They Own Nothing

Apparently, Judge Christopher A. Boyko of the Eastern Ohio United States District Court, on October 31, 2007 dismissed 14 Deutsche Bank-filed foreclosures. The original article can be viewed here. In the post, it states that the ruling was based on lack of standing for not owning/holding the mortgage loan at the time the lawsuits were filed.

[..]The Court's amended General Order No. 2006-16 requires Plaintiff (Deutsche Bank) to submit an affidavit along with the complaint, which identifies Plaintiff as the original mortgage holder, or as an assignee, trustee or successor-interest.

Apparently Deutsche bank submitted several affidavits that claim that Deutsche was in fact the owner of the mortgage note, but none of these affidavits mention assignment or trust or successor interest.

Thus, the Judge ruled that in every instance, these submissions create a "conflict" and they "do not satisfy" the burden of demonstrating at the time of filing the complaint, that Deutsche Bank was in fact the "legal" note holder. [..]

The other items in the post, that will take some further investigation and dissemination of the facts, include the revelation that Deutsche Bank was not the originator of the notes, only the assignee under its securitization agreement, and is attempting to foreclose on these assigned notes without taking possession or proving factual assignment. Thus, these MBS or CDO pool holders own nothing. It's worth further investigation to confirm.

[..]Jacksonville Area Legal Aid Attorney, April Charney, broke this news to us via email and made these comments in regards to the Ohio Federal Court ruling (emphasis ours):

This court order is what I have been saying in my cases. This is rampant fraud on every court in America or nonjudicial foreclosure fraud where the securitized trusts are filing foreclosures when they never own/hold the mortgage loan at the commencement of the foreclosure.

That means that the loans are clearly in default at the time of any eventual transfer of the ownership of the mortgage loans to the trusts. This means that the loans are being held by the originating lenders after the alleged "sale" to the trust despite what it says per the pooling and servicing agreements and despite what the securities laws require.

This also means that many securitized trusts don't really, legally own these bad loans.

In my cases, many of the trusts try to argue equitable assignment that predates the filing of the foreclosure, but a securitized trust cannot take an equitable assignment of a mortgage loan. It also means that the securitized trusts own nothing.[..]

Google Basewide? One Step Away in California

This is one of those "outlandish and inconceivable" notions that occurred to me as I was scanning a few news sites this weekend. Hey, if Jim Cramer can speak in generalities and sound bites on CNBC and induce the Fed to drop rates, then here's my two cents as I see a couple of dots that could be connected some time soon.

Question: If Jason McCarthy, who is the Development Manager of Real Estate for Google (Google Base), were to make a Redfin-type deal with Countrywide in California, what would be the impact?

Scenario: Google Base is attempting to deliver relevant real estate content to the consumer in a format most potential buyers are familiar with and aiming to be the prominent provider of property information aggregation; a new MLS system, if you will, with inventory provided by the agents and owners themselves at no charge.

Redfin is a new brokerage concept that hires in-house (employee) agents to oversee the listing transaction of an owners' home for a one (1%) percent fee, which effectively saves the owner between 2% and 5% of the purchase price in terms of a sales commission represented through traditional real estate brokerage. Redfin is VC funded and attempting to turn a profit through volume, which means that the jury is still out as to whether this type of brokerage business model will be profitable in the long run.

Countrywide is the largest lender in the country and quickly becoming the largest residential land owner in California. Using the chart, the amount of REO properties owned by Countrywide as of Sept. 1, 2007 is $995M in aggregate value, which is most likely going to grow month-to-month another 20% in October.

In the 1990's, the government established a quasi-public institution (Resolution Trust Corporation) to inventory, rehab and sell those REO properties taken back as a result of the Savings and Loan bailout. This time around, is that entity going to be the likes of a Google or Redfin. Is it inconceivable that Basewide or RedfinRTC would be established at a .5% listing commission rate on a Countrywide portfolio that is going to exceed $1B by the end of the year (if not the end of this month)?

I remember those days in the late '80s and early '90s in Houston when entire neighborhoods of 4,000 SF homes were abandoned, with the keys still stuck in the front doors for the RTC officials to pick up when they had time. But, this time around with the Google Van roaming the neighborhoods creating the little "Street View" guy for our viewing pleasure on Google Maps, it might not be that must of a stretch to contract with Google Base to inventory the entire Countrywide portfolio for a transaction fee and reduced listing commission.

Once Google Basewide has its California Broker's license, such a scenario would put Google on the Real Estate map in a hurry. Such a move would certainly get NAR's attention in Chicago (as well as CAR's in Sacramento). The 800 lbs. real estate gorilla (NAR, that is) will be forced to wake up and confront a growing threat to this industry; technology and its endless bank accounts.

National: The Credit Window is Now Closed

"The credit window is now closed," writes strategist Barry Ritholtz in his blog, and the "multi-engine plane" that is the market has lost one of its sources of power ("liquidity - what is occurring today is a full blown repricing of the liquidity spigot slowly turning off").

As for the U.S. housing market, economist Mark Zandi expects a lot more pain, but not a recession. Here are some highlights of his forecast, based on a study using anonymous data collected by consumer credit agency Equifax:

1. Home prices will fall 10% from the peak nationally, more in the bubble regions in California, Florida, Nevada, Arizona and Washington, D.C.
2. Home sales could bottom later this year, home construction could bottom early next year, and house prices could bottom late next year. It'll be 2010 before the housing market could be termed "normal."
3. About 17% of total mortgage debt is at risk, totaling about $2.5 trillion in subprime, Alt-A and jumbo debt. About $1.4 trillion is at serious risk of default. Investors will lose about $113 billion as $460 billion worth of mortgages default.
4. About 20% of the subprime loans written in the last half of 2006 will fail, with the peak of the defaults not coming until 2011. A "significant number" of these borrowers never made a single payment.
5. More than 2.5 million first mortgages will default this year and next year. Subprime borrowers will experience significant financial distress.
6. The U.S. economy will grow less than 3% annualized through the middle of 2009. A healthy job market should prevent a recession, although the jobless rate will likely rise to 5% from 4.5% by the end of the year.
7. Consumer spending has already slowed and will slow further.

View article..

Online: New Online Maps for Real Estate Users

Since Google made its maps available for customization last year, savvy programmers have created thriving businesses by adding layers of information.

So in May, Washington-based startup FortiusOne launched GeoCommons, a cartographic portal where users can easily create their own mashups.

The site has 2 billion pieces of localized data -- from census figures and school district budgets to water-contamination and traffic-congestion hot spots -- and it is rapidly adding more. Two examples are below offered by users that collected data through business and government sites:

1. Foreclosure Filing and the Subprime Collapse: Foreclosure filings are starting to hit hard. People all over the country are having trouble paying off their ARMs (Adjustable rate Mortgages) and houses are being foreclosed. This is having a ripple effect in the economy, Home Depot and Lowe's have already cut their earnings estimates and it looks likely that more trouble is on the way. Our map will show you the locations of foreclosures, auction notifications, and other housing indicators. this map shows the Top 500 Zipcodes ranked by number of foreclosures.

2. House Hunting Made Easy: I wanted to demonstrate how to speed up a home search by using Intersection Heat Maps. In my scenario, we are looking for a home in neighborhoods that have large numbers of kids, large numbers of tech workers, newer homes, low crime rates, and large number of parks. This data includes information on subsidized housing in the lower 48 states. The source of the data is HUD. A full description of the variables and coding used in the dataset is provided on the HUD website: http://www.huduser.org/picture2000/dictionary.pdf

National: The Great Mortgage Party Hangover

This is a recent article I pulled from Inman and the assessment of the troubles that has yet to affect our industry. Lou Barnes discusses the premature "housing crash" that the bond market buyers anticipated a year ago, only to get clobbered with resilient market data ("People are buying cars, going to restaurants, taking vacations in Tahoe.. just not buying houses" from a recent Sacbee article). Now, the market pundits and bond agencies are acknowledging their timing errors and are re-rating their methodologies with stricter guidelines, leading to a two-part "end game": (i) where are the loses? and (ii) what is the effect?

Part one, the mortgage losses. Very little money has been "lost." The market value of the securitized mortgages in question has fallen 30-70 percent, but if you don't sell, you don't have to recognize loss. The re-rating of this stuff to junk will force institutional investors to sell, to recognize, and probably depress value farther. We will also learn who has lost, and it's going to be an embarrassing and painful parade. This week, S&P, Moody's and Fitch downgraded no more than 1 percent of the trash outstanding; the outcome for the other 99 percent is sure as sunrise, the holders in frozen panic. Market losses from forced sales are near, but there is still little actual credit loss from defaulted mortgages -- that's still ahead, and the loss magnitude will depend on the depth and length of the housing recession.

Part two, the housing market. Housing moves slowly, in an aching grind. Sellers resist discount, preferring to hold vacant, or to rent at a loss, or to stay put. Loan servicers are slow to foreclose: they are not staffed to do so (or to do anything except to send you all that mail trying to get you to buy insurance and pre-pay programs), fiddle endlessly and pretend to negotiate workouts of hopeless cases. The housing picture is changing -- not selling, just changing. Foreclosure data is notoriously bad (every county and state has different procedures and law), but RealtyTrac's trend is probably about right, if only in consistency of error. The pattern is stark: national foreclosure filings are up 56 percent year-to-date, but mortgage defaults are up 86 percent -- foreclosure lag. Based on housing markets early to the distress party, Colorado the leading example, Bubble Zone foreclosures will increase for at least the next three years (announcements of bottom in 2008 are fantasy-based). Do some math. Home resales run a tad over 6 million annually, plus another 1 million new-builds. Re-sellers still want to re-sell, and builders, desperate to unload land and to maintain survival volume, are still building at undercut prices. Demand is off (un-affordability and anxiety), but a new seller has arrived: first-half '07 foreclosure filings just short of 1 million. Pull-through from filing to foreclosure is unpredictable, but it looks as though re-sellers and builders will soon be joined by another million foreclosure re-sellers (or two, or three...). That's market saturation, not clearing. We are going to get spillover into GDP. Book it. And we're going to see a serial credit panic. However, the disaster mongers are mistaken. Credit losses are distributed globally, and there is great long-term strength in housing (population growth, land scarcity, wealth...). The forecast here continues to be for a long period of flat prices in the Bubble Zones, but vastly more foreclosure damage from flat prices than previously modeled or imagined, the Great Hangover from the '01-'06 Mortgage Credit Party.

Mortgage resets: Record bill coming due

NEW YORK (CNNMoney.com) -- More than two million subprime adjustable rate mortgages (ARMs) are poised to reset at much higher rates in coming months, worsening an already suffering housing market.

Borrowers who took out hybrid ARMs in 2004 and 2005 to secure low "teaser" rates for the first two or three years of the loan may see their monthly mortgage payments climb by 35 percent or more.

Current Home Equity Rates

Type	Overall avgs

$30K HELOC	7.20%
$50K HELOC	7.09%
$30K Home Eq	8.14%
$50K Home Eq	8.07%
$75K Home Eq	7.96%
Find personalized rates:

Video More video Money Magazine's Walter Updegrave gives a reader advice on the best way to get her retired parents a reverse mortgage. Play video

Consumer groups and politicians worry that hundreds of thousands of subprime ARM borrowers will be unable to keep up with their mortgage payments and will lose their homes.

"In October alone more than $50 billion in ARMs will reset," according to Mark Zandi, chief economist and co-founder of Moody's Economy.com. That's a record, according to Zandi.

Foreclosures: Hardest hit zip codes

A buyer in 2005 with poor credit and limited means might have signed on for a $200,000 2/28 hybrid ARM, locking in a fixed rate of 4 percent for two years. After paying $955 a month, his bill would now be set to spike to $1,331, a 39 percent increase.

Until recently, rising home prices bailed out many ARM borrowers in trouble. They could raise cash with cash-out refinancings or home equity lines of credit. If worse came to worse, they could sell the house and get some money back.

But prices have stabilized or slipped in many markets. (Latest home prices.)

Click here for article..

Florida pre-foreclosures spike for first half of '07

Florida took the No. 2 spot among the states with the highest preforeclosure filings from January through June, foreclosures.com reported Monday.

Florida posted 90,145 pre-foreclosure filings -- homeowners who have defaulted on their mortgages but have not yet lost their homes -- or 1.42 percent per capita. That compared with 39,037 filings, or .62 percent per capita, for the same period in 2006.

Nationwide, three out of every 1,000 homeowners lost their homes to foreclosure in the first half of the year, which represents a 41 percent increase compared to the same period last year. There also were more than 507,000 preforeclosure filings in the United States, or nearly seven of every 1,000 households, for the first six months of the year.

Click here for link..

Top 10 foreclosure markets

Where the action is: Here are the top 10 markets for foreclosed homes as of September 2006, according to data from Realty Trac. Click here for link..

Modesto - SJ Valley Home Bidders Beware..

Another home foreclosure auction is headed to Modesto, and it's got potential bidders hankering for a bargain. But before you start waving your bidding number in front of a fast-talking auctioneer, there are things you should know about home auctions. Most of the more than 500 people who attended last month's auction in Modesto never had seen houses sold that way. The process caused confusion because some deals quickly fell through with several of the high bidders. Those houses ended up being auctioned off again and again, until the auctioneer found bidders who were financially qualified to purchase the homes and had brought sufficient down payment funds.

Bidding rules will be different for the next big auction, scheduled by Hudson & Marshall for July 19 at Modesto Centre Plaza. And more auctions are expected to be held later this summer and fall. That's because lending institutions have repossessed thousands of Northern San Joaquin Valley homes, and they're eager to sell them any way they can. So here are some bidding tips for first-time buyers, seasoned real estate investors and everyone else who is considering buying a home at auction:

RESEARCH HOME VALUES — "It's definitely a buyer's market and everything's on sale right now," said Ken David Elving, co-owner of Matel Realtors. He is representing the sellers of five homes that will be auctioned July 19 in Modesto.

To determine a home's value, Elving said, don't rely on what homes sold for in the past because prices have been falling very quickly. "Focus on the prices being asked for homes for sale now," Elving said. To determine a "comp" — or comparable price — he suggested looking on a Web site to see the asking price for similar homes. Current asking prices often are substantially less than previous sales prices for identical homes.

Example: Elving said a home in the July 19 auction at 1855 Vintage Circle in Oakdale sold in May 2006 for about $550,000. By this spring, that 2,784square-foot home was back on the market for $394,000. No one bought it, so now it will go to the highest bidder. A search of properties for sale in that neighborhood shows several slightly larger homes priced about $360,000. So that $360,000 price may be a more logical bid than $550,000...

(Click link for full article)..