 5.75% or higher coupon into a 4.50% coupon could provide about $30 billion in stimulus from consumers.

But It would also cause a $30 billion premium loss to the GSEs retained portfolio, raise Treasury borrowing costs by $5-10 billion ayear as yields rose, and mortgage rates might rise by 100 bps.

Citi says the rise in mortgage rates would be due to higher Treasury yields, higher negative convexity, higher implied volatility and massive gross issuance which would be a significant short-term problem.

The "free lunch" refi programs that some are advocating "are actually very expensive and would result in more indigestion than thegovernment can stand," the Citi said in a research report.

They also reminded that 90% of the loans that would be allowed to refinance are not delinquent loans. Delinquent loans are getting betterand more appropriate help from other government programs.

Mortgage strategists at Nomura Securities said the odds of such a plan are only 10% if there is no double dip in the economy. If there isa double dip, the odds rise to about 30%.

If the plan was adopted, most mortgage investors would suffer "meaningful" losses in the short-term.

However, the $1.3 trillion in mortgage securities owned by Treasury and the Federal Reserve would suffer less because their costs are lower, they are not marked to market and any losses would be offset by the interest the government has already received, Nomura said.

But Nomura also pointed out that if such a plan was instituted because of a double dip in the economy, the effect on bond yields and mortgage spreads would likely be reduced.

And the government might convince originators to reduce primary/secondary spreads to more normal levels.

Because of these factors, Nomura thinks primary mortgage rates would only rise to 5.00-5.25% which is still attractive.

Finally, Nomura says mortgage investors might complain about government interference in private affairs, but the government could make a few good arguments of its own.

For example, where would the markets be now if the Treasury and Fed had not bought $1.3 trillion MBS foster lower mortgage rates.

And the government would indeed be helping people who are not delinquent and are still making their mortgage payments at much higher than current market rates.

That might sound like a pretty admirable plan if a double dip ensues.

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Mortgage Brokers to Be Fingerprinted and Registered

like criminals, like sex offenders released after a jail term. You gotta be kidding, right?

No. This is all thanks to the Federal Reserve, who will have even more non-transparent power to regulate and legislate under the Donk bill, aka Dodd-Frank financial "reform" bill.

Mortgage brokers to be fingerprinted and registered
(7/28/2010 Reuters via Yahoo Finance)

"WASHINGTON (Reuters) - Mortgage loan originators will have to be fingerprinted and sign up to a central registry to do business in future, according to final rules issued on Wednesday by the Federal Reserve and other regulators.

"The rules are part of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, also called the S.A.F.E. Act.

"They were issued by the Fed, Comptroller of the Currency, Federal Deposit Insurance Corp, Office of Thrift Supervision, Farm Credit Administration and National Credit Union Administration. [They all will be subsumed under the Federal Reserve.]

"Mortgage brokers came under tough scrutiny in the wake of the 2007-09 financial crisis, with some lawmakers and regulators sharply critical of underwriting standards and practices that were seen as so loose they helped foster a housing price bubble.

"The S.A.F.E. Act specifies that mortgage brokers who are employees of agency-regulated institutions must register with the Nationwide Mortgage Licensing System and Registry,

""As part of this registration process, residential mortgage loan originators must furnish to the registry information and fingerprints for background checks," a joint release from regulators said.

"The final rules take effect on October 1 and it is anticipated that the registry could start accepting registrations as early as January 28, 2011.

"Industry sources say that thousands of brokers have gone through mandatory education, credit checks and state and federal testing in order to retain the right to handle mortgage originations.

"The process has thinned the ranks of brokers, who may be even fewer soon given talk of a 30 percent fail rate on testing, said Bob Moulton, president of Americana Mortgage Group in Manhasset, New York.

""It cleaned up the industry," said Moulton, who nonetheless cautioned that he felt credit availability for mortgage lending has been reduced as a result of uncertainty caused by U.S. financial regulatory reform."

Mortgage brokers DID NOT cause the 2007-09 financial crisis (which is on-going, as far as I know). It was 1) easy money from none other than the Federal Reserve; 2) securitization and leveraging by the big Wall Street banks that caused it, coupled with lax enforcement of regulation by the government (the current and the past).

Big Wall Street banks needed the raw material, i.e. mortgage loans whether it was subprime, alt-A, or prime, and a ton of them, to craft MBS (mortgage-backed security), CDO (collateralized debt obligation) based on MBS, and further permutation of the original material such as CDS (credit default swap) on MBS and CDO, and CDO made up of those CDS.

Do those TBTF (too big to fail) Wall Street bankers also get fingerprinted and registered? How about the officials at the Federal Reserve, present and past? Do they get fingerprinted and registered? How about the members of Congress, who turned the other way as long as they got preferential treatment and campaign money? Do they get fingerprinted and registered?

Instead, they go for small flies, the lowest in the food chain.

How is fingerprinting and registering the mortgage brokers and maintaining the national database supposed to prevent the future financial "crisis"?

This is a sick joke.

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Minyanville: Why Bailout Money Should Have Gone to Underwater Homeowners

Robert Barone, head of Ancora West, argues in Minyanville that $2 trillion bailout money that went to the likes of AIG, Fannie and Freddie, Citigroup, GM and Chrysler and TARP recipients should have gone to homeowners who owe more than their homes are worth ('underwater').

In his article, he cites one recent case of J.P. Morgan Chase modifying the mortgage of one of his clients (who didn't even ask for modification) by 27%, resulting in win-win situation for both the bank and the underwater homeowner client of his:

JPMorgan's Generosity

In June, one of my clients was forgiven a substantial portion of the loan on his primary residence by JPMorganChase (JPM). It appears that JPMorgan is doing this for the sub-prime and Alt-A loans it inherited from its FDIC-assisted purchase of Washington Mutual (WaMu). In my client's case, a $250,000 principal reduction was given on a $937,000 principal balance (originally owed to WaMu). The mortgage holder didn't communicate with JPMorgan or ask for any consideration, and had always been current on the loan. The existing interest rate was 2.5% (variable rate loan). In exchange for the principal reduction, JPMorgan asked for a 5.0% fixed-rate 25-year amortizing loan. The client's monthly payment stayed the same.

Recall that JPMorgan received a large amount of FDIC assistance. (While FDIC insurance funds are technically not directly from the taxpayer, they are indirectly, as banks raise their fees to pay for regulatory expenses.) This action by JPMorgan appears laudable. After all, the shareholders of JPMorgan appear to have gained from FDIC assistance. So, some giveback appears appropriate. However, let's not so quickly attribute this to JPMorgan's generosity. JPMorgan "purchased" WaMu's assets at a huge discount to face value. While I don't know the exact terms, let's, for the sake of this example, assume 60% of face. So, JPMorgan was holding my client's mortgage on its books at a $562,000 value. Under accounting rules, JPMorgan could only recognize a "profit" after my client had first paid down the $562,000 carrying value. That would be 12 years away at the current payment. JPMorgan knows this homeowner is underwater, and, while it probably wouldn't lose money if a foreclosure occurred, it would have foreclosure expenses and market wait time. But, by forgiving $250,000 of the $937,000 balance (or 27%) but doubling the interest rate, JPMorgan immediately recognizes more interest income on its financial statement (2.5% of $937,000 = $23,425 while 5.0% of $687,000 = $34,350). In addition, my client can now sell that home at market (about $800,000). If the home does sell, the client ends up with some equity, and JPMorgan recognizes an additional $125,000 in income ($687,000 principal balance less $562,000 carrying value). No foreclosure. No downward pressure on the neighborhood's home prices. Everybody wins!

The way the bailouts were done, it takes this kind of circumstance to actually get an appropriate outcome. Had the $2 trillion in bailout funds been used to benefit the underwater homeowners to begin with, I doubt the housing market would be in its current funk. As a nation now committed to bailouts, the operative rule ought to be: "Any use of taxpayer money must directly benefit taxpayers."

So, JPM purchased the mortgage at a discount at $562,000 (he uses 60%, but could even be less). By cutting the homeowner's mortgage by 27% to $687,000, JPM is still above cost. JPM offers the client 5% fixed rate instead of variable rate of 2.5%. The homeowner takes it, as it gives him the security of fixed rate (and low) on a significantly reduced mortgage. JPM is happy as it secures the fixed-rate interest payment which is more under the new reduced mortgage than under the old, underwater mortgage with variable rate. The homeowner now have equity in the house, which can be sold for $800,000. If the owner sells the house, he will have money in the pocket, and JPM also pockets the profit ($687K minus $562K).

It looks like a sound business decision on the part of JPM to me. Why wouldn't any other banks, particularly the big ones like Bank of America and Citigroup who greatly benefited from the taxpayer-funded bailout, come to their business senses and do the same?

Earlier in the article, he cites the numbers from CoreLogic: 24% of all homes with mortgages (confirmed in May by Zillow's 23% estimate) are underwater. According to CoreLogic, that's 11.3 million of the 47 million homes.

So $2 trillion could have helped these 11.3 million homeowners at the average $176,991 per homeowner.

How about the argument that these homeowners shouldn't be rewarded for their mistakes? Barone has this to say:

Some will object that this favors the certain population segment that made a judgment error and took on too much debt. I argue that this segment is victimized by economic conditions in the same way as those who lose their jobs during recessions are victimized by economic conditions. This year, according to the Bureau of Labor Statistics, we're giving the unemployed $14 billion in unemployment benefit disbursements. Furthermore, "earmarks" on legislation channel taxpayer funds to the benefit of very narrow and specific groups. So, the singling out of a segment of taxpayers to receive benefits isn't something new.

Well, I agree. It would have been a much better use of $2 trillion dollars if the government had to spend on something, although J.P.Morgan Chase and other big coming to the senses by their own profit motive (i.e. market solution) is much preferable to me.

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CDOs and Mel Brooks

Huffington Post's David Fiderer, who has written detailed, well-researched posts on the events that led to the September/October 2008 financial near-meltdown, tells us that CDOs that may have helped crash the housing market which in turn crashed the financial markets which then crashed the global economy has a lot in common with Mel Brooks' classic - "Springtime for Hitler", a play within a play.

What's the common thread here? Both were designed to fail. ("Springtime for Hitler" succeeded, much to the chagrin of the producers. So they had to bomb the theater.)

Do Business Schools See Why CDOs Are Compared to "Springtime for Hitler"? (David Fiderer, 4/12/2010 Huffington Post)

"The Magnetar Trade was taught in the best business schools long before This American Life likened it to "Springtime for Hitler."

"For those unfamiliar with the fraudulent scheme portrayed in Mel Brooks' classic movie and Broadway musical, The Producers, "Springtime for Hitler" was an enterprise specifically designed to fail. It was a play thought to be so insipidly tasteless that it would close on opening night, so the investors, who laid out cash far in excess of the play's actual production costs, would never question where all the money went.

"New reporting in ProPublica offers hard evidence that Magnetar, a hedge fund group based in Chicago, had designed a series of subprime mezzanine CDOs that were all but guaranteed to fail. Magnetar made a bundle by doubling down on bets that its own CDOs, and similar financial instruments, would fail. This idea was not unique to Magnetar. Hedge fund manager John Paulson pursued the exact same investment strategy. The Magnetar story was first reported in the Wall Street Journal back on January 14, 2008, one day before John Paulson put Alan Greenspan on his payroll." [The article continues.]

So what's the big deal? John Paulson did it. Goldman Sachs did it. Why can't they?

The big deal to me is that this story has had hardly any traction in the mainstream media. That these big-shot bankers and fund managers deliberately created financial vehicles that had no intrinsic value for the express purpose of letting them fail. Or worse, making it sure they fail so they could profit. In the process, they at least aggravated the collapse of the housing market if not downright triggered it.

Now, many of the same savvy fund managers have bought up distressed mortgage-backed securities on the cheap, the same securities that they helped tank in price. They are waiting, for now. You can bet they are not waiting for the turnaround of the housing market. They are waiting for the federal government to make them "whole".

The federal government is beyond broke at this point. (See the debt clock on the upper left corner of this blog.) Who's going to pay to make rich investors and fund managers "whole"? Taxpayers, including those distressed homeowners who will be losing their homes.

It's such a comedy, if you are not party to it. Outdoing even Mel Brooks.

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Peter Schiff Will Pay to Debate Alan Greenspan

Peter Schiff is angry at Greenspan, who keeps repeating "Nobody saw it coming... Who could have known?" regarding the housing bubble he and his Fed created and the financial crisis triggered by it. Schiff knew, and he was laughed at (watch the second video in the link). So did many other people, including Ron Paul (he was laughted at, too, and continues to be laughed at by so-called mainstream media). Schiff is irate enough to offer money to debate Greenspan on TV (ABC in particular).

The New York Times Op-Ed piece Schiff is talking about in the video is here: "I Saw the Crisis Coming. Why Didn't the Fed?"

I, too, remember Greenspan praising adjustable-rate mortgages, instead of sounding caution.

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Trump: Best Real Estate Investimg Market Ever Is Now

I saw this banner ad on a Yahoo Finance page yesterday. Donald Trump is offering a free seminar on how to invest in real estate. If you go to the site, you are greeted with a video that proclaims "This is the best real estate investing market in the history of our country!"


You would think real estate properties are the last thing that any sane person wants to invest, given what has transpired since 2007.

Anecdotal evidence in the local residential real estate market shows there are buyers, a great many of them, buying across the board - from trailer homes to multi-million-dollar beach properties. Real estate professionals in the area say many of these investors are cash buyers, including foreign buyers, buying up short sales and foreclosures. Higher-end properties that are not short sales or foreclosures have started to move. The inventory level is actually back to where it was at the peak of the housing bubble: mere 4.6 months.

Is it possible that the real estate market is clearing, at least the residential market? Or is it just the banks are withholding the inventory and the worst is yet to come?

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December Home Sales Plunge

"Cash for clunkers" house version. What else would you expect?

According to the National Association of Realtors, December sales of existing homes dropped by 16.7%, the largest monthly drop in more than 40 years.

December home sales down nearly 17 percent (1/25/2010 AP via Yahoo Finance)

"WASHINGTON (AP) -- Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, sinking more dramatically than expected after lawmakers gave buyers additional time to use a tax credit.

"The report reflects a sharp drop in demand after buyers stopped scrambling to qualify for a tax credit of up to $8,000 for first-time homeowners. It had been due to expire on Nov. 30. But Congress extended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners who move.

"The report "places a large question mark over whether the recovery can be sustained when the extended tax credit expires," wrote Paul Dales, U.S. economist with Capital Economics. "

Really? You don't say... Who could have known?

But the article continues, and concludes with a positive declaration that the worst is over:

"Despite fears that home prices are starting to fall again, some analysts still believe the worst is over.

""We do not believe it is fair to consider this a double dip in the housing market," Michelle Meyer, an economist with Barclays Capital, wrote last week. "The recovery is still under way, but hitting some bumps in the road.""

All that "cash for clunkers" program did was to pull the demand forward (see the chart). The auto sales plunged over 30% in September 2009 when the program ended. Many people had predicted that the tax credit for the first-time buyers would simply pull the demand forward. And it did, plus more: it put more people into the large debt (mortgage debt to buy the house), much larger than the auto loan under the cash for clunkers program.

There will be more struggling homeowners that the government gets to save.

There's a name for this kind of behavior - inflicting pain and suffering on others so that you can save them. It is called "Munchhausen Syndrome by proxy".

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Now We Have HAFA within HAMP to Stem the Housing Crisis

In plainer language, we have the Home Affordable Foreclosure Alternatives Program, a new program announced on November 30, 2009, which is part of the Home Affordable Modification Program courtesy of the U.S. Treasury Department under Obama Administration.

Home Affordable Foreclosure Alternatives Program (HAFA)
(National Association of Realtors)

"On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is part of the Home Affordable Modification Program (HAMP). HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA. A list of servicers participating in HAMP is available at MakingHomeAffordable.gov.

"HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks."

HAFA seems to be in response to the criticism that the administration's loan modification program (HAMP) is not working. The article lists the program features of HAFA in bullet points. They include:

• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

The 2nd bullet point looks like the result of lobbying effort by the realtors. But that aside, my question is: What's in it for investors?

Other than up to $1,000 for giving some scraps for the 2nd lien holders?

I think I know the answer.

Many investors who bought distressed mortgages may be already backstopped by FDIC. If a house is foreclosed or sold on a short-sale, and if the realized amount from foreclosure/short-sale is less than the amount the borrower owes on the house, the investors of the loan will receive 80 to 95% of the difference from FDIC under loss share agreement like the one FDIC has with the investors who purchased IndyMac. (FDIC is, by the way as you know, broke).

The kicker here is that these investors probably paid for a fraction on a dollar for these mortgages. If FDIC's asset liquidation is any indication, they are sold at anything from 3 cents on a dollar (non-performing) to 70 cents (performing) on a dollar.

Let's say here's a house in danger of foreclosure. The mortgage outstanding on the house is $500,000. The market value is determined to be $350,000. Now the investors agree to a short sale at that price. To compensate for the loss, FDIC will give $120,000 (80% of $150,000 loss) to the investors. But wait! These investors purchased this mortgage at $250,000 (50 cents on a dollar). So by agreeing to sell the house at $350,000, they will already have made $100,000. On top of that, FDIC will give another $120,000. Total of $220,000 profit on $250,000 investment. 88% return. The return would be much higher if they used leverage (PPIP anyone?).

With such a perverse incentive in place, investors don't have much interest in loan modification; they would rather foreclose and pocket the quick money than going through a slow process of loan modification. So now the government has stepped in again and is telling the servicers/investors to be a little less greedy; instead of foreclosing, how about short-sale? "You will still get compensated for your "loss", but it may just take a bit longer. It will make you look good in the eyes of distressed homeowners, you know, if you give the appearance of taking some hit ..."

Now, the next question is: Who are these investors?

Or put it another way: Do you know who owns your mortgage?

At this point, it is very safe to assume the bank who gave you the mortgage no longer owns it. It's been sold long time ago. Occasionally, you may get to know who owns your mortgage when there's a change of a loan servicer. Then you may get to know that your loan is actually owned by a bank other than the originating bank, Fannie Mae or Freddie Mac (the wards of the state who have just been given an unlimited ATM card by Uncle Sam), a hedge fund that manages billions of dollars, or that your loan has probably been turned into some kind of securities (MBS, CDO, squared, cubed, who knows) as you may see a combination of alphabets and numbers as the investor.

A hedge fund manager has this to say in a New York Times article ("U.S. Loan Effort Is Seen as Adding to Housing Woes" 1/1/2010) about "clearing the housing market" by allowing foreclosure and short sale:

“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”

Mr. Katari contends that banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues.

Yes, that may be all true. But it is probably a good bet that his firm is invested in residential mortgages outright or in a securitized form, which they probably purchased on the cheap. He'd rather see his fat profit sooner than later, wouldn't you think?

So, again and again, the government is there for the big boys, making sure that they profit handsomely.

What will the distressed homeowners get after the short sale under this HAFA? No house, battered credit record, and $1500 for relocation. Oh and the peace of mind that the first lien holder cannot come after you for deficiency. No guarantee though of the 2nd lien holder...

Here's the link to the November 30, 2009 Supplemental Directive announcing HAFA within HAMP (27 pages of the total 43 pages are sample forms and exhibits).

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FHA Loans in San Francisco for Young Speculators

Anything wrong with this picture? (Nah.)

Three 20-somethings get together and buy a two-unit apartment complex for nearly a million dollars in San Francisco, pay $33,000 as downpayment, as the rest comes from low-rate FHA mortgage, fully guaranteed by the federal government.

With FHA Help, Easy Loans in Expensive Areas
(David Streitfeld, 11/20/09 New York Times via Yahoo Finance)

"SAN FRANCISCO -- In January, Mike Rowland was so broke that he had to raid his retirement savings to move here from Boston.

"A week ago, he and a couple of buddies bought a two-unit apartment building for nearly a million dollars. They had only a little cash to bring to the table but, with the federal government insuring the transaction, a large down payment was not necessary.

""It was kind of crazy we could get this big a loan," said Mr. Rowland, 27. "If a government official came out here, I would slap him a high-five.""

How did they accomplish this feat?

"The Economic Stimulus Act of 2008 helped change that by temporarily doubling the maximum loan the F.H.A. insured, to $729,750. A two-unit property like the one bought by Mr. Rowland and his friends can be insured for up to $934,200."

""We were resigned to waiting another year," said a second partner, Michael Bedar, 31. "Then we read about the F.H.A. I had never heard of it before, and couldn't quite believe it. But it was the answer to our problems." They put down about $33,000, split among the three of them."

"Their building, for which they paid $963,000, is on a quiet street in the up-and-coming Hayes Valley neighborhood, close to fashionable restaurants they have already been trying out. The friends plan to live in the bottom unit and rent out the top. Thanks to rock-bottom interest rates, none of them will pay much more than a thousand dollars a month. "Everyone should have the chance to do this," Mr. Kurland [third partner] said."

""We're banking on real estate," said Mr. Kurland, 24. "Everyone expects prices to keep going up.""

3.4% down for a $963,000 property that they purchased for speculation (investment). Fully insured and guaranteed by the federal government.

The article concludes with these sentences:

"Everyone may get a chance.

"A few weeks ago, Congress extended the higher lending limits for another year. Representative Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that he planned to introduce legislation next year raising the maximum F.H.A. loan by $100,000, to $839,750.

"His bill would make the new limits permanent."

Why stop at $839,750? Let the good time rolling again, shall we? The country is broke anyway.

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What Does U.N. Have to Do with U.S. Housing Crisis?

According to New York Times, the United Nations has assigned an official to investigate the U.S. housing crisis. Ms. Raquel Rolink, UN Rapporteur on Housing, is to make sure people have "adequate" housing in the on-going crisis, particularly in places like New York City.

Affordable? U.N. Puts a Questioning Eye on New York’s Housing
(10/23/09 New York Times)

"Everybody knows New York City is an expensive place to live. But the United Nations wants to know if affordable housing is so tough to come by that it actually violates human rights.

"The United Nations has assigned an official, “a special rapporteur on the right to adequate housing,” to check the city’s affordable housing. The rapporteur, Raquel Rolnik, is to tour the city for the next three days with housing advocates and city officials to “hear the voices of those who are suffering on the ground,” she said.

"The United Nations Human Rights Council appoints a rapporteur, or independent experts, to investigate human rights conditions around the world. In the case of Ms. Rolnik, a professor of urban planning at the University of Sao Paulo in Brazil, her “mission” is to tour New York City and six other places in the United States and to report back to the United Nations General Assembly about housing rights violations and advances.

"After that, “We send off letters to governments to ask, ‘Is this true? What’s going on?’ and to please intervene,” she said."

(You can read the entire incredible article by clicking on the link above.)

The United Nations, after her reportage, will formally declare housing as a basic human right in the United States and elsewhere (Ms. Rolink is already saying that, as you see in the video below). That's my guess. Just like health care is a basic human right, as some people claim. Therefore, the state has to step in to ensure everyone has the equal right to housing and punish the violators, regardless of the economic situation.

What I want to know is: Who invites these people like her?

You can see Ms. Rolink in this video clip. She seems to have a bubbly personality (or her meds are conflicting with each other).

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