Aaron Layman's Katy Texas Real Estate Forum

30-Yr Mortgage Reaches Record Low Of 3.91%

The rate on the 30-yr fixed dropped to 3.91% this week.  The 15-yr stood at 3.21%.  Rates might drop even further should the Fed launch a new program of bond purchases.  It's possible the Fed could signal zero rates for short-term borrowing into 2014, or shall we say to infinity and beyond. 

OCC And Adminstration Allowing Banks To Self Regulate Their Own Fraudulent Mortgage Abuses

Last week's 60 Minutes piece "There Goes The Neighborhood" was depressing enough, but the real kicker comes from this revelation by Legalprise founder Michael Olenick.  It seems the OCC and the current Administration continue to green-light foreclosure fraud at the behest of large banks.  Here, Olenick uncovers the conflict of interest with Allonhill and Aurora Loan Services.

"On September 9, 2011, Allonhill signed an engagement letter— a definitive agreement — with the Office of the Comptroller of the Currency (OCC), as part of the consent order wherein servicers agreed to submit foreclosure fraud for reviewby “independent” third-party companies. The engagement letter notes that Allon founded Murrayhill, “which pioneered the concept of independent third-party oversight of loans and servicers.” But there is no mention that Murrayhill was tasked with promulgating and monitoring Aurora’s default policies and procedures.

That is, OCC chief John Walsh signed off on hiring Allon to audit her prior work for fraud.

Let’s repeat that; the OCC — an arm of President Obama’s Treasury Department — signed off, allowing a company founded and managed by the woman who created Aurora’s foreclosure practices to audit her own firm’s work, and did so pursuant to a consent orderand under the guise of consumer protection. Allonhill, the firm that promulgated and enforced foreclosure policies, is based less than a mile away from the address listed for Murrayhill, the firm auditing for foreclosure fraud on behalf of borrowers.

Until now there has been a mountain of circumstantial evidence that the Obama administrationhas been comfortable with foreclosure fraud. There is the conspicuous lack of prosecutions, unwarranted and unwelcome intervention in the 50-state Attorney General review, and references that infer robosigning is a “victimless” crime. But, until this disclosure, there has been no solid evidence the federal government is actively covering up bank-perpetrated fraud.

This arrangement clarifies that the Federal Government, at the highest levels, are comfortable, or even arguably complicit, covering up foreclosure fraud."

Any homeowner who's struggled with a mortgage modification or short sale need only look at what's actually going on behind the scenes to see the government's true intentions.  Scapegoating a few execs at Fannie and Freddie (while their defense bills are being paid by taxpayers) won't fix the mortgage market.  For all the President's admirable rhetoric, there's been virtually nothing done to rectify rampant criminal fraud in the mortgage and securities markets.

Michael Dell & Other Hedge Fund Managers Profit From FDIC Sponsored Fraud With OneWest Bank

This fascinating piece on the shared loss agreements created for One West Bank exposes involvement of some major players in the hedge fund industry, including George Soros, John Paulson and even computer mogul Michael Dell.  As part of their arrangement for taking over IndyMac loans, the new OneWest investors created a loss-share agreement with the FDIC whereby they profited handsomely for foreclosing on those loans which were purchased at a discount.  Essentially the investors bought the loans at a discount, but were reimbursed on a formula using the original loan amount thereby inflating the true loss on the loan.  Mish Shedlock offers this example of how the system worked.

The original loan amount was $500,000. Missed payments and other foreclosure costs bring the amount up to $550,000. At 70%, OneWest bought the loan for $385,000

The home is located in Stockton, CA, so its current value is likely about $185,000 and OneWest sells the home for that amount. Total loss for OneWest is $200,000. But this is not how FDIC determines the loss.

‘FDIC takes the $500,000 and subtracts the $185,000 Purchase Price. Total loss according to the FDIC is $315,000. If the FDIC is covering “ONLY” 80% of the loss, then the FDIC would reimburse OneWest to the tune of $252,000.

Add the $252,000 to the Purchase Price of $185,000, and you have One West recovering $437,000 for an “investment” of $385,000. Therefore, OneWest makes $52,000 in additional income above the actual Purchase Price loan amount after the FDIC reimbursement.

I've detailed before why short sales are notoriously difficult to close and should generally be avoided.  The prevalence of shared loss agreements with the FDIC is a large part of the problem.  Too many lenders/investors are gaming the system.  It's more profitable for the investors to foreclose than pursue short sales or modifications when the government is picking up the tab for reimbursements.  OneWest reportedly made $1.57 billion in profit in less than one year.

Surprisingly, there are now some 269 loss-share agreements backing some $160 billion of losses on bad loans.  According to this Sun Sentinel article, the payouts are expected to exceed $21 billion by 2014.  This comes at a time when the FDIC insurance fund is already $20 billion in the hole.

I've not been a fan of Dell computers for quite some time, but these latest revelations cast an entirely new perspective on the matter.  I'm even less of a fan of corrupt, greedy bastards who would game a system designed to protect struggling homeowners.

Nevada AG Indicts LPS Employees For Robo-Signing

Is the wheel of justice beginning to turn?  Perhaps so, as Nevada AG Catherine Cortez Masto has just handed down 606 counts against two employees of Lender Processing Services for their involvement in robo-signing.   While the two employees charged are mid-level players, Masto's office has said they will follow the trail as far as it goes.

Yves Smith makes a salient point regarding the current turn of events:  "When you throw your capital into the hands of people who have no incentive to use it wisely, the economy suffers. When you enforce the rule of law, sound business models prevail and ordinary citizens have more confidence in the system and spend and invest accordingly. As an economic policy, justice works." 

Number Of Mortgages Underwater By State

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Mortgage Rates Dip Back Below 4%, Purchase Applications Still Flatlining

Mortgage rates are back below the 4% mark, but that hasn't necessarily provided a boost to mortgage purchase applications.  As this chart shows, there's also a limited benefit to refinance activity.  The refi boom has essentially played itself out as the index has converged with dropping rates.  At this point, it would take a massive stimulus to provide any meaningful boost.

Robosigning Continues With Major Mortgage Lender Servicers...Unless You Are In Nevada

If there was any question as to whether banks have stopped the fraudulent practice of robosigning, it can be answered with the latest data from Nevada.  After Nevada instituted a new law making robosigning a felony, subject to 10 years in jail and fines of $10,000 per violation, notices of default fell off a cliff in the state.  Nevada's new robosigning law took effect October 1st.  While correlation is not causation, it doesn't take a genius to figure out that banks have suddenly been presented with a conundrum in Nevada.  How do you foreclose on properties when you don't have appropriate procedures in place or the documents to support a legal filing?  Apparently the answer is...you don't!

 

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Mortgage Rates Increase, Applications Up Slightly

Mortgage applications were up slightly last week with purchase applications up 1.8% and refinance activity off by 0.2%  Rates on the 30-year fixed were at 4.31 percent.  Rates are dropping again this week now that the Greek debt deal is unraveling.

The 4-week moving average of applications is at a low point for the year, excluding cash buyers.  Those looking for a year-end rally in home sales will likely be sorely disappointed.

 

Foreclosure Timelines Increase, Mortgage Delinquencies Down Slightly

LPS Applied Analytics report for September shows a slight improvement in the delinquency rate with 8.09% of mortgages delinquent.  This is down from 9.27% in September of last year.  4.18% of mortgages were in the foreclosure process, up from 3.84% in September 2010.  That gives you a total of 12.27% of mortgages either delinquent or in foreclosure.

2.36 million loans less than 90 days delinquent
1.84 million loans 90+ days delinquent
2.17 million loans in foreclosure process

These are ugly numbers, and the the foreclosure timelines continue to stretch out.  The number of loans delinquent for 90+ days is back to 2008 levels.  Take a look at the orange section of this graph.  If that's the government's definition of a housing recovery, then Houston we have a problem!

11 Reasons Not To Do Business With Bank Of America

The title of this post was originally going to be 10 reasons not to do business with Bank of America, but last night I turned on the TV and watched this farcical piece on Bank of America foreclosing on Brad Gana's Seabrook lot.  I say lot, because Gana's house was destroyed by Ike while he was away overseas.  Even though the house was destroyed, Bank of America levied a forced-placed insurance policy on Gana's property.  Bofa then attempted to foreclose on the property and even removed Gana's personal items.  Bofa's response... they "incorrectly placed insurance" on a home that didn't exist.

If this example of fraudulent behavior by Bank of America isn't reason enough, Nomi Prins has 10 other reasons to take your assets out of this this criminal cess pool parading as a bank.

1. B of A rejects the right of customers to protest. When two Occupy Santa Cruz protesters in California marched into a local Bank of America to close their accounts, the response was, "You cannot be a protester and a customer at the same time," followed by a threat to call the police if the women didn't leave. (The attending officer later reiterated the bank manager's message.) Meanwhile, the fact that Bank of America charges a fee for closing an account prompted Rep. Brad Miller (D-North Carolina), who resides in Bank of America's headquarters state, to introduce a bill to protect customers from such fees.

2. To recoup ongoing losses from its stupendously dumb acquisitions of Countrywide Financial and Merrill Lynch, B of A pillages its customers. Thus, despite massive public outrage, the $5 debit usage fee for customers with less than a $5,000 balance and no mortgage with the bank will begin in 2012. B of A was the first large bank to confirm it would charge this fee, which is the highest in current discourse among the banks.On October 18, Consumers Union wrote a letter to B of A chief Brian Moynihan asking him to reconsider this fee, which impacts poorer clients disproportionately. The lettersummed it up nicely: "Consumers should not be required to pay a costly fee that appears to be arbitrary and designed to generate income to make up for Bank of America's bad business decisions rather than covering the costs of providing debit card services." Banks collect 24 cents from retailers for each customer swipe, much more than the median 8 cents it costs a bank to process the purchase. Senator Dick Durbin's (D-Illinois) response was to urge customers: "Vote with your feet. Get the heck out of that bank."

3. B of A's other fees are just as bad. According to its last annual report, the bank has 29.3 million active online subscribers who paid over $300 billion worth of bills in 2010. In May, B of A raised its checking account fees, which included e-banking, to $12, in line with JP Morgan Chase's decision to do the same, up from $8.95 per month. In June, it started a $35 overdraft fee, even on overdrafts of one cent. Next year, it will incorporate basic checking with a new"essentials'' account structure that makes monthly fees unavoidable, that will not include free bill pay, and that has a mandatory $6 minimum fee.Last Monday, Bank of America was charged (along with JP Morgan Chase and Wells Fargo) with colluding with the two major credit card companies, Visa and MasterCard, to keep ATM fees high; in other words, they were charged with "price-fixing," in direct opposition to antitrust laws. This is the third of three such suits filed recently, each seeking class action status.

4. Bank of America takes gross advantage of the military.It is the official bank of the US military and has branches by or on many bases, which provides the firm with another locus of extortion. B of A can entice military personnel to take out loans at usurious rates. Personal loans made to soldiers for a few thousand dollars can actually keep them indebted for the rest of their lives.Last May, Bank of America paid $22 million to settle charges of improperly foreclosing on active-duty troops. The firm spun these foreclosures as being Countrywide's fault for having started them before becoming part of B of A.

5. Bank of America is officially rated the biggest, scariest bank. Its stock price also fared the worst of the group of banks (which also included Citigroup and Wells Fargo) when Moody's Investors Servicedowngraded it on September 21. B of A's long-term holding company (parent bank) rating was chopped two notches to Baa1 from A2, and its retail bank rating was cut two notches from A2 to Aa3, placing B of A four notches below rival JP Morgan Chase and one below Citigroup, the third-largest US bank. Its bank holding company has the lowest rating among the top five banks with the largest derivatives positions.This caused great fear for investors involved in derivatives trades with the Merrill Lynch division, prompting them to request trades be moved to the part of the bank with the better rating - the retail part with the insured (peoples') deposits. That way, B of A doesn't have to pony up as much collateral to back the trades, as it would in a subsidiary with a lower rating. The Fed was recklessly happy to approve, despite the Federal Deposit Insurance Corporation's (FDIC) misgiving about having to insure more risk, even if it can borrow from the US Treasury to do so. Meanwhile, Bank of America's stock price got so crushed that Warren Buffett scooped up a $5 billion preferred stock deal, effectively betting that the government won't let this big bank go bust.

6. B of A's derivatives position keeps rising. The total amount of derivatives in the FDIC-insured portion of B of A as of mid-year was $53.7 trillion, up 10 percent from $48.9 trillion the prior year, and up nearly 35 percent from its pre-fall crisis level of $40 trillion (the Merrill Lynch securities division holds $22 trillion in addition.) The bank has $5 trillion of credit derivatives, nearly double its $2.7 trillion pre-Merrill amount. In addition, because of its inherent zombie status and rating downgrades, the cost of insuring B of A against a possible default continues to rise in the credit derivatives market - a pattern that American International group (AIG) once followed.

7. Bank of America got the most AIG money of the big depositor banks. By virtue of having acquired Merrill Lynch's AIG-related portfolio, B of A got to keep approximately $12 billion worth of federal AIG backing, too. It also received more government subsidies than any other mega-bank except Citigroup. Its stimulus package included an initial Troubled Asset Relief Program (TARP) helping of $15 billion for the bank and $10 billion for Merrill, plus a second helping of $20 billion in January 2009 after it became clear that Merrill's losses had spiked to $15 billion - in order to ensure the takeover from hell went through and Fed chairman Ben Bernanke, then-Treasury Secretary Hank Paulson, and then-Merrill Lynch executive John Thain could pat themselves on the back for saving the world. The government guaranteed $118 billion in assets, mostly Merrill's, in the new merged firm. With the benefit of the Fed's nearly 0 percent money policy, and a depositor base to plunder, B of A repaid that aid.In terms of overall federal subsidies (including TARP), Bank of America was second only to Citigroup ($230 billion compared to $415 billion). None of that got in the way of former B of A CEO Ken Lewis' personal take, a $63 million retirement plan, in addition to the $63 million he scored during the three years before his departure.

8. Bank of America leads the big bank fraud lawsuit settlement tally. So far, it has racked up the largest settlement, $8.5 billion in June, to settle claims related to $100 billion worth of Countrywide-spun mortgage securities backed by faulty loans, with bigwig investors like Pimco, BlackRock, and the Federal Reserve Bank of New York.B of A is also being sued by state and federal regulators for questionable foreclosure practices and a union benefits plan for hiding foreclosure problems that impacted its share price. It is one of 17 major US financial institutions being sued by the Federal Housing Finance Agency for billions of dollars of mortgage-securities-related losses that may require B of A to potentially repurchase $50 billion worth of allegedly fraudulent securities. Earlier this year, B of A settled for $3 billion regarding bad loans that they had repackaged by Fannie Mae and Freddie Mac, as well as agreed to a $624 million settlement in a securities fraud class-action suit filed by New York Sate and City pension fund regarding Countrywide stock losses. Then there's AIG's August lawsuit, in which AIG wants $10 billion in damages for mortgage-related securities it bought and against which it claims B of A committed securities fraud.That's a lot of pain for a Federal Reserve-approved $4.1 billion acquisition. Meanwhile, since the settlement didn't lead to a financial restatement, under the supremely elastic (read: useless) Dodd-Frank Act, executives get to keep their related bonuses.

9. Even after lawsuits, B of A would still rather please investors than customers. Investors that won money in the $8.5 billion settlement were upset that B of A was continuing to service loans, instead of foreclosing on them more quickly. Now, B of A had a nasty incentive to kick people out of homes faster, rather than work with them to refinance or restructure mortgages. Two months later, their foreclosure process has, in fact, sped up.
Bank of America foreclosure notices are surging again following a slight robo-signing- related slowdown, meaning they are now sending out a greater increase in default notices (90-day overdue loans) than other banks. The bank has $30 billion in residential mortgage loans in default, which will become foreclosures for thousands of families.

10. Bank of America, despite having been buoyed up by the government, did not pay taxes, and, given its glorious ineptness, will be laying off 30,000 workers. Not only did the bank pay no federal taxes for 2010 (or 2009) by making use of its posted pre-tax loss of $5.4 billion, it actually cited a tax benefit of $1 billion. Meanwhile, it has announced plans to cut up to 30,000 jobs over the next few years as part of its plan to save $5 billion, ostensibly due to the settlements it's paying for engaging in upper-management-approved fraud.