Introduction. For those Realtors® who were in the business in 2005 – 2007, multiple offers occurred fairly frequently.  Today, we are seeing them again.  However the circumstances are far different from before.

The term “multiple offers” refers to situations in which sellers receive two or more offers to purchase their property.  The reason for multiple offers during the boom years of 2005 – 2007 was because prices were rising rapidly, and buyers wanted their offers accepted quickly in order to lock in the price.  Consider this:  With average prices appreciating, say 18% per year [which was not unheard of], this meant that at 1.5% a month, by the time a buyer closed in 45-60 days, he or she had already realized a sizeable amount of paper equity.  On the other side of the coin, sellers who had already committed to sell were often lured by higher offers that came in while their sale was “pending” with another buyer.  It is for this reason that there were so many specific performance suits and/or arbitrations filed during this time; sellers didn’t want to close with their buyer, because after they went under contract they found they could get a better price, and looked for reasons to terminate the first transaction. Continue reading “OREGON HOUSING: Multiple Offers – Then and Now”

On July 11, 2012, Oregon’s mandatory mediation law will go into effect.  For a summary of the law and time lines, go to my posts here and here.  In anticipation of this important new law, I’ve developed a glossary of terms [go to this link]  for use by those involved in the mandatory mediation process. Hope it helps! – PCQ

Part One of my blog post “Ratings Agencies Get Their Comeuppance – They’ve Been Downgraded!” dealt with the favored status of the large ratings agencies in our country over the last several years.  The premise in that post was that responsibility for the financial crisis in this country beginning in 2007, and the resulting collapse of credit availability, housing prices and employment, was a direct result of the rampant and largely unregulated securitization of mortgage backed securities that Wall Street engaged in circa 2005-2007.  But while Wall Street may have been the “Evil Genius” that came up with the scheme, it would have never been possible but for the complicity of the big ratings agencies, who were the Shills in the Crowd. 

Without the investment grade ratings of Moody’s and S&P, in particular, the large pension and retirement funds could never have purchased the toxic tranches sold by the Wall Street investment banks.  You see, although investors sought the higher returns of the Private Label secondary mortgage market – there was a big problem.  Unlike Fannie and Freddie’s securitizations, which had the “implicit guarantee” of the federal government, the Private Label market had no such financial backstop.  So it seized on the next best thing – the imprimatur of the big rating agencies.  The agencies [for a fee] dutifully complied and rated Wall Street’s Private Label mortgage-backed securities as “investment grade” – meaning that they were suitable to purchase by the large funds.  Continue reading “Ratings Agencies Get Their Comeuppance – They’ve Been Downgraded! Part Two”

Even the most heinous of financial crimes are usually – if not always – the bi-product of willing participants.  Admittedly, there may be only one “evil genius” in the mold of Bernie Madoff, but invariably there are many willing enablers.  These are the peripheral players to whom we might contribute some degree of culpability or at least benign neglect: Never asking the tough questions; uncritically following the crowd; accepting rewards for silence and moral passivity; and, putting introspection on auto-pilot.  ~PCQ

Background.  Before we get to “The Comeuppance,” we need to address what might be moralistically described as “The Pride before the Fall.”

Certainly, the boom and bust of the credit and housing markets of 2005-2007, can be attributed to many factors; there were multiple players and participants.  For example:

  • There was pressure by the federal government to extend the dream of homeownership to persons who deserved it, but could not afford it;
  • There was Wall Street’s securitization machine that encouraged the mass marketing of mortgages;
  • Fannie and Freddie, heretofore wildly successful quasi-public corporations that seemingly served the secondary mortgage market well, both played a role in their own demise;
  • There was the big investment banks’ creation of a Private Label secondary market, thus enabling home loans to be given to borrowers that Fannie and Freddie wouldn’t touch;
  • Added to this were the financial and real estate industries, which convinced themselves that property appreciation was like a perpetual motion machine, and would continue forever;
  • And then there was the American Public, whose insatiable appetite for homeownership turned them into lemmings, following one another over a financial cliff. Continue reading “Ratings Agencies Get Their Comeuppance – They’ve Been Downgraded! [Part One]”

 In an “above the fold” front page article in the June 28, 2012 Wall Street Journal, we learn that Barclays PLC, one of the world’s largest banks,[1] “…agreed to pay $453 million in fines to U.S. and U.K. regulators after admitting that traders and executives tried to manipulate [LIBOR] interest rates tied to loans and financial contracts around the world.”

For many folks who had adjustable rate mortgages during the Easy Credit Era, circa 2005 -2007, they may know about LIBOR, since it was the ubiquitous index to which interest rate adjustments were tied.  And they may remember being pleasantly surprised when their interest rates adjusted downward, thus reducing the monthly payments on their first or second mortgages. LIBOR stands for “London Inter-Bank Offered Rate” and it represents the average interest rate at which a select group of large banks engage in unsecured borrowing between each other.  For more information on LIBOR, go to this link.

This story began back in 2008 when questions were being raised about whether Big Banks were manipulating the LIBOR process by influencing their submissions that are used to calculate the rates which are then used as global benchmarks. According to the WSJ article, LIBOR “…is set each day in London based on estimates submitted by a panel of banks. The banks are supposed to say how much it would cost them to borrow from each other in different currencies over different time periods.”   Since this is published information, apparently some Big Banks submitted low-ball rates …”to avoid looking desperate for cash amid the financial crisis.”  However, reading somewhat between the lines, it appears that understating their own rates at which they were borrowing was only part of the problem. Although it is not as clear as it could be from the article, it appears that Barclay’s traders were also attempting to profit on their bets that were linked to LIBOR by influencing their bank’s submitted rates.  In other words, the lowball figures were not just for reputation, but also to manipulate rates for profit. Continue reading “Barclays’ Big Settlement – Just Banks Being Banks”

Following the National Mortgage Settlement, B.L. Zebub, Belial Bank’s once fearless leader, is waffling on whether to jump into the fray, and start writing down the mortgage balances for his Beleaguered Borrowers.  Not that the milk of human kindness flows through his icy veins – he’s just trying to figure out an “angle” so he can game the system and still appear to care about The Little Guy.  For the last three years, Belial Bank has put up incredible loan modification numbers without actually having to modify a single borrower’s loan.  The trick, of course, has been to continually move the goal posts, so while their borrowers may get to the 80, 90, or 95-yard line, they never quite get the ball into the end zone.  Once they get close, Belial either tells them they don’t qualify, or they can’t get a mod because they didn’t get their paperwork in on time.  

B.L. has perfected this insidious shell game ever since he attended a banking industry seminar entitled “Loan Modification as Performance Art” which blends the best of Kabuki dancing and Liar’s Poker.  From that moment on, as if awakening from a deep sleep, B.L. had an epiphany:  “It’s not what you do that counts – it’s what you appear to do.”  This little known mantra explains why the Behemoth Banks continuously chant to distressed homeowners: “We’re here to help,”  when what they’re really saying is “We’re here to help you out of your home.” 

So once again, B.L. has convened his trusted advisors to discuss the national mortgage settlement, which, he has learned, contains some interesting “incentives” to encourage the Big Banks to take principal write downs on their borrowers’ loans.  B.L.’s plan is not to erase ALL borrower negative equity, but just enough to keep them in the game and on the field.  As a Big Bank Servicer, B.L. knows all too well that he needs his borrowers’ loans to stay in the servicing pool, however non-performing, as long as possible before letting them slip into the Abyss.  Since servicing fees for non-performing loans means Big Money to Big Banks, he needs to find a new gimmick to entice his borrowers.  He has concluded that principal write downs, courtesy of the National Mortgage Settlement, may be just the ticket.  Thus, for those distressed homeowners awash in negative equity, the promise of a principal write-down – however meager – may keep them circling the drain a bit longer before he pulls the plug.

Participating in this hastily convened conference call is B.L.’s legal intern, Les Guile, who was successful at the last meeting in totally alienating the head of Belial’s South American Derivatives Trading Desk, Chase N. Prophett, by suggesting he was “small minded” and “morally vacuous.”  Liz Pendens of the title industry is on the phone, fidgeting, as usual, in anticipation of some new hair-brained idea from B.L. and his cronies. Joining in on the call is Dee Faulting, the Queen of Hearts in default servicing. Dee has just arrived back from a recent default servicing convention where she was awarded the title of “Most Inspirational” for her unwavering willingness to foreclose as many homeowners as possible regardless of the severity of their hardship. Damian Faust, Belial’s chief legal counsel, is back with us, after weathering a storm of protest over the vanity plate, “TBTF,” that he ordered for his new Porsche Carrera.  Kenneth Y. Slick III (aka “KY”), is also on the phone conference.  He is B.L.’s “Idea Man” whose most recent claim to fame was to suggest that Belial institute a $10.00 debit charge fee after Bank of America, following a storm of protest, retracted its $5.00 fee.  B.L.’s loyal secretary, Lucy Furr, has dutifully transcribed this conversation, careful to redact even the hint of profanity, just in case Julian Assange got ahold of the transcript and made it public.  Alas, Lucy failed again, which explains how this purloined post fell into my hands. – PCQ Continue reading “Belial Bank Discusses Principal Write-Downs”

Introduction.  On February 9, 2012, the U.S. Department of Justice issued a press release announcing the “landmark” $25 billion dollar settlement with five of the largest Big Banks.  On February 9, 2012 President Obama told the nation that the $25 billion settlement was:    “…about  standing up for the American people, holding those who broke the law accountable, restoring confidence in our housing market and our financial sector, getting things moving.”

But was it? Were those who broke the law held accountable and if so, how?  The purpose of this post is not to criticize the settlement or those who fashioned it.  Rather, my purpose is to examine a major financial component of the settlement, to determine if, as touted, those who “broke the law” will, in fact, be held “accountable.”

Background.  In June, 2010, Jeffrey Stephan, a low level employee at Ally Financial, admitted in deposition that he routinely signed hundreds of foreclosure notices daily without reviewing the underlying facts supporting the case.  This astounding practice, which was later revealed to be SOP in most Big Bank foreclosures, introduced a new verb into the American lexicon: “Robo-signing.”  While banking apologists were quick to characterize these acts as “technical paperwork problems,” no amount of spinning could erase the fact that people were being foreclosed out of their homes through the widespread use of fraudulent documents.

Over the following few months, we learned that a variety of laws were routinely being broken: (a) Documents were signed by persons who had no familiarity with the facts leading up to the underlying foreclosure; (b) Affidavits were sworn to as fact, when affiants had no knowledge of what they were swearing to; (c) Forged or falsified documents were regularly submitted into court as a part of judicial foreclosures; (d) notaries routinely violated state notarization laws; and (e) official titles, such as “Assistant Vice President,” were handed out to low level employees or subcontractors, to sign legal documents, as if acting in an official capacity.

Shortly after the revelations, the attorneys general of all 50 states joined together to bring claims against five of the largest banks for their servicing[1] misdeeds: (1) Bank of America Corporation, Charlotte, North Carolina [together with BAC Home Loans Servicing, formerly Countrywide Homes Loans Servicing LP, Calabasas, California]; (2) Wells Fargo & Co., San Francisco, together with Wells Fargo Bank NA, Des Moines, Iowa; (3) JPMorgan Chase & Co., New York, along with JPMorgan Chase Bank NA, Columbus, Ohio;  (4) Citigroup Inc., New York, along with CitiMortgage, O’Fallon, Missouri; and (5) Ally Financial Inc., Detroit [formerly GMAC], along with GMAC Mortgage LLC, Fort Washington, Pennsylvania, and GMAC Residential Funding Co. LLC, Minneapolis.

The complaint filed by the A.G.s included claims of unfair and deceptive loan servicing, foreclosure processing, loan origination practices, violations of the False Claims Act and Servicemembers Civil Relief Act, as well as various charges relating to the treatment of homeowners in bankruptcy. Continue reading “The National Mortgage Settlement – Will The Big Banks Pass The Buck?”

“This case demonstrates that the notion that the bailed-out banks have somehow found God and have reformed their ways in the aftermath of the financial crisis is pure myth,” Neil Barofsky, former special inspector general of the Troubled Asset Relief Program.

There’s an interesting story on the May 30, 2012 Bloomberg website.  It involves Sherry Hunt, who is a country girl, has a working class background, married at 16, and no college degree.  Growing up, she fished, hunted, raised horses and was a fan of Marty Robbins[1] and Buck Owens.[2]   She spent 30 years working her way up the corporate ladder. She has now found herself the recipient of a $31,000,000 reward under the federal False Claims Act.  Perhaps the story doesn’t have the sex appeal of a Karen Silkwood movie, but at least Sherry Hunt lived to receive her money.  Here’s the Cliff Q-Notes summary of the Bloomberg article. Continue reading “Citibank’s $158.3M Settlement With Feds…Just Banks Being Banks”

[This is the second post in a 2-part series in which we take a not-so-nostalgic stroll down Memory Lane, revisiting the events that linger with us today – almost exactly five years after the collapse of the lender credit markets and the resulting cliff dive in housing prices.  The first post can be found here. PCQ]

Loan Documentation – The Promissory Note.  The promissory note is commonly referred to as the “debt instrument,” meaning it is the legal document that contains the promise to repay the loan. As discussed later, promissory notes may be transferred between various banks for various reasons.  It is less clear why banks transfer promissory notes that appear to be non-performing at the time of transfer [i.e., suggesting that the note had been “written off” by the holder and then transferred at a significant discount to a company that would either try to collect, or aggregate notes for assignment out for third-party collection.]  Nevertheless, it does appear that there has been an active market for the sale and transfer of promissory notes.[3]  In order to transfer a promissory note, Section 3-203 of the Uniform Commercial Code (“UCC”) is triggered. The UCC is a set of uniform laws applicable between the states that govern non-real estate commercial transactions.  To fully understand the legal issues raised by multiple transfers of promissory notes, it is essential to have a working knowledge of Articles 3 and 9 of the UCC.  This subject is beyond the scope of this post.

Loan Documentation – Trust Deeds and Mortgages.  Trust deeds and mortgages perform essentially the same function, i.e. securing repayment of the promissory note. Trust deeds and mortgages differ primarily in their nomenclature:

Introduction.  Well, it’s been nearly five years since the 3Q 2007 collapse of the credit and housing markets.  How time flies!  Are we having fun yet?  According to the Regional Multiple Listing Service (“RMLS™”) for the Portland Metro area, comparing January – April 2012 [the latest reporting period available at this time] with January – April 2011, closed sales increased 13.1%, pending sales were up by 17.5%, and total time on the market decreased 18.3%.  These are all good signs, as far as they go.

But there’s much more to the story; there are more troubling statistics that belie the cheerier numbers: April’s 2012 housing inventory was a dismal 4.7 months, compared to 7.2 in April, 2011.  In effect, there are fewer homeowners entering the market, and what’s available is being snapped up.  This is confirmed by the January – April, 2012 new listing numbers; they were down 9.7% compared the same period in 2011.  [Although I’ve not gone behind the housing inventory numbers, I suspect what’s happening is the lower priced homes, e.g. short sales and REO sales (i.e. bank inventory), are flying off the shelf, and higher-end properties and equity sales are languishing. – PCQ]

But the most sobering statistic is that over the same four month period, 2012 versus 2011, there is less than a 1% difference in both median sales price and average sales price.  At the peak of the Portland Metro market in August, 2007, the average home price was was $355,000.  Today it stands at $262,000.  From September 2007 to the present time, Portland Metro housing prices have been on a steady decline.  According to the RMLS™, annual average sale prices were as follows: 2007 – $342,900; 2008 – $330,300; 2009 – $289,900; 2010 – $282,100; 2011 – $263,300.  So for half a decade, Portland area housing, as measured by average price, has been in a dead calm, adrift and rudderless. Perhaps 2012 will yield better results. Time will tell. Continue reading “2005 – 2007: Big Bank Securitizations, Easy Credit, MERS, Housing, and the Foreclosure Crisis (Part One)”