The Foreclosure Machine

[flashl]

Source: NY Times

NOBODY wins when a home enters foreclosure — neither the borrower, who is evicted, nor the lender, who takes a loss when the home is resold. That’s the conventional wisdom, anyway.

The reality is very different. Behind the scenes in these dramas, a small army of law firms and default servicing companies, who represent mortgage lenders, have been raking in mounting profits. These little-known firms assess legal fees and a host of other charges, calculate what the borrowers owe and draw up the documents required to remove them from their homes.

As the subprime mortgage crisis has spread, the volume of the business has soared, and firms that handle loan defaults have been the primary beneficiaries. Law firms, paid by the number of motions filed in foreclosure cases, have sometimes issued a flurry of claims without regard for the requirements of bankruptcy law, several judges say.

Much as Wall Street’s mortgage securitization machinery helped to fuel questionable lending across the United States, default, or foreclosure, servicing operations have been compounding the woes of troubled borrowers. Court documents say that some of the largest firms in the industry have repeatedly submitted erroneous affidavits when moving to seize homes and levied improper fees that make it harder for homeowners to get back on track with payments. Consumer lawyers call these operations “foreclosure mills.”

NY Times

Read more: http://www.nytimes.com/2008/03/30/business/30mills.html?ref=business

[Xipe Totec]

1. Zopilotes

Carrion eating vultures.

[Sailing]

5. Here is a fitting song...

The vultures fly high - Renaissance

http://www.youtube.com/watch?v=WhFeyLLN8E0

[calimary]

9. Welcome to DU!

Glad you're here! Now get to work.

[lonestarnot]

2. Disgusting.

[msongs]

3. On the whole the residential real estate industry is pretty scummy

my dad was a realtor for years so I watched it first hand. He was your proverbial honest man who shook his head in dismay at the hustlers and sharks who raked in big bucks while he confined his energy to quality services and personal involvement to the betterment of his clients. Even so, he managed to do fine and enjoy his service.

first there are the lenders and their predatory associates, with jacked up fees based to get access to loans.
Most of the fees and charges are for nothing more than typing some information into a computer. And these fees are escalating even though lenders are going to make tens of thousands of dollars of interest on loans.

of course now, most loans are just sold off, so the original lenders have to jack up the fees or they will not make any money for being middle men instead of mortgage holders. They have effectively inserted themselves between the home owner/buyer and the money source.

The biggest scam is realtors charging 6% of the house sales price as a fee. Now get this, not only do they get 6% of the equity in a house sale, they are also adding another 6% onto the debt/existing loan the property owner has as well.

Used to be a realtor had to do a lot of work to sell a house in a reasonable market, now with the computer and internet the amount of time has gone down yet the money made has gone way up with escalating prices.

well the industry rode the gravy train and is now going rotten because of its own practices.

and the greedhogs, speculators, and people who refuse to live within their means are going for the fall as well.

some people were suckered in by the industry's liars and deceivers, and I sympathize with them.

Msongs

[rwenos]

4. The Six Percent is Negotiable

Real estate agents' big lie is that the 6% is set in stone. It's not -- it's completely negotiable. Especially when the values are so high nowadays.

If you have to sell, find a broker who will list for 4%. Especially if the house is worth more than $500,000. You'll find someone, believe me.

[truedelphi]

19. I'm glad to encounter someone else with an honest dad.

And what a great amount of character he possessed - to stay in a field where a lot of people do nothing but HYPE and HYPE. Yet for whatever reason, he remained true to principles.

My dad was that way also - though not a realator.

[Mark D.]

6. They Represent Mortgage Lenders...

...who are banks. Controlled by the bankers on a larger scale. Did you all hear Bush wants to give more authority and power to the Federal Reserve due to this manufactured crisis? The big slump very early in the 20th century that lead to the Federal Reserve's establishment was to 'prevent future financial crisis like that' and what happened? They opened up the money supply in the 20s, consumers were 'credited' with the boom. It crashed and we had a depression, and consumers were blamed for that too. Blame the victim, always.

One had noted elsewhere. All this 'relief' for banks, investment firms and other assorted tentacles of the elite for the games they played, by the Federal Reserve. They are out there trying to give them more. But who's money? We have to repay it. Us taxpayers, most of whom can't afford to invest much, or anything at all in those markets. This latest of the collapses orchestrated as a way to hit US consumers with more debt to repay forever, as a way to give the financial market billions in relief we never get any of despite our having to pay it back.

Again. Morgan, part of the big three (Rockefeller, Morgan and Rothschild) partially orchestrated the collapse creating the 'need' for a Federal Reserve to 'protect' us. They then helped jerk around the money supply to create the Great Depression. Morgan was a major player in that. Now we have risky mortgages given out everywhere. Sold to naive investors as a few things, mainly HEDGE FUNDS. Hedge Funds (surprise) go on to crap out. That was the biggest factor in the housing crunch, which is the biggest factor in the economic collapse.

What's the biggest Hedge Fund in America? - MORGAN. - Any questions? Blame consumers, blame small lenders, realtors, your uncle Steve. Wake the fuck up. They jerked the strings and the puppets moved. Keep blaming the puppets, or maybe, if you think you've all the answers, blame the strings or the wood they are attached to. Ignore the hands at work above. At the top of the pyramid. The same few, decade after decade, century after century. Monetary Policy is behind it all. Until it changes, these things will keep happening to us.

[calimary]

10. Welcome to DU, to you, too!

You certainly nailed it on the food chain here.

[Hannah Bell]

12. "They jerked the strings..." Interesting comment.

I've been thinking about where the original impetus for the sub-prime thing came from, & who was fronting the money for derivatives & the like.

In a big institution with a lot of history & the best minds money can buy, people at the top knew the risks. The low-level schucks sold the stuff & can be excused for being young unthinking go-getters. But the people at the top had to have known it was unlikely the party could go on forever & the downside was major. So why did they let it get so extreme? Why did they loan money to buy turds, why did they sell them?

I come to the point where I start to think the result was desired in some quarters. I mean the downside of taking out pension funds, cities, the us budget/treasury, whatever.

Wouldn't be the first time.

[Doctor_J]

7. More republican donors

human waste who need to go on hunting trips with Cheney

[Cronopio]

8. Link to this article sans NYT authentication.

http://biz.yahoo.com/nytimes/080330/1194760391479.html?.v=5

[selador]

11. ignores half the equation

"NOBODY wins when a home enters foreclosure — neither the borrower, who is evicted, nor the lender, who takes a loss when the home is resold. That’s the conventional wisdom, anyway.

The reality is very different. Behind the scenes in these dramas, a small army of law firms and default servicing companies, who represent mortgage lenders, have been raking in mounting profits. These little-known firms assess legal fees and a host of other charges, calculate what the borrowers owe and draw up the documents required to remove them from their homes."

why is this so hard to understand. there are also winners on the buy side. when supply outstrips demand, the housing market (at least on a shorterm basis is glutted by foreclosures and forced sales, etc. the BUYERS benefit

the market is two sided. for every seller there is a buyer

there is a great upside to the housing market crash (god, i hope it comes). the market works to REASSESS value (and price).

just as there was great upside to the dotcom bust at the turn of the century , there is great upside to houses getting dumped

buyers who stood on the side and/or didn't overleverage and buy ridiculouslty overpriced houses are STOKED when foreclosures hit the market.

[McCamy Taylor]

13. You ignore another half then, the builders side. With all these old homes on the market

new home starts are going to be down, which means fewer jobs for home builders, less demand for the materials that go into new homes. That hurts the economy in general.

Plus, since the middle class wealth is all in its home, if home values drop everywhere, home owners are suddenly 20-40% poorer across the country. That is a serious blow to their ability to finance their kids higher education, pay medical bills, weather crises without going bankrupt, survive a layoff (which could be precipitated by a down turn in the economy started by decrease in new home starts)

If you are going to look at consequences look all the way,

[selador]

14. good points u make

"new home starts are going to be down,"

correct.

" which means fewer jobs for home builders, less demand for the materials that go into new homes. That hurts the economy in general."

in some senses, yes. demand filters into other areas. classic economy cycles - wax and wane.

also, lower demand for materials means lower costs, which EVENTUALLY helps restart the cycle.

feel free to correlate lumber futures prices for example, with home prices.

"Plus, since the middle class wealth is all in its home,"

a substantial portion for many in the middle class.

" if home values drop everywhere,"

home values drop the most WHERE they are the most overbought. that's corrective and healthy. all bubbles crash. they have to because greater fool theory can only take you so far. it gets to a point where it is simply not feasible to buy a home. it already was there, which was why people got interest only and exotic type loans. they were just hoping to flip for more. that speculative excess is seen at the end of bubbles in most asset classes.

" home owners are suddenly 20-40% poorer across the country."

yes. and for those who didn't overleverage, there is little downside to this . they lost paper wealth in THEIR house, but replacement cost if they have to move is similar. the ones who win out are the ones who were smart enough to sell before the bubble popped, held the cash then REINVESTED after it.

smart money buys low and sells high.

"That is a serious blow to their ability to finance their kids higher education, "

not if they are responsible enough NOT to depend on loans against their paper wealth to pay off things like higher ed. those that DIDN'T overextend are much safer.

again, the MARKET HAS TO IMPOSE COSTS for speculative excess. that's a GOOD thing. it helps the market cycle back (below hopefully) fair values.

it's a constant cycle. it's healthy. it's been happening for CENTURIES and always will

the problem is that people ASSUMED that housing prices HAVE to go up. they relied on greater fool theory and they did the most dangerous thing in ANY asset class (just ask a broker) they overleveraged BASED on that (erroneous) assumption

"pay medical bills, weather crises without going bankrupt, survive a layoff (which could be precipitated by a down turn in the economy started by decrease in new home starts)"

the way you survive a layoff is to build a cash reserve. anybody who parks their wealth in ONE asset class is crazy. and they get what they deserve.

people who act irresponsibly SOMETIMES get rewarded. those who act responsibly are much more likely to KEEP their rewards in the long run. there are old traders, and there are bold traders, but there are no old, bold traders.

people became embroiled in speculative excess. yes, they will be hurt. they SHOULD be hurt. not because we want to see others pain (shadenfreude and all) but because it's the only way that overbought conditions can correct them.

"If you are going to look at consequences look all the way,"
sure. i am saying it's good AND bad. yin./yang. all that

i know people in my area (seattle) who have been renting and/or who bought small homes or whatnot and built cash reserves who will GREATLY benefit from (hopefully) continued weakness in our market. the market was already pricing out people that should not bepriced out of the market.

these market cycles are healthy. it's always gloom and doom when we are in the midst of them, but in the long run they are extremely healthy and they HAVE to happen.

[nealmhughes]

20. In some areas of the country, the credit crunch has hit home buyers, but not the market

otherwise. It is easy to have a home shown at the price you would have got 6 months ago, but not so easy to have the loan approved these days. My sister had 3 contracts on a 3BR 2 BA house in the Huntsville AL market and there is to be an influx of 4000 families due to the base realignment program, from St. Louis to Redstone Arsenal in Huntsville. All 3 fell through due to the loans not being approved. This house has a brand new roof and new appliances and only about 2 miles from the Interstate and in Limestone County (much lower taxes than Madison/Huntsville) and can't seem to move until this past week when someone who actually had the money at hand to satisfy the bank.

On the other hand, the luxury river/lake-front properties have dropped like a rock in what people are willing to pay and the McMansions that were ubiquitious in North Alabama are now much more modest and hardly mansionettes any longer. One large estate was listed at over $600 K and sold at $430K as the owner had to "dump" it. This one was on the Elk River and on a bluff with an electric chair lift down from the bluff to the boat house! The realtor made a mint off that one.

This problem is really very regional, except for the credit crunch, which seems to be nationwide. I am applying for a tenure track job in U. Nevada Reno later this week and went online and saw that the rent was incredibly low for what I assumed was still a go-go real estate market there as spillover from Tahoe and Vegas, only to find out that the entire state is in a huge downturn alongside its neighbors Cali. and Arizona.

[AP]

15. I think the banks win when there's as little equity as possible in real estate, which happens when

you foreclose on someone who is overleveraged, and new buyer moves in who is overleveraged. So, I think the banks do end up winning if there's a lot of churn.

[ShockediSay]

18. Worthwhile quotes from the cited article & their import

"John and Robin Atchley of Waleska, Ga., have experienced dubious foreclosure practices at first hand. Twice during a four-month period in 2006, the Atchleys were almost forced from their home when Countrywide Home Loans, part of Countrywide Financial, and the law firm representing it said they were delinquent on their mortgage. Countrywide’s lawyers withdrew their motions to seize the Atchleys’ home only after the couple proved them wrong in court.

The possibility that some lenders and their representatives are running roughshod over borrowers is of increasing concern to bankruptcy judges overseeing Chapter 13 cases across the country. The United States Trustee Program, a unit of the Justice Department that oversees the integrity of the nation’s bankruptcy courts, is bringing cases against lenders that it says are abusing the bankruptcy system.

Joel B. Rosenthal, a United States bankruptcy judge in the Western District of Massachusetts, wrote in a case last year involving Wells Fargo Bank that rising foreclosures were resulting in greater numbers of lenders that “in their rush to foreclose, haphazardly fail to comply with even the most basic legal requirements of the bankruptcy system.”



+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

These would be great cases for punitive damages except that the neo con Fascists favor lobby lawyers, and foreclosure mills in the legal community, over those attorneys who represent real people really screwed by the system

[slackmaster]

16. This article complely overlooks another class of people who win out in foreclosures

The people who buy foreclosed properties at greatly reduced prices for the purpose of living in them.

In January one of my coworkers bought a nicely refurbished 2 bedroom condo for $210 K. The previous owner had paid $370. My coworker got a very good deal. He won, as will people who have been patiently waiting for prices to become affordable as prices continue to contract.

Foreclosure is a nasty business but it is a necessary process that is defined by laws and regulations. Like trash collection, somebody has to do it.

[Joanne98]

17. The "opportunity" scumbags.