Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Housing Market Foreclosure Chinese Water Torture

Housing-Market / US Housing Apr 20, 2011 - 02:49 PM GMT

By: Douglas_French

Housing-Market

Best Financial Markets Analysis ArticleThe real-estate bust continues at a pace akin to Chinese water torture. Home prices peaked five years ago, but a mountain of foreclosures still looms. RealtyTrac reports that filings rose 7 percent in March from the previous month but are down 35 percent from March of last year, when RealtyTrac recorded the highest number of default filings since the company started in boom-time 2005. Foreclosure filings for the entire first quarter fell to a three-year low.


RealityTrac's senior vice president, Rick Sharga, told MarketWatch that, once procedural issues start to be resolved, foreclosure filings will begin slowly to rise. He adds, "We're not expecting to see an explosion as lenders and servicers try to catch up."

"It's likely that these delays [in foreclosure processing] will push out the housing recovery further than anticipated," Sharga noted.

Those unaware of the tangled web of the world of mortgage defaults and modifications should chat with Duke and Tina Renslow. The Renslows have a loan on their home with, well, either Wells Fargo or the Federal Home Loan Bank of, well, nobody knows for sure.

There is no question that Wells Fargo was the originator of the note secured by a deed of trust on the Renslows' home in Washoe County, Nevada. The family had some money issues and contacted their lender in July of 2009 to see about a modification.

Of course, representatives for the lender said they would only discuss a modification if the borrowers were 60 days or more delinquent. Taking the hint, the Renslows missed a couple payments and contacted the bank. The bank then provided the couple with a Home Affordable Modification Program (HAMP) application.

The couple made a payment so as not to be 90 days late and thus in default, but carefully remained 60 days late so the bank would continue to speak with them about modifying the loan.

The Renslows completed the HAMP application and on September 17, 2009, received a letter from Wells Fargo stating "You did it!" and accepting the couple into the HAMP program. The bank told the borrowers they didn't need to make the October payment and the HAMP trial period would begin November 1.

Missing the October payment meant the borrowers were in default. However the Renslows received the HAMP trial-period packet indicating that Wells Fargo was their lender and their monthly payment would be $1,127.06.

The trial period would end in February of 2010, and if payments were made on time the couple would receive a permanent modification. The borrowers made (and the lender accepted) their three trial payments as agreed, but when the lender didn't send a modification agreement, the Renslows called Wells Fargo to see what the deal was.

Instead of receiving the modification, the couple was sent a letter informing them that they "may not be eligible" for HAMP because, "[Wells Fargo] service[s] your loan on behalf of an investor or group of investors that has not given us the contractual authority to modify your loan under [HAMP]."

The letter said for the Renslows to keep making their trial payments and that the file would be reviewed in a month. However, less than a month later, Wells Fargo informed the couple that it would not modify the loan because "the investor on your mortgage has declined the request."

The bank said it was keeping the trial payments and could only recommend a short sale or a deed in lieu of foreclosure to resolve their problems. Even though the Renslows had made their payments as agreed, Wells Fargo reported their loan 180+ days delinquent, making a refinance with another lender impossible.

On August 6, the bank started foreclosure by recording a notice of default. The Renslows elected mediation under a recently passed Nevada law. At the mediation, the bank first provided the original deed of trust demonstrating that it was the beneficiary and that the bank had every right to be negotiating at the mediation. A deed of trust is the legal document that is the security for the note, which is the obligation to pay.

Then, a Wells Fargo employee on the phone said the bank didn't own the loan; it was just the servicer. When asked to provide to the mediator the entity that actually owned the loan, so that the appropriate party could represent the lender side of the mediation, a two-hour search ensued, but to no avail.

And in fact it is still unknown who owns this particular loan. It's a federal home-loan bank (FHLB), but there are a dozen of these banks. There is no recorded assignment that might indicate which of the dozen might own the Renslow's note.

That the owner of the loan is an FHLB is significant. A Wells Fargo employee admitted that the bank refused to do the HAMP modification that had been previously agreed to, not because the Renslows didn't qualify, but because "the underlying lender did not participate in HAMP and thus had not authorized the servicer to enter into a HAMP modification."

Judge Patrick Flanagan's footnote on this point is precious:

This Court professes a certain shock at the fact that a FHLB, as a federal GSE, does not participate in HAMP, which is required for loans owned by FNMA and FHLMC, two other federal GSE's. The fact that the Federal Home Loan Mortgage Corporation authorizes HAMP modifications while the Federal Home Loan Bank does not, that WELLS FARGO has sold mortgages in the past to both of these entities, and that the election to sell to one over the other is completely outside of the borrower's control has a certain Kafkaesque quality. Had WELLS FARGO simply chosen FHLMC instead of FHLB, this entire matter would have been averted.

In the end, Judge Flanagan found that Wells Fargo, among other things, "lacked authority to negotiate and modify the loan," and in turn used the court's power to modify the note, for whichever Federal Home Loan Bank actually owns the loan.

The current principal is being reamortized, a new payment amount of $1,145 has been set, and the interest rate is reduced to 2 percent for the life of the loan.

This is one tiny loan among millions that are out there in a wilderness of GSEs, too-big-to-fail institutions, individual state-court systems, real-estate laws, and of course underwater homeowners who are just trying to figure out who to negotiate with.

This is the opinion of one judge on one small case. However, it should give pause to servicers thinking they can step into the shoes of note owners (known or unknown) to negotiate modifications or foreclose on properties. Mortgage Electronic Registration Systems (MERS), a firm with 50 employees in Reston, Virginia, claims to hold title to half of the home loans (60 million) in America, yet hasn't invested a dollar in a single loan — not to mention that it lacks the clear paper trail that the courts insist on.

Mr. Sharga might think the case chronicled above is an example of "working out the procedural issues." Others might be harsher in their description. Either way, this housing bust will take a long, long time.

Douglas French is president of the Mises Institute and author of Early Speculative Bubbles & Increases in the Money Supply. He received his masters degree in economics from the University of Nevada, Las Vegas, under Murray Rothbard with Professor Hans-Hermann Hoppe serving on his thesis committee. See his tribute to Murray Rothbard. Send him mail. See Doug French's article archives. Comment on the blog.

© 2011 Copyright Ludwig von Mises - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in