As we enter the New Year, everyone, it seems, has an opinion or prediction.  However, one rule should always be applied: Be careful how you interpret the numbers!

A recent Oregonian article is a case in point. It carried the following headline: “Portland home sale volume improves in November.” The article, which was based upon a review of the November 2011 RMLS™ statistics appearing in its Market Action publication, opened with the following statement:

“Portland-area home sales improved again in November, bringing the inventory of active listings to its lowest point in three years.”

Later in the article the author made the following statements:

“Some 1,521 homes were sold in November across the Portland area, up 18.1 percent from a year ago and 3.2 percent from October. Another 1,685 sales were pending at the end of the month. At that rate, the three-year low 9,451 homes for sale would sell in 6.2 months. *** That’s close to the six months of inventory market analysts would expect to see in a healthy market.”

But these numbers, standing alone, are misleading, and unfortunately do not suggest a “healthy market” anytime soon.  In reality, these statistics underscore the unusual dynamics at play in our local marketplace.  The Oregonian article touched only on the numbers, but missed the bigger story, which paints a much different picture about what’s going on.  I will attempt to explain below. Continue reading “The Portland Housing Market: Is the Glass Half Full or Half Empty?”

As we approach 2012, our friends in the banking, servicing, and title industries are on their last conference call of the year; this time discussing how to put a better face on the banking industry.  Belial Bank’s President and CEO, B.L. Zebub, moderates. He has convened his trusted cronies to consider various schemes to cast the Big Banks in a better light for 2012.  In attendance are B.L., his honest but naïve legal intern, Les Guile; title industry hand-wringer Liz Pendens; and her nemesis, Dee “Take No Prisoners” Faulting, of the default servicing industry; Damian Faust, Belial’s lead counsel and hatchet man is present, as is the Bank’s chief schemer and PR man, Kenneth Y. Slick III (aka “KY”).  B.L.’s loyal secretary, Lucy Furr, has dutifully transcribed this conversation. As in the past, I am legally prohibited from revealing the source of this purloined post. – PCQ

B.L. Zebub: “OK, do we have everyone on the line?”

Lucy Furr: “B.L., I think everyone is on the line.” B.L. Zebub: “Good.  Well everyone, we’re rounding the corner into a new year, so I thought it appropriate to have an open discussion on what goals we ought to set for 2012.  I have some thoughts of my own, but would like to hear from the rest of you first.” Continue reading “Belial Bank’s Conference Call Re: New Year’s Resolutions”

The following Frequently Unanswered Questions have been provided in an effort to better understand Big Banks and their systemic inability to explain, answer, or even address, basic questions that pervade the Oregon foreclosure landscape.  Since the they have not offered the slightest explanation to frequently ask questions,  I am compelled to do so.  If  I am wrong, perhaps a Big Bank attorney will let me know. – PCQ

Question: When the Big Banks halted their foreclosures in light of the robo-signing scandal last year, and resumed again this year, what precisely did they do to correct the earlier problems?

Answer: Nothing. In fact, when they rescinded their Notices of Default, the merely recorded the same ones oftentimes with little or nothing changed.  Since several months had elapsed, one would think they would at least have updated the information, but normally they did not. Continue reading “Oregon Bank Foreclosures: Frequently Unanswered Questions”

As we know, until recently, the vast majority of foreclosures in Oregon were conducted non-judicially, by advertisement and sale.  However, due to the McCoy and Hooker decisions,[1] the efficacy of this method of foreclosure has been placed in doubt. The proposal described below suggests that before filing judicial foreclosures, homeowners be offered an opportunity to convey the property back to the bank in lieu of foreclosure. This would avoid any McCoy/Hooker title problems, since the deed would come directly from the homeowner.  If there were subordinate liens on the property, the lender could either negotiate a voluntary removal of that lien, or could decide to foreclose judicially or non-judicially without the borrower’s involvement. This solution would provide significant benefits: (a) Lenders could avoid the costly filing fees, legal fees, and prolonged foreclosure process, compounded by the six month right of redemption; (b) Borrowers would be able to transition out of their distressed housing situation sooner, and would avoid having to hire an attorney to explain their rights; (c) The Oregon court system would avoid the time and cost of ramping up for hundreds or thousands of judicial foreclosures, saving significant money and administrative time.  – PCQ Continue reading “The Deed-In-Lieu-of-Foreclosure: A Solution Whose Time Has Come”

When we last left this telephone conference in Part One, Damien Faust, chief legal counsel for Belial Bank, was regaling everyone with his brilliance in creating the following legal provision that the Big Banks had quietly inserted into every lender’s trust deed forms:

“Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to releasing and cancelling this Security Instrument.”

Les Guile:  “That seems kinda sneaky to me.  These are standard forms.  The banking industry prints them out for consumers to use so they don’t have to go to an attorney every time they get a loan.  Of course the consumers don’t read it – they wouldn’t understand it if they did.  But, if I were to paraphrase what this clause really says, it would be something like this:

‘Borrower understands and agrees that in order to make MERS legal under state law, it has the right to do anything the lender can do if necessary to comply with the laws and customs of that state.’

Under that rationale, if the lender also sold jelly beans, MERS could do so as well, if it was necessary to make MERS legal in that state.  But this isn’t sophistry – you tried that and failed.  It’s downright silly. It’s like the old Roadrunner cartoons where he escapes through a tunnel painted on the side of a mountain.  The banking industry stuck a portable hole in its trust deeds that only MERS can escape through.” Continue reading “Judicial or Non-Judicial? Belial Bank Debates How to Foreclose Oregon Homeowners – Part Two”

 

Senior Supervisor, Bank Hardship Letter Department

Have you ever been curious about what “test” the Big Banks apply when deciding to allow short sales?  I have.  What follows is my analysis only.  Readers are free to disagree; but remember, a couple of anecdotal stories overheard at a cocktail party, do not a trend make.  There are rules and there are exceptions to those rules.  I’m interested in the rules. – PCQ

First, we know that the Big Banks all base their borrower assistance programs on the concept of “deservedness.” Now, with the help of a sleeper agent working “deep cover” at the highest levels of a Big Bank, we have discovered the following purloined paperwork (including this candid staff photo taken at work), describing, in depth, the inner workings at one lender’s Hardship Letter Department:

“You get our help only if you deserve it. To be deserving, you must have a “hardship.” We get to define the meaning of “hardship.” It must relate to something unplanned or beyond your control[1]:  Such as illness, death, divorce, job loss, financial inability to pay, mandatory relocation, etc.  Pregnancy cannot be “unplanned” or “beyond your control” according to the Planned Parenthood folks, so it won’t get you into our “deservedness” line.

When you seek our help, we expect you to prepare and sign, under oath and penalty of perjury, a “Hardship Letter,” describing in detail, your tale of woe, beginning from early childhood and continuing through adulthood.  We ask that it be hand written on cheap bond notebook paper (blue lines only – and no fancy yellow legal pad paper!), with a No. 2 pencil and shaky hand.

Before writing your Hardship Letter, we recommend watching one or more of the following sad movies to serve as your cinematic Muse and help conjure up the appropriate melancholy [in no specific order]: Titanic, Schindler’s List, Steel Magnolias, and Ordinary People.  For the distressed older Baby Boomers, we suggest Love Story and Old Yeller. Continue reading “Do You Know Who Just Read Your Hardship Letter?”

The Conundrum. In Oregon we have a foreclosure conundrum:  ORS 86.735(1) requires lenders to record all successive trust deed assignments when non-judicially foreclosing a trust deed.  However, lenders have routinely either lost, never created, or destroyed, their trust deed assignment documents during the securitization frenzy of 2005 – 2007. This means that starting with the subprime loans, and working their way up the food chain, lenders have been non-judicially foreclosing trust deeds without recording the necessary assignment documents. This has resulted in two significant court rulings [McCoy in Oregon’s federal bankruptcy court, and Hooker, in Oregon’s federal district court – PCQ] holding that these defective non-judicial foreclosures are invalid.The upshot has been that title companies have become skittish about insuring marketable title when banks attempt to sell their REO properties following a non-judicial foreclosure. In order to avoid the problem, many banks have decided to take a “poison pill” – that is, even though it  benefits no one, they are beginning to judicially file foreclosure lawsuits in court, in order to avoid the McCoy and Hooker problem that was limited to non-judicial foreclosures.

However, the judicial foreclosure alternative carries with it a host of unpleasant side effects for everyone.

  • It entails costly court filing fees;
  • It taxes already limited judicial resources;
  • It requires that borrowers be given a six-month right of redemption following the foreclosure sale, which hampers the lender’s ability to quickly re-sell the property;
  • It creates a potential public record and credit stigma on borrowers, who now have a court judgment taken against  them;
  • It continues the oppressive psychological impact on borrowers who are served, sued, and then must retain an attorney to figure out their legal options;
  • It continues  the reputational damage of Big Banks, by drawing further attention to the never-ending foreclosure crisis.

The Solution. Is there a better alternative?  Yes, and it is in plain sight.  I have discussed it in a prior post, here. The answer  is to secure a pre-foreclosure result. This is not rocket science. “Is anyone home, McFly?” Here’s a pre-foreclosure solution that banks should embrace, rather than continuing to pile on beleaguered homeowners, just because lenders and servicers can’t seem to comply with Oregon’s non-judicial foreclosure law:

  1. Prior to commencing any foreclosure, judicial or non-judicial, lenders should contact the borrower to see if they would execute a Deed-in-Lieu-of-Foreclosure (“DIL”).  It would be “without merger”, which would permit the lender to foreclose a subordinate lienholder, if necessary;
  2. The DIL would contain certain borrower title warranties to the effect that they have not placed or permitted undisclosed liens on the property [this would be confirmed with a lender’s title policy, of course. – PCQ];
  3. The lender and borrower would execute a global settlement of all claims – including any borrower rights of redemption and any lender rights to a deficiency judgment;
  4. The borrower would agree to turn over the subject property to the lender in broom clean condition;
  5. If a foreclosure lawsuit was already filed, the lender would execute a Judgment of Dismissal against the borrower, “with prejudice and without costs or fees”.

 

Win-Win. It would seem that this DIL solution would result in a win-win for all parties and the Oregon judicial system.   Assuming that there are no lienholders on the property that may have priority claims, that puts an end to all the unpleasantness; the borrower gets on with their life.

If a foreclosure suit was already filed, the other co-defendants (e.g. junior lienholders) would likely permit default judgments to be taken without costs and fees.  If a priority battle was necessary, and no judicial foreclosure had been filed, the lender could pursue them non-judicially, without having to name the borrower, who has already deeded his/her property back to the lender.

Going forward, title would be marketable to any REO buyer. The McCoy and Hooker problems are entirely avoided. The banks get back the property without the cost and delay of a lawsuit, and everyone’s happy….sort of.

How Do We Make This Work? My suggestion is to encourage those in the judicial system to embrace this approach.  Require that at the time of filing a judicial foreclosure, bank attorneys sign an affidavit under oath, swearing to the fact that they [not their lender-clients who gave us the robo-signers, DocX, and other shenanigans – PCQ] had formally offered the above protocol and the borrower either rejected it or could not be reached.

If anyone can tell me what’s wrong with this approach, I’m willing to listen.   But until I’m convinced otherwise, this proposal would seem to give the lender what they want – marketable title, and the borrower what they need – finality.

“The great thing about working at  ________________ Bank is that no one has to take personal responsibility for the institutionalized immorality of our industry.  We get up in the morning, go to work, and check our soul at the door. When we come home at night to our families, we can become human again, without feeling any regret for the havoc our foreclosures have wreaked on so many lives.  We’re the zombies in zombie banks.  It’s no wonder our industry has no code of ethics….” [Overheard at a local Portland watering hole from an obviously intoxicated bank employee in the foreclosure department, responding to the frequently asked question: “How do you live with yourself?”][1]

In my recent post here, I was critical of what appeared to be intentional document destruction by Freddie Mac.  This information was based upon an April 11, 2011 announcement that it sent to its sellers and servicers.  However, at the time, I was unclear of the reason for – and timing of – the document destruction.  Was there some explanation that would dispel the appearance of chicanery?  As Paul Harvey used to say, “Here’s the rest of the story.” Continue reading “Freddie’s Destruction Instruction Rule – The Epilogue”

On April 13, 2010, the Office of Comptroller of the Currency (OCC), together with the Board of Governors of the Federal Reserve Board (FRB), and the Office of Thrift Supervision (OTS) announced that it had commenced enforcement actions against 14 large residential mortgage servicers and two third-party vendors for improper practices arising out of their mortgage servicing and foreclosure processing during the years 2009 and 2010.

As a result of the investigation, consent orders were entered into by the 14 servicers and vendors.  Independent consultants have now been charged with evaluating whether borrowers suffered financial injury due to these improper practices.  The consultants are empowered to evaluate whether and to what extent certain remedies would be available to the consumers who suffered injury. If appropriate, financial compensation may be ordered.

The 14 servicers and vendors are the following:  America’s Servicing Company; Aurora Loan Services; Bank of America; Beneficial; Chase; Citibank; CitiFinancial; CitiMortgage; Countrywide; EMC; Everbank/Everhome; First Horizon; GMAC Mortgage; HFC; HSBC; IndyMac Mortgage Services; Metlife Bank; National City; PNC; Sovereign Bank; SunTrust Mortgage; U.S. Bank; Wachovia; Washington Mutual; Wells Fargo.

Most of us know of one or more folks who’ve had some pretty bad experiences with banks.  If so, pass this information along to them.  Here are two links for them to visit for more information: IndependentForeclosureReview.com and http://independentforeclosurereview.com/faq.aspx.

The deadline for aggrieved borrowers to request review is April 30, 2012.

PCQ Comment. Given the abysmal reputation that the Big Banks have for transparency, one has to question the efficacy of this latest effort at “Peace and Reconciliation.”  The independent reviewers may be selected by the banks themselves – with the consent of the regulators.    There is a suspicion that those selected will be the same companies with whom the banks already have a business relationship with other review and auditing functions. As reported in American Banker:

“Allowing the banks to choose their own judge, jury, and jailer presents almost untenable conflicts of interest. All of the consulting firms that were initially being considered to do the work serve the banks already. The banks, and their mortgage servicing operations, are existing or prospective clients.

PricewaterhouseCoopers, for example, is the auditor for Bank of America and JP Morgan Chase, two of the fourteen servicers under scrutiny. PwC’s retired Chairman, Sam DiPiazza, is an executive of, and on the board of, Citigroup, another bank with a servicer to be reviewed. Promontory Financial Group and Treliant Risk Advisors are professional services firms that serve the mortgage servicers directly on other consulting assignments.”

News of this event hit the Internet in June, 2011.  If so, why is it only getting attention now?  As we learned from Belial Bank’s Chief Lobbyist, Kenneth Y. Slick, or “KY” as he likes to be called:

K. Y. Slick:  “Guile, you seem to forget, we’re “too big to fail.”  We don’t have to show weakness to get our way.  We’ve got friends in high places.  The Office of the Comptroller of Currency is in our pocket.  Hell, they’re run by one of our former lobbyists!  So while they pretend to be angry at us, we plead with them to do anything they want, so long as they don’t throw us into the briar patch.  Didn’t you read about our latest ruse?  On June 30, the OCC posted a bulletin on the Internet, requiring all the big servicers to undergo an examination of their practices, from documentation to notarization.  But the catch is that we get to do the examination ourselves!  Yeh, ‘self assessment.’ And after our period of mandatory introspection, we’re supposed to report any deficiencies we see in our practices.  Ooooh! Scary stuff!  This reminds me of my sophomore high school lit class, when the teacher let us grade our own papers!  So, in short Guile, we don’t need to go down the path of self-righteousness.  We have might on our side, and from where I come from, ‘Might Makes Right.’'” [For a revealing look at the entire conference call, click here. – PCQ]

So, time will tell.  There is intriguing speculation that some unemployed robosigners may now start applying to become “independent reviewers”.  Seems like a perfect fit, since at least they will be able to recognize the signatures that they actually signed, and the ones they didn’t….

Introduction. As we know today, there are many bank-owned properties being listed and sold.  A term commonly used to refer to these homes are REOs, i.e. “Real Estate Owned.”  After a lender forecloses a home, it takes it back into its REO inventory, prepares and lists it for sale.  Most of the heavy lifting is done by the Realtor® holding the listing.  However, the bank, not the Realtor®, makes the rules.  One of these rules frequently is that the earnest money deposit must be sent to an escrow or other entity out of state.   While it is important that the out-of-state institution receiving the funds is actually a licensed escrow, there still can be risks.  The two main reasons, both inter-related, are that (a) the other entity is regulated by the laws of another state, and (b) accordingly, the Oregon Real Estate Agency has no control over what happens to the trust money held by an escrow beyond its reach.

Most real estate transactions begin with the submission of a buyer’s written offer of purchase.  In Oregon, the most common form of offer is the one published by Oregon Real Estate Forms, LLC or “OREF.”  It is entitled “Residential Real Estate Sale Agreement” and identified as Form #001 (hereinafter the “Sale Agreement”).  The printed portion of the Sale Agreement describes how the buyer’s earnest money deposit will be handled.  Early in the transaction, the money will generally be deposited in the buyer’s agent’s trust account or the escrow trust account.   However, in most REO sales, the banks have their own form, usually called an “Addendum” that supersedes many of the Sale Agreement provisions – including who will hold the earnest money deposit until closing. [Why the banks use a document entitled “Addendum” rather than “Counteroffer” is a mystery.  Their Addendum is intended to replace and supersede all provisions to the contrary that are contained in the buyer’s initial offer. In all respects, that is a counteroffer. – PCQ]

Oregon Real Estate Trust Fund Rules. Addressed below are the general Oregon rules regarding where such trust funds are to be kept: Continue reading “Oregon Realtor® Warning: Sending Trust Money Out Of State”