Kamala Harris Comes Through: CA Out Of Big Banks Deal!

kamala harris, attorney general of california

Kamala Harris Is My Hero, Too

This is terrific news: Kamala Harris, California’s Attorney General, has heard the people of this state, suffering under the worst mortgage and real estate crisis since the Great Depression. She has opted out of the proposed settlement of the 50 states Attorneys General with the Big Banks. That settlement, rumored to be about $25 billion, is really small potatoes and would have been a disastrous conclusion of their investigation.  $25 billion would barely settle the monetary issues for California alone, not to mention the other 49 states. In addition, the banks are seeking to limit all their legal liability in return for the meager settlement. Despite the support of the Obama administration,hoping to end financial uncertainty with this settlement, Harris has decided that California will pursue a separate investigation and, if possible, make a separate settlement with the Big Banks.

Other States Are Reluctant To Sign

Harris follows in the footsteps of Eric Schneiderman of New York who has launched a wide-ranging investigation of the activities of the Big Banks which include Bank of America, Chase, Wells Fargo, Citigroup and Ally Financial.  Other states have also signaled their displeasure with the proposed deal which, if rumors are correct, allots a huge windfall to the Big Banks and a meager settlement to the states. Besides New  York and California, Delaware Massachusetts, Kentucky and Minnesota, along with our hard-hit neighbor, Nevada have all signaled intense dislike of the proposed deal.

California, already one of the worst foreclosure states in the nation, recently made headlines again when foreclosures jumped 55% in one month as BofA, a prime supplier of SoCal mortgages during the “bubble years” via Countrywide, prepared to “dump” more seized homes on an already-bloated real estate market. Stockton, CA is especially at risk for there, it is estimated, 1 in every 7 homes could be foreclosed in the near future. Likewise,  Nevada’s Las Vegas is suffering from an especially difficult and long-lasting crisis  as estimates say that 75% of Las Vegas homes are underwater and could potentially be foreclosed.

Fraudulent Mortgage Practices

As indicated in a previous post, some of the most notorious fraudulent practices of the Big Banks, such as robo-signing, continue despite their public exposure. Since California is a non-judicial state, meaning foreclosures do not have to be approved by a judge or, indeed, by anyone, fraudulent foreclosures are harder to spot. Judicial states, in general, are the ones which have brought such practices to light. Given the huge number of foreclosures in California, though, it stands to reason that large numbers of these were not legitimate.  Victims of such practices should have the help of the state’s top lawyer, the attorney general, to help them seek redress. Except in rare cases, it is prohibitively expensive for individuals to launch suits against Big Banks. That should not give the Big Banks carte blanche to commit wholesale fraud against California mortgagees.

What Does This Mean For Distressed Homeowners?

The most likely scenario now with both New York and California posing uncomfortable questions to the Big Banks while launching probing investigations into mortgage abuse is that the 50-state deal will collapse. The Big Banks will have to live with  uncertainty. Will they be brought to the bar for their crimes? How much will it cost them? Will heads roll? And the Big Question for Big Banks: will profits suffer? will stock prices dive? Few have much sympathy left for the banks, so, aside from Timothy Geitner and Henry Paulson, few will really care.

big banks bailout cartoon

The outcome for the distressed and already-foreclosed-upon homeowner, though is a different story. With multiple ongoing investigations, quick relief in the form of monetary settlements is not in the cards.  It is really, though, to everyone’s advantage to dig deeper into this morass of abuse. If the fraud is papered over, then, equally obviously, it will happen again. If the banks made trillions by fraud and nobody cares to demonstrate the modus operandi, then they will continue to  behave in the same way. Showing the crime and punishing the criminal:  That is the basis of our judicial system and it is a vital necessity in this case.

Some of the more flagrant practices are already known, publicized, and yet continuing. Big Banks could regulate themselves in order to regain public confidence. This is, apparently, what was expected of them after the 2008 bailout which seems to have been offered with no strings whatsoever.  Did they regulate themselves?  For those imprisoned in Siberian ice caves for the past 4 years, the Big Banks went right back to business as usual. Congress needs to regulate our messed-up financial sector. The sooner, the better if we are ever to get out of this nightmare.

Banks Are Still Cheating!

After all the hullaballoo last fall over the “robo-signing” scandal, you would think that banks had learned their lesson. You wouldn’t expect to see a big bank still forging documents so it could foreclose, would you? You would be wrong.  GMAC, one of the biggest of the big mortgage lenders/servicers, was recently caught-again!-doing that very thing.

Here’s what happened. The bank wanted to foreclose on a property in New York and, as often happens in these days of mortgage-backed securities, tranches and what have you,  did not have the requisite documents. Usually in a case like this, the bank goes to the original lender and asks permission to recreate the original documents. Even that sounds pretty murky. We consumers are required to have documentation for everything or–too bad for you–no dice. In this case for GMAC, though, it was even worse because the original lender, notorious subprime mortgage-maker Ameriquest, had gone out of business in 2007.

So, GMAC, not to be deterred, started seeking ways to craft the documents anyway. The problem, as stated by its own “Document Execution Team” head, Jeffrey Stephan, was that the bank did not have signing authority.  Several months passed and no solution appeared to help GMAC out of this legal “snag.”  Then, suddenly, GMAC had an answer. It filed a document with New York City authorities  stating  the delinquent Ameriquest loan had been assigned to it “effective” August 2005. The document was dated July 7, 2010, three years after Ameriquest had ceased to exist and was signed by Stephan, who was identified as a “Limited Signing Officer” for Ameriquest Mortgage Company. Soon after, GMAC filed for foreclosure.

Was it legal? No way was this little trick legal as it did not have signing authority from the defunct Ameriquest. In fact, it’s own paperwork giving itself authority was dated in 2010. Oops!

Guess what, GMAC? In New York it’s a felony to file paperwork “with intent to deceive”.  Already we know that GMAC was at the forefront of the fradulent “robo-signers” and, apparently, has not taken its lesson to heart because, according to ProPublica which discovered this particular case, this is just one of hundreds, if not thousands of similar work-ups arranged by GMAC so it can proceed to foreclosure, regulations and laws be damned.

Snagged in the act, so to speak, GMAC has not yet been able to foreclose on this home where the owner still resides. And, since apparently no one did much homework at the time of the demise of these sub-prime lenders, this will continue to plague not only GMAC, but also other mortgage servicers in their quest to foreclose.

How inconvenient it is that real estate laws exist! How much better if these silly little laws could be just wiped off the books and the banks allowed to do as they wish-foreclose without proper documentation.

That is the root of the cries for “less regulation”, “free market capitalism,” no “job-killing rules” and the like.   GMAC is not alone in its tricky interpretation of foreclosure laws.  Many banks have filed thousands of false foreclosures, knowing full well that few homeowners will contest them in court.  In fact, fewer than 4% of foreclosures are contested, though the stakes are very high for homeowners.   Recently, in Vermont a judge threw out a pending foreclosure from GMAC, based on a flawed signature emanating from the aforementioned Stephan who has admitted to signing up to 400 foreclosure notices a day, precipitating the foreclosure scandal.

After December, The Avalanche?

Louis XIV of France, styled the Sun King, famously opined, “Apres moi, le deluge.”  After me, the flood. He was right, of course, for his excesses so infuriated the people that his successor was guillotined and his monarchy overthrown in the French Revolution.

SoCal Plunge In Foreclosure Filings

Something similar seems to be brewing in Southern California and maybe even nationwide as lenders ratchet up their foreclosure filings after the “robo-signing” lull. Though foreclosures dropped dramatically in SoCal this fall, so, too, did all home sales. The reasons seem to be many: the end of the home buyer tax credit, stubbornly high unemployment and the generally still-moribund economy. In fact, sales are down a full 16% from November of 2009. This at the same time foreclosure filings fell 14% from the previous November after a 22% decline in October for a two-month total 36% decline. Nationwide, the filings fell 21%.

December is traditionally a slow month in real estate as consumers focus on retail buying, parties and holiday travel plans. Typically, though, also in December  smart investors are out there snapping up last-minute bargains of the now-extremely motivated sellers still on the market. Competition is almost always much less, to put it mildly, and sellers are determined to close out their books for year’s end.  This year seems to be different as even investors are holding back.

That may be because the huge drop in  foreclosure filings this fall has ominous repercussions for home prices in the new year. With the foreclosure freeze over, informed observers now expect to see the banks ratchet up their foreclosures with a vengeance, restarting filings begun in October and November and barreling ahead with new ones in January. Executives from RealtyTrac, a real estate data collection firm, speculate that the housing recovery could be set back three months, if not more, as the foreclosures pile up. In fact, we can expect ” an avalanche” of foreclosures shortly.

SoCal Home Prices

The most immediate effect of an avalanche of foreclosed properties on the market will be to further depress prices in Southern California which had started a slight upward movement. Los Angeles County home prices had dropped 1.2% over November 2009 to a median of $325,000. Riverside and San Bernardino Counties, the hardest hit by the bursting of the real estate bubble, lost 2.5% and 5.0% respectively to medians of $195,000 and $152,000. But, that is a huge improvement over the 30% and 40% drops of previous years. Other SoCal counties actually gained in value. Orange County eked out a .6% improvement for a $435,000 median home price. San Diego topped the charts with a 3.1% improvement over last year to a median of  $335,000 with Ventura County just behind at 2.7% uptick to a median of $375,000.

Future: More Underwater Homes

These hard-earned gains will soon be lost as the promised avalanche of foreclosures hits the market. Perhaps sales will pick up as buyers and investors are lured back into the game. But, bargain-hunting fun aside,  another price drop for already distressed homeowners will plunge yet more homeowners underwater.  That, in turn, spirals down into more foreclosures and more equity loss in future.

Like Louis XIV, banks see this as well as anyone, yet still refuse to modify loans in any serious way. Like Louis, they see, but, obviously, don’t give a damn as long as they get their bonuses. Short-term is the only term.

Bank Breaks Into Woman’s Home

Recently, Nancy Jacobini of Orlando, Florida was terrorized when she realized someone was trying to break into her home. She thought she was a victim of bold daylight robbers.  She was afraid the robbers might be armed. It turned out it was her bank, JP Morgan Chase, apparently super-eager to grab her house. Chase had sent out a  contractor to “secure” the home and change the locks.  Jacobini was home at the time with her lights on, and the contractor scared her to death.

Do banks take over homes before the foreclosure is accomplished?

Many people are not aware that banks routinely invade homes in which homeowners have stopped making payments  and change the locks.  If a home is vacant, the  bank’s  contractors step in to change the locks and check out the property. They do this without starting the legal procedure known as foreclosure.

BofA did it to one of my listings, a local condo, vacated by the tenants. The bank  knew it was for sale because it was in the MLS and it had a lockbox. I had also contacted the bank to begin the short sale procedure.  The bank  had not bothered to file a Notice of Default, the first legal step in a foreclosure. As the listing agent, I was obliged to call the bank and request a key on behalf of my sellers. This key arrived promptly I will admit, but what legal right had the bank to change the locks in the first place? I will tell you —-none.

 

DARTH INVADER

 

More Bank Horror Stories

In another instance, someone I know had tenants leave a property in Texas which was also up for short sale. It’s easier to sell without tenants, of course.  In this case, the listing agent soon heard from other agents that they couldn’t access the property becasue the key didn’t work. You guessed it. Shortly after the tenants vacated, the bank, BofA again, had swooped down and changed the locks.  The agent was obliged to call the bank  so he could continue to list the house. Again, the bank had not bothered with the legal formality of Notice of Default before asserting its “rights” of possession.

Matt Weidner of St Petersburg, Florida is Nancy Jacobini’s attorney. Jacobini admits she had missed some mortgage payments, but she was living in the home and was actually home at the time of the contractor’s visit.

 “What we have right now is lawlessness across the country. Banks and institutions are circumventing our courts. They’re going behind our judges’ backs and they are throwing homeowners out on the street out completely improperly,” Weidner said. 

“These are jack-booted thugs driving around with a pickup truck and a clipboard … kicking down doors. And they are unregulated in most states. This has gotten out of control,” Weidner further stipulated.

In another case in Punta Gorda, Florida contractors entered the home of Darlen Dicinti and her husband who returned home from a trip to care for her sick grandmother to find the locks on their home changed. 

“These people called Safeguard Properties broke in … They went through my back window – they cracked the glass,” Decinti said.

A judge had entered a foreclosure judgment against the couple, but they are appealing it – and they have the right to remain in the home at least through the end of November.

Inept Banks Plunge Foreclosure Process Into Chaos

In yet another consequence of the “bubble years” when zero-down mortgages went to almost anyone, now the foreclosure crisis is itself in crisis.

Bank of America, largest holder of US home mortgages, has declared a moratorium on foreclosures. Other large lenders, GMAC, Chase, have stopped foreclosures in 23 states, but  all large lenders are expected to follow suit shortly and declare a total moratorium across the country.  Initially, California was not involved, though immediately Jerry Brown the attorney general who is also running for governor of the state, pledged to scrutinize the banks’ foreclosure processes.

The reason for the moratorium is the revelation of the “robo-signing” of foreclosure affidavits without even looking at the contents. This has opened the banks to claims of massive fraud.

What does this mean for my  home? Will the auction go through?

If you with a  BofA or Countrywide loan  were expecting an auction any day now, that auction has been postponed indefinitely.  As mentioned here previously, from start to foreclosure, the process has been taking over one year due to the slow pace set by the banks. Now, add to that an indefinite moratorium period. The consensus seems to be the time will be 60 to 90 days. I would bet that most, if not all, foreclosures will begin again only in the new year.

How long will I be able to stay in my property without paying the mortgage?

At this point, no one knows what is going to happen next. Most likely, BofA for now and perhaps other banks will use the period of the moratorium, no matter how long it lasts, to clear out their huge,clogged pipelines of homes which have already been foreclosed upon and remain in some part of the sale or pre-sale process.  With the pipeline cleared, once the moratorium is lifted, foreclosures should resume at a brisk clip.

I haven’t paid my mortgage on my home for 6  months and I have a Notice of Default. Does this mean I won’t get a foreclosure on my record?

No, this means that,  if you have just done nothing so far, the BofA  moratorium is allowing you time to do a short sale and avoid the worst result for your credit. If you have an NOD, that means the process has started and the clock is ticking. Once the moratorium is lifted, whenever that is, you are just that much closer to foreclosure. You  may be one of the first foreclosures after the moratorium.

For help deciding or doing a  short sale, call me at 626-641-0346 or email Diane.

I haven’t paid, but I don’t have a Notice of Default. What about me?

It’s unclear at this point whether or not the banks will continue to issue NODs during the moratorium. No matter because at some point the moratorium will be over and the foreclosures will continue.  During this lull in the foreclosure activity, you have time to get going on a short sale.

How did all this happen?

Foreclosure Heat Map

As indicated in another post, really the incredible speed and complexity of the modern mortgage system are at the root of the issue. As explained in a Washington Post article, the situation is further complicated by the various reactions and legal opinions coming from many states. Some states which have not been especially hard hit appear to have adopted either more scrupulous attention to detail or some have even passed laws making it easier for banks to foreclose. Other states, especially the Big Four Foreclosure States, Florida,  California, Arizona and Nevada, faced with entire neighborhoods shuttered and communities gutted of population, have tried to stem the tide.

What is going to be the outcome?

BofA has already said it will resume foreclosures once its internal investigation is complete and has further stated that, so far, its internal investigation has revealed no irregularities.Banks are notoriously self-serving, though, so no one is relying too much on a self-test. Rumors are that Congress wants to hold hearings on the topic to see exactly what the banks are doing to validate the foreclosure process.

It’s evident that massive lawsuits may follow any hint of wrongdoing which could throw the entire real estate and financial sector into chaos.  Bad as the foreclosures are, the spectre of another TARP to bail out the banks again is just too horrible to contemplate. Let’s hope against hope  the banks have been following the proper procedures.

For help deciding or doing a short sale, call me at 626-641-0346 or email Diane.

Rosedale Update

As seen recently in the Wall Street Journal. Rosedale Azusa is bankrupt.
All Eyes on Land as Auction Nears

Housing developers thirsting for deals are excited for a large land auction that is expected Thursday after US Bank forecloses on a Azusa, Calif., property.

The US Bancorp subsidiary will auction enough land in the Rosedale master-planned community near Los Angeles to build more than 700 homes, people familiar with the matter say. That is big news to builders and real-estate investors, who are finding sizable land deals few and far between.

Some industry experts say the site could command more than $70 million.

Azusa Land Partners LLC, Rosedale’s master developer, couldn’t be reached for comment. US Bank declined to comment.

The site, located in the foothills above the San Gabriel Valley, is part of a project that was to include 1,250 homes, a recreation center, parks and other amenities.

While the housing crash halted progress, developers convinced recovery is imminent are itching to start again. The site has drawn “a lot of interest,” said Richard Gollis, co-founder of the Concord Group, a real-estate consulting firm. Major entitlements and infrastructure already in place are “a significant cost and time advantage for the new buyer,” Mr. Gollis said.

Builder Standard Pacific Corp. says it is eager to bid, but Chief Executive Ken Campbell declined to reveal how high he will go.

Foreclosure Activity Increases Nationwide

According to the California Association of Realtors [CAR]:


.  The report by RealtyTrac® also showed nine of the 10 metro areas with the highest foreclosure rates experienced declines.  Four states—Florida, California, Nevada, and Arizona—accounted for the top 20 metro foreclosure rates. Florida led the way, with nine of the top 20 metro foreclosure rates, followed by California with eight of the top 20 metro foreclosure rates, Nevada with two, and Arizona with one.

With 4.59 percent of its housing units (one in 22) receiving a foreclosure filing, Modesto, Calif., posted the nation’s third highest metro foreclosure rate. Other California cities in the top 10 were Merced at No. 4 (4.47 percent of housing units); Riverside-San Bernardino-Ontario at No. 5 (4.37 percent); Stockton at No. 6 (4.37 percent); and Vallejo-Fairfield at No. 9 (3.91 percent).

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People frequently ask me when I think that home prices might recover from this recession. These foreclosure figures make it plain California has not recovered, though San Francisco, Los Angeles and San Diego, the biggest cities, are not in the top foreclosure areas.

With all the wealth of California, why are foreclosure rates still so stubbornly high? One reason is that our housing prices were “out of sight” for quite some time and are coming back to earth with a thud. The other reason is our very high unemployment rate which also answers the question about rising home values. Not until the employment situation turns around will home values start to climb again. Unemployed people do not buy houses. If they already have homes, they are in danger of losing them to foreclosure as the above figures from CAR show us.