About foreclosures, our housing markets, and economic recovery… oh, and lying.

Okay, so let’s start by remembering where we started on the housing and foreclosure crisis back in 2009… here’s President Obama’s delivering his speech that introduced his Making Home Affordable program on February 18, 2009.

 

Among other things, he says his plan will help save between 7 – 9 Million families so they can avoid foreclosure. But, that’s not all.  He also says his plan is important because of the neighbors to these families because foreclosures lead to lower home values, along with failing local businesses and lost jobs.  He says…

“In the end, the home mortgage crisis, the financial crisis and the broader economic crisis are all interconnected.  And we can’t successfully address any one of them without addressing them all.”

Quite right, and I think it’s fair to say that just about everyone would agree.

 

But yet… fast forward to March of 2012… about a year ago, and the foreclosure crisis was understood to be far from over.  As I recall, HAMP fell just slightly short of helping 7-9 million… or 3-4 million… or whatever we’ve changed the numbers to today.  You recall that statistic too, right?  I don’t need to go find a link, do I?

 

Hang on… I don’t need to go find anything… I interviewed the former Special Inspector General for the TARP program (and author of the book, Bailout), Neil Barofsky myself on a Mandelman Matters podcast, and if you haven’t listened to it yet, now is as good a time as any…  Former SIGTARP Neil Barofsky, the Last Honest Man in Washington.  If you haven’t read Neil’s book yet, you’ll find a link to Amazon there too.  It’s absolutely worth reading… twice.

 

Susan Wachter, a real estate professor at the Wharton School at the University of Pennsylvania, talking with Bloomberg’s Lori Rothman on March 23rd of last year says that the foreclosure crisis is still a major threat to our country’s economic recovery.

She also states clearly that, “Without Fannie, Freddie and FHA, there would simply be no (mortgage) market.”

 

 

Nobel Prize-winning economist Joseph Stiglitz, asked on October 3, 2012, what we need to do to create an economic recovery, said there were three things needed… Engage in another round of fiscal stimulus, do something about home foreclosures and address the problem of income inequality.

 

 

Then, as of July of 2012… Yale Professor Robert Shiller, who correctly predicted the current housing meltdown said that even though the crisis is now five years old, he didn’t think we were at the bottom. When asked, “If the current housing crisis was a baseball game, what inning would it be?” Shiller replied, “Maybe we’re in the fourth.”

Shiller also said that home prices may not recover “in our lifetime.”

He cited the Florida land boom in the 1920′s, where prices did not rebound for a “half century,” adding, “There are a lot of long term doubts about home prices right now.” Asked the question: If real estate does not recover “in our lifetime,” what about the banks still holding it?  Shiller responded by calling that a “dark scenario, also saying…

“A lot of people have the mistaken impression that we must be at a bottom.”

Shiller makes it very clear that our housing market not recovering is the major factor holding back our overall economic recovery.

 

 

And, as recently as ONE MONTH AGO… on January 25, 2013… Yale’s Robert Shiller, founder of the Case-Shiller Index, says that no experts think we’re headed back to any sort of boom in housing and that he believes that housing will continue to fall.  To his interviewer at the Davos Economic Conference only a month ago, he says,

“But, you’re right… the rhetoric… the cheap talk is we’re off to the races again.  But people that think about it seriously… doubt it.”

 

And one more thing… on March 23rd, 2012… Alex Sanchez, president and chief executive officer of the Florida Bankers Association, discussing the implications of a home foreclosure moratorium for the U.S. economic recovery, and says that a delay in foreclosures will continue to slow any U.S. economic recovery.

 

He also says a bunch of other things that I wouldn’t agree with, but I’m including his interview because it’s representative of what the banking industry has continued to say…

 

That delays in foreclosure can only delay our nation’s economic recovery.

 

 

And since there should be no question in anyone’s mind that not only have we already seen significant delays in foreclosure activity as a result of the robo-signing scandal, National Mortgage Settlement, and new state laws like Nevada’s AB 284, that essentially brought foreclosures filings to a halt in the fall of 2011, but such delays are continuing and even increasing in state’s like California, Oregon and Hawaii… as a result of those states recently passing laws that make non-judicial foreclosures impractical.

 

Now, I explained this situation weeks ago in my article titled, “9.9 Earthquake in Default Servicing Turns California into Judicial Foreclosure State,” and if you haven’t read it… you should.

 

But the crux of the matter is that because of the compensation structure for foreclosure attorneys in non-judicial foreclosure states, once a state passes a law that creates or increases the potential for monetary liability for improprieties in the foreclosure process, the lawyers contracted to handle foreclosures simply don’t want to do them without a change in their compensation.

 

More simply put… if you were getting $1200 to handle a foreclosure in a non-judicial state, and then that state passed a law saying that you now could end up having to pay a fine of $10,000 or more if it were determined that something wasn’t done properly… how many more of those $1200 jobs foreclosing would you want to take on?  Not too many, right?

 

See the problem?  So, what happens when state laws create such potential for liability, is that the bank has to switch over to a judicial foreclosure process, which they can do, but takes a year or more to renegotiate contracts and compensation structures for the foreclosure law firms.  And while those changes are being made… it makes it appear that foreclosures have slowed down dramatically in the state.

 

And that’s precisely what you’re seeing today in California.  In fact, just today, the Sacramento Bee reported…

 

Foreclosure activity – default notices, scheduled auctions and bank repossessions — in California plunged dramatically in January, according to a report released today by Irvine-based RealtyTrac.

The LA Times reported…

The real estate website ForeclosureRadar.com reported a 60.5% decline in California default notices in January from December. The number of default notices — the first formal step in the state’s foreclosure process — fell 77.7% from December 2011. A total of 4,500 such filings were logged last month, the lowest number of default notices since at least September 2006, when the website’s records begin.

 And the Ventura County Star reported…

Foreclosure activity in California and Ventura County took a dramatic tumble in January as the state’s new Homeowner Bill of Rights kicked in, market researcher RealtyTrac reported Wednesday. There were just 354 foreclosure filings — default notices, scheduled auctions and bank repossessions — in Ventura County, according to the Irvine-based firm.

 

That number is down 69 percent from January 2012 and 35 percent from December. California had 4,386 foreclosure starts last month, down 62 percent from December and nearly 75 percent from January 2012.

And at the national level, because California is so disproportionately large when compared with the rest of the country, foreclosure numbers also dropped significantly.  It’s not because foreclosures slowed down everywhere, it’s because California’s drops had huge impact on national averages.

As reported today by the Minneapolis Star Tribune

The number of U.S. homes entering the foreclosure process fell in January to a level not seen since the peak of the housing boom, a consequence of a package of state laws aimed at stemming foreclosures that went into effect in California at the beginning of the year.

So-called foreclosure starts — when a home with a mortgage gone unpaid is placed on a countdown clock to possible foreclosure — declined 28 percent nationally last month from January 2012, foreclosure listing firm RealtyTrac Inc. said Thursday.

Foreclosure starts also fell 11 percent from December, the firm said. The last time fewer homes entered the foreclosure process in a single month was June 2006, when the U.S. housing market was roaring and home values were rising — trends that helped homeowners avoid foreclosure.

January’s decline in foreclosure starts was most pronounced in California. The number of homes in the state that started on the path to foreclosure plunged 75 percent from a year earlier and sank 62 percent from December.

As the nation’s most-populous state, California has seen a larger share of the fallout from the housing downturn that most states. That’s why the state’s sharp drop in foreclosure starts last month had such an outsized impact on the national figures.

And of course Bloomberg weighed in as well, with some incomprehensible financial industry inspired double speak about how this could be interpreted in some positive way…

The new California law includes stricter standards for mortgage servicers such as a prohibition on “dual tracking” — simultaneously pursuing a foreclosure while borrowers are in the process of applying for a loan modification — and fines of as much as $7,500 per loan for filing unverified foreclosure documents, according to Blomquist.

“In the short-term, the new law will probably prop up prices by restricting inventory, but it’s artificially holding back supply that would otherwise be listed for sale,” Blomquist said in an interview.

Sellers, however, may be persuaded to “move off the fence” with less competition from distressed inventory, he said. Nationwide, tight supply and borrowing costs near record lows may drive prices higher this year and reduce the inventory of distressed homes, according to a Feb. 12 report from JPMorgan Chase & Co.

So, let me be CLEAR about a few things… 

1. Did I already explain this in great detail almost a month ago?  Why, yes… I did.  And does that make me smarter or at the very least more honest than the rest of the sycophants in the media?  Why, yes… I’d have to say yes it does.

 

2. And secondly… so what’s the deal banking industry and Obama Administration PR people?  Since you’ve ALL been abundantly clear for years now about how ANY slow down in foreclosures CAN ONLY delay the recovery of our housing markets, which in turn CAN ONLY delay our nation’s economic recovery, and… since we’re obviously seeing a HUGE slow down in foreclosures as a result of California’s new law on top of other states who have passed laws with similar impacts on foreclosures…

 

… Then how in the world can we be “at the bottom,” of housing price declines or starting to see ANY sort of “housing recovery” as the MORONS in the media are also reporting TODAY, after receiving your press releases?

 

Don’t answer that, it was rhetorical… I know the answer… it’s because you’re ALL LYING and intentionally confusing people so they won’t realize what’s really happening, which might lead more of them to decide to say f#@k it and walk away from their FUNNY & FATTY GSE loans that are hopelessly underwater for the next so many DECADES… as I’ve been saying and writing consistently for the LAST FOUR YEARS!

 

And that would make Ed DeMarco’s models of the future look pretty STUPID with his plugged in assumptions for fantasies like GDP growth that’s NEVER going to even come close, even with you fluffing up the figures, and default rates that depend on misleading the public with nonsense that’s become so obvious as to be glaring today… but has been obvious all along to me and others.

 

FUNNY & FATTY are bankrupt mortgage companies that no longer offer “implied” guarantees by the U.S. Government… they are entirely GUARANTEED by the U.S. Government… JUST LIKE THE INSOLVENT FHA, that plays more accounting games than even Enron and Arthur Anderson ever thought about… so why are we allowing FUNNY & FATTY to deny principal reductions…why are we continuing to blame the banks, when 75 percent of the loans are GOVERNMENT LOANS and it’s the GOVERNMENT that’s preventing them from being written down?

 

FUNNY & FATTY have their own RULES?

Oh, do they now?  What RULES do bankrupt mortgage companies entirely funded by MY tax dollars have exactly?  Care to show me and the rest of the American public those RULES?

 

Better yet… would anyone care to invite me to any sort of public debate about any of these issues or facts about what’s gone on these last five years or what’s continuing to go on today?  Come on Wall Street people… or Treasury people… you’ve got “the smartest guys in the room, right?”  Economists that got 1600 SAT scores?  So, you’ll just put me in my place with your mastery of the facts, right?

 

What else could possibly happen?  Oh, I know… I’m dreaming… I can’t even get any of you to debate me on an L.A. radio show… every time I’ve tried on Money Radio you’ve disappeared during the first commercial break.

 

Okay, so does everybody see what’s going on here now?  Any questions?

 

Anyone?  Anyone?  Bueller?  Bueller?

 

Mandelman out.

 

P.S. Want another economics lesson?  Foreclosures slow, repossessions slow… inventory falls… so scarcity makeprices rise… then banks start foreclosing judicially as they’ve already started to in Nevada and Oregon… foreclosures rise again… prices fall again… and presto more  losses in real estate market…

 

So, if you didn’t lose enough last time around, jump into the real estate market now.  Just like they said about the Great Depression… If you didn’t lose your shirt in 1929… you had another chance in ’32… and ’35… and ’38…

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