Financial News

[Balta1701]

Holy f***, anyone seen AAPL stock?

The Verizon/Ipad announcement?

[southsider2k5]

+ WMT selling Ipads

[lostfan]

The Verizon/Ipad announcement?

Even before that. Just skyrocketing over the past month.

[Balta1701]

Well, here's one guy who's credibility I have zero ability to judge putting out an estimate of loss exposure based on who knows what.

Banks could face losses of over $80 billion from the foreclosure mess—not so much from the moratorium on home seizures but from the flood of homeowner and investor lawsuits likely to follow, analyst Dick Bove said Friday.

 

The lawsuits are likely to focus on "fraud at every level of the process"—from packaging mortgages into bonds to selling them to investors, the Rochdale Securities analyst said in a note to clients.

 

The legal fallout could cost the industry more than $80 billion, about 10 times the amount that Bove sees banks losing from the foreclosure halt itself.

 

...

Bank of America, the country's largest mortgage servicer, could be forced to repurchase as much as $74 billion in mortgages, according to one estimate by Branch Hill Capital.

 

"The combination of the moratorium and the lawsuits are likely to cause the major mortgage originators to withdraw from the markets while they deal with their problems. There is no one to replace them," he wrote. "This could cause the rates on mortgages to rise, further depress home mortgage prices, and increase foreclosures."

TARP Tranch 3: Electric Boogaloo!

[Cknolls]

Holy f***, anyone seen AAPL stock?

 

 

AAPL makes up over 20% of NDX and QQQQ. AAPL as of three days ago was up over 43% ytd. It accounted for over 2/3 of the increase in the said indexes.

[Balta1701]

You should probably be a buyer of Bank of America right now.

 

I never thought I’d find myself typing those words. I’ve been a huge critic of Bank of America for years. I'm bearish on the financial supermarket model. I don't think the acquisition of Merrill Lynch is working out. I still don't understand the logic of buying Countrywide.

 

But Bank of America's recent decline—down almost 10% this week—is driven by fears that the bank could be hit with huge liabilities for faulty mortgage pools. And I’m pretty sure that is not going to happen.

 

Why not?

 

Because the politicians will not let the financial stability of the largest bank in the nation be threatened by contractual rights. Not when there’s an easy fix available that won’t cost taxpayers a dime.

 

Here’s what is going to happen: Congress will pass a law called something like “The Financial Modernization and Stability Act of 2010” that will retroactively grant mortgage pools the rights in the underlying mortgages that people are worried about. All the screwed up paperwork, lost notes, unassigned security interests will be forgiven by a legislative act.

 

There’s a big difference between the financial crisis of 2008 and the new crisis. In 2008, banks were destabilized by the growing realization that they were over-exposed to the real estate market. Huge portions of their balance sheets were committed to mortgage-linked investments that were no longer generating the expected revenues or producing losses. That was a problem of economics that could only be solved by recapitalizing banks or letting some of the biggest banks in the U.S. fail.

 

The put-back crisis is not driven by economics. It is driven by legal rights. And there’s simply zero probability that the politicians in Washington are going to let Bank of America or Citigroup or JP Morgan Chase fail because of a legal issue.

 

So here’s what I expect will happen. The lame duck session of Congress will pass a bill that essentially papers over the misdeeds of the banks that originated mortgage securities. Every member of Congress and every Senator who has been voted out of office will cast a vote for the bill. And the President will sign it.

 

Will the public be outraged? Probably. Financial bloggers will scream from the high heavens against another bailout of the banksters. Congress may try to create some cost for banks in exchange for the forgiveness, perhaps requiring more mortgage modifications.

 

But the much feared put-back apocalypse will be laid to rest.

 

If you’re skeptical about the possibility that this will happen, you have greater faith than I do in the ability of the political system to resist doing favors for bankers.

Link

[Chisoxfn]

Well, let's divide that up. There is a difference between softening the extremes, and just postponing the inevitable.

 

Putting false stops on foreclosures is the latter - its not helping anyone, those people aren't going to suddenly find big money, so all you are doing is making things worse. The banks have f***ed a lot of things up, but the speed of foreclosures was actually being handled pretty well. Messing with it is stupid.

 

Stimulus type actions, on the other hand, aren't really forestalling anything. They are softening the dip, but also blunting the rate of recovery a bit. So its changing the curve, but can still have an overall positive effect, all the way out to the next run up. My problem has never been with the idea of the stimulus in general - and its plain to see that it has indeed helped avoid a depression. Problem is, they spent the money in the wrong places, so the long term (and I mean past the recession entirely) hasn't been helped.

Or not, I can tell you all kinds of scenarios 2nd hand from my dad (who works the foreclosures constantly) about ridiculous deals given out by the banks because the bank party in charge of the transaction (often times a 3rd party REO company like REO America) will get frustarated with the stagnation of something falling out of escrow that the property will end up selling for ridiculously low amounts.

 

For example, last week a home just sold for 425K which has recent neighborhood comps no lower than 600K and had been in escrow multiple times for between 575 and 650 (over the past 6 months). This home originally sold for 1.3M. The reason the home sold was the property manager got frustrated and ended up taking the first offer because he needed to get it out of his portfolio and sold.

 

Now lets say the bank worked with the person living in the home, yes, the person who paid 1.3M. Say the bank just negotiates with the borrower and does some legitimate principal reduction, rate reduction, etc. Even all the way to a reduction to almost market value. Throw in some incentives that ensure the bank can get additional funds over a 5 year time (i.e., increase the borrowing balance) if the prices recover X amount of dollars, etc and all of a sudden a scenario exists where the people win (i.e., the homeowners) and the banks win (thus the investors win). I realize people have a lot of issues with certain people being forgiven for there poor investments but the reality is it is the proper business scenario and had things been done right initially the real estate market would not have suffered as much as it did, would have recovered quicker, and our economy as a whole would have been better off.

 

And if you think, I'm mistaken, lets just point out that foreclosures are typically sold at a discount, are typically destroyed (i.e., the borrower will take upgrades that they can out of the house and thus the lender either has to invest money so that the home is at least complete or up to code or sell it at a significant discount), and the banks are stuck with these worthless assets for the next 2 years.

 

Factor in that these investments are worth X amount on the books and in many instances have already been written off, so if the bank did things as I mentioned above, they'd have much better longterm rate of return.

 

The true problem with the current housing situations is that the plans didn't fix anything. The deals people get from the banks are pretty much worthless. There is minimal principal reductions going on and ultimately, lowering the rate on a home so the payments are more affordable is fine, but it doesn't solve the situation that the borrower is putting money into something that is worth 30-50% less than his loan value. So while the payments might be affordable, from a pure principal standpoint there is so many more reasons for a homeowner to instead live in the home for 2 years scott free (while the foreclosure process happens), take the credit hit, and than rent for a few years, and than after his credit recovers he can buy a new place at the new values.

 

Way too many people I know who have gone through the foreclosure process aren't poor or even out of work. They did take on a bit more than they could cheer, but realistically, they got into situations where the best business decision was to walk away. And they weren't walking away and becoming homeless, they were walking away and renting a nice place after saving up griploads of cash while there place was foreclosed.

 

The above isn't everyone, but it covers a decent number of people and ultimately it is ridiculous the banks haven't done more from a business perspective to solve things. Just look at it this way, if someone owes you 1M and you no longer can get that from them, but you can find a way to get 700K from them or 550 from someone else, wouldn't it make the most sense (even though the person didn't come through) to get the 700K.

 

I do realize that if banks started doing this more and more people would than all of a sudden stop making payments and join in on this, but quite frankly, that is how we should have bailed out America. It benefits the banks (as they get more on written-off or drastically devalued investments) and the people in this country benefit. Does everyone, no, but did everyone benefit by the huge bailouts we gave to GM and the banks, nope.

[Chisoxfn]

They're stopping foreclosures because they were rushing through them and evicting people who didn't have mortgages with them. No one was taking time to actually review the documents and verify that.

 

If that's how their going to operate, blindly signing tens of thousands of foreclosure documents as one GMAC manager/exec put it, then they need to be stopped.

I think it has more to do with the fact that they are starting to realize banks aren't acting in the best interest of the investors and money is being left on the table. Banks should be putting in there homework and making the best decision possible regarding whether to sell or "settle" with a homeowner and currently not enough is being done and banks should be doing that.

 

However, I don't think for one minute this f***ed up situation is going to get fixed.

[Chisoxfn]

The bolded is patently untrue - what they are doing is losing money, lots of it. Further, your scenario of a shadow foreclosure is falacy. That is not what happens, it can't because its all kind of illegal, so they'd never be able to complete the proceedings in the courts even if they tried it. I really don't get where you think your scenario is some sort of new "method".

 

 

 

No, they're not. That is not who I am talking about. I'm talking about the people who've been right, not the ones who've been wrong.

I have not heard of any situation in which they are foreclosing on people who have been making payments. Banks are not profitizing on these deals. They did receive bail-out funds and they are selling assets already reduced or nearly written-off for some sort of value. I'm not close enough to the process and investments as I was a couple years ago when I worked for a company where I had access to a lot more information, but I think what you are saying Balta is far from the reality of the process.

 

My understanding was that the party that started this whole foreclosure stoppage was a home in Maine and the ultimate issue was that the bank wasn't doing enough to work with the homeowner and part of that was that basically the homeowner would be willing to provide more for the home than the general public (or market price) could/would. And when thta is the case, it makes you wonder, why can't we do more to keep people in there homes.

 

And this bulls*** payment reduction isn't a solution and the current process isn't working (people using Obama's mortgage program just delayed the inevitable and still got foreclosed on).

[Chisoxfn]

Simple math here. You're a bank, holding the mortgage on a house that is going into foreclosure. That loan has paid 10-15% on it. Bare minimum, basically anything other than an interest-only mortgage. The house has lost 20% of it's value. You have 2 options...you can either have the inhabitants stop paying entirely, or you keep them on the hook with a "modification" where they keep paying for another 12-16 months. You have no intention of actually redoing the loan, but you extract another 12-16 months of payments from that family, foreclose on them anyway, and now you own the house and you have every dollar that they've paid into that mortgage. It's not always a win, but compared to the write-offs they were taking on those, a 2-3% loss thanks to the government telling the family to keep paying is a pretty big win.

One problem, if you modified and are paying for another 12-16 months, than they can't start the foreclosure process at that time and the foreclosure process isn't something that by law can happen overnight. In fact your scenario above is completely in-accurate based upon all of the real world real life real estate stuff that I'm privy to.

[Chisoxfn]

Class action only works if it was done wrong in the same way, across "millions" of mortgages. And further, such a class action would only succeed if the problems in foreclosure were found to be material in any way. Further still, the amount of damages they could claim are only significant if it was found that the foreclosure action itself was improper, because any other finding would only results in small liability.

 

So for all the bluster we are seeing over this, unless the foreclosures are all beyond messy and downright fraudulent or illegal, I don't see this becoming a huge impact.

And a class action lawsuit won't fix anything anyway. A few law firms win and everyone else loses.

[Balta1701]

One problem, if you modified and are paying for another 12-16 months, than they can't start the foreclosure process at that time and the foreclosure process isn't something that by law can happen overnight. In fact your scenario above is completely in-accurate based upon all of the real world real life real estate stuff that I'm privy to.

2 points.

 

First, paying for another 12-16 months, on top of the additional fees, is exactly what you talk about with the failure of the HAMP program in your other posts.

 

Second...the foreclosure process isn't supposed to happen overnight, but that hasn't stopped them.

[Balta1701]

And a class action lawsuit won't fix anything anyway. A few law firms win and everyone else loses.

Which is why I think that has a shot at happening...because it's a really low hanging fruit for a couple of law firms to jump on. Hell, even if it doesn't benefit homeowners, increasing the costs of fraud for the banks would be a good thing; they're getting way too used to fraud for free.

[Balta1701]

I have not heard of any situation in which they are foreclosing on people who have been making payments. Banks are not profitizing on these deals. They did receive bail-out funds and they are selling assets already reduced or nearly written-off for some sort of value. I'm not close enough to the process and investments as I was a couple years ago when I worked for a company where I had access to a lot more information, but I think what you are saying Balta is far from the reality of the process.

 

My understanding was that the party that started this whole foreclosure stoppage was a home in Maine and the ultimate issue was that the bank wasn't doing enough to work with the homeowner and part of that was that basically the homeowner would be willing to provide more for the home than the general public (or market price) could/would. And when thta is the case, it makes you wonder, why can't we do more to keep people in there homes.

I think your confusion really stems from the mismatch between these 2 paragraphs. On one hand the banks aren't profiting on these deals, on the other hand the banks are turning down what would seem to be opportunities to avoid foreclosures. Either the banks are the worst businesses in history (well...), or the banks have a way to make money while foreclosing on people who could otherwise find ways to afford modified payments.

[Chisoxfn]

I think your confusion really stems from the mismatch between these 2 paragraphs. On one hand the banks aren't profiting on these deals, on the other hand the banks are turning down what would seem to be opportunities to avoid foreclosures. Either the banks are the worst businesses in history (well...), or the banks have a way to make money while foreclosing on people who could otherwise find ways to afford modified payments.

But they are not foreclosing on people for no reason. The people that modify try and still fail, bank still loses. It just delays the process of when they stop making payments. Sure they get an extra 12 or 14 months worth of payments but than at that point forward, they go into foreclosure and that process is taking about 16 months on average.

 

And I'm not confused at all on this subject. A big problem is the industry is scared of the precedent that would be created if it went into full blown principal reduction and quite frankly it won't happen until the government backs it.

 

Oh and did I mention taxpayers win, because of these loans getting sold for way less they are kept at a reduced rate and thus the gov doesn't need to kick as much in for all the govnmt backed loans out there (thus savings the taxpayers here too).

[Chisoxfn]

I think your confusion really stems from the mismatch between these 2 paragraphs. On one hand the banks aren't profiting on these deals, on the other hand the banks are turning down what would seem to be opportunities to avoid foreclosures. Either the banks are the worst businesses in history (well...), or the banks have a way to make money while foreclosing on people who could otherwise find ways to afford modified payments.

Quite frankly the banks aren't in the business of buying/selling homes and even negotiating with its borrowers. That isn't what they do.

[Balta1701]

But they are not foreclosing on people for no reason. The people that modify try and still fail, bank still loses. It just delays the process of when they stop making payments. Sure they get an extra 12 or 14 months worth of payments but than at that point forward, they go into foreclosure and that process is taking about 16 months on average.

 

And I'm not confused at all on this subject. A big problem is the industry is scared of the precedent that would be created if it went into full blown principal reduction and quite frankly it won't happen until the government backs it.

 

Oh and did I mention taxpayers win, because of these loans getting sold for way less they are kept at a reduced rate and thus the gov doesn't need to kick as much in for all the govnmt backed loans out there (thus savings the taxpayers here too).

A couple points.

 

First, I'm afraid the last paragraph doesn't make any sense to me. The loans are kept at a reduced rate, somehow making government-backed loans cheaper? Doesn't that mean that the taxpayer's losses on the taxpayer mortage portfolio is increased?

 

Secondly, there's no difference between industry and government on this issue. The industry easily beat back the effort to allow for courts to alter the principal value. They made sure it went this way. And the government waltzed along there with them.

 

Here's a great example story of how this mess has worked. People have gone into it whether they're on the path to losing their houses or not. But the trial payments don't wind up counting towards the loan principal, so if the trial modification is denied, the House is immediately behind on its payments and ont he path to foreclosure. Just one example

Michele McBeth was not behind on her house payments and never had been. But money was tight for the Norfolk elementary school teacher in 2009. She hadn't seen a raise in years, and her son would soon be starting college.

 

McBeth was looking for any way to relieve some of the strain on her budget, so she contacted her mortgage company to see whether it could lower her payments.

 

The company offered help through the U.S. Treasury Department's Making Home Affordable program, and McBeth signed on to a trial loan modification.

 

Now, almost a year later, McBeth is facing foreclosure.

 

On Aug. 27, her lender's attorneys plan to auction her Bayview home on the steps of the Norfolk Circuit Court.

 

This wasn't how the Making Home Affordable program was supposed to work. The goal was to help people stay in their homes by modifying their mortgages and reducing their payments. But, in its haste to reach out to millions of homeowners, the government made several missteps. The rules kept changing, the calculations were complex, and many of the banks and mortgage companies tasked with implementing the program didn't fully understand it or have the staff to handle it.

 

The mortgage companies often did what was easiest for them, even if it wasn't exactly following the guidelines, said John Rao, an attorney with the National Consumer Law Center, based in Boston.

 

"The harm is significant for the consumer," he added. "In some respects, they're worse off than they were before."

 

Such is the case for many who signed up for trial plans that reduced their mortgage payments for several months while they waited to see whether they qualified for a permanent reduction.

 

Homeowners who didn't qualify were left with hefty bills for late fees and missed mortgage payments and a quick deadline to pay once their trial plan ends. Many face foreclosure.

[Balta1701]

Quite frankly the banks aren't in the business of buying/selling homes and even negotiating with its borrowers. That isn't what they do.

Whether it's what they're supposed to be doing or not, it's the mess they got into.

The Federal Home Loan Bank of Chicago has sued several of the nation’s largest banks, including its biggest shareholder, Bank of America Corp., alleging that their failure to disclose lax mortgage underwriting standards led the Home Loan Bank to suffer losses after purchasing poor-quality mortgage-backed securities from them.

 

The Home Loan Bank’s lawsuit, filed in Cook County Circuit Court, asks the court to void the sales of the securities and direct the banks to reimburse the Home Loan Bank plus 10% annual interest, according to Bloomberg News.

 

The $88-billion-asset Federal Home Loan Bank of Chicago is one of 12 federally chartered wholesale banks around the country that make low-interest loans to their member banks and in the past have purchased mortgages originated by their member banks. With one of the biggest mortgage-buying programs of any of the 12 wholesale banks, the Chicago institution has struggled through the recession. It’s under orders from its federal regulator not to pay dividends to its members and is redeeming their shares, which don’t trade, only under very limited circumstances.

 

As of June 30, the Federal Home Loan Bank of Chicago reported having $3.4 billion in mortgage-backed securities purchased from private banks and has recognized $800 million in losses on that portfolio.

 

“The defendants did not tell the bank the truth about the loans that comprised the mortgage pools,” the lawsuit said, according to Bloomberg. While the Federal Home Loan Bank believed the securities were “safe,” “in fact the bank purchased a toxic stew of doomed mortgage loans,” Bloomberg quoted the complaint as saying.

 

In addition to Bank of America, defendants include Citigroup Inc., Goldman Sachs Group Inc. and Wells Fargo & Co. Representatives of the banking giants either declined to comment or couldn’t be reached immediately by Bloomberg.

[Balta1701]

Their loan originally was with subprime lender Argent Mortgage, then LaSalle Bank, then Wilkshire Financial. The loan was sold to Bank of America in September 2009, although the couple said they weren't initially notified. They made their September and October payments to Wilkshire.

 

"I had no clue. I just made my payment," Michael Rendes said. "I knew I had a mortgage." Wilkshire then told him the loan had been sold. He called Bank of America many times, but bank employees couldn't find the couple in the system. They tried using names, Social Security numbers, the parcel number, dates of birth, everything.

 

Their two payments were cashed but apparently not forwarded to Bank of America, or at least not posted to the couple's account. In November, they received a letter that they were in default.

 

The couple had the money to get caught up, but they said Bank of America wouldn't take it.

 

"It's a nightmare," Rendes said. "I'm paying lawyers. I'm going to the Justice Center all of the time. I'm almost to the point where I want to take that house apart and tell them to shove it."

Link

[Chisoxfn]

A couple points.

 

First, I'm afraid the last paragraph doesn't make any sense to me. The loans are kept at a reduced rate, somehow making government-backed loans cheaper? Doesn't that mean that the taxpayer's losses on the taxpayer mortage portfolio is increased?

 

Secondly, there's no difference between industry and government on this issue. The industry easily beat back the effort to allow for courts to alter the principal value. They made sure it went this way. And the government waltzed along there with them.

 

Here's a great example story of how this mess has worked. People have gone into it whether they're on the path to losing their houses or not. But the trial payments don't wind up counting towards the loan principal, so if the trial modification is denied, the House is immediately behind on its payments and ont he path to foreclosure. Just one example

Balta, that article tells me nothing. It tells me she renegotiated, but nowhere does it say why she got foreclosed? Maybe it is because she decided to stop making the payments. I see nothing to show me that anything was done improperly. Additionally, when you renegotiate with a bank you need to agree to something before it works and if what you agree to isn't something you can do or afford than you shouldn't agree to it.

 

Essentially the government has guaranteed a huge chunk of the loans that exist right now. So, if these loans are fully foreclosed upon and than sold at a reduce value, the government (and ultimately the taxpayers) will pay the burdon of these transactions ultimately due to the federal guarantees out there. However, if a program was properly handled, the banks would reduce the principal while ensuring they receive payments (basically, actually having a good loan assistance program which would actually allow people to afford and stay in there homes), the actual loan default that is guaranteed would be at a much reduced rate, thus, ultimately, there is a major benefit behind the government backing a much more aggressive program.

 

There are a ton of other positive trade-offs regarding a much more beneficial program.

 

[Balta1701]

Balta, that article tells me nothing. It tells me she renegotiated, but nowhere does it say why she got foreclosed? Maybe it is because she decided to stop making the payments. I see nothing to show me that anything was done improperly. Additionally, when you renegotiate with a bank you need to agree to something before it works and if what you agree to isn't something you can do or afford than you shouldn't agree to it.

She got foreclosed on because she missed a payment...because the mortgage modification company told her to skip a payment. From that point on, they started tacking on fee after fee until she was canceled out of the modification program and given the option of either paying the full amount with fees or losing the house.

It wasn't a huge savings, but McBeth said she was happy to have it. The next thing the woman said, however, was surprising.

 

"She told me to hold off on making the August payment and not make my next payment until September."

 

McBeth had never missed a house payment before and didn't want to start. The woman from EverHome explained it was just part of the process, McBeth said.

 

For several months thereafter, McBeth made the lower mortgage payments.

 

Then in November 2009, EverHome informed her that her application for a permanent loan modification had been denied. The company offered her two options. She could pay back all of the $2,000 now due, which included several $50 late fees for each month that she had paid the lower amounts under the trial plan.

 

There are a ton of other positive trade-offs regarding a much more beneficial program.

I'm not disagreeing on that point, from the taxpayer's point of view. I'm just arguing that we wouldn't have the current system if the banks didn't want it this way; their lobbyists designed the entire structure of the program. It's been a disaster for everyone except the banks.

 

[NorthSideSox72]

She got foreclosed on because she missed a payment...because the mortgage modification company told her to skip a payment. From that point on, they started tacking on fee after fee until she was canceled out of the modification program and given the option of either paying the full amount with fees or losing the house.

 

 

 

I'm not disagreeing on that point, from the taxpayer's point of view. I'm just arguing that we wouldn't have the current system if the banks didn't want it this way; their lobbyists designed the entire structure of the program. It's been a disaster for everyone except the banks.

 

So what you have proven here, is that...

 

1. The HAMP program has been poorly implemented

2. There are instances where mortgage companies are f***ing it up

 

What is the surprise there? And still, your original point that the mortgage company somehow makes out well in all this is unsupported. They will LOSE money by foreclosing on that property, they aren't getting away with a fast one. They are screwing up, and in the process, its sounds like, screwing themselves AND their customers. I'm sure that happens here and there, no doubt.

 

[Balta1701]

What is the surprise there? And still, your original point that the mortgage company somehow makes out well in all this is unsupported. They will LOSE money by foreclosing on that property, they aren't getting away with a fast one. They are screwing up, and in the process, its sounds like, screwing themselves AND their customers. I'm sure that happens here and there, no doubt.

Then here's my question, and this is why I refuse to believe that "they're not getting away with a fast one".

 

If everyone is losing money on this...if the mortgage servicers, the banks, and the investors are all losing money...isn't it worth their money to build a better working system? Why do we have this system?

 

If you're running a program at a bank/investment firm that you set up and run from the ground up, and it takes a good portion of your investment portfolio and significantly degrades it, losing your company a ton of money, shouldn't you be fired? Wouldn't your superiors step in and say "Stop losing money" if they were losing money?

 

Either these guys are the worst businessmen in history or they're not losing money like you say they are.

[NorthSideSox72]

Then here's my question, and this is why I refuse to believe that "they're not getting away with a fast one".

 

If everyone is losing money on this...if the mortgage servicers, the banks, and the investors are all losing money...isn't it worth their money to build a better working system? Why do we have this system?

 

If you're running a program at a bank/investment firm that you set up and run from the ground up, and it takes a good portion of your investment portfolio and significantly degrades it, losing your company a ton of money, shouldn't you be fired? Wouldn't your superiors step in and say "Stop losing money" if they were losing money?

 

Either these guys are the worst businessmen in history or they're not losing money like you say they are.

You are trying to make something black and white, that isn't.

 

First, yes, obviously, the systems need improvement. Second, do you really think that any institution dealing with something as complex as mortgages and foreclosures and HAMP is going to get everything right, every time? Third, you have these banks taking on all these new programs and regulations, and it takes time to adjust to them. In the meantime, people will get hurt, I never said otherwise.

 

Still, this particular situation is weird to me. It sounds as if, if she missed just one payment, but kept paying, she'd be at worst a month behind. That one month of mortgage payment is not enough to make financial sense of the bank to foreclose - it would cost them a lot more than that just to handle a foreclosure.

 

[Balta1701]

You are trying to make something black and white, that isn't.

 

First, yes, obviously, the systems need improvement. Second, do you really think that any institution dealing with something as complex as mortgages and foreclosures and HAMP is going to get everything right, every time? Third, you have these banks taking on all these new programs and regulations, and it takes time to adjust to them. In the meantime, people will get hurt, I never said otherwise.

 

Still, this particular situation is weird to me. It sounds as if, if she missed just one payment, but kept paying, she'd be at worst a month behind. That one month of mortgage payment is not enough to make financial sense of the bank to foreclose - it would cost them a lot more than that just to handle a foreclosure.

I really feel like your guys' opinion that it's just a casual series of unavoidable mistakes really misses the essence of the problem. Your argument makes sense if the case I cited above was a rarity. It really isn't; that is explicitly how the program has worked for the millions of people who have had their trial modifications denied. There are a ton of examples. If it's an accident and a mistake...it's a mistake that has lingered for a year and a half, which no one has had any reason to correct.

The trial period lasted five months. During that time, Dennis would get notices from the lender saying he owed money on his mortgage, and that he could face foreclosure if he remained delinquent. He would frantically call his contact at the lender, and they would patiently explain that the trial payments go to a separate account, and everything would get folded in once a permanent modification was approved.

 

But then, one day Dennis called up his lender for a different reason, and the person on the other end casually mentioned that he had been denied for a permanent modification. This meant that he owed all of the back payments, missed payments, fees and penalties, which came to close to $10,000. His credit took a hit from the missed payment, and the bank could immediately foreclose on his property, a consequence of being the equivalent of 90 days behind on the loan.

 

Citi Mortgage never officially informed Dennis that he was denied for the modification. “They said they sent a letter, and then they said they don’t send letters unless I call a certain department. So I called the department, and they told me they don’t send letters from there anymore.” At one point, he told his contact at the bank that he was recording the conversation, and she refused to speak with him.

 

Dennis has whittled it down to being 50 days delinquent. He is in contact with Citi for an in-house modification – which has terms much more favorable to the banks. “Again, they’re making it sound like a sure deal,” but Dennis is skeptical this time. Instead of modifying the interest rate over the life of the loan, the Citi modification would merely lower the rate for five years, with a gradual reset to the original rate. Because it’s in-house, Citi can enact more favorable terms for themselves. And they never had any pressure to use the HAMP program for modifications, so there’s seemingly no reason for them to do so. “They’ve had a year to get around HAMP,” Dennis said.

 

“I have made every payment I’ve been asked to make,” Dennis told me. “I haven’t defaulted, and I played by the rules. And yet I’m facing foreclosure.” Despite being significantly underwater, Dennis doesn’t want to walk away from the home, a common reaction at this point, because he is proud of what he did to fix it up and the effort that took.

LAT

The couple received a notice of default on their mortgage from Wells Fargo in August 2009. But a bank rep said there might be some hope. The Kaharas were advised to seek assistance through the Home Affordable Modification Program, a federal program intended to help homeowners by modifying loan terms.

 

In December, they were notified by Wells that they were eligible for a three-month trial loan modification that would lower their monthly payments to about $1,400. The Kaharas managed to make all subsequent payments in full.

 

After the three months were up, Ellen Kahara said, they were told by Wells that their case was still under review and that they should keep making the $1,400 payments. They did.

 

The bank continued requesting paperwork as part of its review process. Ellen said she called Wells on Aug. 9 and for days afterward to check on the status of their loan modification but never got a call back.

 

The Kaharas received a letter from Wells dated Aug. 11 saying that their application for a permanent loan modification had been rejected. The letter said the Kaharas would have 30 days to discuss other options available to them.

 

"No foreclosure sale will be conducted and you will not lose your home during this 30-day period," the letter said.

 

But on Aug. 18 there was a knock at the door around 8 in the morning. Mike Kahara said a young man wearing a white polo shirt and dark slacks introduced himself as Sebastian Cruz of the investment firm Pacifica Cos.

 

Cruz said his firm had purchased the house and that he would offer the Kaharas $1,500 if they'd agree to vacate the property within two weeks.