If  the politicians in Washington today were instead the CEOs of private industry, they’d all have been fired by now.”  Anonymous [sort of]

Introduction. At the end of 2012 we all went over the Fiscal Cliff like Wile E. Coyote.  But unlike Wile E., we were able to grab a hold of a small scraggly branch on the way down, and eventually climb back onto terra firma…for the time being. The next looming crisis – the Debt Ceiling negotiations – is the second feature in this macabre satire called “Your Government at Work,” so don’t go away just yet![1]

Leaving a discussion of who’s to blame for another day [there’s enough blame to go around], how did the real estate industry fare in the Fiscal Cliff legislation [technically known as H.R. 8, American Taxpayer Relief Act of 2012], that was moved, seconded and passed on January 2, 2013?  Well, considering what was at risk, it appears we dodged a few bullets, albeit temporarily.  So here’s what the scorecard looks like right now: Continue reading “2013 Fiscal Cliff Legislation And Its Impact On The Real Estate Industry”

Following a rough and tumble year in the banking industry, Belial Bank’s feckless fearless leader, B.L. Zebub, believes it is high time to bring some levity and loyalty to the lowly troops who have been tirelessly foreclosing all the Beleaguered Borrowers they may have missed the first and second time around.  Mostly, however, B.L. is concerned about the reputational damage his bank has suffered this year.  Once known as the largest bank in America as measured by hubris, it is at risk of losing this mantle of distinction.  On the Chinese calendar, 2012 has been Belial Bank’s Year of the Rat.

B.L. is hoping against hope to instill a sense of pride among the rank and file; he knows that his company’s  promise to the feds to install a “single point of contact” [or “SPOC”] for every borrower seeking help, has become a sham.  Problem is, after a couple of weeks on the job, the SPOCs either quit, get fired, or leave to take more respectable jobs in the collection and repo industries. And then there was the public relations nightmare Belial Bank suffered after it was disclosed to the press that the top brass were giving prizes to supervisors who could run up the highest number of SPOCs for a single borrower in the shortest amount of time.  Last week’s big winner, Art O. DeLay, won a hundred crisp dollar bills and the afternoon off to visit The Devil’s Den Gentlemen’s Club, conveniently located just down the street from Belial’s headquarters.  [Cover charge waived.] Continue reading “Belial Bank’s 2012 Holiday Planning Meeting”

This is the second installment of my article looking back over the past five years at Portland housing statistics.  Part One examined the real reason for the housing crisis which officially commenced in 3Q 2007, and looked at the historic numbers for average and median (i.e. “mean”) sale prices according to the RMLS™. The link to Part One is here

 The Rest of the Story. Besides pricing over the past five years, what about time on the market?  Available inventory?  Number of listings? Closed sales? Let’s look at each one:

1.     Time on the MarketUntil 3Q 2007, an overheated real estate market was still burning through inventory.  In August 2007, the average time on the market was 56 days less than two months from listing to “pending sale.”[1]  The following month, September, 2007, banks began realizing that the drumbeat of subprime defaults was not going away.  They tightened their underwriting requirements almost immediately.  Over time, they began to even restrict borrowers from tapping their HELOCs based upon ZIP code.  As short sales and REOs began to fill the real estate marketplace, buyers and appraisers began viewing the sales figures as legitimate comps by which to gauge present value.  All the while, many potential buyers remained on the sidelines, waiting for prices to hit bottom.[2]  Many sellers who were fortunate enough to have equity during the following five years had to decide whether to wait until the market turned, or sell their home and recover far less equity than they had earlier.[3] Continue reading “Portland Metro Housing Prices – The Last Five Years [Part Two]”

Background – 3Q 2007.  Looking back, August 2007 was a memorable month, filled with good news and bad.  Based upon RMLS™ numbers, it was a statistically impressive month for closed residential transactions in the Portland Metro area.  The bad news was that it was the last such month we were to see. From that point forward, in almost every meaningful category, the local housing stats just kept getting worse.

The Credit Crisis – 3Q 2007.[1]  Quietly, and with little public fanfare, in the third quarter of 2007, worrisome cracks began to appear in the country’s financial system. They were first noticed by those who monitor these things, such as the Federal Reserve. They were also noticed by some who actually had a hand in causing the cracks to occur.[2]

In short, the credit markets began seizing up; access to short term borrowing engaged in by companies was drying up.  Normally, large businesses financed their daily operations through the sale of commercial paper, i.e. secured and unsecured short term loans.  The Federal Reserve recognized the crunch, and in September 2007, cut interest rates by 50-basis points, or one-half of one percent. The purpose in so doing was to provide liquidity for financial institutions and investment houses so they could continue to survive. Bloomberg explained it well in its September 27, 2007 article titled “U.S. Commercial Paper Drop Slows After Fed Cuts Rates (Update5)”: Continue reading “Portland Metro Housing Prices – The Last Five Years [Part One]”

OK, I admit it!  I am suffering from chronic MERS fatigue.  Every few days, in some part of the country, MERS gets sued by someone.  Sometimes it involves a pending foreclosure; other times it involves some state or county suing to recover lost recording fees.  And the beat goes on. MERS apologists, aka the Big Banks and their toadies attorneys, appear before one judge or another with arguments so specious as to make intellectually honest lawyers grimace and intellectually dishonest lawyers grin. – PCQ

On Thursday evening, November 15, we learned through the Oregonian, that the Multnomah County Commissioners unanimously authorized the filing of a lawsuit against Mortgage Electronic Registry System, also known as “MERS,” which describes itself as follows: Continue reading “MERS Fatigue”

“Language and speech are the means by which people communicate with one another.  However, with the Big Banks, their silence conveys the loudest message.”  [Anonymous – sort of.]

In Part One, I analyzed the recent Oregonian article, titled: “Lenders not engaging in Oregon foreclosure mediation program.”  The gist of my post addressed the process under SB 1552 by which borrowers were intended to be helped under the law.  However, it seems that the Big Banks are refusing to participate in a major component of SB 1552 – the part dealing with “at risk” borrowers who have applied for mediation in an effort to find a “foreclosure avoidance mechanism” such as a modification, forbearance, short sale, deed-in-lieu or some other method to avoid foreclosure. Continue reading “SB 1552 – Why Don’t The Big Banks Wanna Play? [Part Two]”

 “It’s one thing to be stubborn when relying on well-reasoned principle; it’s quite another to be stubborn relying on no principle.” Anonymous [Sort of.] 

 

An interesting, though not surprising, article recently appeared in The Oregonian, titled: “Lenders not engaging in Oregon foreclosure mediation program.”  Before discussing what’s behind the banks’ decision, it is necessary to understand that SB 1552, Oregon’s mandatory mediation law, is essentially focused on the following two groups:

  1. Folks whose trust deed is being foreclosed non-judicially.  That is, a Notice of Default has been recorded in the public records. This event triggers the mandatory mediation law, and requires lenders[1] to offer the borrower an opportunity to meet and mediate, to see if an agreement can be reached on a specific “foreclosure avoidance measure” [e.g. modification, deed-in-lieu, short sale, or any other such mechanism that avoids the foreclosure]. If the borrower timely responds, complies with other criteria, and pays a $200 filing fee, the foreclosing lender must participate.  If the lender does not participate, or fails to do so in good faith,[2] it cannot receive the coveted “Certificate of Compliance” from the mediator.  This Certificate must be recorded on the public record before the sale can occur.  No Certificate, no foreclosure.[3]
  2.  Folks who are not in a formal non-judicial foreclosure, but due to their economic circumstances, are “at risk” of default under their note and trust deed.  The law does not define at “at risk” borrower.  Thus, it could be someone who is still current, but is on the cusp of defaulting due to the high cost of their mortgage payments; or it could be someone who hasn’t paid for a year, but the bank has not yet commenced any foreclosure.  Thus, even if a bank routinely forecloses judicially, such as Wells Fargo, before the foreclosure is filed in court, an “at risk” borrower could request that Wells enter into mediation to see if the parties could agree on a foreclosure avoidance solution.  But the sticking point in “at risk” mediations is that SB 1552 contains no sanction for lender non-compliance.[4]

The recent Oregonian article focused largely on folks in category No. 2, since clearly, banks that commence non-judicial foreclosures in Oregon must comply.  So, with that preface, herewith are some snippets from the Oregonian article:

  •  “The state’s contractor charged with running the mediation program told an advisory committee in Salem on Wednesday that 132 eligible homeowners applied for the program on the grounds that they are at risk of foreclosure. The law allows at-risk borrowers to request a meeting with their lender even before they’ve missed a payment. *** But none of the mortgage servicers responded to the requests within 15 days as required under the law that created the program.”
  • “When asked by The Oregonian for the reason, the answer was simple: ‘They just don’t want to play,” said Jonathan Conant, who is managing the state mediation program on behalf of the Florida-based Collins Center for Public Policy. He added that the five largest lenders operating in the state have indicated they won’t participate in the mediation process under any circumstances.’”
  • “Meanwhile, lenders have also stopped filing out-of-court foreclosures. More are proceeding with court-supervised foreclosures, avoiding the mediation program altogether through the traditionally slower and costlier judicial foreclosure process.”
  • According to the article, here’s what the Lender’s Lobby and Lackeys say:
    • “There is just so much coming at these folks in terms of new requirements,” Markee[5] said. ‘Many of them are talking to their legal counsel and other learned people trying to make rational decisions about how to proceed with this issue.’” [Hmm. “Legal counsel and other learned people….” Now there’s a phrase that begs to be parsed. Hopefully, at least one such “learned” person will include someone schooled at the College of Common Sense.  Just a small dose would hopefully convince the Big Banks that totally ignoring Oregonians’ pleas for help will backfire.  More about this later. – PCQ] 
    • Markee and Kenneth Sherman Jr., general counsel for the Oregon Bankers Association, both told the advisory committee they couldn’t explain why mortgage servicers hadn’t responded to the requests for mediation. [Sorry guys – But as a fellow lawyer, I don’t believe that for a minute. First, you wouldn’t even talk to The Oregonian without your clients’ OK.  Secondly, you wouldn’t be quoted saying  anything without first having it vetted by your clients in advance. Third, to say you “don’t know,” really means that your Big Bank clients told you to say you “don’t know.”  Fourth, you do know.  The real reasons are pretty clear.  But if struggling Oregon homeowners were told the real truth, they’d quickly decide that your industry should never be permitted to conduct business in this state again. More about this later. – PCQ]

Before moving on, let’s look at the actual text of the law.  What follows is taken from Section 2(7)(a) of SB 1552, the “at risk” provisions.  The references to “grantor” refer to the borrower; the “beneficiary” is the lender or servicer that is foreclosing; the “trustee” is the foreclosure trustee who actually conducts the non-judicial foreclosure process; and the “mediation service provider” is The Collins Center for Public Policy, which has been designated by the Oregon Attorney General to coordinate all mediations arising under SB 1552.

  • “A grantor that is at risk of default before the beneficiary or the trustee has filed a notice of default for recording under ORS 86.735 may notify the beneficiary or trustee in the trust deed or the beneficiary’s or trustee’s agent that the grantor wants to enter into mediation. Within 15 days after receiving the request, the beneficiary or trustee or the beneficiary’s or trustee’s agent shall respond to the grantor’s request and shall notify the Attorney General and the mediation service provider identified in subsection (2)(b) of this section. The response to the grantor must include contact information for the Attorney General and the mediation service provider.”  [Emphasis mine.]
  • “A grantor that requests mediation *** may also notify the Attorney General and the mediation service provider of the request. The Attorney General shall post on the Department of Justice website contact information for the mediation service provider and an address or method by which the grantor may notify the Attorney General.”
  • “Within 10 days after receiving notice of the request *** the mediation service provider shall send a notice to the grantor and the beneficiary that, except with respect to the date by which the mediation service provider must send the notice, is otherwise in accordance with the provisions of subsection (3) of this section.”
  • “A beneficiary or beneficiary’s agent that receives a request under paragraph (a) of this subsection is subject to the same duties as are described in [the remaining applicable provisions of SB 1553].”

So when the 2012 Oregon Legislature said that when an “at risk” borrower requests mediation, “…the beneficiary or trustee or the beneficiary’s or trustee’s agent shall respond to the grantor’s request and shall notify the Attorney General and the mediation service provider….” [Emphasis mine.]  – what did it mean?

As lawyers, we were taught that when certain legislative action is called for, it can be divided into those that are required versus those that are only permissive [or in legal parlance, those that are “precatory”].  For example, words like “shall” and “must” are mandatory.  Compliance is compulsory.  Words such as “may,”  “should,” “can,” etc. are permissive.  An example of a permissive statement in a will, might be: “I hope that my son and daughter will keep the house in the family.” It is purely a wish or desire; it is not a requirement.  The will does not say that the son and daughter cannot sell the family home; to the contrary – they can do so without violating the terms of their inheritance.

However, as any sixth grader knows when his parents tell him that he “must do his homework before being allowed to play outside with his friends,” there is little room left for negotiation.  So it is with the use of mandatory words such as “shall” in the “at risk” provisions of SB 1552.  Had the Oregon Legislature intended for banks to have a  choice in deciding whether or not to respond to an “at risk” borrower’s request to mediate, it could have easily said so by using permissive rather than mandatory words.  By changing a single word, the mandate for how Big Banks are to deal with mediation requests from “at risk” Oregon homeowners would be entirely different.  For instance, it could have said:

“Within 15 days after receiving the request, the beneficiary or trustee or the beneficiary’s or trustee’s agent may respond to the grantor’s request by notifying the Attorney General and the mediation service provider identified in subsection (2)(b) of this section.”

Clearly, such a simple change was within the power of the drafters of SB 1552.  To put a finer point on all this, let’s look at other portions of the “at risk” provisions quoted above:

  • “A grantor that is at risk of default before the beneficiary or the trustee has filed a notice of default for recording under ORS 86.735 may notify the beneficiary or trustee in the trust deed or the beneficiary’s or trustee’s agent that the grantor wants to enter into mediation. [Emphasis mine.]
  • “A grantor that requests mediation *** may also notify the Attorney General and the mediation service provider of the request.” [Emphasis mine.] 

Clearly, the use of the word “may” in these two instances, is because not all “at risk” borrowers” may want to mediate.  And if they choose to mediate, they may not elect to notify the Attorney General. Those that do, can, and those that don’t, need not.  These are voluntary choices; not mandatory imperatives.

Voilà! Now we know that the drafters of this legislation understood the difference between “shall” and “may”!  They were used differently for a reason.  Now was this all that difficult?

Remember, that both the lender and consumer lobbies were at the table when SB 1552 was negotiated.  The Big Banks and their high paid lawyers could have pushed back on the choice of “shall” or “may” – but they didn’t.  And so, when I hear lawyers, lobbyists and lender lackeys say that the Big Banks need to consult with “legal counsel and other learned people *** to make rational decisions about how to proceed… I want to gag.  Why the handwringing? “Shall” means “shall.”  “May” means “may.”  It’s not like we’re trying to interpret the First Amendment to the Constitution.

So when the mandatory mediation law says that banks “shall” respond, there is no room to rationally argue that they have a choice of not responding. Ignoring “at risk” Oregon homeowners who want to mediate a foreclosure avoidance solution clearly violates the spirit and intent of the law.  And like so many other legal positions taken by Big Banks over the last five years, this too will come back to haunt them. [Continued in Part Two]



[1] This law does not apply to individuals, financial institutions, mortgage bankers, and consumer finance lenders     that commenced 250 or fewer foreclosures in the preceding calendar year.

[2] In Big Bank lexicon, the term “good faith” is noticeably absent, so we can expect an argument from the lenders’ lobby and lackeys, as to exactly what that term requires of them.

[3] Note that 1552 only applies to non-judicial foreclosures.  Thus, a lender could decide to avoid the mandatory mediation process altogether, and simply file the foreclosure in court, and proceed judicially.

[4] Lest someone say that this was a bonehead mistake, I think not.  Legislative negotiations on such a volatile issue can result in an impasse, where the consumer lobby must say to itself, better to have the provision included, even without a built-in enforcement mechanism, than to have nothing at all.  I agree.  The fact that mandatory mediation is in the law at all, is a minor miracle.  I’m comfortable with leaving it up to a judge to determine if it’s OK for the Big Banks to thumb their noses at Oregon’s distressed homeowners. So far, the courts have been lining up pretty consistently behind the Little Guy – Niday being the most recent example.

[5] Jim Markee, a lobbyist representing the Oregon Mortgage Lenders Association.

Compliments of several dedicated consumer attorneys, including Kelly Harpster, consumer attorney par excellence, and Sybil Hebb,lead attorney for the Oregon Law Center, a non-profit law firm for low income Oregonians, I am posting a Frequently Asked Questions publication discussing the recent Niday court ruling [which I have discussed here and here] as well as general issues regarding the infamous MERS company and important Oregon foreclosure information.  Although it is not “legal advice,” this post contains information “You can take to the bank.”  And after you take it to the bank, you can tell them what to do with it…. PCQ

1)  What is MERS?

MERS stands for Mortgage Electronic Registry Systems, Inc. It is a private company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States. MERS is owned by holding company MERSCORP, Inc. When MERS is named as a beneficiary in a trust deed, a related entity named MERSCORP records transfers

of the loan in a private database. Continue reading “FAQ on Niday Ruling & MERS/Non-Judicial Foreclosures in Oregon”

Economist [e·con·o·mist; noun] – An expert in the production, distribution and consumption of goods and services, but is a complete idiot when it comes to making good business decisions for homeowners awash in negative equity. Q-Law.com Unabridged Dictionary

The following July 26, 2012 article appearing on a default servicing website, dsnews.com[1] caught my attention the other day: “Economists in Survey Oppose Strategic Default, Principal Forgiveness.”  Herewith, are some of the gems: Continue reading “More Nuts and Dolts”

[Door Slamming]

Her:  “Honey, is that you?  It’s awfully early for you to come home.  Are you ill?”

Him: “Yeh, I know it’s early.  I’m OK. I just didn’t feel like working anymore.”

Her: “What’s wrong?  Don’t you enjoy your work kicking people out of their homes anymore?   I thought you loved having Big Bank clients who specialized in that sort of thing.”

Him: “That was then, this is now. After a couple of years of writs of executions and evictions, the thrill is gone.  I’m tired of watching U-Haul trailers getting packed up and children on the sidewalks crying.  I never thought I’d say it, but maybe I’m starting to grow a conscience – hard as that sounds.  Whatever it is, I’m beginning to wonder if I’m playing for the wrong team.  I’m noticing how people kinda shy away from me at the cocktail parties now.  Like I’m some kind of monster.  I remember early on when we had our soirees, I was the life of the party, regaling everyone with stories of my latest foreclosure, and how I kept postponing the auction sales letting the beleaguered borrower think they were actually going to get a loan mod, and then at the last minute, when they were on the 99-yard line, I’d drop the hammer and foreclose ‘em.  I had people rolling on the floor laughing.  Now no one wants to hear about this anymore.  I feel like the lonely Maytag Repairman.” Continue reading “A Curious Day At The Foreclosure Mill….”