Hat tip to MB for sendingthisin, from the nytimes.com:
PHOENIX — Bank of America and GMAC are firing up their formidable foreclosure machines again today, after a brief pause.
But hard-pressed homeowners like Lydia Sweetland are asking why lenders often balk at a less disruptive solution: short sales, which allow owners to sell deeply devalued homes for less than what remains on their mortgage.
Ms. Sweetland, 47, tried such a sale this summer out of desperation. She had lost her high-paying job and drained her once-flush retirement savings, and her bank, GMAC, wouldn’t modify her mortgage. After seven months of being unable to pay her mortgage, she decided that a short sale would give her more time to move out of her Phoenix home and damage her credit rating less than a foreclosure.
She owes $206,000 and found a buyer who would pay $200,000. Last Friday, GMAC rejected that offer and said it would foreclose in seven days, even though, according to Ms. Sweetland’s broker, the bank estimates it will make $19,000 less on a foreclosure than on a short sale.
“I guess I could salute and say, ‘O.K., I’m walking, here’s the keys,’ ” says Ms. Sweetland, as she sits in a plastic Adirondack chair on her patio. “But I need a little time, and I don’t want to just leave the house vacant. I loved this neighborhood.”
Homeowners, advocates and realty agents offer particularly pointed criticism of Bank of America, the nation’s largest servicer of mortgages, and a recipient of billions of dollars in federal bailout aid. Its holdings account for 31 percent of the pending foreclosures in Maricopa County, which includes Phoenix and Scottsdale, according to an analysis for The Arizona Republic.
The bank instructs real estate agents to use its computer program to evaluate short sales. But in three cases observed by The New York Times in collaboration with two real estate agents, the bank’s system repeatedly asked for and lost the same information and generated inaccurate responses. In half a dozen more cases examined by The New York Times, Bank of America rejected short sale offers, foreclosed and auctioned off houses at lower prices.
“When I hear that a client’s mortgage is held by Bank of America, I just sigh. Our chances of getting an approval for them just went from 90 percent to 50-50,” said Benjamin Toma, who has a family-run real estate agency in Phoenix.
Fannie Mae, the mortgage finance company with federal backing, gives cash incentives to encourage servicers, who are affiliated with banks and who oversee great bundles of delinquent mortgages, to approve short sales.
But less obvious financial incentives can push toward a foreclosure rather than a short sale. Servicers can reap high fees from foreclosures. And lenders can try to collect on private mortgage insurance.
Some advocates and real estate agents also point to an April 2009 regulatory change in an obscure federal accounting law. The change, in effect, allowed banks to foreclose on a home without having to write down a loss until that home was sold. By contrast, if a bank agrees to a short sale, it must mark the loss immediately.
Ms. Sweetland’s real estate agent, Sherry Rampy, appeared to receive good news last week. GMAC re-examined her client’s application and suggested it might be approved. But the bank attached a condition: Ms. Sweetland must come up with $2,000 in closing costs or pay $100 a month for 50 months to the bank. Ms. Sweetland, however, is flat broke.
“After this, I’ll never buy again,” Ms. Sweetland says. “This is not the American dream. This is not my American dream.”
Hat tip to RE for sending in this from Eric Wolff on Attorney Pines – here are excerpts:
The break-ins generated widespread news coverage, including from The Wall Street Journal, “Inside Edition,” and this newspaper, in part because of the public relations efforts by Pines that preceded each one.
The publicity generated interest from a slew of potential new clients and nonstop media requests for interviews, Pines said.
“My goal, frankly, is that I will get a TV show or radio show where once a week I can appear in the media, or be a guest on a show,” he said. “I can do a lot more good if I can inform millions of people.”
The lawyer appears to be in urgent need of the accompanying revenue: Pines —- who has instructed other attorneys on the subject —- has seven properties in the process of foreclosure, a bankruptcy judge considering holding him in contempt, and a pair of temporary restraining orders.
Meanwhile, the publicity from his take-back-the-house approach may be launching Pines back into solvency. Pines takes $5,000 up front in retainer, current and former clients said.
Before he started his publicity campaign, Pines posted to a message board that he would “probably be on TV and radio a lot soon.”
Before his foreclosure break-ins, he hired a public relations professional, and print and TV reporters typically knew the day and time of each scheduled break-in before the real estate agents or current owners of the home, although Pines makes it a practice to call the real estate agents for each home just before the lock gets picked.
He spent last week in court and doing interviews with Bloomberg Radio, “Inside Edition,” and a wide swath of local TV, print, Web, and radio reporters.
The result has been phones ringing constantly in his Encinitas office.
When the 39th governor of California takes office in Sacramento next year, there will be no place to lay a pillow for his or her head, no place to plug in a toaster and no place to hang a picture.
Like every other working stiff, he or she will have to go house hunting.
Not since 1967, when the Reagans moved out of the once official governor’s dwelling — which they considered a firetrap in an undesirable part of town — has there been a permanent home for the state’s chief executive. That Italianate mansion was turned into a museum and would need extensive repairs to make it livable for any future governors. Many agree that it’s not worth the expense — a tone set by Jerry Brown in 1975, when he was elected governor (he’s running again for the office against Meg Whitman in the November election). Brown was adamant: Providing a home for the state’s top dog is an extravagance California can’t afford.
Californians weren’t always so frugal. Long before the state went broke, long before its unemployment rate was the third-highest in the nation and rampant foreclosures topped the news, governors were housed in style.
You may expect wealthy celebrities to have their own screening rooms, horse farms or vineyards. The world’s best-known skateboarder has his own skatepark.
“When I bought the house, I did not have that intention,” says extreme sports icon Tony Hawk of the 4,000 square foot skatepark in the backyard of his Southern California home. The former owner was “a bit eccentric,” Hawk tells CNBC. “She had an in-ground trampoline with a harness.” It wasn’t until after he moved in five years ago that Hawk noticed the depth and potential of the unusual landscaping feature. A friend and designer came up with the idea to re-create it into a skatepark.
“He took it to the city as a koi pond,” laughs Hawk, about what’s now a twisting concrete multi-sport court, 8 feet deep in some curvy corners. “It was a while before someone [there] said, ‘I don’t think that’s a koi pond.'”
Hawk estimates the construction to have cost between $100,000 and $120,000, with the payoff in the privacy it affords. The 6-foot-3 Hawk is instantly recognizable to fans. “If I go to a skate park, kids expect me to entertain them, not try out new moves,” he says.
After amassing the best record in the profession he pioneered — a winning percentage that topped 70 percent of all contests he entered — Tony Hawk retired at age 31. Once his competitive career ended, the ultimate role model for laid-back skater culture became a mogul.
He’s taken his winning attitude into everything from board and apparel designer, Sirius radio host, arena tour promoter, philanthropist and video game producer. And now, he’s written a new business book “How Did I Get Here? The Ascent of an Unlikely CEO.”
His five-division empire, Tony Hawk, Inc., earned him $12 million in 2008.
While not as highly paid as endorsement king Tiger Woods, Hawk is the heavyweight brand in a sports culture with fewer superstars. From teenagers to hobbyists, skaters “are beholden to authenticity,” explains Hawk. “I’m sure when an idea will work.”
Sales of Tony Hawk-branded products, including an exclusive clothing line at Kohl’s and his own Birdhouse Skateboards, topped $275 million in 2009. His video game series with Activision has sold more than $1 billion of games since 1999, one of the industry’s most successful franchises.
The big four banks have $234.1 billion in foreclosure or delinquent. FromHW:
JPMorgan Chase, Wells Fargo Bank and Bank of America each reported more than $20 billion in single-family mortgages currently foreclosed or in the process of foreclosure as of midyear, according to Weiss Ratings. In addition, for each dollar these banks held of mortgages in foreclosure, they had additional exposure to more than $2 in mortgages that are 30 days or more past due.
“Although only some portion of the past-due loans will ultimately go into foreclosure, these figures tell us that the biggest players are not only in deep, but could sink even deeper into the mortgage mayhem,” said Martin D. Weiss, chairman of Weiss Ratings.
Among all U.S. banks, JPMorgan Chase has the largest volume of mortgages in foreclosure or foreclosed with $21.7 billion. It has $43.4 billion in mortgages past due.
Bank of America has a somewhat smaller volume of foreclosures ($20.3 billion), but it has a larger pipeline of past-due mortgages — $54.6 billion. Thus, overall, including all foreclosed and delinquent categories, Bank of America has the largest volume of bad mortgages among U.S. banks, with $74.9 billion, while Wells Fargo has the second largest with $68.6 billion.
Other banks, despite their large size, are less heavily exposed. Citibankhas $6.3 billion in foreclosures and $19.2 billion in past-due mortgages, or a total of $25.6 billion. The volume held by other large banks, such as U.S. Bank, PNC Bank, andSunTrust is smaller.
“In addition to the volume of bad mortgages, the vulnerability of each bank to the foreclosure crisis depends on the capital and loan-loss reserves it has set aside to cover losses and other factors such as its earnings, liquidity, reliance on less-stable deposits, and the quality of its overall loan portfolio,” Weiss said.
Among banks with $1 billion or more of mortgages already foreclosed or in process of foreclosure, Wells Fargo has the greatest exposure to bad mortgages in proportion to its capital.
For each dollar of Tier 1 capital, the bank has 75.4 cents in bad mortgages, or a ratio of 75.4%. The equivalent ratios for JPMorgan Chase, Bank of America and SunTrust are 66.8%, 66% and 57.6%, respectively.
Hopefully there will be more acceptance of using the auction format to sell houses.
All that is needed are sellers who will accept whatever price the market will bear. Will the sellers trust that an auction would produce the same results (or better) than a traditional listing?
Another benefit of an auction is that the sellers know what day the house is going to sell, and can make plans accordingly. It’s usually inconvenient to sell your house, at least you would have some time parameters. Then take two weekends off so we can conduct open house leading up to the auction, and on a Sunday afternoon at 1:00pm we’ll gather everyone around and see what the market will bear.
If there were sellers willing to try, I’d like to help. If we can follow a few auctions that work so people might feel more comfortable with the process, maybe we could start something here:
In 2002, an accountant in Boca Raton, Florida, named Joseph Lents was accused of securities-law violations by the U.S. Securities and Exchange Commission. Lents, who was chief executive officer of a now-defunct voice- recognition software company, had sold shares in the public company without filing the proper forms. Facing a little over $100,000 in fines and fees, and with his assets frozen by the SEC, Lents stopped making payments on his $1.5 million mortgage.
The loan servicer, Washington Mutual Inc., tried to foreclose on his home in 2003 but was never able to produce Lents’s promissory note, so the state circuit court for Palm Beach County dismissed the case. Next, the buyer of the loan, DLJ Mortgage Capital, stepped in with another foreclosure proceeding. DLJ claimed to have lost the promissory note in interoffice mail. Lents was dubious.
“When you say you lose a $1.5 million negotiable instrument — that doesn’t happen,” he said in an interview in Bloomberg Businessweek’s Oct. 25 issue.
DLJ claimed that its word was as good as paper. But at least in Palm Beach County, paper still rules. If his mortgage holder couldn’t prove it held his mortgage, it couldn’t foreclose.
Eight years after defaulting, Lents still hasn’t made a payment or been forced out of his house. DLJ, whose parent, Credit Suisse Group AG, declined to comment for this story, still hasn’t proved its ownership to the satisfaction of the court. Lents’s debt has grown to about $2.5 million, including unpaid taxes, interest and penalties.
Ms. Sweetland, 47, tried such a sale this summer out of desperation. She had lost her high-paying job and drained her once-flush retirement savings, and her bank, GMAC, wouldn’t modify her mortgage. After seven months of being unable to pay her mortgage, she decided that a short sale would give her more time to move out of her Phoenix home and damage her credit rating less than a foreclosure.
