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What is ForeclosureGate and Robosigning?

post #1 of 39
Thread Starter 
Can someone explain what the heck is happening?
post #2 of 39
Thread Starter 
Is this guy a nutcase or does he have a point?
http://www.youtube.com/watch?v=yXrkubSA2SA
post #3 of 39
Quote:
Originally Posted by nvidia2008 View Post

Can someone explain what the heck is happening?

Need a job? No skills or experience? No problem. Mortgage default experts are in demand!

Quote:
NEW YORK (AP) -- In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in "foreclosure expert" jobs with no formal training, a Florida lawyer says.

In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn't define the word "affidavit." Others didn't know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers' accusations about document fraud.

"The mortgage servicers hired people who would never question authority," said Peter Ticktin, a Deerfield Beach, Fla., lawyer who is defending 3,000 homeowners in foreclosure cases. As part of his work, Ticktin gathered 150 depositions from bank employees who say they signed foreclosure affidavits without reviewing the documents or ever laying eyes on them -- earning them the name "robo-signers."

In essence:

1. Write off bad loans as quickly as possible. Details don't matter. The mortgage market equivalent of "kill 'em all, let God sort 'em out"
2. Wait for a market recovery (whistling past the graveyard)
3. Dump the assets as quickly as possible.

It doesn't bode well for a market recovery. Realty Trac estimates banks are basically sitting on 600,000 foreclosed properties - they're not bothering to sell them since they think they'll get more if they wait a bit. However, when they're eventually dumped it will have a further depressing effect on the market.

It's almost a tautology - the housing market will recover once it's found its bottom. Many forces are in effect to prevent the market from hitting bottom.

Problems feared if foreclosures halted in US
Robo-signers: Mortgage experience not necessary
http://www.mortgagenewsdaily.com/101...realtytrac.asp
http://www.washingtontimes.com/news/...ember-quarter/
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post #4 of 39
As I understand it, the problem is that mortgages were bundled up, and then chopped into different security bundles. There were two pieces of paper with each mortgage - the title and the note, when the bankers were making up the MBS bundles they were careful to reassign the note (so that the MBS would get the stream of payments from the mortgage), but were not so careful with the titles.

So, as a result, it is not exactly clear who owns the houses, or if mortgage collectors can foreclose on houses where they don't hold the title (the note becomes unsecured, in other words, once it was carelessly transferred a few times then cut up into MBS bundles).

Then on top of that, the ex-McDonalds workers hired to process the massive number of mortgage defaults forged all kinds of documents once they realized that they could not legally foreclose on the homes.
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post #5 of 39
Thread Starter 
Interesting... But also somewhat depressing.

I thought the robo-signers referred to the people being foreclosed on but it's actually the employees of the banks doing the robo-signing.

But also the issue is that the banks were lending to all kinds of people that weren't supposed to be borrowing so the banks had little incentive to get the paperwork right in the first place, let alone when foreclosing.
post #6 of 39
Quote:
Originally Posted by nvidia2008 View Post

But also the issue is that the banks were lending to all kinds of people that weren't supposed to be borrowing so the banks had little incentive to get the paperwork right in the first place, let alone when foreclosing.

Spot on!

People tend to buy homes, or cars for that matter, not based on price, but what they can afford to pay each month. I always thought that was stupid, but now we're all paying the price of stupidity.
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post #7 of 39
And there were two things pushing this to happen.

- FHA loans, government forced the banks to loan to poor people. However - in 2008 FHA loans were only 2% of the total mortgage pool (down from 10% a decade earlier). This is the part used as a libertarian argument, but the libertarians are wrong because FHA loans were an insignificant part of the problem. Defaults on FHA loans are roughly the same as defaults on non-FHA subprime loans, but most subprime loans were not FHA.

- deregulation of mortgage backed securities: Bank makes fraudulent loan and sells it taking none of the risk - this was the vast bulk of the problem mortgages.

IMHO, if the answer to this problem is deregulation, we can kiss our financial system goodbye and just hide in the mountains with gold and a vegetable farm. Deregulation caused the mess, and it scares the heck out of me that people are suggesting more deregulation as the fix.
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post #8 of 39
Quote:
Originally Posted by e1618978 View Post

And there were two things pushing this to happen.

- FHA loans, government forced the banks to loan to poor people. However - in 2008 FHA loans were only 2% of the total mortgage pool (down from 10% a decade earlier). This is the part used as a libertarian argument, but the libertarians are wrong because FHA loans were an insignificant part of the problem. Defaults on FHA loans are roughly the same as defaults on non-FHA subprime loans, but most subprime loans were not FHA.

- deregulation of mortgage backed securities: Bank makes fraudulent loan and sells it taking none of the risk - this was the vast bulk of the problem mortgages.

IMHO, if the answer to this problem is deregulation, we can kiss our financial system goodbye and just hide in the mountains with gold and a vegetable farm. Deregulation caused the mess, and it scares the heck out of me that people are suggesting more deregulation as the fix.

On the FHA issue you are only correct to a narrow point. Directly FHA is a tiny portion of the overall market, but indirectly it runs almost the entire market. Why? The FHA guidelines are looked at as the gold standard for lender liability avoidance, i.e. if your loan met FHA guidelines even if it wasn't an FHA loan the lending institution would not be liable for any government related sanctions due to overly-risky lending. Specifically because the government standard was treated as essentially a risk-free stamp.

We all know how that worked out. Anti-redlining legislation and legislation creating mandatory low income loan programs forced the FHA guidelines to where they were irresponsible, but legally required to be. That made the default-risk assessments utterly worthless. If you could sign documents you could pretty much get a home loan in any zip code that had government identified low income or disadvantaged buyers, and the bank would get congratulated for it. The VAST majority of the loans weren't fraudulent, they were totally underwritten in accordance with FHA guidelines. Guidelines that were horribly broken by the way the House Financial Services Committee wrote the laws the Congress passed.

Once that got into full swing the banks had to unload the loans from their books so they could make more loans. Again our favorite sons on the House Financial Services Committee set about language that made whacky things legal, refusing to allow full regulation of derivatives.

It's not de-regulation that's the problem, it's misguided regulation regulating the wrong things the wrong way. Remove the initial congressional push that forced FHA to create impotent standards and none of this could have ever happened.
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post #9 of 39
So the banks loaned a bunch of money to unqualified buyers because they met FHA standards? Sorry, that does not fly - if the banks were not allowed to sell their worthless mortgages, they would not make these loans no matter what the FHA said about it.

And if we deregulate the banks and eliminate the FHA, they will start making worthless loans and selling them again, as long as they can find a buyer that believes Moody's lies about AAA. Deregulation was the whole problem - there is no aspect of this crisis that was not caused by deregulation (on mortgages, bond ratings, investment bank leverage ratios, CDS reserve levels, etc).
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post #10 of 39
Quote:
Originally Posted by e1618978 View Post

So the banks loaned a bunch of money to unqualified buyers because they met FHA standards? Sorry, that does not fly - if the banks were not allowed to sell their worthless mortgages, they would not make these loans no matter what the FHA said about it.

And if we deregulate the banks and eliminate the FHA, they will start making worthless loans and selling them again, as long as they can find a buyer that believes Moody's lies about AAA. Deregulation was the whole problem - there is no aspect of this crisis that was not caused by deregulation (on mortgages, bond ratings, investment bank leverage ratios, CDS reserve levels, etc).

You cannot have deregulation if something was never regulated in the first place. And the fact that you don't like the standard for "safe lending" being FHA standards is irrelevant. It flies because that is the standard. Period. Even if the banks held the mortgages and couldn't sell them, it would still be the standard. Mortgages are always underwritten to a standard, and those that meet the FHA standard are considered low risk. Then, contrary to what you seem to think, single bank reserve requirements aren't designed to handle a 50% loss on 20% of the held investments. Banks would still fold because of reserve deficiency triggers, and the whole problem would still exist.

When you ignore root cause you can propose whatever change you want, but it won't affect the end result over the long run. And the root cause was government forced regulation in the name of "opportunity" making mortgages available to those who had no business taking them. Eliminate that and no banks can be exposed to failure thresholds.

Your misplaced solution doesn't change that at all, and it eliminates the ability to efficiently generate well qualified mortgages, and that only artificially depresses housing due to over-regulation of the wrong thing.
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post #11 of 39
The banks would not be having such high losses, because they would not have made the loans in the first place if they had to hold the loans and deal with the default risk themselves.

We didn't have these types of problems for decades after the great depression, because we had severe limits on what banks could do. We only started having banking crisises every 10 years or so once Regan started the deregulation train going in the 80s.
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post #12 of 39
Just a manufactured controversy right before the election to stir some populist nonsense and increase voter turn out for democrats. Has a single foreclosure gone forward on someone that was up to date on their payments?
post #13 of 39
Quote:
Originally Posted by FloorJack View Post

Just a manufactured controversy right before the election to stir some populist nonsense and increase voter turn out for democrats. Has a single foreclosure gone forward on someone that was up to date on their payments?

Yes - in fact, one of the banks foreclosed on a person who didn't even have a mortgage. This is not a manufactured controversy (at least not for political reasons, this was manufactured by banker idiocy), this is a serious mess that will cost billions and could push us back into an even deeper recession due to lower house prices.

What politicians do you think this benefits? This certainly does not benefit Obama (who only looks out for his two constituencies - union members and banking executives), his reaction makes him look like an even worse bank whore than normal.
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post #14 of 39
Quote:
Originally Posted by e1618978 View Post

Yes - in fact, one of the banks foreclosed on a person who didn't even have a mortgage. This is not a manufactured controversy (at least not for political reasons, this was manufactured by banker idiocy), this is a serious mess that will cost billions and could push us back into an even deeper recession due to lower house prices.

What politicians do you think this benefits? This certainly does not benefit Obama (who only looks out for his two constituencies - union members and banking executives), his reaction makes him look like an even worse bank whore than normal.

Is that the only one you got? Pretty low error rate.

Vote Not Republican!
post #15 of 39
Quote:
Originally Posted by FloorJack View Post

Is that the only one you got? Pretty low error rate.

Vote Not Republican!

Are you blind? Deaf? Willfully ignorant? There are over 3000 cases before the courts with fraudulent paperwork already verified as fraudulent in the discovery process. The single most egregious was the foreclosure on a house with no mortgage on it. A foreclosure which only went forward with fraudulent affidavits documents testifying that missing documents actually existed once upon a time.

The error rate in Florida seems to be more like 85% according to a story this morning. 3000 cases, all with questions, 175 through discovery so far and 150 of those all robo-signed by a "BoA VP" who testified the only thing he verified was the spelling of his name before signing that he had personal knowledge of the sales and documents. And every one of those was before he was ever hired.

It's just as bad in California, only a judge isn't necessary, it's all administrative. The only folks that aren't getting completely screwed are the ones with enough $$ to sue, and almost all of them are winning.
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post #16 of 39
I sat next to a gentleman on a flight a few weeks ago who received a foreclosure notice on his house, the reason was he hadn't made any payments in three months. He said they were correct - he hadn't made any payments recently, because he paid off the mortgage several months before.

He said he forwarded the payoff letter to them and hadn't heard anything since, but wondered what would have happened if he didn't keep the paperwork.

This was before all the foreclosure stories now coming forward, so he didn't think much of it and neither did I. The house was in Florida though.
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post #17 of 39
Quote:
Originally Posted by Hiro View Post

Are you blind? Deaf? Willfully ignorant? There are over 3000 cases before the courts with fraudulent paperwork already verified as fraudulent in the discovery process. The single most egregious was the foreclosure on a house with no mortgage on it. A foreclosure which only went forward with fraudulent affidavits documents testifying that missing documents actually existed once upon a time.

The error rate in Florida seems to be more like 85% according to a story this morning. 3000 cases, all with questions, 175 through discovery so far and 150 of those all robo-signed by a "BoA VP" who testified the only thing he verified was the spelling of his name before signing that he had personal knowledge of the sales and documents. And every one of those was before he was ever hired.

It's just as bad in California, only a judge isn't necessary, it's all administrative. The only folks that aren't getting completely screwed are the ones with enough $$ to sue, and almost all of them are winning.

Slow down there Hiro. Are these technical violations or foreclosures that would have gone forward if all the "i" dotted and "t" crossed. Florida? Speculation, second "home" ground zero? Cry me a fucking river!
post #18 of 39
Quote:
Originally Posted by FloorJack View Post

Slow down there Hiro. Are these technical violations or foreclosures that would have gone forward if all the "i" dotted and "t" crossed. Florida? Speculation, second "home" ground zero? Cry me a fucking river!

Foreclosures that have been actually halted in court for lack of proper documentation. Not i's and t's but outright no documents, so affidavits get made up that "once upon a document existed and it must have said ________" . The lawyers are showing the "must have said ________" is often pure fantasy.

I'm not crying any river, I'm pointing fingers at the industry that's screwing over the entire economy and foreclosing on almost 25% of the homes sold in my state over the past 5 years. They take no significant loss, but their errors continue to cost me, a paying mortgagor who has done nothing wrong, a veritable shitload.
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post #19 of 39
I wanted to suggest Fauxclosure... but it was already suggested (several times):

Help Us Name the Foreclosure Crisis!
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post #20 of 39
http://www.washingtonpost.com/wp-dyn...101904845.html

This is a serious issue, which could take down the banks if it goes on long enough. Hopefully Obama does not bail out the thieves a second time.
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post #21 of 39

Malo periculosam, libertatem quam quietam servitutem.

(I prefer the tumult of liberty to the quiet of servitude.)

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Malo periculosam, libertatem quam quietam servitutem.

(I prefer the tumult of liberty to the quiet of servitude.)

Reply
post #22 of 39
Quote:
Originally Posted by nvidia2008 View Post

Interesting... But also somewhat depressing.

I thought the robo-signers referred to the people being foreclosed on but it's actually the employees of the banks doing the robo-signing.

But also the issue is that the banks were lending to all kinds of people that weren't supposed to be borrowing so the banks had little incentive to get the paperwork right in the first place, let alone when foreclosing.

My understanding is that the banks were signing off on foreclosures and not even examining the documents to see if foreclosure was warranted.

Agreed on issue two. Now it's so bad that people who ARE qualified go through the ringer to get a loan. I speak from experience.
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post #23 of 39
Quote:
Originally Posted by SDW2001 View Post

My understanding is that the banks were signing off on foreclosures and not even examining the documents to see if foreclosure was warranted.

It is worse than that - they were actively forging documents.
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post #24 of 39
Quote:
Originally Posted by FloorJack View Post

... Has a single foreclosure gone forward on someone that was up to date on their (sic) payments?

Quote:
Originally Posted by e1618978 View Post

Yes - in fact, one of the banks foreclosed on a person who didn't even have a mortgage.

Quote:
Originally Posted by john galt View Post

I sat next to a gentleman on a flight a few weeks ago who received a foreclosure notice on his house, the reason was he hadn't made any payments in three months. He said they were correct - he hadn't made any payments recently, because he paid off the mortgage several months before. ...

It appears this is not uncommon:

Quote:
In Michigan, Mr. Rought says that the bank went after the wrong person.

Mr. Rought bought the cabin from Deutsche Bank on Jan. 27, 2009, paying in cash. He spent the next seven months fixing it up in anticipation that his daughter, Hannah, "would live in the house and be away from her parents for the first time in her young life," court records show.

But in August of that year, when the Roughts pulled into the driveway, they noticed that something was wrong. The American flag was missing, the house had been broken into and the locks had been changed.

The Roughts' belongings were gone too, including an heirloom dining room table, pots and pans, a pile of firewood - even the bracket used to hang the American flag. A contractor for Deutsche Bank, Field Asset Services, left a sign tacked to the front door, so the Roughts contacted them and said a mistake had been made.

A month later, however, Deutsche Bank's representatives came to winterize the house, pouring antifreeze in the sinks and toilets and disconnecting the water pump. "We had expected an answer by now and quite frankly am appalled by the total lack of respect and professionalism of your company," Mr. Rought wrote in a Dec. 1, 2009, letter to Field Asset Services. "We are trying to be patient and settle this peaceably. What would you do?"

Eventually, Mr. Rought hired a lawyer. Deutsche Bank declined to comment, and Field Asset Services did not return calls seeking comment.



http://www.nytimes.com/2010/10/28/bu...28victims.html
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post #25 of 39
Quote:
Originally Posted by nvidia2008 View Post

Can someone explain what the heck is happening?

What is happening is the banks don't give a shit about people losing their homes.They are foreclosing on homes without even reading the whole case history behind the foreclosure.Just automatically signing off like a robot.Pathetic.
post #26 of 39
Quote:
Originally Posted by john galt View Post

Spot on!

People tend to buy homes, or cars for that matter, not based on price, but what they can afford to pay each month. I always thought that was stupid, but now we're all paying the price of stupidity.

People have to learn to say no if they cannot afford something in life.Price is essential in this what ever you purchase.
post #27 of 39
Quote:
Originally Posted by gerald apple View Post

People have to learn to say no if they cannot afford something in life.Price is essential in this what ever you purchase.

Are you a blind idiot or just plain malicious? The majority of those who are in foreclosure could afford what they bought when they bought it.

We are in the biggest economic downturn since 1929, people who had jobs when they bought the houses don't have jobs anymore. People with large medical bills are faced with "pay the doctor" or "pay the mortgage and don't get better", because they can't borrow in a house that's underwater. People who's job transfers them cannot sell their house because the foreclosures in the neighborhood have depressed prices so much, so their house ends up getting foreclosed too.

The foreclosure problem itself is driving the whole system down in a slow death spiral, the more foreclosures, or even possibility of foreclosures, the lower buyers prices go. The lower the prices go, the more folks go underwater on their mortgages. The more underwater mortgages, the greater the cross section of good performance mortgages that go bad because of unrelated causes. Which generate more foreclosures at the already depressed price point, causing more competition and yet lower prices.

With more than 50% of the houses in CA underwater who can leave without facing foreclosure or short sale? Answer: Nobody who has bought a house in the last 10 years. Get that? 10 years. You can't move for a job if you bought a house in the last 10 years, unless you short sell or get foreclosed on. Seeing as how ~3% of the workforce relocates by more than 25 miles every year that makes for a lot of people who are faced with no job or foreclosure, even if some of those 3% per year avoid voluntary moves.

This is no longer about a few percent of folks who bought above their means because of essentially fraudulent, but actually legal, programs created by government policies that were the personal brainchild of Rep. Frank. It is about a systemic meltdown being made worse by idiotic self-defeating business practices chosen because a CEO can report a bad quarter or three and say there is a plan to stop the red ink. Only the plan(s) is(are) actually a sham and has gone on about two years longer than promised or necessary. Now internal panic is setting in inside the companies while everyone else thinks this sucks but the worst is over. Well, if the idiots are allowed to keep doing what they are doing it won't be.
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post #28 of 39
Quote:
Originally Posted by john galt View Post

Spot on!

People tend to buy homes, or cars for that matter, not based on price, but what they can afford to pay each month. I always thought that was stupid, but now we're all paying the price of stupidity.

Almost nobody can afford a house except on payment terms. Your opinion is utterly uneducated and shortsighted. Mortgage loans are one of the engines that drive the economy by creating money supply. Look at where we are today and the prospects of recovery while that engine sits there coughing and sputtering. Eating more capital that it generates.

The engine is sick because an idiot made the mixture too rich, not because people buy homes with mortgages. The mixture got overly rich by turning the legislative carburetor screws to force more money down the intake thinking it was a right and moral imperative to lift everyone out of rental poverty by giving them homes.

And the way you do that is by forcing the FHA to accept loans from folks who were otherwise un-lendable. And you twist bank and mortgage companies arms by writing overly reactive redlining legislation, threatening companies with penalties if they don't make those risky loans. Then you refuse to allow the SEC to regulate securities made up of these loans because that would shut off the spigot of available dollars in an election year.

So while you are right about stupidity, you are utterly wrong about where it lies. The system is entirely built on trust. And when trust its allowed to take its rightful place in a transaction the economy gets it right the VAST majority of the time. Remove the ability to use trust or not let trust do its thing, we will be back to late 18th century and early 19th century class bifurcation or worse, an essential feudal state where the property large owners own ever more, and everyone else is necessarily cur out of the process because the big owners don't have to play ball at all.
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post #29 of 39
So, that would be the Buick school of economic theory, then?

I think you're misunderstanding my point, but perhaps I didn't explain it clearly enough: One's ability to pay for a commodity is not necessarily related to its value. Just because someone is willing to lend a buyer $500,000 for a house doesn't mean the house is worth the money.

Buyers and lenders who neglected this simple distinction got hurt. Both parties share culpability, and consequences should have been limited to those responsible for their own neglect. My point is that now, thanks to taxpayer-funded bank bailouts, it's everyone's problem - including those who acted responsibly.

A price for a commodity can be reasonable, or not. When a home in Florida sells for one million dollars, and someone offers to buy it the very next week for two million (a personal anecdote), something's obviously wrong.
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post #30 of 39
Quote:
Originally Posted by john galt View Post

So, that would be the Buick school of economic theory, then?

I think you're misunderstanding my point, but perhaps I didn't explain it clearly enough: One's ability to pay for a commodity is not necessarily related to its value. Just because someone is willing to lend a buyer $500,000 for a house doesn't mean the house is worth the money.

Buyers and lenders who neglected this simple distinction got hurt. Both parties share culpability, and consequences should have been limited to those responsible for their own neglect. My point is that now, thanks to taxpayer-funded bank bailouts, it's everyone's problem - including those who acted responsibly.

A price for a commodity can be reasonable, or not. When a home in Florida sells for one million dollars, and someone offers to buy it the very next week for two million (a personal anecdote), something's obviously wrong.

You are avoiding point, the value of the houses weren't the biggest problem, the price you state is a strawman -- pure fiction. Investors trying to flip houses like that play the risk, but they are such a small part of the market they are insignificant, even though they may make for the sexy headline. The problem was the systemic artificial forcing of demand, which rose prices following the natural supply and demand curves, and now the systemic destroying of demand which is again artificially depressing prices.

At the time of sale the price and the qualifications for the mortgagees were good for the majority. It's not until the banking system unravelled and caused collateral damage through fear of lending that the prices went down. And they have gone down in a way that has never been seen before in home history. Four years ago if anyone told you housing prices would drop by 40%+ in 18 months you would have been looked at like a heretic, because it shouldn't be possible. Flat prices or 5-10% down for a decade, sure, 40% ever? No. People live in houses, its not like they are just the gambling toys of the big commercial real estate bubbles where there isn't much of any perpetual steady guaranteed demand.

The housing crisis isn't a housing price crisis caused by a couple % of the loans defaulting, it was and is the result of mortgage related anything being considered poison because investors don't trust banks with risk packaging anymore and are over-reacting predictably because of that. It's all derivative and packaging related, there wasn't even a whole $50 billion in actual bad mortgages before the bottom fell out.

That overreaction has caused a self fulfilling death spiral that has nothing to do with market fundamentals anymore. Now we have lost several trillion in equity with a couple more predicted before there is any chance of it being over.

Housing prices are going down because housing prices are going down. The only way to stop it is to remove the perception that they will continue to go down. How the hell that's done is beyond me, but it is pretty obvious that a few hundred thousand loans backed by real property that should have only led to a total of ~$10 billion lost after the auctions couldn't be responsible for destroying several years GDP worth of equity in 18-24 months. The fuck-up is way to grand for that to be the least bit believable.
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post #31 of 39
Quote:
Originally Posted by Hiro View Post

You are avoiding point, the value of the houses weren't the biggest problem, the price you state is a strawman -- pure fiction. ...

I understand your point, though I disagree that price wasn't relevant. Price is always relevant. I never said it was the biggest factor in this debacle either. That factor was as you state - pressure to lend money to unqualified and uninformed buyers who should never have bought homes to begin with, secured by overvalued assets. What was the basis for that overvaluation? Price!

I agree that situation was as "artificial" and not grounded in reality, just as the overreaction that followed.

I'm looking at the market from a perspective of decades of experience - it just never made sense to me that people would pay what they did for a poorly constructed megamansion on a quarter acre lot. For that matter, why they'd pay what they did for a condo either. Neither of them represented the true value of real estate to me, and I'm not even talking about the market of the last few years - I'm talking about the bloated McMansion yuppie trend that began in the early 90s. Those are going to be white elephants for a long, long time... in my opinion

The fact that millions of buyers considered their mortgage "affordable" ignored a fundamental problem - the asset was unrealistically valued to begin with. Smart investors are buying unrealistically low value houses today. What a great opportunity for young people.

Quote:
The only way to stop it is to remove the perception that they will continue to go down. How the hell that's done is beyond me, ...

Once there was a perception that housing prices would climb forever. Markets arrested and reversed that trend, with all the fallout that happened next. Market forces can arrest and reverse the decline as well.

The market will recover once it's hit bottom. Let it. Markets always work - if you let it. The traditional price discovery mechanism that exists in normal markets must return.
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post #32 of 39
Quote:
Originally Posted by john galt View Post

I understand your point, though I disagree that price wasn't relevant. Price is always relevant. I never said it was the biggest factor in this debacle either. That factor was as you state - pressure to lend money to unqualified and uninformed buyers who should never have bought homes to begin with, secured by overvalued assets. What was the basis for that overvaluation? Price!

I agree that situation was as "artificial" and not grounded in reality, just as the overreaction that followed.

I'm looking at the market from a perspective of decades of experience - it just never made sense to me that people would pay what they did for a poorly constructed megamansion on a quarter acre lot. For that matter, why they'd pay what they did for a condo either. Neither of them represented the true value of real estate to me, and I'm not even talking about the market of the last few years - I'm talking about the bloated McMansion yuppie trend that began in the early 90s. Those are going to be white elephants for a long, long time... in my opinion

The fact that millions of buyers considered their mortgage "affordable" ignored a fundamental problem - the asset was unrealistically valued to begin with. Smart investors are buying unrealistically low value houses today. What a great opportunity for young people.



Once there was a perception that housing prices would climb forever. Markets arrested and reversed that trend, with all the fallout that happened next. Market forces can arrest and reverse the decline as well.

The market will recover once it's hit bottom. Let it. Markets always work - if you let it. The traditional price discovery mechanism that exists in normal markets must return.

Now you are deliberately misquoting me to try to say I am agreeing with you. That is false. I never said anything about over valued assets, you did. Singularly. I said specifically:

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he problem was the systemic artificial forcing of demand, which rose prices following the natural supply and demand curves, and now the systemic destroying of demand which is again artificially depressing prices.

Which does not even imply overpricing. Homes were expensive relative to historical norms, but within the bounds of the systems ability to handle a correction. Now the prices look excessive not because they were, but because we are comparing the prices to artificially deflated prices some 3-4 times reduced from what is reasonable for the housing market price shift to create on it's own.

Your conception of true value is strictly an emotional one, it is worthless to the overall market realities and you are only cherry-picking now when you are attempting to say "See! I told you so!". Correlation does not imply causation, or in simpler terms, even a broken clock is correct twice a day.

Valuation in real estate is based solely on what the buyers are willing to pay. There isn't an P/E ratio test for over-valuedness. And before you say rental equivalency that is bunk unless you are specifically buying an income property. It is well known that mortgages will be more expensive than rents, if done at the same time for the same property because of the underlying investment/profit margins the owner enjoys over the renter.

The reality is that over the long run housing prices will climb forever, or the underlying economy is utterly broken. In the short term prices fluctuate. Because the truism is that people will always need someplace to live, prices in the housing market should never fluctuate by more than the percentage of families that are congregating into shared dwellings. Are you telling me that 40% of americans suddenly moved in with their extended families? No you can't because it didn't happen. So something else, OUTSIDE OF HOUSING (we have already covered that territory) is keeping the demand so artificially low and thus any attempt to use current pricing as a comparison for previous pricing is totally invalid.

As for hitting bottom, I'm not sure there is one in the foreseeable future because the mortgage and foreclosure market is utterly without consumer trust. Lenders are without trust in consumers. It is a death spiral and those don't have definable bottoms. Either you get lucky or you get ruined. I went to look at a refinance and do you know what several agents told me? I can't get an 80% loan, because the market might go down. I can get 80% on 80%, that extra -20% is the banks distrust fudge factor. And that collective 64% is based on a price that is 25% below what I paid for it. The banks are telling me I can't even get a loan for half of what the house was worth when I bought it. Literally I bought the least expensive house in the zip code and have improved it significantly, but am told that totally does not matter. How long should I keep paying that mortgage when nearly the entire price and valuation drop is due to their actions? Now, that's a moral dilemma.
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post #33 of 39
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Originally Posted by Hiro View Post

Now you are deliberately misquoting me to try to say I am agreeing with you. That is false. I never said anything about over valued assets, you did.

However,

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Valuation in real estate is based solely on what the buyers are willing to pay.



I expressed my opinion and I really don't care if you agree with it or not. It sounds like you just want to pick a fight. I'm not interested.

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How long should I keep paying that mortgage when nearly the entire price and valuation drop is due to their actions? Now, that's a moral dilemma.

I assume your lender has a security interest in your house. If they erred in determining its value, too bad for them. Walk away from it if you wish. The morality of doing so is up to you.
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post #34 of 39
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Originally Posted by john galt View Post

I expressed my opinion and I really don't care if you agree with it or not. It sounds like you just want to pick a fight. I'm not interested.

If you don't care why do you respond? You betray yourself. What you appear to care about is getting your way.

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I assume your lender has a security interest in your house. If they erred in determining its value, too bad for them. Walk away from it if you wish. The morality of doing so is up to you.

Thats helpful, not. You also seem not to understand the concept of a rhetorical statement. Oh well, just go away mad that someone else in the world doesn't agree the whole world is irresponsible in setting prices for housing, and ignore the over-intertwined financial system. I'm sure the too simple explanation will help you be successful in life and business.

Oh wait, but you don't care. And therein lies the problem with the financial system.
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post #35 of 39
You... have anger issues.

I expressed an opinion, and you chose to respond with personal attacks. You asked a question, I answered, and you chose to respond with sarcasm, saying I was unhelpful... even though your question was meant to be rhetorical? Pardon me if I don't understand; I just think that's odd.

If you're seeking guidance regarding your investments, I'd be willing to help, but you'd have to at least try to be polite. If you're not seeking guidance, then what do you want?

You made a regrettable investment decision in buying property that's not worth what you owe. So have millions of others. Perhaps you - and they - should consider how emotions influence one's major decisions in life. Emotions will almost always lead to making poor investment decisions, and as I said, it's apparent to me you're an angry man.

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Oh well, just go away mad that someone else in the world doesn't agree the whole world is irresponsible in setting prices for housing, and ignore the over-intertwined financial system. I'm sure the too simple explanation will help you be successful in life and business.

Again, I'm afraid I don't understand. Given your use of sarcasm, curious analogies involving carburetors, "playing ball," and random ad hominem attacks on myself and others, I get the impression you're really not interested in communicating. Having said that, I look forward to occupying a position of honor in your "hall of shame ignore list."
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post #36 of 39
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Originally Posted by e1618978 View Post

It is worse than that - they were actively forging documents.

Haven't really heard that. Some examples? Pretty frightening.

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Originally Posted by gerald apple View Post

What is happening is the banks don't give a shit about people losing their homes.They are foreclosing on homes without even reading the whole case history behind the foreclosure.Just automatically signing off like a robot.Pathetic.

Oh my God. Please tell me you don't actually think that. First, banks have never cared about people losing their house, nor should they. There is no "case history." There is only lack of payment. That's all there has ever been.

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Originally Posted by Hiro View Post

Are you a blind idiot or just plain malicious? The majority of those who are in foreclosure could afford what they bought when they bought it.

I'd like to see some evidence of that. It might even be a majority, but a lot of folks got mortgages based on teaser rates or the notion of annual and bi-annual refinancing as the market went up.

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We are in the biggest economic downturn since 1929, people who had jobs when they bought the houses don't have jobs anymore. People with large medical bills are faced with "pay the doctor" or "pay the mortgage and don't get better", because they can't borrow in a house that's underwater. People who's job transfers them cannot sell their house because the foreclosures in the neighborhood have depressed prices so much, so their house ends up getting foreclosed too.

The foreclosure problem itself is driving the whole system down in a slow death spiral, the more foreclosures, or even possibility of foreclosures, the lower buyers prices go. The lower the prices go, the more folks go underwater on their mortgages. The more underwater mortgages, the greater the cross section of good performance mortgages that go bad because of unrelated causes. Which generate more foreclosures at the already depressed price point, causing more competition and yet lower prices.

I don't agree that foreclosures are driving the car, so to speak. They are a symptom, not the disease. They are a serious symptom...don't get me wrong.

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With more than 50% of the houses in CA underwater who can leave without facing foreclosure or short sale? Answer: Nobody who has bought a house in the last 10 years. Get that? 10 years. You can't move for a job if you bought a house in the last 10 years, unless you short sell or get foreclosed on. Seeing as how ~3% of the workforce relocates by more than 25 miles every year that makes for a lot of people who are faced with no job or foreclosure, even if some of those 3% per year avoid voluntary moves.

Who can leave? The people that aren't underwater...that's who. But yeah...people are stuck. Even in areas not as bad off as CA.

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This is no longer about a few percent of folks who bought above their means because of essentially fraudulent, but actually legal, programs created by government policies that were the personal brainchild of Rep. Frank.

I think a lot of it is about that, actually. It's also about the housing bubble bursting as it was bound to do.

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It is about a systemic meltdown being made worse by idiotic self-defeating business practices chosen because a CEO can report a bad quarter or three and say there is a plan to stop the red ink. Only the plan(s) is(are) actually a sham and has gone on about two years longer than promised or necessary. Now internal panic is setting in inside the companies while everyone else thinks this sucks but the worst is over. Well, if the idiots are allowed to keep doing what they are doing it won't be.

The worst is over. Prices are bottoming now, and going up in some areas. In my opinion, the market will come back once employment improves. It's going to take about 5 years to get back to normal. More employment will stimulate demand for housing, which will push prices higher. Prices have already corrected to levels not seen since 2002 in most areas.
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post #37 of 39
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Originally Posted by john galt View Post

You... have anger issues.

Wow, guess I struck a nerve. You have been calling people who buy houses stupid, and saying they are stupid for running up prices. Then you say you don't care what I say. I think you had better look in the mirror when you talk about issues.

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I expressed an opinion, and you chose to respond with personal attacks. You asked a question, I answered, and you chose to respond with sarcasm, saying I was unhelpful...

Do yon know what the difference between a personal attack and making a value judgment on the content of a post is? Stop, don't answer that, because your last sentence proved you either don't, or choose to ignore the difference.

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even though your question was meant to be rhetorical? Pardon me if I don't understand; I just think that's odd.

If you're seeking guidance regarding your investments, I'd be willing to help, but you'd have to at least try to be polite. If you're not seeking guidance, then what do you want?

No, I'm not seeking your help, you have proved to be quite weak in understanding a complex problem and generally callous in your labeling of hurting homeowners.

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You made a regrettable investment decision in buying property that's not worth what you owe. So have millions of others. Perhaps you - and they - should consider how emotions influence one's major decisions in life. Emotions will almost always lead to making poor investment decisions, and as I said, it's apparent to me you're an angry man.

Well if you call buying a property for 25% below market regrettable I guess you really don't understand anything. Now it is clear you are only trying to incense and inflame. Really it's quite sad that you display such a shallow attitude.

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Again, I'm afraid I don't understand. Given your use of sarcasm, curious analogies involving carburetors, "playing ball," and random ad hominem attacks on myself and others, I get the impression you're really not interested in communicating. Having said that, I look forward to occupying a position of honor in your "hall of shame ignore list."

Why would I ignore you? Your attempts to bait are pathetic! And you show yourself so well! It's too easy to expose your poor logic and callousness.

And to think, you said you didn't care. I almost feel honored that you have decided to suddenly care so much!
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post #38 of 39
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Originally Posted by SDW2001 View Post

I'd like to see some evidence of that. It might even be a majority, but a lot of folks got mortgages based on teaser rates or the notion of annual and bi-annual refinancing as the market went up.

All those loans are either OK or already foreclosed on. The new foreclosures now aren't in the low income areas where the shady loans were. They are in the mid and upper-middle income areas because the low end dropped so far that the mid sank, which dropped so far the upper-middle sank. I don't live in a tony neighborhood, but you would consider it upper middle class. And all the foreclosures are from job transfers (2), only 1 job loss, and divorces (2) where they cannot sell because the prices in neighborhoods over 20 miles away sank so fan and over two years they moved up market and ever closer. The original problem neighborhoods aren't listing foreclosures in the paper anymore, they are pretty much left with long-time residents making payments. The ever creeping valuation slide killed our values before any of the 5 foreclosures above ever hit the market. The job loss foreclosure solidified the neighborhoods previous paper losses.

There aren't many new foreclosures on the original adjustable loans because the interest rates went down, not up. Down far enough that the new P&I is almost the same as the previous interest only amounts.

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I don't agree that foreclosures are driving the car, so to speak. They are a symptom, not the disease. They are a serious symptom...don't get me wrong.

I think it started that they were just a symptom in the housing market, now they are the downward engine.

The previous CA policy that distress sales were not allowed to be used in appraisals has been eliminated, because now almost 50% of the homes for sale are distress sales (which doesn't count houses which are current in mortgage payments but short selling to avoid the foreclosure process). In my zip code there are by the local realtors newspaper report, a whole 1 of 75 homes for sale that are not listed for less than the outstanding loan balance and 50% of the listings are already approved for short sales at the listing price.

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Who can leave? The people that aren't underwater...that's who. But yeah...people are stuck. Even in areas not as bad off as CA.

And not being able to leave to chase jobs does 2 things, a) create more potential foreclosures, or b) slow down the recovery of the economy because they cannot get a higher paying job.

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I think a lot of it is about that, actually. It's also about the housing bubble bursting as it was bound to do.

Yes, the bubble burst, but never before have prices dropped drastically more than 10% and or just leveled off for a decade. I have owned houses in CA and FL that were in BRAC areas. 50% of the workforce left, and housing prices went down a couple percent and didn't essentially move for 10-12 years. The early 90's CA bubble dropped 5-10% and didn't move up for about 10 years. The Texas oil bust areas did the same thing. You couldn't sell in those areas, but the values didn't plummet off the charts, you just had to sit on it for a long time and rent it out.

What's the difference today? The financial industry screwed the pooch and has caused a set of circumstances where prices have moved so far that we would have though the Survivalists would be in charge for something this bad to happen. It's amazing the country is weathering it as well as it has. But there is only so much resilience.


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The worst is over. Prices are bottoming now, and going up in some areas. In my opinion, the market will come back once employment improves. It's going to take about 5 years to get back to normal. More employment will stimulate demand for housing, which will push prices higher. Prices have already corrected to levels not seen since 2002 in most areas.

I wish I agreed that prices are bottoming, but I don't see that. As for demand, where are all those foreclosed people living? We are talking collectively about 25% of the houses in CA sold in the last 8 years, that number is HUGE. Where did those families go? Because the houses aren't all rented. And I don't see lenders being willing to finance those houses second time around, with so many in the neighborhood still in the foreclosure process. There aren't enough cash buyers to stop the bleeding
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post #39 of 39
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Originally Posted by SDW2001 View Post

Haven't really heard that. Some examples? Pretty frightening.

skip the first 12 pages:

http://www.scribd.com/doc/39594746/F...-David-J-Stern

That is just one example, it was from the trial in Florida that started the whole foreclosure robosigning business.
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