Wednesday, May 20, 2009
Average Joe American got screwed because Congress ripped out the teeth of the bill. Essentially without the threat of a cramdown in bankruptcy lenders and loan servicing companies have nothing to fear if they refuse to give a customer a loan modification.
The weak incentives contained in the bill, as I have previously stated, are the functional equivalent of offering a 13 year old a quarter to go clean up a 30 acre cow pasture!
Speaker of the House Nancy Pelosi stated, "I am disappointed that the Senate failed to include crucial mortgage bankruptcy provisions that would have prevented more foreclosures, but this legislation is critical to strengthening our economy by stabilizing the housing market,”
Well Nancy it just doesn't go far enough does it?!?
The bill also offers a safe harbor to Loan Servicing companies who engage in loan modifications. So what if these companies are protected from investor lawsuits for giving a loan modification. This just means that if a servicer offers a loan modification, none of the investors will hire that service in the future to service loans! So a lot of good that does anyone.
I am hoping that Average Joe American is going to wake up and start reading the fine print. He/She didnt read the fine print when they signed those predatory loans. If the don't read the fine print now on these bills they are going continue to be lulled into complacency thinking that President Obama and the Democrats are looking out for us because the "Helping Families Save Their Homes Act" will be signed into law. The reality and the fine print show us that Obama's plan is like a toothless pit pull placed in the hen house to protect the hens from the fox. GOOD LUCK!
I so thoroughly disgusted!
Friday, May 15, 2009
The Kudlow report is insane! check it out!
Saturday, May 9, 2009
"I'm a 10 year real estate and bankruptcy attorney. I am in the trenches daily with the banks and loan servicers. I have experience and information about the bad faith loan modification tactics of most of the banks. My short and long story listed below so I don't take up too much of your time. At least I will have educated you so you can look for evidence of this in your own state. Somebody needs to know and understand what may really be going on and how your constituents are being harmed.I wonder if any of them will respond. You are all fee to copy and paste this letter if you think this is happening to you. I would love to hear from you if this is happened to you!
SHORT STORY: Banks need and want the foreclosures. I have directly evidence and can give you trustee sale nos where this has happened. Recent enmasse foreclosures where the notes are NOT reverting back to the bank/lender beneficiaries for the "Face Value" of the Note. Instead, competitor banks purchasing the note at 30-40% of face value of notes AND are about 50% under fair market of the home being foreclosed upon. They resale at current market value with nice tidy profit. Banks books start looking good to Asian and European investors one more time.
The problem is these are the same banks who claim they are trying to work with their borrowers to help them with loan modifications. But this is a lie because these same lenders refuse to communicate with the borrowers representatives. We can fax over to them 5 times financials and every fax is lost! When they do offer a modification it is one where the homeowner has to sign what amounts to a release of any and all FUTURE claim they have against the bank on the loan, including their rights to a future bankruptcy if necessary.
Allowing a CramDown would have stopped the banks from foreclosing and interferred with this profit making plan that it appears the banks are now engaging upon.
An even bigger problem is outright violation of California law in order to accomplish the above-identified scheme. Look at California Civil Code, Section 2923.6 states that the loan servicers are supposed to maximize profit and balance the interests to everyone (including the borrowers) in a security pool. The Investor's interests are far better served by offering loan modification on a loan where the security is a bit upside down now. Otherwise when house goes to foreclosure the investor takes a huge loss.
Conclusion: To discourage modification, bar a cramdown, the government is now the Banks' best friend ensuring a steady stream of foreclosures upon which banks can now maximize its personal profits. All of this at the expense of average American Homeowners and illegal! This is not fair. Its not right! How do we put a stop to this?!?
I have several cases (PROOF) that the bank denied loan modification to borrowers forcing them into foreclosure where it was subsequently purchased by a competitor bank. This is all pretty recent. I don't think most of the pundits or the politicos realize this is happening.
It will be too late before Obama or anyone can help us. I have this insane idea that if I get enough people to listen to me to see what is happening, maybe the cramdown might have a chance if brought to congress again? Maybe something else could be done to help the average person?
What do you think of my thoughts and ideas?
Thanks for reading.
R. Grace Rodriguez, Esq.
LONG STORY: Wrote this in my Blog Thursday: It explains it more precisely my theory of what is happening. http://letbksaveyou.blogspot.com/
Thursday, May 7, 2009
I'd wager a couple of bills that the banks are not even thinking about programs to save homeowners from foreclosure. They have a bigger fish to fry. I would bet a new plan of action is being put into place to recover from this mess. Think about it for a moment. Banks need to attract investors to recover. Investors want to see results; portfolios that are doing well. How will those portfolios be built? I'm guessing, but have you noticed at the foreclosure auctions, banks are starting to accept bids FROM OTHER BANKS (their friends) that are 50% less than the face value of the notes? What a brilliant idea. The bank selling at foreclosure gets to take a 50% write-off for the loss. The bank buying the property ends up with a property for 30% off fair market value. When the buying bank goes to sell at fair market, they show a profit to investors. Now the bank looks like its on the right track for its new investors. All the banks come out smelling like roses after this whole mortgage fiasco.
I have a client who will remain nameless for client confidentiality purposes. But he is representative of what I have observed in the past week. He has a $400,000 mortgage on his house. He asked the bank to reduce his mortgage to $300K and that he would pay 6% interest on the modified loan. My client's house is worth about $280K. The bank said no.
Unfortunately he was too far behind to do a Chapter 13 and catch up on the arrearages. But might I point out to you that those arrearages would never have existed BUT FOR his lender telling him that they would not consider a loan modification unless he was 3 months behind on his mortgage! My client was left with no alternative but to let the house be foreclosed upon.
When the house went to foreclosure, EMC sold the house to US BANK for about $150,000.00. This means that EMC will now book a $250K Loss on this investment. HOWEVER, US BANK will spend another $15 to $20K on eviction/relocation fees and may be another $15K to clean up the property and resell it at $280K. US BANK will be able to show a clean return on its investment of nearly 30% return. . . numbers investors will find attractive. It will then be business as usual for US BANK.
EMC will look bad to its investors, but those investors will have moved on to banks like US BANK. EMC perhaps will simply disappear as the fall guy for a mortgage industry who suffered chronic and severe anemia!
Let me point out something however. The banks will not be successful in this endeavor unless they actually have properties going to foreclosure sale; a LOT of properties going to foreclosure. The banks won't achieve the foreclosure numbers it needs to make this policy work with a broad policy of encouraging loan modification. It seems transparent that this is why recently so many of my colleagues and their clients are failing to achieve en masse positive modification results.
Let's get real. The financial incentives offered by Obama's plan amount to throwing a kid a penny and asking him to go clean out all the cow pies in a 30 acre cow pasture. I wouldn't count on seeing the banks voluntarily provide fair and reasonable loan modifications in the future.
Without the stick of a cram down the banks have already moved on to their bigger fish to fry! Your average homeowner in America will be merely the kindling to fuel that fire!
Tuesday, May 5, 2009
The Rodriguez Theory of how the Banks are Planning to Recoup Losses and Attract Investors Post-Cramdown Rejection
Okay call me crazy for thinking this way. Call it my over-exposure to the Watergate scandal at the tender age of 10, but I am noticing an alarming trend in my practice that leads me to believe that the average American is about to get royally screwed over again by our Banks and the Senators in this Country are protecting them!
Here is what I noticed. Just a few days before it became clear that the Senate was not going to pass the Cramdown in bankruptcy provision, I started getting letters on my pending loan modification files. Aurora and Countrywide were the most prevalent. These letters essentially informed my clients that they did not qualify for a loan modification at this time. (Note however, that these clients are pre-qualified to do a Chapter 13 Bankruptcy and keep their homes in most cases.)
Additionally, they sent out 2nd letters in almost all cases informing the client that they were entitled to a "Special Forebearance" agreement. Essentially the agreement offered the client to pay a reasonable mortgage payment for two to three months, with a final baloon payment of THE ENTIRE AMOUNT OF ARREARAGES. Typically this ranges from three to four months of back payments ($10,000+ usually).
These are the very same banks who informed many of these same borrowers that they would not consider giving a loan modification until they were two to three months behind on their mortgage payments.
On the other side of the table, I have new clients coming to see me after their homes have already been foreclosed upon. I have also performed some of my own investigations to discover some interest foreclosure results. Instead of most of the loans reverting back to the beneficiary, the loans are now being purchased for HUGE DISCOUNTS in many cases 50% off of what was owed on the note.
Now one particular client who consulted with me showed me the loan modification request he had made. He owed $400,000 on first mortgage. His interest rate was 7.25% His regular payments were approximately $2,700.00. His income had decreased due to loss of overtime work. He requeste a loan modification where he would pay 2000.00 a month based on about 4.10 interest. This means the investor would not get as much interest, but they would get their full $400,000. During the loan modification process, the bank, despite the loan modification being in review, foreclosed on the property. US BANK bought the property at foreclosure sale for $242,000.00. The investors on that loan LOST $158K!!! not to mention the cost of the foreclosure sale, and the cost now to fight with my client to evict him! That's easily another $40K.
So I suspect what is happening is the banks are offering investors to come up with a little more money to reinvest in REO's. I also suspect that there is some sort of tacit understanding or agreement among investment bankers to buy up each other's REO inventory so when have the big turn around, the investors who lost so much money in their portfolios with the latest mortgage fiasco, will be able to turn around and make up their losses on the re-investment. This makes the banks look like heros to today's investors. The average homeowner continues to take a big loss.
The way I see it the banks and investors only see numbers on a page. They don't see the effect of multiple foreclosures and empty neighborhoods. I have seen empty houses stripped of their plumbing, electrical and fixtures such as air conditioners because there are not enough people living in certain neighborhoods to report the house was getting stripped.
Americans have to wake up from their apathy and contact their representatives and fight the banks. Were is our "Ralph Nadar" hero who will help the average consumer beat back the American Mortgage Banker's Association and all the money they funneled to key Democratic senators ensuring a "Nae" vote on the cramdown provision?
As long as the average citizen continues to ask the question . . . "What can I do? I'm only one person." and then does nothing, everyone will suffer. I would urge everyone to seek out organizations who are forming everywhere to achieve reform of this industry.
Okay I ranted enough. Like I wrote earlier call me a conspiracy theorist if you will. But would bet a few bucks that I'm right. I would bet that I'm not even beginning to scratch the surface of how much these banks are taking advantage of us all. I welcome your thoughts.
"The Rodriguez Theory of how the Banks are Planning to Recoup Losses and Attract Investors Post-Cramdown Rejection"
Friday, May 1, 2009
Dear Ms. Rodriguez:
Thank you for writing to me to share your thoughts on legislation that would allow bankruptcy courts to modify the terms of home loans. I appreciate hearing from you on this important subject.
California is one of the states hardest hit by the foreclosure crisis. Approximately 520,000 homes received a foreclosure filing in California in 2008, and more than 2.3 million homes received a foreclosure filing nationwide.
Foreclosures are not in anyone's best interest. While they are a catastrophe for the homeowner, they also leave the lender with a property that has to be resold, frequently at a loss, and the neighborhood with an empty house that is often not being maintained. When this happens, communities can be decimated, local economies suffer, and crime often increases.
On January 6, 2009, Senator Richard Durbin (D-IL), introduced S. 61, the "Helping Families Save Their Homes in Bankruptcy Act." I am an original co-sponsor of this bill because I believe it will help to stem the current foreclosure crisis. The bill would amend the bankruptcy code to eliminate a provision that prohibits bankruptcy judges from modifying mortgage loans on primary residences. The bankruptcy court would be authorized to extend the time allowed for repayment of a mortgage loan, in order to reduce the debtor's monthly payment to a feasible amount. The bill would also allow bankruptcy judges to convert escalating adjustable rate mortgages into fixed-rate mortgages, at a reasonable rate of return for the bank.
On March 5, 2009, the House of Representatives passed a companion version of this legislation (H.R. 1106) with similar provisions by a vote of 234-191. It is expected that this legislation will come before the Senate shortly.
I believe that Congress must do everything possible to help solve the current foreclosure crisis and keep struggling homeowners in their homes. I appreciate hearing your views on this matter. Please know that I will be sure to keep your comments in mind should this bill or similar legislation come before me for consideration in the Senate.
Again, thank you for contacting me. If you have additional questions or concerns, please feel free to contact my Washington, D.C. staff at (202) 224‑3841.
Sincerely yours,Dianne Feinstein
United States Senator