Posts Tagged ‘Banks
The Banks, Rushing To Foreclose So They Can Sit On Vacant Homes
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Editor’s Comment:
Author: Matthew D. Weidner, Esq.
These damn judges here in Florida, they really need to wake up, start working harder and grant more foreclosures more quickly. Hurry up already, and stop whining about budget cuts and staff positions cut, and who cares that the entire state court system is funded by less than one percent of the state budget, and shut up about case loads that have tripled to 3,000 or more cases per judge and frazzled judicial assistant. Just grant those damn foreclosure judgments….after all, everyone knows the economy cannot recover until these damn slacking judges push through this foreclosure backlog….right?
Oh wait a minute, there’s apparently a bit of a fly in this ointment. You see, apparently the banks are cancelling foreclosure sales just as quickly as our good judges are able to sign those damn Final Judgments of Foreclosure…yup…apparently, now wait just a dadgummed minute.
You mean to tell me our elected circuit court judges are busy throwing families out into the streets just so the banks can amass ever larger portfolios of vacant and abandoned properties that they are apparently not responsible for taking care of?
Well shut my mouth! You don’t say? Really! No way? Do you mean to tell me we can’t blame all this on our under-funded judges and this ain’t the fault of those damn ethically-challenged foreclosure defense attorneys what with all their delay tactics and pesky rules and those absurd arguments about THE LAW…blah, blah, blah.
When exactly will this nation wake up and start directing appropriate anger and rage at the real evil that’s hard at work, everyday all across this sleeping nation?
From the Tampa Times:
It’s an oft-repeated pattern.
In the last 12 months, lenders have canceled auctions on 4,204 properties in Pinellas and Hillsborough counties. Sales have been canceled two, three, even nine times on some homes.
In many cases, banks delay seizures to avoid having to pay maintenance bills or homeowner association fees. Meanwhile, neighbors fend off vandals and thieves and worry about property values falling because of the deteriorating houses.
The repeated cancellations burden the court system.
“These never seem to go away,” said Thomas McGrady, chief judge of the Pinellas-Pasco County Circuit. “It’s a nuisance.”
Filed under: foreclosure Tagged: borrower, Eviction, Florida, foreclosure, foreclosure backlog, foreclosure defense, foreclosure fraud, foreclosure judgement, foreclosure offense, FORECLOSURE SETTLEMENT, foreclosures, Hillsborough county, homeowner association, housing market, judges, Matthew D Weidner, Mortgage, Pinellas county, Pinellas-Pasco County Circuit, predatory lending, rush to foreclosure, Tampa Times, Thomas McGrady, vacant homes 
Livinglies’s Weblog
Debt Relief for Banks, Not Homeowners
The Young Turks host Cenk Uygur talks about Freddie Mac, Fannie Mae will screw homeowners. The Young Turks on Current TV: current.com The Largest Online New Show in the World. Google+: www.gplus.to Facebook: www.facebook.com Twitter: twitter.com Support TYT for FREE: bit.ly
Video Rating: 4 / 5
Why the Banks Are Paying You to Sign the Deed in a Shortsale
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“The bottom line is that the value of a homeowner’s signature is going up and might be the best investment in existence. The walls are closing in on trillions of dollars in real estate that could be the subject of summary proceedings repatriating the property to their rightful owners using the most basic principles of property law.” — Neil F Garfield, livinglies.me
It isn’t just hype. Law firms like the one shown below are realizing that there really is money in servicing homeowners who are underwater. But lawyers should also beware of this offer. Think about it. What economic reason would there be to pay a distressed homeowner to enter into a short-sale? If they really thought they had the right to foreclose and/or collect on the promissory note they are using, the last thing they would do is pay a person who is already delinquent in their payments.
The banks have realized that in a short sale they don’t sign the deed — that job goes to the homeowner who is usually giving a warranty that title is all fine and dandy. The pretender lender is not doing the lying; they are getting the homeowner to do their lying. All that is fine if there was only one owner of the property or one prior mortgagee who is joining in the transaction and registering the appropriate releases, satisfactions and warranties.
If a third party or prior owner makes a claim against title, the pretender lender has succeeded in placing another layer between them and claimants who want title vested or re-vested as a result of wrongful, illegal foreclosures — or wrongful or illegal satisfactions (release and reconveyance). They now have a stronger argument about why the “chain of title” while imperfect, should not be disturbed because of the transactions that were in the public records and notice to the world.
If you are buying one of these short-sales or other REO property, take a good long look at the title policy they are offering and make sure you get advice of competent legal counsel — because most of the new “replacement” policies have language that excludes risks associated with the chain of title being mangled by securitization or claims arising out of securitization. So if you buy, you are getting naked paperwork that may or may not be ratified later — or could be the target of a wave a repatriating property to their rightful owners because the foreclosures are and were wrongful. With no title insurance proceeds you could be out of a lot of money and still have a liability if you financed the purchase.
I’ve heard some talk of the statute of limitations being applied against claims of repatriating property. I don’t know of any statute of limitations on defects in the title chain but there might be some on theft, fraud and adverse possession that could provide some cover for the older mortgages. That alone could be an interesting question. Imagine representing the bank and arguing “yes your honor, we admit that we stole this property and illegally evicted the owner. However, under the statute of limitations I have shown you, the homeowner has no cause of action because it is barred by the expiration of time.”
THAT is where civil rights violations should be alleged in Federal courts. If the states failed to safeguard the rights of homeowners in their procedures for foreclosures then the civil rights of the homeowners may well be the last and only claim the homeowner can make even after it is admitted that the foreclosures are wrongful and illegal.
The lesson here is stop waiting to see what happens. Get on your horse and have your bags packed with as much proof as you can and start your actions now. At this point, you need to show that the general policies resulted in wrongful, illegal foreclosures with “strangers” taking title to property on which they loaned no money and never financed or purchased the property; and then show that those policies that have been the subject so many studies, orders, decrees, fines, penalties, settlements etc. are the same same policies that were used in your case.
Remember, the burden of proof shifts when you cross the line of establishing a prima facie case. At that point the pretender is dead in the water unless they still have more rabbits in that hat.
BANKS PAYING HOMEOWNERS TO AVOID FORECLOSURES
by Harold Shepley & Associates, LLC, see www.jdsra.com
Banks, anxious to move troubled mortgages off their books, have started offering cash incentives to homeowners to sell their properties for less than what they owe – typically called a “short sale.”
In the past, banks have balked or dragged their feet at short sales. However, lately, they have decided that short sales are more advantageous than foreclosures, which can take a year or more to process. Additionally, banks take about 15% less of a loss on a short sale than they do on a foreclosure.
Some banks are now offering cash incentives to homeowners to have them sell their homes at a loss—sometimes up to $ 35,000. Experts believe that banks just want to get rid of bad loans. They can often afford to forgive the debt and offer incentives yet still make a profit, because they usually purchase the loan from another bank at a discount.
For a bank, approving a short sale can cut a year or more off the process of unloading a home and its accompanying loan. A short sale takes about 123 days on average. On the other hand, it takes nearly a year to foreclose on a home and then another 175 days to re-sell the property.
Allowing your home to go into foreclosure is may not be your only option. Every situation is different. For a in depth look at your situation you should contact a full service debt relief law firm like Harold Shepley & Associates that can answer any questions you may have about debt relief, mortgage modification, and short sales.
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: 60 minutes, AHMSI, appraisal fraud, attorney general, auction fraud, Chris Koster, credit bids, DocX Indictment, foreclosure fraud, FORECLOSURE SETTLEMENT, foreclosures, forgery, housing market, housing prices, investors, linda green, LPS, Missouri, mortgage fruad, mortgages, Robo-Signing, settlement, short-sale, strategic default, Wells Fargo 
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Banks Rob Taxpayers – Bailout Payback Scam
Cenk Uygur discusses a New York Times report on how banks are using government money meant to be loaned to small businesses to ‘pay back’ TARP. Also, 475 billion of TARP that was funneled through insurers like AIG has not been paid back. Subscribe: bit.ly TYT Mobile: bit.ly On Facebook: www.facebook.com On Twitter: twitter.com www.theyoungturks.com FREE Movies(!): www.netflix.com Read Ana’s blog and subscribe at: www.examiner.com Read Cenk’s Blog: www.huffingtonpost.com
Gerry Epstein: S&P face possible prosecution for role in sub-prime debacle
Video Rating: 4 / 5
Treasury To Shame Banks Into Mortgage Fixes? – Bloomberg
Federal government wants banks to modify toxic mortgages. (Bloomberg News)
Video Rating: 5 / 5
Stocks open higher in light trading. Gold and oil prices steady after big gains yesterday. Allstate sues Countrywide over toxic mortgages. GM may rise after positive analyst calls. BJ’s Wholesale may face a hostile takeover offer from Leonard Green.
Community Banks Prosper as MegaBanks Lose Customers
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Editor’s Comment:
There are a lot of good reasons for the 10% defection rate at big banks — and the benefit flowing to smaller community and regional banks. The biggest reason appears to be a visceral dislike for the large banks and massive distrust over what these behemoths will do next. Add to that factor that it costs less to deal with community banks for the same service that the large banks have monopolised, and you barely have any reason at all to stay with the big banks.All the services are now produced electronically and even the smallest banks have access to that. Add to that the personal factors of actually knowing your banker and the knowledge that deposits will be used for loans somewhere in your geographical region and now you also have a good reason to go to community banks and credit unions.I would add one more — safety. The balance sheets of the big banks are bloated with non-existent or overstated assets and are missing huge liabilities reaching into the trillions to pay back those investors who bought $ 13 trillion in bogus mortgage bonds. But add to that mix, the facts that management of these mega banks have trillions parked off shore that the government wants to see repatriated PLUS the tacit deal in which the Federal Reserve agrees to lend at 0.25% in exchange for the big banks buying US Treasury debt at 3% and you can see why Washington is addicted to the toxic idea that they should still do business with, and therefore prop up these mega banks whose actual net worth is a tiny fraction of what has been reported. Eventually they must fall, which is another reason for not having your money there.More customers leaving big banks
NEW YORK (CNNMoney) — New fees and poor customer service have sparked an exodus among big bank customers, many of whom switched to smaller institutions last year.
The defection rate for large, regional and midsize banks averaged between 10% and 11.3% of customers last year, according to a J.D. Power and Associates’ survey of more than 5,000 customers who shopped for a new bank or account over the past 12 months. In 2010, the average defection rates ranged from 7.4% to 9.8%.
Meanwhile, small banks and credit unions lost only 0.9% of their customers on average last year — a significant decline from the 8.8% defection rate they saw in 2010.
These smaller institutions were also able to attract many of the customers who left the big banks. Over the course of last year, 10.3% of customers who shopped for a new bank landed at these smaller institutions — up from 8.1% in the prior year.
New and higher bank fees at the nation’s biggest banks led many customers to switch to smaller institutions over the past year, with about a third of customers at big banks reporting fees as the reason for looking elsewhere.
“When banks announce the implementation of new fees, public reaction can be quite volatile and result in customers voting with their feet,” said Michael Beird, director of the banking services practice at J.D. Power and Associates.
Community banks team up to fight the megabanks
Checking account fees have been on the rise at the nation’s biggest banks over the past year, and customer revolt against big banks really began to mount after Bank of America (BAC, Fortune 500) proposed amonthly fee for debit card use last fall.
Even though the bank later backtracked on its decision, the announcement led to a nationwide, social media-fueled “Bank Transfer Day”, during which customers encouraged each other to dump their big banks for community banks and credit unions.
The report also found that many customers were already unhappy with the customer service at big banks, so when fees were announced or raised, there was even more of an incentive to switch institutions.
‘I dumped my bank!’
“Service experiences that fall below customer expectations are a powerful influencer that primes customers for switching once a subsequent event gives them a final reason to defect,” said Beird.
More than half of all customers who said fees were the main reason for switching banks also said they had received poor customer service at their prior bank, he said.
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: 60 minutes, affidavits • attesting • Daniel Edstrom • DTC-Systems • fabricating • false information • false sworn documents • foreclose • illicit business practices • improper statements • imp, AHMSI, appraisal fraud, attorney general, auction fraud, Chris Koster, community banks, credit bids, credit unions, DocX Indictment, foreclosure fraud, FORECLOSURE SETTLEMENT, foreclosures, forgery, housing market, housing prices, investors, linda green, LPS, Missouri, mortgage fruad, mortgages, Robo-Signing, settlement, strategic default, Wells Fargo 
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Investors Getting Wise to Conflict of Interest With Banks and Servicers
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by Isaac Gradman, www.subprimeshakeout.com
Having received copious kudos for engineering an $ 8.5 billion investor settlement with Bank of America over soured Countrywide residential mortgage backed securities (RMBS), “pitbull” lawyer Kathy Patrick, of the Houston-based firm, Gibbs & Bruns, has now trained her sights on the other big dogs in the world of pre-crisis MBS issuance.
Patrick’s most recently disclosed target is Wells Fargo, one of the Big Four Banks that up to now has stayed largely out of the RMBS litigation spotlight, as investors and insurers have gone after more notoriously irresponsible lenders such as Countrywide/BofA and EMC/JPMorgan. But that all changed on January 5, 2012, when Gibbs & Bruns issued letters to RMBS Trustees US Bank and HSBC, stating that its clients held 25% of the voting rights (the critical threshold for legal standing) in 48 trusts that issued these securities and instructing them to open investigations into ineligible mortgages backing $ 19 billion of RMBS issued by Wells Fargo affiliates.
Recall that it was just such a letter that kicked off negotiations between Patrick’s bondholder clients, BofA-Countrywide and Bank of New York Mellon (BoNY) as Trustee. Despite purposefully avoiding a more aggressive stance with the Trustee that may have involved declaring an event of default and triggering the Trustee’s fiduciary duties (as other bondholders were contemplating), the letter got the Trustee’s attention and was the precursor to the $ 8.5 billion proposed settlement that is currently being challenged in federal court.
A Pattern Emerges
The Wells Fargo letter comes on the heels of two other recent assaults by Patrick’s bondholder group. On December 16, 2011, the group announced that it was going after JPMorgan. In the announcement, Gibbs & Bruns said that it had issued instructions to BNY Mellon, US Bank, Wells Fargo, Citibank, and HSBC, as Trustees, to open investigations into ineligible mortgages in pools securing over $ 95 billion of MBS issued by various affiliates of JPM. The most eye-popping number in this announcement was the law firm’s claim that its clients held 25% of voting rights in 243 JPMorgan trusts, even more than the 180 Countrywide trusts in which the group currently claims it has standing (now that it’s no longer counting Freddie Mac’s holdings).
Prior to that, on October 18, 2011, Gibbs & Bruns sent a letter to Morgan Stanley, saying that its clients held 25% of the voting rights in 17 MBS deals issued by the investment bank, and that it had found a large amount of servicing violations and false or fraudulent information that had been published in connection with the offering of those securities. The letter, which has not been released to the public, only became public knowledge after Morgan Stanley disclosed it in its 2011 Q3 10-Q report. The original face value of the 17 MBS deals was reported to be over $ 6 billion.
Subsequently, on January 31, 2012, Gibbs & Bruns issued a formal announcement regarding Morgan Stanley, in which the law firm stated that it had instructed RMBS trustees US Bank, Deutsche Bank and Wells Fargo to open investigations into ineligible mortgage securing $ 25 billion of Morgan Stanley-issued RMBS. In that announcement, the firm claimed to have standing in 69 different Trusts. It’s unclear why the numbers disclosed by Morgan Stanley in their earlier 10-Q are only a quarter of the size of the holdings announced by Gibbs & Bruns, but perhaps the firm has been able to attract a number of new clients in the last few months.
Shotgun Approach
By the numbers, the Wells Fargo deals represent the smallest original principal amount of RMBS out of the four issuers that Patrick has confronted thus far. But what makes that effort particularly interesting is that it illustrates that Patrick’s group, which currently contains at least 22 major institutional investors, is not exactly taking a surgical approach to selecting the deals it wants trustees to investigate.
For example, several of the WFB deals contained in Gibbs & Bruns’ press release are experiencing delinquency rates of less than 1% and minimal cumulative losses. One analyst has also pointed out that some of the deals Patrick has identified in the past contain few actionable reps and warranties and extremely high procedural hurdles (such as voting rights thresholds of 50% just to petition the trustee).
What this indicates is that Patrick is not examining individual deals and hand picking the ones on which she is most likely to recover significant returns for her clients through putback litigation or other legal claims. Instead, she’s identifying every trust in which her clients have standing, in the hopes of giving her the broadest platform from which to negotiate a global putback settlement for each targeted lender – a settlement, by the way, that will bind every investor in these deals, not just Patrick’s own clients.
But don’t just take my word for it. Listen to Patrick herself, quoted in her firm’s press release on the Wells Fargo letters:
Our clients continue to seek a comprehensive solution to the problems of ineligible mortgages in RMBS pools and deficient servicing of those loans. Today’s action is another step toward achieving that goal.
Or take Patrick’s quote in this Forbes article from October 2011:
This group did not come together just to deal with Bank of America. They came together because they wanted a comprehensive industrywide strategy and an industrywide solution… They started with Bank of America because they thought they could achieve a template that they could extend to other institutions.
These quotes may not seem remarkable until you delve into choice of language and the objections raised in the past to to Patrick’s efforts, including allegations regarding conflicts of interest and the secretive manner in which she negotiated the settlement. What Patrick is not saying is that she wants a comprehensive solution for just her 22+ institutional clients; she’s saying that she wants a comprehensive solution for the entire industry. Recall that the big banks (who should be Patrick’s biggest opponents) have been saying much the same thing since the early days of this litigation – that they want a comprehensive, industrywide solution – and their support for efforts such as the proposed 50-state robosigning settlement have backed that up.
This only gives more credence to the fears of many of the bondholders outside of Patrick’s group: that she’s actually working to achieve sweetheart deals for the banks that would allow her institutional clients to maintain their cozy relationships with the financial firms while allowing the conflicted investors, Trustees and issuers to put these issues behind them. But while it may be clear that Patrick is trying to architect a comprehensive settlement of all putback liabilities for the major banks along the lines of her groundbreaking settlement with BofA, what’s also clear is that this time around, her opponents will be better prepared to thwart her efforts.
A Mobilized Opposition
In the world of MBS litigation, bondholders and bond insurers have thus far gravitated toward a select few attorneys who have made their names by diligently pursuing investor interests. This short list includes Philippe Selendy, whose firm, Quinn Emanuel, represents a number of bond insurers, including MBIA, and bondholders like the FHFA; David Grais, who represents many of the FHLBs, the distressed debt fund Baupost Group (aka Walnut Place), and TM1, to name a few; Talcott Franklin, who created the Investor Clearinghouse and represents Knights of Columbus in its lawsuit against Bank of New York Mellon; and Bernstein Litowitz, which represented the class that settled with Merrill Lynch for $ 315 million and currently represents Allstate and a number of European funds in recent suits.
But none of these attorneys has been the source of more controversy, more media adulation or more rampant speculation than Patrick. The adulation stems in part from the fact that Patrick represents some of the biggest names in the world of MBS investors, such as BlackRock, PIMCO and the New York Fed, and the fact that Patrick’s firm stands to make $ 85 million in fees if the proposed $ 8.5 billion settlement between BoNY and BofA gets court approval.
Yet, Patrick has also been the source of significant controversy, primarily because of the manner in which Patrick steered her bondholder clients – many of whom have significant conflicts of interest with the issuer banks – away from more aggressive approaches to putback litigation. While I have been skeptical of the strategy behind Patrick’s efforts since she sent her first letter to BofA in September 2010 (as she failed to include any of the powerful supporting evidence she had at her disposal), recent revelations have only reinforced that belief.
Specifically, at a hearing before Judge Pauley over whether to keep the proposed $ 8.5 bn settlement in federal court, it emerged that Patrick had submarined efforts by the Investor Clearinghouse by urging her clients to avoid taking the more aggressive stance that was being advocated by Franklin. This revelation came after lawyers for Gibbs & Bruns had argued that they were the only group of bondholders doing anything about MBS losses.
In addition, conflicts of interest identified between Bank of New York and Bank of America (such as the fact that BofA provides BoNY with over 60% of its trustee business and the fact that BofA has agreed to indemnify BoNY from all liability stemming from its conduct as Trustee of Countrywide trusts) have drawn the ire of bondholders and New York Attorney General Eric Schneiderman, who sought leave to file a counterclaim under the Martin Act against BoNY in court proceedings surrounding the proposed settlement. In short, these developments have caused many bondholders, commentators and regulators to view this settlement as a sweetheart deal concocted by funds that want to maintain a cozy relationship with the big banks while satisfying their fiduciary obligation to do something about the massive losses they’ve suffered in their MBS portfolios.
Thus, it would be no exaggeration to say that Patrick and her bondholder group have been the single greatest galvanizing force for bondholders, motivating a diverse and largely passive group of institutions to band together, hire counsel, and begin taking steps to enforce their legal claims against the banks that sold them atrociously performing private label RMBS. For this reason, Patrick will likely face a stiffer challenge the next time she works with a trustee to seek judicial approval for a proposed global settlement.
Challenges to Next Set of MBS Settlements
As I see it, Patrick faces three major challenges to accomplishing her goal of piecing together global settlements with the remaining MBS issuers. First, most of these issuers did not use the same Trustee on all their deals, as Countrywide did with BoNY. This will make it significantly harder to coordinate a global settlement, as Patrick’s group does not have standing in the majority of any particular issuer’s trusts and needs the cooperation of a friendly Trustee to impose the settlement on the remainder of the bondholders. For banks like JPMorgan, who used at least five separate Trustees (all with varying interests and motivations), getting all Trustees to buy into any settlement could be a logistical nightmare.
Second, the world has changed since Patrick’s BofA settlement was first proposed in New York State Court. Since then, bondholders have organized and mobilized in opposition, with over 40 bondholder groups having now retained counsel and filed petitions to intervene in the proposed settlement proceedings. These bondholders have also had success in forcing the settlement outside of the favorable posture in which Patrick, BoNY and BofA sought to adjudicate it – in state court, under the deferential standards of Article 77. Opposition bondholder groups, led by Walnut Place, LLC, have successfully removed the case to Federal Court, where (pending success on appeal) it will presumably be treated more like a class action, meaning it will be subject to an entire fairness standard, more robust discovery, and bondholder rights to opt out.
Finally, opposition bondholders are now on guard against another settlement negotiated in secret. There was a significant amount of controversy in the BofA settlement surrounding whether David Grais was denied the right to participate in negotiations. This time around, opposition bondholders are not likely to let another deal get to court without making some serious noise and creating a record showing that they tried to participate in negotiations but were stonewalled.
Meanwhile, Patrick’s group will probably start down the path of negotiating with issuing banks, who themselves will be armed with the benefit of hindsight after watching how the BofA settlement has fared in court. While these banks likely won’t have the luxury of seeing how that first settlement is ultimately resolved, rest assured that they will learn from the pitfalls suffered by their competitor thus far and dream up new strategies to allow them to put these legacy mortgage issues behind them. The upcoming battle, involving some of the best legal minds in the country, promises to be a chess game for the ages.
Thank you to India Autry for her meaningful contributions to this story.
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: 60 minutes, affidavits • attesting • Daniel Edstrom • DTC-Systems • fabricating • false information • false sworn documents • foreclose • illicit business practices • improper statements • imp, AHMSI, appraisal fraud, attorney general, auction fraud, Chris Koster, credit bids, DocX Indictment, foreclosure fraud, FORECLOSURE SETTLEMENT, foreclosures, forgery, housing market, housing prices, investors, linda green, LPS, Missouri, mortgage fruad, mortgages, Robo-Signing, settlement, strategic default, Wells Fargo 
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Banks Cover Up Their Actual Losses and Insolvency
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RECEIVERS SHOULD BE APPOINTED TO FORCE DISGORGEMENT OF PENSION MONEY
Editor’s Note: It isn’t just the Banks that are covering up the fact that those “assets” on their balance sheet are not assets and never were owned by the Banks. The underlying threat here is that the loss is going to hit pension funds and other “investors” in RMBS whose money was used to fund mortgages (after the investment banks took a huge bite out of the pool of funds as “trading profits”). Pensioners are already getting notices of cutbacks and even elimination of the pension benefits.
This is all brought to you by the makers of such accounting tricks like “off balance sheet transactions.” Try telling your boss that the money you stole was an off balance sheet transaction and see if that covers it — or if you end up a guest of the state or federal government in prison.
RMBS Losses in Limbo: As Bad As They Seem, The Reality May Be Much Worse
Since the financial crisis in 2007, residential mortgage-backed securities have been hit with high levels of borrower defaults, realized losses and credit rating downgrades. Realized losses declared on private residential mortgage-backed securities (RMBS), already much higher than original rating agency and investor estimates, are projected to rise substantially in the coming months, according to a recent analysis by R&R Consulting, a credit rating and valuation firm in New York.
On the securities performing at December 2011, a universe of approximately $ 1.42 trillion, R&R estimate the amount of additional losses likely to materialize is $ 300 billion, with one-third concentrated in ten arranger names, including Countrywide, Morgan Stanley and JP Morgan. About 17,000 tranches, or 34% of the universe analyzed by R&R, may lose up to 83% of their remaining principal.
In addition, R&R estimates that approximately $ 175 billion of losses already incurred on the loans have not yet been allocated to the bonds in the related transactions. Failure to allocate realized loan losses could distort the valuation of related RMBS tranches.
“The light at the end of the tunnel is still a long way off for RMBS,” said Iuliia Palamar, head of ABS research for R&R. “We are now drilling down into the analysis to identify the individual transactions by vintage, servicer and other important issues with respect to these losses.”
Unallocated Losses by Security Vintage
In the course of conducting valuations on RMBS, the R&R analytics team discovered widespread, serious, repeated data discrepancies. Ann Rutledge, a founding principal, asked the team to measure the magnitude of the discrepancy on the RMBS universe. To do this, R&R subtracted cumulative losses allocated to the tranches from unallocated, expected losses, calculated as the sum of defaults, bankruptcies, foreclosures and REOs minus recoveries. “The results were very disturbing: $ 175 billion of unallocated current losses and $ 300 billion of imminent losses,” Rutledge said.
Rutledge commented that she was not clear why these losses are being held in limbo instead of being properly allocated, since the data used by R&R in the calculations were included in the servicer reports. She cautioned, “Investors should be concerned about receiving inaccurate bond performance information and paying unnecessary fees.”
The implication for bond holders in RMBS is significant with respect to both estimates. Subordinated securities in the RMBS with probable future losses ought to be written down by such losses but instead may be continuing to receive interest owed to more senior tranches. It could also mean that servicers are earning fees against loans that have already been liquidated, which also reduces the amount of cash to pay senior bond holders. For example, in one month, servicers could generate $ 75 million or more in inappropriate fees against the $ 175 billion in unallocated losses.
Rutledge also noted that R&R has observed a steady increase in amount of limbo losses, raising the prospect that a significant amount of funds are still being misallocated for bond investors.
“The system for MBS is still fundamentally broken,” she said. “All the loose ends need to be identified and knit together into a well-functioning system before investors can feel comfortable investing in RMBS once more.”
R&R Consulting is a credit rating and valuation boutique. Founded in 2000, R&R has a patented process for obtaining current intrinsic valuations on structured securities in the secondary market.
Inquiries should contact Iuliia Palamar at +12128675693 or iuliia@creditspectrum.com
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: Ann Rutledge, bailout, bankruptcy, banks, borrower, countrywide, credit crisis, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, Iuliia Palamar, LOAN MODIFICATION, modification, press releases, quiet title, rescission, RESPA, Risk Measurement, securitization, Structured Finance/Securitization, TILA audit, trustee, WEISBAND 
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The banks have committed mortgage and foreclosure fraud
www.stophomeforeclosure.us 732-580-2174 Sixty Two Million Americans did not wake up yesterday and decide to commit Fraud. That is what the Banks and Financiall Institutions wants you to believe. THEY HAVE ORCHESTRATED THIS REAL ESTATE MARKET AND ITS PRESENT CONDITION, HAVING FULL KNOWLEDGE THAT IT WAS GOING TO FAIL. Look at the facts. If you don’t stop the bank they will foreclose on your home too. The most common trick is to wear you down so you will just give up and walk away. If you will JUST TAKE A STAND, then they lose and you win. Don’t give up. Don’t walk away. The bank gave you a bad loan and they don’t want you to prove it. Because if you do, they don’t get your home! www.stophomeforeclosure.us
Video Rating: 5 / 5
Pt. 5 America’s Bankrupt Banks (Inside the Meltdown)
On Thursday, Sept. 18, 2008, the astonished leadership of the US Congress was told in a private session by the chairman of the Federal Reserve that the American economy was in grave danger of a complete meltdown within a matter of days. “There was literally a pause in that room where the oxygen left,” says Sen. Christopher Dodd (D-Conn.). As the housing bubble burst and trillions of dollars’ worth of toxic mortgages began to go bad in 2007, fear spread through the massive firms that form the heart of Wall Street. By the spring of 2008, burdened by billions of dollars of bad mortgages, the investment bank Bear Stearns was the subject of rumors that it would soon fail. “Rumors are such that they can just plain put you out of business,” Bear Stearns’ former CEO Alan “Ace” Greenberg tells FRONTLINE. The company’s stock had dropped from 1 to a share, and it was hours from declaring bankruptcy. Federal Reserve Chairman Ben Bernanke acted. “It was clear that this had to be contained. There was no doubt in his mind,” says Bernanke’s colleague, economist Mark Gertler. Bernanke, a former economics professor from Princeton, specialized in studying the Great Depression. “He more than anybody else appreciated what would happen if it got out of control,” Gertler explains. To stabilize the markets, Bernanke engineered a shotgun marriage between Bear Sterns and the commercial bank JPMorgan, with a promise that the federal government would use billion to cover Bear Stearns …
Video Rating: 4 / 5
On Thursday, Sept. 18, 2008, the astonished leadership of the US Congress was told in a private session by the chairman of the Federal Reserve that the American economy was in grave danger of a complete meltdown within a matter of days. “There was literally a pause in that room where the oxygen left,” says Sen. Christopher Dodd (D-Conn.). As the housing bubble burst and trillions of dollars’ worth of toxic mortgages began to go bad in 2007, fear spread through the massive firms that form the heart of Wall Street. By the spring of 2008, burdened by billions of dollars of bad mortgages, the investment bank Bear Stearns was the subject of rumors that it would soon fail. “Rumors are such that they can just plain put you out of business,” Bear Stearns’ former CEO Alan “Ace” Greenberg tells FRONTLINE. The company’s stock had dropped from 1 to a share, and it was hours from declaring bankruptcy. Federal Reserve Chairman Ben Bernanke acted. “It was clear that this had to be contained. There was no doubt in his mind,” says Bernanke’s colleague, economist Mark Gertler. Bernanke, a former economics professor from Princeton, specialized in studying the Great Depression. “He more than anybody else appreciated what would happen if it got out of control,” Gertler explains. To stabilize the markets, Bernanke engineered a shotgun marriage between Bear Sterns and the commercial bank JPMorgan, with a promise that the federal government would use billion to cover Bear Stearns …
Video Rating: 4 / 5