MANDELMAN’S MONTHLY MUSELETTER VERSION 7.0

Har’ she blows… Version 7.0 of the Museletter that’s the musiest of all.  The one that won’t slow you down.  The one you read and find yourself wishing you could remember the details of when in a discussion with your brother-in-law who’s a real jerk.

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Now without further adieu…


1. Wells Fargo Settles Suit to Leave Frying Pan, Walks Directly Into Fire

Wells Fargo Bank has finally agreed to settle a lawsuit brought by the NAACP that accused the bank of pushing African Americans into expensive sub-prime mortgages, regardless of credit score.  Statistically, borrowers with lighter skin tones, when applying for mortgages with Wells Fargo, received better deals.

Wells Fargo employees testified that internally they referred to these loans as “ghetto loans,” and to the African Americans that were offered such loans… ready for this… the “mud people”.

Since, in my way of thinking, it doesn’t get much more offensive than that, I wrote an article last year about Wells Fargo and this charming terminology.  If you want to catch up, you can find it here:

Wells Fargo’s Ghetto Loans and the Mud People.

What is absolutely grand, however, is that the same day that Wells Fargo settled the NAACP lawsuit in an attempt to leave the proverbial frying pan, it had no sooner wrote the check when two cities, Baltimore and Memphis, filed new federal lawsuits that accuse Wells Fargo of steering African American borrowers into expensive mortgages, which were later the proximate cause of many foreclosures that cost the cities property tax revenue, forcing each city to increase its spending on public safety programs.

The City of Baltimore filed an amended Fair Housing Act complaint because an earlier lawsuit brought by the city against Wells Fargo was dismissed for being too broad.   In the amended complaint, Baltimore cites specific expenses incurred as a result of Wells Fargo foreclosures.  The city wants to recoup costs for inspections, condemnations and boarding up of homes, as well as increased police and fire costs.

The City of Memphis’ lawsuit also alleges that Wells Fargo committed Fair Housing Act violations, and that the bank violated Tennessee consumer protection law.

Wells Fargo’s CEO, John Stumpf, asked to comment on his ongoing legal troubles, said: “I don’t want to get down in the mud on this.”

I don’t know… sounds like a case of the pot calling the kettle black, if you ask me.

2. Nicolas Cage’s Bel-Air Estate Price Drop from $35 million to $17.5 million – Still No Offers

One of the highest-paid actors in Hollywood, Nicolas Cage, can’t seem to catch a break. Even after slashing the price of his Bel Air estate from $35 million to $17.5 million, and then to a minimum bid of $10.4 million, but still not one bid came in on the property during its foreclosure auction last week, which was reported to last all of sixty seconds.

According to a story in the LA Times, Cage’s mansion includes nine bathrooms, six bedrooms, an Olympic-size pool, a custom wine cellar, and a 35-seat home theater.

Cage borrowed against his home’s equity during the boom years, taking out a total of six loans against the house, totaling more than $18 million, but with no bidders, the lender that foreclosed on the property still owns it and I suppose plans to take a bath in each of the home’s nine bathrooms.

So, the bank wouldn’t even modify a loan for Nick Cage?  I wonder if they lost his paperwork six times, then got him to make a bunch a trial payments before they foreclosed, or whether it’s true that Hollywood stars get special treatment and go straight to foreclosure without the rest of the crap.

3. Senator from Colorado Says Common Sense Would Stop Unnecessary Foreclosures

U.S. Senator Michael Bennet, in an effort to help Colorado homeowners avoid foreclosures, sent a letter to the U.S. Treasury Department this past week encouraging them to make common-sense improvements to its mortgage modification program, which is known by the acronym, HAMP.

The letter requested that Treasury increase the program’s transparency, and make available an independent appeals process for those turned down for a modification.  It was addressed to Herbert Allison, Assistant Secretary for Financial Stability.

Bennet proposes that when a homeowner is denied for modification, the lender or servicer would provide have to provide a justification for the denial in writing… with meaningful information about the basis for the denial… so that the homeowner can determine whether the decision was appropriate.  In addition, an independent, expeditious appeals process would be made available to families that have been declined, or denied an opportunity to convert their trial modification into a permanent one.

When it comes to getting Treasury to make changes to the loan modification program, Bennet has a successful track record.  In February of this year, when he sent a different letter to Sec. Allison asking Treasury to forbid lenders or servicers from initiating or continuing foreclosures until borrower eligibility for a loan modification under HAMP could be determined.  In point of fact, Treasury agreed and the language was incorporated into HAMP guidelines.

Bennet says that homeowners throughout Colorado that are at risk of foreclosure have expressed their frustration with the federal government’s existing loan modification process.  According to Bennet:

“It seems to me that families that are faced with foreclosure have been through enough already – the least Washington can do is make it a little easier for them to get the help they need.”

I couldn’t agree more, Senator.  I could not agree more.  Could we borrow you for California, Arizona, Nevada, or possibly even Florida?  Just for a few weeks in each, I swear.

One more thing… is there any way I could get an autographed photo for my wall.  I’m kinda’ developin’ a little crush on you.

4. Arizona Homeowners – Looks Like It’s Time to Take Matters Into Your Own Hands

A meeting open to members of the public, hosted by the Arizona Housing Department, was intended to share information and receive feedback on how it plans to spend the $125 million in new federal funds that are to be used to fight the foreclosure crisis.  As those in the room listened to what the public officials had to say, they quickly determined that this latest financial package is… well, let’s call it underwhelming and leave it at that.

Housing Department Director Michael Trailor opened the meeting, facing a large crowd.  Seats had been snapped up by homeowners within hours of the meeting being first announced two weeks ago.  People were talking about the news that foreclosures in the Phoenix-area had hit a new high in March.  Some pretended to be surprised, others just groaned.

Trailor told the audience in Phoenix: “We are on track for 50,000 foreclosures in the Valley this year.  We are hoping we can use this $125 million to help 4,000 homeowners.”

Oh goodie.  That’ll help a lot.  If it works perfectly, it’ll help less than ten percent.  If it works less than perfectly, and unquestionably that’s the way to bet, it’ll help somewhere between zero and ten percent.  Under no circumstance is it going to provide any noticeable amount of help to Phoenix, as a whole.

New money, announced in February as being available to five states, totals $1.5 billion and it’s to be divided among California, Florida, Nevada, Michigan and Arizona.  Trailor’s agency has until April 16 to submit to the Treasury Department a plan outlining how the new money will be spent.  (On an unrelated note, I hate it when they use the term “new money” because I’m thinking we’re just printing it and have to wait until the ink is all dry.)

The discussion, by all accounts, went downhill right from the beginning as Trailor made clear that his priority would be “responsible” homeowners facing imminent foreclosure.

Oh dear God… here we go again… responsible homeowners.  Not irresponsible ones.  Homeowners… hide your jet skis.

Following a principal I learned as a camp counselor back in New England, if you give certain people a whistle and clipboard, they think they’re in charge… so, standing with microphone in hand, Trailor explained that he would be using the funds to help homeowners who had “demonstrated personal responsibility” in their purchase.

Oh my, it’s worse than I thought.  Better go hide the flat screen, and maybe ask your wife to take her jewelry off, at least for the next couple of months.

He said that he would not be helping those with “self-inflicted wounds,” which he described refinancing in order to take out buckets of cash through home-equity lines of credit or risky loans.  And then he added: “Only homeowners living in “modest” primary residences would be eligible, not investors.”

Who gave this guy a whistle and clipboard?  Because he’s kind of a dick.  If this guy isn’t careful, the wounds he’ll be worrying about won’t be self-inflicted.  This is Arizona we’re talking about… they carry guns while in line at Starbucks there.

And I have to make a note so I’ll remember to ask my wife if our primary residence is “modest”.  I hope it is, because I don’t think I’d like my primary residence going around town bragging and boasting to other primary residences when we’re out of town.

“We can’t be all things to everyone,” Trailor said.

I could not agree more.  They can’t.  And if I were Trailor, I wouldn’t worry about that at all.  There is absolutely no possibility whatsoever that his agency will ever be all things to everyone.  I think the more meaningful question would be whether he’ll ever be anything to anyone.  Or even something to someone.  See… this is why I’m not allowed to attend these types of meetings.

At that point in the meeting, perhaps sensing that things were deteriorating, Reginald Givens, the director of the department’s Neighborhood Stabilization Program, took the microphone to explain that homeowners will need to be at least 60 days delinquent on mortgage payments to qualify for the financial help.

Quite predictably the flurry of questions began.  The homeowners smelled blood in the water.

First they jumped on the whole “personal responsibility” angle.  Homeowners understandably hate it when a couple of government types who don’t know any of them personally, show up to imply that many among them are likely “irresponsible”.  Who, one might wonder, might be the arbiter of said responsibility?  Will the government being hiring workers, similar to those hired to assist with the taking of the census, to come around and look in people’s garages in order to ascertain their relative degree of responsibility?

And, as it pertains to the country’s economic meltdown and resulting foreclosure crisis:

Were the banks being responsible with their 40:1 leverage of debt to assets as they bought and sold AAA rated securities of which no one could know the value?

Were the government regulators responsible as they fiddled around, allowing the carnage in the financial markets to go on unchecked until it threatened to destroy the economic prosperity of much of the developed world?

Were the politicians themselves responsible as they bickered over petty differences, pointing fingers at each other’s side of the isle, before agreeing to an essentially limitless bailout of the very institutions that caused the crisis?

And now, sonny boy, you show up accusing me… a homeowner… of being irresponsible because I didn’t see that the Great Depression Part 2 was coming around the corner?  It’s my fault that the government failed in all of its efforts to contain the freefall in the housing market for three years?  Yeah, I thought I could refinance if my loan adjusted higher.  Want to know why I thought that?  Because it’s been true every year of the last 60 or 70, that’s why I thought that, you characterless judgmental jackass.  Next time you call me irresponsible, I’m going to plant my responsibility right up your… oh, never mind.  (Sorry about that… is it warm in here?)

Next up, those in attendance, who apparently can and do read, questioned the requirement that a homeowner be 60 days delinquent to qualify for the assistance, pointing out that the Home Affordable Modification Program (HAMP) now allowed borrowers who have never missed a payment to apply and qualify for a loan modification.  Why would the state program not dovetail with the federal one?

Then things in the room went from worse to worser.

Someone asked how many lenders or servicers the Housing Department had been able to persuade to reduce borrowers’ mortgage amounts through loan modifications, but neither Trailor nor Givens had any sense of that number, meaning that it could be zero, but probably not more than one or two.

They both went on to say how frustrated they were over how few lenders had granted modifications to-date, and said that they still held out hope that more pressure from the federal government would someday help.  (I’m confident that this was very reassuring to the homeowners in the room, so stop being such a smart ass.)

Someone asked how the new program would impact homeowners already working with government-certified housing counselors in Arizona, and Givens was quick to say that it would not be a problem because the state plan would complement the federal program… with the exception of that whole have-to-be-sixty-days-delinquent-thing… he meant, with the exception of that have-to-be-sixty-days-delinquent-thing, I’m sure of it.

The same person then wanted to know how homeowners would know if they qualified for this new state aid, and Givens said there would be a Website where homeowners could ask a magic 8-ball for the answer.  Okay, I made that last part up, but it’s late and I’m betting the Website is going to work about that effectively in real life.

Patricia Garcia-Duarte, president of Neighborhood Housing Services, one of Arizona’s leading nonprofits, and a woman with a hyphenated last name, waited an hour for her chance to establish in front of the room that she was a woman who was paying close attention to the presentation.  Taking the microphone, she said the new plan would confuse homeowners because it doesn’t conform to HAMP, which does not require delinquent payments in order to be eligible for aid, a point that had been raised ten minutes earlier by another homeowner in attendance.

Garcia-Duarte recovered quickly, however, adding: “I also have trouble with this plan not helping those who got into bad loans.  There are proven studies showing minorities were targeted and put in bad loans.”

Givens replied saying that he expected the 60-day issue to draw criticism, but he added, in response to absolutely nothing that anyone had said thus far: “We all know people who bought homes they couldn’t afford and shouldn’t have.  This money isn’t to help those homeowners.”

Towards the meeting’s end, a man seated at the back of the room asked, “Why is Arizona only getting $125 million of the $1.5 billion?”  He was wringing his hands and looking less than stable.

Trailor, obviously nervous about the potential for the man to rise and harm him, only said the he agreed with the man’s question, thus showing the attendees that his grammatical skills were hovering at around the third grade level… assuming English was your second language.  He then tried pacifying the wringing hands man by claiming… out of nowhere… that Arizona could potentially receive more money from the federal government for foreclosures.

Realizing that he was now talking out of his hind-quarters, Trailor wrapped things up by saying:

“There are smart people in Washington who realize HAMP isn’t doing enough in Arizona and other states hit hardest by foreclosures and falling home values.  The feds are calling this round ‘an innovation fund’ and want the states to succeed.  I definitely get the impression if we do well with this money, more will be coming.”

Okay, see… as far as the foreclosure crisis goes in Arizona, everything’s completely under control.  You wanted answers… they’ve clearly got answers.  My hat’s off to them.

When’s the next meeting, because I for one am totally looking forward to doing this again… and don’t want to wait until the last minute, because I’m going to need to pick-up a Teflon vest at the surplus store.  No sense taking any chances with these guys running the show.

5. Two women sentenced in loan-modification fraud case

Proving that there’s a loan modification scammer on just about every corner in California, Attorney General Jerry Brown is boasting about making the state a safer place to lose your home to foreclosure as a result of his successful prosecution of two women… who pleaded guilty last month in a loan-modification fraud case. Both were sentenced today to a year in jail.

Marianne Curtis, 69, of Costa Mesa, and Mary Alice Yraceburu, 46, of Riverdale, were also ordered to pay more than $32,000 in restitution to 36 victims, according to the California Attorney General’s Office.  That’s almost a thousand dollars apiece for 36 people!  Woohoo!  Go Jerry… Go Jerry… It’s your birthday… Go Jerry.  I’ve seen more money recovered by more people in one night of Bingo at the Unitarian Church near my house.

“Curtis and Yraceburu shamelessly exploited homeowners desperate to avoid foreclosure, charging up to $1,800 in upfront fees for loan modifications that were never delivered,” state Attorney General Jerry Brown said. “Today’s jail sentences send a warning shot to loan-modification consultants — if you swindle homeowners, you face serious time behind bars.”

The two women, who operated a company called Foreclosure Freedom, pleaded guilty to 71 counts on March 24, including unlawful foreclosure consulting, grand theft, attempted grand theft and conspiracy.

(Unlawful consulting?  I’m sorry… I don’t mean to be this way… but that’s hysterical.  I hear Jerry Brown, but I see Barney Fife.)

Okay, I apologize… good job.  Any time you can take a 69 year-old woman scammer off the streets, you gotta’ give it up for the AG.  (Insert that sound from Law & Order here.)

6.  Bernanke Says We’re Not Out Woods in Terms of Recession

According to Fed Chairman Ben Bernanke, joblessness, home foreclosures and weak lending pose challenges to the economy as it recovers from the worst recession since the 1930s.  As it recovers, as in: 1931, 1932, 1933, 1934, 1935, 1936, 1937, 1938, 1939, 1940, 1941… you know, AS IT RECOVERS.  Get it?

“We are far from being out of the woods,” Bernanke said in a speech a week ago in Dallas.  “The U.S. faces hurdles including the lack of a sustained rebound in housing, a troubled commercial real estate market and very weak hiring,” he added.

Challenges and hurdles.  Sounds like fun.  We need to get in better shape in this country anyway.  Are we all going to get team jackets?

So, there’s three things I didn’t see coming: terrible unemployment, rising foreclosures, and lending that requires Warren Buffet as a cosigner, or the federal government as the lender.  Go figure.  What happened to the banks in this country?  I’m so confused.  I thought they just had the BEST YEAR EVER!  They paid out the LARGEST BONUSES EVER.  Even larger than during the boom years.  So, why aren’t they lending like crazy and stimulating the old economy?  I just don’t understand it.  Don’t they make money by lending?

Oh, wait.  That’s right… I forgot.  They’re INSOLVENT!  We’ve just suspended the accounting rules so they don’t have to report their losses.  Cool.  And it’s a strategy that really works.  I stopped writing in the checks I’ve been writing and only post my deposits and sure enough… I’m having my best year ever too!  Why didn’t I think of this before?

Looking forward, the Fed officials are said to have concerns that the job market and tight credit would restrain consumer spending.  Hmmm… let’s see.  I don’t know if I can agree with that.  I mean, why would no jobs and no credit constrain consumer spending?  This economic stuff is so complicated.  It makes my hair hurt.  Better take a nap.

Bernanke and his colleagues also said that interest rates will stay very low for an “extended period.”  What’s an extended period, do you suppose?  Like a decade?  That would be extended.

This is the weirdest recovery I’ve ever seen.  The recession is over.  Happy days are here again.  But there are no jobs, no credit available, foreclosures are out of control as real estate continues it freefall… and the Fed says it’s not going to raise rates for a long, long time.

Last month, central bankers left the benchmark rate target, covering overnight inter-bank loans, in a range of zero to 0.25 percent, where it has been since December 2008.  Zero to 0.25 percent.  Good thing no one’s talking about lowering rates, because we’d be in deep kimchi if those rates had to get any lower.

“We have yet to see evidence of a sustained recovery in the housing market,” Bernanke said. “Mortgage delinquencies for both sub-prime and prime loans continue to rise as do foreclosures. The commercial real estate sector remains troubled, which is a concern for communities and for banks holding commercial real estate loans.”

But Bernanke went on to say that some of the economy’s “toughest problems” are found in the job market.  “Hiring remains very weak,” Bernanke said. “I am particularly concerned” that more than 40 percent of those without jobs have been out of work for at least six months, because such spells may erode skills and reduce the workers’ income and employment prospects, the Fed chief said.

“My best guess is that economic growth, supported by the Federal Reserve’s simulative monetary policy, will be sufficient to slowly reduce the unemployment rate over the coming year,” Bernanke said.

His “BEST GUESS”?  Holy Mother of Mandelman, did Bernanke just say his “best guess”?  The Fed Chief is offering us his best guess?  I wrote an article last year where I showed that his forecasts had been wrong every month for like 10 months.  And I asked the question: If you’re wrong every single month, is it still forecasting or at a certain point, does it become guessing?

And sure enough, now Bernanke is actually GUESSING.

If you start to get nervous, just remember my favorite old Russian proverb:

The church is near, but the road is icy.  The tavern is far, but we will walk carefully.

Seriously, it always helps me.  Ergo bibamus!

` ` ` ` ` ` ` ` ` ` `

WELL, THAT’S ALL FOR THIS EDITION.

MANDELMAN’S MONTHLY MUSELETTER 7.0

Oh… wait… P.S. Mandelman Matters has an exclusive license to the same software platform that major banks and servicers use to qualify borrowers for HAMP loan modification.  By running the report, you’ll know whether you qualify for a loan modification under the HAMP program.  And if you don’t qualify, you’ll finally get to see and know the reasons why!

It’s the only place a homeowner should start start, because armed with the same type of information the banks have, regardless of where he or she might go from there, you level the playing field to great degree.

It’s not at all expensive to have us run your report, and you’ll sleep better knowing what you can expect if you apply for a loan modification.  The system will also qualify you for a HAFA Short Sale, and presents the alternatives offered by various lenders and servicers.  It’s the only system that will tell you if you’re qualified for HAMp, and pun intended, you can take it to the bank.

It’s what you’ve been waiting for… the truth, in writing. Email me at: mandelman@mac.com and we’ll answer all your questions, and get you started on the path to knowing what the banks know.  Even if you’re in the middle of the processing of your loan modification already, you might want to consider running the report to make sure you qualify, and avoid any traumatic surprises.

AND LOOK FOR THE NEXT EXCITING EDITION OF

MANDELMAN’S MONTHLY MUSELETTER, VERSION 8.0.


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