News, Research & Insights for American Homeowners, Patriots & Constitutional Conservatives
Surprise, surprise.
The Heritage Foundation’s Lachlan Markay uncovers a potentially key motivation for the president’s recent proposal to offer incentives to companies to buy and use trucks powered by natural gas: One company that stands to benefit handsomely from the president’s proposal is Westport Innovations. The company converts diesel engines to be fueled by natural gas. Wall [...]
Open letter to the president.
Whew. I haven’t read a letter this profoundly accurate since I read Ali Akbar’s Tea Party invitation to Morgan Freeman. In New York City, Leon Cooperman is a legend, the quintessential self-made man. His parents were Polish immigrants, his father a humble, hard-working plumber. Cooperman became the first in his family to attend college — [...]
"They about had an orgasm in Biden's office when we mentioned Solyndra."
Remember back in September when White House visitor logs came out showing more than a dozen visits from George Kaiser, a.k.a. billionaire George Kaiser a.k.a. top Obama donor George Kaiser a.k.a. major Solyndra investor George Kaiser? The press corps grilled Carney about it at the time, and after a little checking he came back and [...]
Did the White House consider a Solyndra bailout?
Taxpayers lost $535 million in subsidies to Solyndra, a firm whose main investor was a bundler for Barack Obama and one that Department of Energy auditors warned would fail. Did Solyndra executives share in the pain? Not exactly, as the San Jose Mercury News and GreenTechSolar discovered while perusing the bankruptcy documents. Solyndra execs took [...]
What do the investors think about all these foreclosures?
What’s the relationship like between investors and servicers?
Do investors want to modify loans?
Do investors ever stop servicers from approving loan modifications?
Why don’t investors get more involved in this mess?
IF YOU’VE ASKED THESE QUESTIONS, HERE’S YOUR CHANCE TO GET ANSWERS!
Attorney Talcott Franklin knows mortgage-backed securities inside and out. He should… his firm, Talcott Franklin P.C. whose main offices are in Dallas, in dollar terms represents more than half of all the investors in mortgage-backed securities on the planet. Tal’s the co-author of the “Mortgage and Asset-backed Securities Litigation Handbook,” and he’s a very experienced and highly sophisticated litigator.
What makes Tal a pleasure to talk to, however, is that he makes a very complex subject very easy to understand… in fact, every time I talk to him, I feel like come away smarter. Actually, the very first time Tal and I spoke, it was very clear that we couldn’t be more in-sync as to our views on the economy… where it’s headed and why.
Tal sees the foreclosure crisis essentially the same way I do, which I found interesting right from the start because he represents the other side of the foreclosure coin… the investor side. And because of his knowledge and perspective you’re going to find listening to what he has to say absolutely fascinating.
You know how servicers are always saying “the investor says no,” when they want to deny a loan modification… well, Tal explains why that simply isn’t true. And he walks us through the securitization process in a way that you’re likely to remember forever. And you’ll learn all sorts of other things you did not know. I’m telling you, you’re going to love spending an hour with Talcott Franklin on this, A Mandelman Matters Podcast.
The podcast is available in two versions… MP4 and MP3. The MP4 version includes a couple of slides that show diagrams of the basic securitization process, but the MP4 format may not play on some computers. The MP3 version is audio only, and should play on most any computer. Most listeners will have no trouble following along either way.
So, turn up the volume on your speakers, and click the MP4 or MP3 version. I loved recoding this podcast. If you want to know more about the foreclosure crisis, you’re about to learn from an expert on the other side of the foreclosures, the investor side… it doesn’t get any better than this!
Mandelman out.
Rich.
C’mon, IRS. “Stop coddling the super rich.” Contrive to successfully extract the taxes they already owe. Mr. Buffett, I barely want to waste my breath on your blatant hypocrisy. And, Mainstream Media (by which I mean the NYT, which ran Buffett’s obnoxious op-ed in the first place), WHERE ARE YOU? From NewsMax: Billionaire investor Warren [...]
We all know that most, if not all, of the subprime lenders that were originating the loans we are now defending for homeowners were engaging in various degrees of widespread fraud and deceit in order to close the loans. Our borrower clients were not sophisticated enough to catch the fraud or participate in it, but every level of the originating lenders were. Take the attached lawsuit against filed by a mortgage insurance company against Countrywide Home Loans for instance, in it,
They admit we didn’t actually review the loans we were insuring, we trusted Countrywide and relied on our “delegated” model for reviewing. (That means we didn’t look at all at the loans, we just issued an insurance policy.) The astonishing this is that there were billions of dollars sloshing around between originating the loans with shady brokers here on the ground level to when they were packaged, insured and sold to trustee, then investors and no one was actually looking at the loans themselves. I was a broker, we made loans and we would never do a loan unless we actually looked at everything, credit, income, visit the home.
The subprime mess was caused because no one, and I mean no one was looking at anything and they were all lying to one another…every player at every step in the process. And they needed unsophisticated players like our clients to start the chain of lies that started when the loans were originated then went all the way to the White House.
There is so much pushback from the remaining servicers and lenders who are fighting and preventing even reasonable modifications from occurring. One fascinating thing that befuddles me is the fact that if the laws on fraud and improper inducement were really followed here that might provide us with real opportunities to use proven allegations of fraud to force the hands in these modifications.
Read the lawsuit and let’s use the swarm strategies to pull all these pieces together.
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By now, I would think, most of my readers know that when homeowners ask me questions about today’s loan modification process, I tell them that, if it were me… and it certainly could be one day… I’d run a REST Report. In fact, I wouldn’t even consider applying for loan modification, without running my own REST Report, and assuming it was NPV positive, sending it to my mortgage servicer, along with the other documents required, to my mortgage servicer.
I say this without hesitation, because the REST Report has now been used by more than 1,000 homeowners facing foreclosure, and it is the only way, outside of a HAMP servicer, that you can know with certainty whether you qualify for a loan modification under the president’s HAMP program. And should the REST Report show that you do not qualify under HAMP, the report shows whether the NPV of other loan modification scenarios would cause the investor who holds your note to come out ahead financially as compared with foreclosure.
In point of fact, it’s the only tool or practice I’ve ever seen that’s made a consistent, measurable, and highly positive difference for homeowners, attempting to get their loans modified. Last year at this time, if someone asked for my advice on how to increase the odds that a servicer would ultimately modify a loan, I would have said “get a lawyer.” Now I respond to those inquiries, by saying, “get a REST Report.” You can always hire a lawyer later, should you feel the need.
There are law firms and individual attorneys stretching from coast-to-coast that offer the REST Report along side loan modification services, and in fact several have told me that they are no longer accept a new client until he or she has run the report, and that report shows a positive NPV as compared with the costs of foreclosure.’
Enter REST Report Matters…
Founded a few months ago, with offices in San Diego, California, REST Report Matters is the brainchild of partners, Michael Nazarinia and Charlie Rose. But even though it’s their vision and leadership that drives their organization forward each day, the pair has also made a special commitment to supporting the readers of Mandelman Matters.
For example, they invited me to their offices to provide three days of training to their staff, in addition to the extensive training they themselves offer, and that training not only covered the technical aspects of the REST platform, but also created a professional atmosphere designed to be more consultative than sales driven, according to Charlie. He wanted me to tell my readers that they should feel free to call REST Report Matters with questions anytime, without worrying that the person they speak with will be singularly focused on selling them something.
I’ve known Michael for about a year now. In his last position, his firm helped support my efforts to protect the rights of a homeowner to hire an attorney when at risk of foreclosure. He and I got along from the very first time we spoke on the phone, as I recall… you’ll find him to be smart, knowledgeable and caring. Like me, Michael is a lifetime learner, which I believe is a euphemism
for what we used to call a nerd, in my day.
The team at REST Report Matters also stands out in my mind, as many have worked with Charlie and Michael in past positions so there is a sense of shared purpose beyond what one would expect in a young company. Oh, and that’s the company that’s young, the staff… not so much, which I also like a great deal. Call me crazy, but I’m not sure I’d care much for talking about my mortgage with someone whose experience with mortgages consists of hearing about them from Mom & Dad, so no worries about that here. Charlie is actually pretty young… 30 years-old, I believe, and I although I usually don’t find myself in conversations with too many thirty year-olds, entirely by design actually, but Charlie’s certainly the exception. He’s quick to grasp the significance of new things, and I can’t imagine any homeowners not liking him and appreciating his candor right away.
But, I am perhaps most excited about a new password protected section of the firm’s site, that although still under construction as I write this, REST Report Matters is in the process of incorporating several unique features into their “clients only” Website that, soon will be capable of delivering a unique, technology-driven ongoing educational support and community component that I think homeowners will find both valuable and even enjoyable… to the extent that anything having to do with this topic can be considered enjoyable… perhaps stimulating is a better word in this instance.
I wouldn’t want to spoil anything that’s in development and only a few weeks away from the public launch, so suffice it to say that the suite of services the firm is developing are designed to fit together and complete the picture of what optimal support for working with the REST Report to get a loan modified should look like.
REST Report Matters is not a law firm, and as such they do not represent homeowners with their lenders and servicers, nor do they provide advice to homeowners, or in any sense offer comprehensive loan modification services. It’s just the REST Report, packaged with other important support tools and educational programs… delivered by the highly trained, compassionate professionals at REST Report Matters.
And, as always, you can reach me for further discussions at mandelman@mac.com.
Mandelman Matters is a California Nonprofit Corpooration and does receive a small percentage of the revenue generated by sales of the REST Report.
However, you may be assured that it a very small percentage and nowhere near enough to get me to recommend something I wouldn’t be recommending regardless. If you want any additional details, including, email me and I’ll be happy to disclose anything and everything.
Because if I can’t disclose it, I don’t do it.
According to a news release, David J. Stern has been replaced! OH NO! How can the company that bears one’s name function without the man behind the name? Whoever will be in charge of performing the “non legal functions” of the enterprise? What can this mean?
On the conference call just a few short weeks ago, Stern reassured investors that all was fine in China Town. (Nothing to see here folks, just move right along.) Why I even heard him reassure investors that they had only discovered “problems” with 21 assignments of mortgage. (Or something to that affect.) If I were an investor in DJSP and I based my decisions solely on the statements made in that conference call, I’d think everything was just fine. Now did these depositions and AG investigations just materialize overnight after that conference call? Did no one making those statements on that conference call have any knowledge of the severity of the Category 5 Hurricane of investigations and allegations swirling around?
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The gig is up. The word is out. The national press is on the scene. Now they need real examples of the horrors of the foreclosure courtroom. My problem is I have few horror stories to share. Fortunately, the judges in the Sixth Judicial Circuit are pretty fair and most of my clients get their cases resolved without the real horrors that I hear about from elsewhere. The foreclosure mill attorneys don’t get too many cracks in on me or my clients…..WE DO THE KICKING AND PUNCHING IN MY CASES.
Having said that, I know this is all about to change. I know there are going to be families who first find out their home is sold in foreclosure when the investor or sheriff comes knocking at the door. I know there are families who have no notice of their hearings. I know there are families who lost there home to Jeffrey Stephan or other faulty affidavits.
Soon I will create a forum where everyone can come and share these stories, but for now, please email me directly at weidnerlaw@yahoo.com if you want to do it privately, or post your story here along with your contact information.
Thank You.
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By Lane Houk
THE REST REPORT IS a report generated by the REST software platform, which is a loan disposition analysis system that, in limited different formats, is used by major banks and mortgage servicers with borrowers and properties that are in default, to run an NPV test and to determine qualification for a HAMP Loan Modification. Financial institutions use systems like REST to analyze the various options available when a loan is not being repaid as agreed by the borrower. The purpose of such analysis is to make sure that the bank can choose the path that offers the best financial outcome possible for the investor or owner of the loan; the servicer is simply the agent for the investor with whom most borrowers interface with on a regular basis. Usually, the investor/owner of the loan is unknown to the borrower and, in most cases, is a Special Purpose Vehicle (SPV) more commonly known as a “Trust.”
Although almost all financial institutions and servicers use loan disposition analysis software platforms, these systems are not made available to consumers. They are sophisticated systems only purchased and utilized by banks that have many thousands of loans that need to be analyzed so that outcomes may be determined and optimized.
When homeowners arrange to run a REST Report, the system produces an 11-page document based on the specifics of their property and their financial situation that shows, from the investor and servicer’s perspective, the various financial outcomes that would result from modifying their mortgage compared with the costs and bottom line result of foreclosure and distressed sale. A homeowner can then use the report by submitting it to his or her lender or servicer, along with the required supporting documents, when seeking to obtain a loan modification, or approval for a short sale.
Compare the approach of using an expert financial professional who knows how to use the REST Report to that of today’s homeowners applying for a loan modification without any assistance and without any negotiating leverage whatsoever. Some homeowners attempt to negotiate with their lender or servicer on their own and from a position of weakness, while others hire lawyers or other third parties to represent them, but in either case, all the homeowner ends up submitting to the lender or servicer is information about themselves, and nothing substantive about the possible dispositions of that loan from the bank’s perspective, or in the best interests of investors.
Law firms and other third parties, depending on the state you live in, all concentrate on helping homeowners submit the best possible application… or “proposal” to the bank. In general, that proposal includes the borrower’s information, various documents intended to verify income, a letter describing the hardship that has caused the homeowner to apply for a modification or short sale… all the information that the homeowner or attorney/representative hopes will paint a picture that the servicer will view as qualifying for a loan modification.
But, “hope,” should only be considered a negotiating strategy, when hope is all you’ve got.
When applying for a loan modification with the REST Report, borrowers still submit their application and supporting documentation, but in addition the borrower submits a report, generated by a loan disposition analysis platform that incorporates the same decision analytics used by lenders and servicers. The report clearly shows the servicer the investor’s financial outcome, in terms of net present value, in a range of scenarios, assuming such outcomes are possible, of course. In addition, the REST Report clearly quantifies a borrower’s eligibility for a HAMP Loan Modification and a HAFA short sale or deed in lieu of foreclosure alternatives.
In March 2009, the Obama Administration published detailed program guidelines for the Making Home Affordable (MHA) Program. Mortgage servicers were authorized to begin modifications under the HAMP plan immediately. With the assistance of several government agencies, GSEs, and servicers – this effort involved the development and refinement of servicer guidelines, modification documents, and data collection and modeling tools.
The Home Affordable Modification Program (HAMP) was designed to help as many as 3 to 4 million financially struggling homeowners avoid foreclosure by modifying loans to a level that is affordable for borrowers now and sustainable over the long term. The program provides clear and consistent loan modification guidelines that the entire mortgage industry can use.
Borrower eligibility is based on meeting specific criteria including:
1) borrower is delinquent on their mortgage or faces imminent risk of default
2) property is occupied as borrower’s primary residence
3) mortgage was originated on or before Jan. 1, 2009 and unpaid principal balance must be no greater than $729,750 for one-unit properties.
After determining a borrower’s eligibility, a servicer will take a series of steps to adjust the monthly mortgage payment to 31% of a borrower’s total pretax monthly income:
First, reduce the interest rate to as low as 2%,
Next, if necessary, extend the loan term to 40 years,
Finally, if necessary, forbear (defer) a portion of the principal until the loan is paid off and waive interest on the deferred amount.
Note: Servicers may elect to forgive principal under HAMP on a stand-alone basis or before any modification step in order to achieve the target monthly mortgage payment.
The Home Affordable Modification Program was designed with good intentions, however, in reality, the servicers are denying thousands of homeowners who actually qualify for a HAMP Modification. There is an answer “why” but that’s another article for another time. In short, if you’re reading this, you are likely one of the tens of thousands of homeowners who have been denied a HAMP Modification even though you really qualify. The problem is that the servicers don’t usually tell the homeowner the specific reason(s) they were denied because, in reality, they should never have been denied. Let’s just say that the real reason for denial is that it’s just not in the servicer’s best interest to modify. They’d rather foreclose because they’ll make more money going that route. It may not make sense to you right now at face value but trust me; they make more money foreclosing than they do modifying a homeowner’s loan.
The simple fact is that when a servicer receives an application for a loan modification from a borrower, that servicer should conduct its own loan disposition analysis in order to determine which outcome, foreclosure or some form of modification or disposition, is in the best interests of the investor who owns the loan. So, when you apply with the REST Report, you provide that loan disposition analysis, causing the servicer to have to verify those numbers. When they find that the report’s analysis is correct, we are seeing modifications granted in situations, and in timeframes, that were unexpected.
Loans and loan modifications are like snowflakes… no two are alike. And while there are law firms or other mortgage professionals that may feel confident about their analysis, the REST Report unquestionably adds a degree of certainty that hasn’t been possible until now.
According to the latest HAMP report from the U.S. Treasury, dated April 30, 2010: Out of 1.2 million HAMP trial modifications there have been 277,640 trials cancelled… and 295,348 permanent modifications granted.
The latest Treasury HAMP Report shows the situation clearly. The number of trial modifications that have been cancelled, is about the same as the number of permanent modifications granted, which is not good enough if you find yourself among those that have been declined by HAMP. There are still 637,353 trial modifications awaiting an answer… thumbs up, or thumbs down. I have seen homeowners who have paid 6, 9 and even 12 trial monthly payments (which is outside the allowable guidelines) and they are still awaiting approval for their permanent modification. Still other clients have come to me having faithfully paid their 3 monthly trial period payments only to be denied a permanent modification and for no apparent or good reason.
The latest Treasury data did show some very encouraging trends as well. For example, as of June 1, 2010, borrowers will have to document their income before beginning a trial modification, and many servicers started implementing this policy in April, so there is data, and it is very encouraging in that it shows roughly twice as many homeowners being approved for a permanent modification after successfully completing the trial period.
Well, when it comes to loan modifications under HAMP, the REST Report runs NPV analytics that should fall within HAMP guidelines. So, when the report says you qualify for HAMP, there’s no one else, besides your servicer of course, that can be as sure you do, as the REST Report.
But, what if you don’t qualify for HAMP?
However, for homeowners that don’t qualify for HAMP, the REST Report can be every bit as helpful to the loan modification or short sale process as it is for those applying under HAMP. Perhaps the principal balance on your loan exceeds HAMP’s $729,000 limit. Or, perhaps you’ve been turned down for HAMP and don’t know why. Or, maybe it’s a mortgage on a second home that you’re trying to modify.
Whatever the reason for falling outside of HAMP guidelines, the loan disposition analysis report produced by the REST platform is proving itself invaluable in the negotiations between a homeowner and their lender or servicer.
Mortgage servicers are companies that are hired by investors to “service” mortgages they own. The servicers all work under a contract called a “Pooling and Servicing Agreement,” or PSA. And all PSAs require servicers to make decisions related to the loans they are servicing in the best interests of the investors for whom they work.
So, when you submit a REST Report to your lender or servicer, they don’t just receive information about you, they also receive an analysis of the financial impact to investors of the alternatives to foreclosure compared with the cost of foreclosing on your property.
If the net present value analysis shows that investors would be better off modifying than foreclosing, we’re seeing servicers responding to the report, and offering to modify loans in more cases than we expected.
It’s not that we believe that a servicer would accept the analysis shown in the REST Report at face value, they most certainly would not. But we do know that when they verify the report’s conclusions using their own internal systems, they will find the REST Report’s financial analysis to be accurate.
Does that mean that submitting an application for a loan modification or short sale along with the REST Report guarantees anything? No, no one can guarantee anyone that a lender or servicer will modify a loan, at the end of the day, both participation in HAMP, and their willingness to modify a mortgage internally, is strictly voluntary. And as anyone in the banking industry will readily tell you… banks only modify loans when it’s in their own best financial interest to do so.
And that, folks is precisely the point. When you can quantify and document that the modification (or short sale) is in the best interest of the investor, the servicer will be put in a very precarious position if they then still choose to ignore those findings.
Most importantly, when it comes to a HAMP Modification, the core component of a HAMP approval boils down to the NPV Analysis or NPV Test. NPV stands for “Net Present Value.”
The base NPV model provides consistency in NPV calculations for the Home Affordable Modification Program and was designed to help the mortgage industry move toward a more standard process for evaluating the NPV of mortgages for purposes of making modifications.
A participating servicer in the Home Affordable Modification Program must modify any loan that meets the program’s eligibility criteria if the modification tests “positive” for NPV. I hope you noted that point above. That word is “must.”
When mortgage modifications have a positive NPV, it is in the best interests of lenders, servicers, investors, and borrowers to modify mortgages to reduce the risk of foreclosure. The Home Affordable Modification Program increases the potential number of mortgage modifications that will have a positive NPV, resulting in more servicers modifying mortgages, and keeping more Americans in their homes. The Home Affordable Modification Program specifies a precise method for determining NPV and provides a base NPV model that any servicer can use or customize into a proprietary NPV model that satisfies all of the program’s methodological requirements.
Almost all servicers in the US have by now elected to participate in the Making Home Affordable program and have signed what is called a “Servicer Participation Agreement” (SPA) with the US Department of Treasury, Fannie Mae and Freddie Mac as compliance agent.
The SPA obligates the servicer to follow the HAMP guidelines. If the NPV Test comes back positive and the servicer still refuses to modify, it is likely that a claim for breach of contract could be brought against the servicer; and, there are already about a dozen lawsuits currently pending claiming just that… that the servicer breached their contract with Treasury by wrongfully denying homeowners for a HAMP Modification.
Now, if you are a homeowner who is frustrated beyond belief and looking for relief, I encourage you to pick up the phone and call us. We are one of the few firms around the country authorized to run REST Reports and help homeowners with the process of getting their ducks in a row and putting their best foot forward.
Call the National Institute of Consumer Advocacy at 800-985-4685 or by email at info[at]nioca.org
Attention Taxpayers:
There is a solution to the foreclosure crisis that is destroying our country. It keeps people in their homes, doesn’t cost taxpayers a dime, and actually makes the banks more money than were they to foreclose on the property.
It’s called a “short sale lease-back” and here is how it works:
1. The homeowner applies for a loan modification and is turned down, or just applies for permission to short sell the property.
2. The options are foreclosure or short sale, as the homeowner is at risk of immanent default.
3. An unrelated third party investor organization negotiates the short sale with the lender or servicer, and buys the property at the short sale price.
4. That company also, at that time, agrees to lease the home back to the homeowner for five years at an agreed to price, and with specified terms.
5. At the end of five years the homeowner can exercise their lease option and repurchase the home for a previously agreed to price.
There are other relatively minor details, but that covers the broad strokes. It keeps the homeowner in the house, doesn’t cost taxpayers a dime, and makes the bank more money than would be the case if sold after foreclosure as an REO.
So, what’s not to love? Banks win by getting more for the property than would otherwise be the case. Investors win through earning a return that averages 15% on their investment. Banks win by getting more for the sale of the properties than would result from foreclosure. Our society, our economy and other homeowners win from a reduced the number of foreclosures. So, why do Fannie Mae and Freddie Mac both say no. Neither will approve a short sale under such circumstances.
By the way, I’ve spoken with one of the principals in the company that does just what I’ve described for homeowners all over the country, and they’re the real deal. It’s not theory, they’ve done it and it’s fact. Personally, I found Jorge Newbery, one of the company’s principals, to be one of the brightest, most ethical, caring and candid business executives I’ve ever encountered… and that’s really saying something when you consider that I’ve had more than a couple of decades experience meeting with and speaking with business executives from all over the country and around the world.
The company’s name is American Homeowner Preservation (“AHP”), and it’s located in Ohio, one of the hardest hit states in terms of foreclosures, and on top of that they’ve got both Dennis Kucinich and John Boehner. (Kidding, I’m just kidding… sort of… no, I am kidding… sort of… no, really… I am for sure… sort of.)
So, if you’re anything like me, you’re thinking… okay, so what’s the problem here? Who wouldn’t like this? Why in the world wouldn’t Fannie and Freddie, two totally failed mortgage companies whose stocks are listed over-the-counter, right next to Blockbuster video stores, be opposed to a way for them to make more money than foreclosing, something they’re doing far too frequently these days anyway? You’d think they’d like it just for the change of pace, if for no other reason.
Because their opposition to approving short sales when the current owner is going to be renting the house from its new owner, well… it feels like they want to punish the homeowner for losing the house to foreclosure, but that can’t be the reason, right? Tell me I’m right about that… they don’t want to punish the homeowner for anything here, do they? No, they couldn’t… they wouldn’t… talk to me industry people… what’s going on here.
Because if I found out that it did have something to do with punishing the homeowner who is losing the home, I would likely find myself compelled to write all sorts of unpleasant things about the relative intelligence of whomever the overpaid clown is currently running the two failed GSEs into the ground. Why, I might even call him names I haven’t even considered yet. Nah, it couldn’t have anything to do with punishment, right? I so want to be right about that… tell me I’m right.
Well, I did place a call to Fannie Mae and to Freddie Mac inquiring about the rationale behind the policy, so let’s just go on and we’ll all hope for their sake that they say something in response to my inquiries. If they don’t, then all I can say is that if you’re one of those that felt that I was a little too harsh with the Freddie and Fannie executives when writing about the whole “strategic-default-is-bad-thing, then you won’t like what I’m likely to do to them next time, were I to believe that they actually are attempting to punish a homeowner.
Like, here’s one of my questions: I realize that you won’t approve a short sale in which the homeowner agrees to live in the home after the sale, renting it from its new owner, but what about if the homeowner agrees to sleep in the home’s back yard… and not go inside except to use the facilities? Would that be okay, or would the same policy apply? Well readers, what’s your guess?
How about if the old owners park their car in the driveway and sleep in it overnight, but then they leave during the day… and the new owner doesn’t even own a car, so he agrees to the deal? Would you approve the short sale then? You wouldn’t, would you heartless halfwits? I didn’t think so.
Here’s how AHP figures out the monthly lease payments:
It’s $375 for the first $10,000, $12 per thousand up to $50k. After that it’s $10 per thousand. On average, investors make 12% return on the lease. On a $50,000 purchase price, monthly lease is $855. The investor pays the taxes and insurance.
The original homeowner can buy back the house in year one or two for 15% over the short sale sales price. In year 3 it’s 20% over the short sale price, and year four it’s 25% and in year five it’s 30%. Throughout the lease the company provides training and education to help ensure that the original homeowner is financially Also they provide counseling to help homeowner be ready to obtain financing by the fifth year, which I think is terrific.
And, if the homeowner wasn’t able to buy the home in the future, or if they decided not to buy the home, and the house were to sell for more than the pre-agreed to price, the homeowner participates in the profits at 50%. Amazing, if you ask me.
Newbery says that PIMCO, the world’s largest bond holder, has said what AHP does should not present a problem for investors or servicers, but when PIMCO contacted several servicers, they found it to be quite the problem. I want to know why?
One of the problems could involve establishing the short sale price at which the servicer approves the home to be sold. Currently, servicers obtain a BPO, which stands for Broker Price Opinion. It’s sort of an appraisal-lite. A real estate broker is paid to provide his or her opinion as to the value of the home if sold as a short sale. One would think that such an opinion would be based on the comparable sales in the neighborhood, but come to find out… it’s not always the case.
Apparently, servicers that ask for such BPOs from brokers who do broker price opinions are paid an average $35 – $75 for rendering their opinion as to price of home, BUT many of the servicers provide the brokers with something called BRACKETS within which the servicer wants the BPO to come in. As in… give us your opinion as to the price of this home as long as it comes in within $60,000 and $80,000. Yeah, there’s a comp that sold for $40,000 last week, but we’re not interested in that one. We want an opinion between $60,000 and $80,000.
And isn’t that nice?
On the other hand, some servicers actually refer clients to AHP. Default servicers, in particular, that get the charge-off loans from the larger servicers, mostly on low value homes, such that are found in Michigan and Ohio, although there are some in Arizona, Nevada, and even California and Florida, often do so. In these highly devalued markes, principal reductions are commonplace, the homes are generally worth less than $100,000, with loans that can be $200,000 and up… and the original servicer has decided that it’s just not worth going after anymore. Clearly, AHP is the best answer for investors in these properties
Newbery says that the problems his company faces are the same as what everyone else is facing today when negotiating with a lender or servicer. “Our deals take as long as loan modifications. We’ve had them take 12 months and one or two have taken 18 months. If the servicer doesn’t approve it the first time, we resubmit and resubmit, and often times they will accept the fifth offer.”
I think Newbery’s company is the real deal… a truly win-win-win operation. “Transparency means sustainability. Our program is easy to understand, totally transparent and presents a solid value proposition for everyone involved,” explains Newbery.
So, let’s see what I can find out about this from Fannie and Freddie or other servicers. Let’s see if there’s some reason we’re not embracing this as an answer that makes sense… or if we’re just intent on punishing those that find themselves in financial trouble… you know… the old fashioned way.
Personally, I think there should be more companies like Newbery’s, and I hope the idea catches on. I know there have been several that have had a similar idea, but I haven’t seen any getting actual deals done like AHP definitely has. So.., investors… come on… start your engines and let’s get this economy moving in the right direction again, or at least let’s stop it from falling through the floor.
For more information, visit AHPHelp.com. And for the record, I was not paid a nickel for writing this article, nor do I receive anything when you click or decide to do business with this company. It may have sounded like an infomercial or commercial, but it was nothing of the kind. I just think whet they’re doing is great, especially in light of the fact that the government hasn’t the foggiest idea of what to do to change things for the better… obviously.
If you disagree, I’m open to listening to whatever you have to say. Either leave a comment or email me at mandelman@mac.com.
Mandelman out.
Editor’s Note: The REAL BOTTOM LINE POINT is not some technicality wherein the paperwork wasn’t done right, which frankly is reason enough to deny the foreclosure, it is that this “technical” deficiency is “derived” from the fact that there is no note or mortgage or deed of trust that can be enforced. There might not even be any obligation at all if the creditor received payment in full.
LAWYERS TAKE NOTE: Go back to the law books. There are essential differences between the obligation that arises as a matter of law, the note that is offered as proof of the obligation, and the mortgage or deed of trust which is incident to the note.
Don’t dispute the obligation. It DID arise by operation of law. And by operation of law it may still exist, be partially extinguished or entirely extinguished. The documents signed at closing were only PART of the deal in a securitized residential loan. The borrower signs a note and the lender (investor) gets a bond (or evidence of a bond). [THE NOTE AND BOND HAVE DIFFERENT TERMS AND PARTIES BUT THE BOND REFERS TO SECURITIZATION DOCUMENTS THAT IN TURN DESCRIBE LOANS OF WHICH THE BORROWER'S LOAN IS ONE CLAIMED TO BE IN A POOL FORMING THE SOURCE OF REVENUE].
WITHOUT REAL DOCUMENTS SIGNED BY REAL PEOPLE WITH REAL AUTHORITY WITH REAL EFFECTIVE DATES, THE CHAIN IS BROKEN.
The borrower signs the note to a party whom the investor never heard of nor could the investor have uncovered the payee on the note because the information was withheld. The investor receives a bond which is an assignment of all right, title and interest to the receivables, but the security instrument is left where it always was — with the mortgage originator (the only one in county records with an interest). The lender (investor) doesn’t know the borrower and the borrower doesn’t know the lender, while each of them receives different terms and [promises from different parties.
But by operation of law, the originator’s interest is extinguished the moment it arises because it is in most cases a table funded loan in which the originator acted as a broker not a lender, and performed no underwriting tasks. So the legal obligation is extinguished at the same time that the legal obligation arises.
BUT that is not the end of the story.
The equitable powers of the court come into play to prevent unjust enrichment. So the next time a Judge says he doesn’t want the borrower to get a house for free, your answer should be you don’t want anyone to get the house for free. And if the Court wishes to exercise its equitable powers to allocate any equity in the home, after due consideration for the obligations of the borrowers and many others who promised to pay the bond holder then the party seeking affirmative relief must make a short plain statement of ultimate facts upon which relief could be granted and then prove their case.
What these law firms and fabrication mills are doing is fabricating and forging documents to create the illusion that those complexities don’t exist — a conclusion that every Judge would like to reach.
Ultimately, the die is cast — the Courts are required to consider the complexity and force the real party in interest, the party with standing to say they lost money on the deal and to show exactly how they did lose money — not merely point to the borrower’s non-payment.
The non-payment by borrower ONLY comes into play if the payment is due and the “creditor” can prove their standing and prove the obligation, complete with an accounting from beginning to end. The fact that the note SAYS the payment is due does not make the payment due — not if the payment was made or the obligation has been changed or satisfied.The note is evidence that must be proffered though the rules of evidence with authentication from competent witnesses or admission from the borrower. Don’t be so quick to admit that they have the note. Even if it is right in front of you, close examination may well reveal that it came off a color printer that morning.
The reason the die is cast is that ultimately this comes down to property law. The breaks in the chain of title render every title in whichever a securitized loan was involved susceptible to being identified as unmarketable or defective title. This threatens the entire marketplace. It is this issue that these firms and the large banks are continuing to finesse with their freshly color-printed “original” documents, indorsements, assignments and powers of attorney.
NEWS RELEASE
For Immediate Release
August 10, 2010
Contact: Sandi Copes
Phone: 850.245.0150
Sandi.Copes@myfloridalegal.com
FLORIDA LAW FIRMS SUBPOENAED OVER FORECLOSURE FILING PRACTICES
——————————————————————TALLAHASSEE, FL – Attorney General Bill McCollum today announced his office has launched three new investigations into allegations of unfair and deceptive actions by Florida law firms handling foreclosure cases.
The Attorney General’s Economic Crimes Division is investigating whether improper documentation may have been created and filed with Florida courts to speed up foreclosure processes, potentially without the knowledge or consent of the homeowners involved.
The new investigations name The Law Offices of Marshall C. Watson, P.A.; Shapiro & Fishman, LLP; and the Law Offices of David J. Stern, P.A. The law firms were hired by loan servicers to begin foreclosure proceedings when consumers were in arrears on their mortgages.
Because many mortgages have been bought and sold by different institutions multiple times, key paperwork involved in the process to obtain foreclosure judgments is often missing. On numerous occasions, allegedly fabricated documents have been presented to the courts in foreclosure actions to obtain final judgments against homeowners.
Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the allegedly improper actions of the law firms under investigation.
The Attorney General’s Office is also investigating whether the law firms have created affiliated companies outside the United States where the allegedly false documents are being prepared and then submitted to the law firms for use.
Subpoenas have been served on each of the law firms listed above, and the investigations are ongoing.
For an official, downloadable photograph, please visit http://www.myfloridalegal.com/picture.html. Also, follow the Attorney General’s Office on Twitter! http://www.twitter.com/myfloridalegal
From M. Solimon
Editor’s Note: Pretty Good Entry From M. Solimon discussing aspects of fraud. I would add the following:
- FRAUD: A false statement wherein the speaker knows it is false, intends for it to be relied upon to the detriment of the receiver, who does reasonably rely on it to his/her financial detriment.
- FRAUD IN THE EXECUTION: A trick where the signor believes he/she is signing something other than what the document says it is. Probably applicable in the mortgage mess because the truth is people did not know they were signing the equivalent of their own financial destruction whereas the parties presenting the document pretended it was a standard mortgage loan that had been properly subject to industry standard verification and underwriting standards.
- FRAUD IN THE INDUCEMENT: A lie causing a person to execute a document, and otherwise meeting the definition of FRAUD as above. Examples “This is the fair market value of your new house,” or “Housing prices always go up, nevr down,” or “we’ll be able to refinance the property, give you more money out of it, all before the time for reset of the payments.”
Deceit and fraud are defined separately in statutes. Under Civ. Code §§1709 and 1710, deceit is defined in simple terms. See Civ. Code §§1572 for both actual fraud and 1573constructive fraud.
Loook at Liability for actual fraud is limited to acts committed by or with the connivance of a party to a contract with the intent to deceive another party to the contract and induce that party to enter into the contract. Look under Civ. Code §1572
Deceit is appropriate under a material beach or perhaps cause of action. The notion of a lender, who willfully deceives its borrowers or customers leading to foreclosure so to remedy an investor issue and to avoid recourse.
]I suggest you use it there or for the servicing argument for showing the willful intent to induce the consumer homeowners of a right to modifications ad compliance with 2923. to alter his or her position towards litigation (and eat up the balance of legal reserves their intended for a defense and their attorneys). These guys, I know all too well and it’s all too much. The consumer’s injury or risk is liable for any damage suffered as a result of the deceit. [Civ. Code §1709] etc, etc.
My take on this is too isolate the actual fraud that consists of any of the following acts, committed by or with the connivance of a party to a contract who is the assignor and its agents and not the successors.
The argument is it is with willful intent a lost beneficial interest woefully deceives a trustor or mortgagor to the contract, solely to induce the other party to enter into the contract [see Civ. Code §1572]:
Deceit and Actual Fraud combined
•Servicing rights violate SEC 1122 AB,
•Accounting rules violations under FAS 140, FIN 115,
•Trust assets are restricted to passive investments,
•Lenders controlling interest revoke the powers of sale and foreclosure,
•Parties lack standing to bring a foreclosure by appointment,
•Conspiracy to commit fraud where Trustee, Beneficiary and Transferee are all one in the same
•Bid rigging at trustee sale
•Fraud perpetrated against the country recorder
•A nominal interest has powers that conflict in the original assignment,
•Violations of the Code of federal regulations “CFR”
Your feed back will be critical and evident where I have gone as far as I can. It’s not getting through to skilled litigators that still don’t get it. Maybe I am lacking your codifications eloquence and ledger capacity to zero into the abuses of GAAP in more subtle terms; LOL!
he head of the OCC stated in 2009 “I don’t know why getting relief from offering modifications is not working?”
It’s simple “BECAUSE LENDERS FORECLOSING DON’T OWN THE ASSETS THEY SOLD ….for starters.
That said, even after the effort and inability for the US Secretary to further tweak FASB to get them to completely roll over.
Few are winning here. Even Judges who are deciding the matter favorably are commenting from a wrong perspective. There is no demand on UCC judicial interpretations for perfection in a bonefide sale.
The District Courts hearing these chapter proceedings provide comments after deciding the matter favorably are merely suggesting it’s all about “get it right next time”. That wrong where it says’s to a lender they can bring it back, even when a decision is favorable.
The key arguments come down to the fact the lender transfers each receivable as a “whole loan” sale. For Pete’s sake, looks at the general ledger where the asset was entered as a “Receivable” and “Loan Held for Sale”.
That’s not “Loan Held to Maturity” but “Sale”.
The cost to capitalize and reserve a 30 year loan held to maturity defeats the arguments lenders are making that “they did not sell the subject loan. It’s the old “blank assignment” gimmick. Its arguments are lost in court where the problem peaks the Judges curiosity and that’s about it.
We know the value of the open assignment argument is defining for the court where it’s a bank surety and liquidity play. It’s also a GAAP disclosure fraud.
Therein the consumer is disadvantaged arguing defects after being instrumental in a lenders shuffling of assets for maintaining REPO requirements and in its pursuit for shareholder earnings and profitability.
My take on the matter is to let them have the consumer’s home. The consumer then makes the lender pay the price of foreclosure claiming recognition, for reclassifying the sales as debt and restating earnings.
These UD attorneys are so smart that they may cost these bank power houses a debt load totaling about $3 trillion and more in liabilities left off the books. It’s a scary thought actually where you put Citigroup out while not looking and as they still struggle with a $65 billion tax tab carried by consumer taxpayers. BAC may end fighting for their life with a private right to call receivership.
Foreclosures cannot continue in violation of GAAP and where lenders circumvent basis accounting laws while continuing to force the sale treatment issue and while denying they are controlling assets.
It’s the best of both worlds with sale on the front side and as if it was leveraged borrowing upon liquidation and egress.
As we sit I’ll show you the subtle instances of apparently innocent manipulation and confusion befallen o to the courts from errors and omissions which lenders are getting away with. That is happening as the courts say . . . . So what!
The errors and omissions are the desperate means for seeking to maintain some semblance of SFAS140 adherence while employing lawyers as third parties appointed by agents of agents by a nominal interest.
I personally have given up on the right MERS arguments as MERS is entitled to act as an accommodation and even a nominal interest, possibly.
It’s just so easy for one to see the obvious that it has become lost. The nominee cannot execute instruments upon being replaced by the signature below it. Hello guys, right! That’s the purpose of the nominee! And, while one courts rules in favor of the consumer it misses the call.
Something basic is getting lost and I’m not getting through. Unique “floating” entities cannot appear from nowhere to execute assignments by virtue of meritless appointments.
If one of your cases is picked up by the Fed it should register a nice settlement . As one District court judge put it with disgust. . . “The SEC is turning into a penalty and fine system where they are to quick to settle the matter for a couple hundred million every time allowing the defendants’ to save face.”
“That’s not bad!
The US AG office thinks there is a case for bid rigging but I’m not sure the AG’s office knows where to look. Yet as one Judge told me in court “speak English.”
The precise and distinct GAAP and FASB rules violation are clearly demonstrated in each foreclosure. Lenders are violating GAAP even with the recent codification, including revisions and interpretation.
It’s all mind boggling when you consider the distance in communication here and counsel’s alternative to grab the lowest hanging fruit. . . .A RESPA audit (what is that anyway) and a QWR that together are just not going to cut it.
These bank execs fail to realize maybe that these and other Enron style crimes, like those stated in the Fastow confessional, will gets you 10 years . . .at least.
M.Soliman
Witness to Counsel
Expert.witness@live.com
WHAT IS ABOUT TO HAPPEN: The appointment of the head of the Bureau of Consumer Financial Protection recently created by the new federal legislation on financial reform. Elizabeth Warren and Mary Schapiro essentially defined the job. Ms. Schapiro is already head of the SEC and is vigorously investigating and prosecuting the mortgage fraud business across the board. That covers the investor side. Elizabeth Warren has been vigorously investigating but unable to bring action on behalf of homeowners and borrowers because she is “only” chairman of the task force on financial reform.
HERE IS THE PROBLEM: The Banks will do ANYTHING to keep her from getting that job. If the President nominates her, it will provoke a big fight in the Senate. If you like the idea of bailing out the banks again, if you like the idea of plunging the country into a recession, if you like the idea of ruining the lives of 20 million homeowners, and if you like the idea of stealing money from investors all around the world, then by all means join hands with the banks and do nothing.
But if you would really like to see something happen — something that will actually MEAN something in your life and the lives of millions of Americans, then spend 30 minutes, and write to the President, your senators, and your congressman. With separate letter to each one, I suggest the following wording, but write anything you like:
Dear _______,
I am aware that you face a difficult choice of nominating and confirming a candidate to lead the new consumer financial protection bureau created in the financial reform package you just signed into law. The choice however is not who would best serve in that position. Everyone knows it is Elizabeth Warren. Even the banks who oppose her nomination know it, which is why they gearing up for battle. She is the one they are afraid of because we all know that the entire truth of this mess is still being revealed. If she is not the nominee than the entire plan for protection of consumers is undermined. She defined the position and she should be appointed not as a reward but as protection for myself, my family, my friends and neighbors. PLEASE NOMINATE AND CONFIRM ELIZABETH WARREN NOW.
SIGN YOUR NAME
PUT IN YOUR ADDRESS
I like this post from a reader in Colorado. Besides knowing what he is talking about, he raises some good issues. For example the original issue discount. Normally it is the fee for the underwriter. But this is a cover for a fee on steroids. They took money from the investor and then “bought” (without any paperwork conveying legal title) a bunch of loans that would produce the receivable income that the investor was looking for.
So let’s look at receivable income for a second and you’ll understand where the real money was made and why I call it an undisclosed tier 2 Yield Spread Premium due back to the borrower, or apportionable between the borrower and the investor. Receivable income consists or a complex maze designed to keep prying eyes from understanding what theya re looking at. But it isn’t really that hard if you take a few hours (or months) to really analyze it.
Under some twisted theory, most foreclosures are proceeding under the assumption that the receivable issue doesn’t matter. The fact that the principal balance of most loans were, if properly accounted for, paid off 10 times over, seems not to matter to Judges or even lawyers. “You borrowed the money didn’t you. How can you expect to get away with this?” A loaded question if I ever heard one. The borrower was a vehicle for the commission of a simple common law and statutory fraud. They lied to him and now they are trying to steal his house — the same way they lied to the investor and stole all the money.
Receivable income is the income the investor expects. So for example if the deal is 7% and the investor puts up $1 million the investor is expecting $70,000 per year in receivable income PLUS of course the principal investment (which we all know never happened).
Receivable income from loans is nominal — i.e., in name only. So if you have a $500,000 loan to a borrower who has an income of $12,000 per year, and the interest rate is stated as 16%, then the nominal receivable income is $80,000 per year, which everyone knows is a lie.
The Yield Spread premium is achieved exactly that way. The investment banker takes $1,000,000 from an investor and then buys a mortgage with a nominal income of $80,000 which would be enough to pay the investor the annual receivable income the investor expects, plus fees for servicing the loan. So in our little example here, the investment banker only had to commit $500,000 to the borrower even though he took $1 million from the investor. His yield spread premium fee is therefore the same amount as the loan itself. Would the investor have parted with the money if the investor was told the truth? Certainly not. Would the borrower sign up for a deal where he was sure to be thrown out on the street? Certainly not. In legal lingo, we call that fraud. And it never could have happened without defrauding BOTH the investor and the borrower.
Then you have the actual receivable income which is the sum of all payments made on the pool, reduced by fees for servicing and other forms of chicanery. As more and more people default, the ACTUAL receivables go down, but the servicing fees stay the same or even increase, since the servicer is entitled to a higher fee for servicing a non-performing loan. You might ask where the servicer gets its money if the borrower isn’t paying. The answer is that the servicer is getting paid out of the proceeds of payments made by OTHER borrowers. In the end most of the ACTUAL income was eaten up by these service fees from the various securitization participants.
Then you have a “credit event.” In these nutty deals a credit event is declared by investment banker who then makes a claim against insurance or counter-parties in credit default swaps, or buys (through the Master Servicer) the good loans (for repackaging and sale). The beauty of this is that upon declaration of a decrease in value of the pool, the underwriter gets to collect money on a bet that the underwriter would, acting in its own self interest, declare a write down of the pool and collect the money. Where did the money come from to pay for all these credit enhancements, insurance, credit default swaps, etc? ANSWER: From the original transaction wherein the investor put up $1 million and the investment banker only funded $500,000 (i.e., the undisclosed tier 2 yield spread premium).
Under the terms of the securitization documents it might appear that the investor is entitled to be paid from third party payments. Both equitably, since the investors put up the money and legally, since that was the deal, they should have been paid. But they were not. So the third party payments are another expected receivable that materialized but was not paid to the creditor of the mortgage loan by the agents for the creditor. In other words, his bookkeepers stole the money.
Very good info on the securitization structure and thought provoking for sure. Could you explain the significance of the Original Issue Discount reporting for REMICs and how it applies to securitization?
It seems to me that the REMIC exemptions were to evade billions in taxes for the gain on sale of the loans to the static pool which never actually happened per the requirements for true sales. Such reporting was handled in the yearly publication 938 from the IRS. A review of this reporting history reveals some very interesting aspects that raise some questions.
Here are the years 2007, 2008 and 2009:
2009 reported in 2010
http://www.irs.gov/pub/irs-pdf/p938.pdf2008? is missing and reverts to the 2009 file?? Don’t believe me. try it.
http://www.irs.gov/pub/irs-prior/p938–2009.pdf2007 reported in 2008
http://www.irs.gov/pub/irs-prior/p938–2007.pdfA review of 2007 shows reporting of numerous securitization trusts owned by varying entities, 08 is obviously missing and concealed, and 2009 shows that most reporting is now by Fannie/Freddie/Ginnie, JP Morgan, CIti, BofA and a few new entities like the Jeffries trusts etc.
Would this be simply reporting that no discount is now being applied and all the losses or discount is credited to the GSEs and big banks, or does it mean the trusts no longer exist and the ones not paid with swaps are being resecuritized?
Some of the tell tale signs of some issues with the REMIC status especially in the WAMU loans is a 10.3 Billion dollar tax claim by the IRS in the BK. It is further that the balance of the entire loan portfolio of WAMU transferred to JPM for zero consideration. A total of 191 Billion of loans transferred proven by an FDIC accounting should be enough to challenge legal standing in any event.
I believe that all of the securitized loans were charged back to WAMU’s balance sheet prior to the sale of the assets and transferred to JPM along with the derivative contracts for each and every one of them. [EDITOR'S NOTE: PRECISELY CORRECT]
The derivatives seem to be accounted for in a separate mention in the balance sheet implying that the zeroing of the loans is a separate act from the derivatives. Add to that the IRS claim which can be attributed to the gain on sale clawback from the voiding of the REMIC status and things seem to fit.
I would agree the free house claim is a tough river to row but the unjust enrichment by allowing 191 billion in loans to be collected with no Article III standing not only should trump that but additionally forever strip them of standing to ever enforce the contract.
The collection is Federal Racketeering at the highest level, money laundering and antitrust. Where are the tobacco litigators that want to handle this issue for the homeowners? How about an attorney with political aspirations that would surely gain support for saving millions of homes for this one simple case?
Documents and more info on the FDIC litigation fund extended to JPM to fight consumers can be found here:
You can also find my open letter to Sheila Bair asking her to personally respond to my request here:
Any insight into the REMIC and Pub. 938 info is certainly appreciated
As some of you knew or probably have guessed, livinglies is a lightening rod for information. We have posts like the one below on the comments and emails sent with details that are neither for attribution or publication. In addition, several people in sensitive government positions use livinglies as a method of getting the real information out. Take a close look at this comment posted from “Anonymous” a frequent contributor. While succinctly stated his points are pearls.
Yeah – searching Maiden Lane is good. But, it will only tell you what “toxic” tranches the government took off the books of the banks that held them. These are the tranches that were NOT paid by the swap protection.
My point is that if the upper tranches were paid via swap protection, then the bottom tranches – held by the government (Maiden Lane) are simply worthless tranches. This is because the pass-through tranche structure has been paid and is no longer existent.
Lower tranches are only paid current payout – if – and only if – the upper tranches have been paid. But, this payment must be current. If a swap payout has occurred, the upper tranches are NO LONGER current. They are done – there is nothing left for for the subordinate tranches to receive. Purchasing worthless toxic assets, by the government, was only a ploy to aid the financial institutions that held worthless “toxic” assets – that are no longer part of the originated “waterfall” structure payout. Worthless assets from a dissolved and dismantled Trust.
You must remember, the REMICs were set up for current pass through of receivables ONLY. Nothing more. Foreclosures cannot be assigned to REMICs with knowledge of default.
My anger is – the government knows this – and what the heck are they doing? They claim to be promoting modifications – and at the same time – are the investor in the toxic securities that are dead. Thus, ironically, the government is the one denying a loan modification and/or principal reduction – and, forcing foreclosure – despite their own law – including the 2009 TILA Amendment and .Federal Reserve Interim Opinion.
But, listen to Mr. Ben Bernanke – he wants short sales. This is their goal. And, for anyone who knows of someone purchasing a new home – ask them their terms – ask them the size of their mortgage, ask them their down payment. These people are going to be in trouble. All is simply a transfer of wealth of from you – to them (new home buyers). I cannot figure out how this ever came to be – except politics in the worst possible way.
NOTE: Working on one of my expert declarations I figured I would share my computations with the readers. In order to protect privacy I am deleting any identifying information.
In this case there was a $1 billion offering of non-certificated mortgage backed securities, which is a fancy way of saying there was no certificate, just a book entry. The Master Servicer is the one with all the power to write-down the value of the pool to what the Master Servicer deems to be fair market value. You might call that a license to steal. The use of proceeds does not list any specific uses. It merely says that the money is going for general operational purposes.That is contrary to the usual standards of an offering prospectus which gives at least some specifics on use of proceeds. Thus it didn’t take much effort to see $1 billion worth of non-certificated mortgage backed securities and only use 75% of it to invest in mortgages.
So it is easy as in this case to take $747,000 from an investor, lend out $377,000, pocket the rest. Then when the guaranteed to fail loans start failing, the Master Servicer announces that the pool is no longer viable and the Master Servicer buys it at a small percentage of the nominal value of the mortgages.
Then because the pool is deemed a failure, say by Goldman Sachs (who bought credit default swaps against the pool), the Master Servicer collects on the insurance and other credit enhancements. Since the investors no longer own anything they don’t have a claim, or so the scheme says.
So even if a particular loan does NOT fail on schedule, they can still declare the pool as failed, and still collect the third party payments that were originally promised to the investors. But none of this takes away from the fact that all these institutions were part of a single securitization chain which is to say a single transaction in which the investor was the lender and the homeowner was the borrower. If they collected money and didn’t give to the investor it still doesn’t mean that the profit should not be allocated to the debtor’s loan account.
And if, as in this case, they collected a yield spread premium (Yield spread premium #2 in prior posts) created as a result of cheating the investor, well, whether the investor wants to press that claim or not, it is a yield spread premium, it is a single loan transaction, and TILA says you must disclose it — or give it back. Since the originating “lender” is the face they put on the transaction and since the originating “lender” is the only party of record in the title records, the yield spread premium must be applied to the benefit of the borrower. In this case, the YSP is almost the same as the loan amount, and with interest, vastly exceeds it. And then there is the issue of treble damages.
What many lawyers are missing because they are intimidated by the complexity of this thing, is that there are a lot of damages that can be collected from deep pockets and there is also a recovery of attorney fees.
Let’s see what happened in this case:
$1 billion (approximate) in securities offering. No showing of actual proceeds or any limitations on issuer. Second yield spread premium may exist in this unknown spread or in the spread between the offering amount and the unknown actual amount funded.
Extrapolating from yields disclosed in the prospectus the actual yield promised to investors was approximately 7%, with the right to reduce same under a variety of circumstances wholly in control of the underwriters. The nominal yield weighted average is stated in several different ways in order to confuse the reader and make computation more challenging. Based upon computations made directly from the prospectus and comparing it with similar prospectuses involving most of the same parties, the nominal actual average interest was sold to the SPV at approximately 9.6%. Thus, rounding down, the yield spread premium was 2.5%. 2.5% is 26% of the nominal 9.6% rate. Applying 26% to the declared proceeds, the dollar yield spread, undisclosed to either the investors or the borrowers, was approximately $250,000,000. The nominal principal of the debtor’s note is approximately $377,000.
The non-weighted yield spread premium at this level of the lending chain should therefore be expressed as either $94,250 or $82,500 (25%, non-weighted, or dollar weighted without regard to actual rates and data from this particular case). Applying an average between the two methods, the estimated non-weighted yield spread premium on this loan is approximately $88,000 without weighting for the actual rate spread. Applying the customary weighting using the actual nominal rate sold on this debtor’s loan (14.1%), the estimated yield spread premium earned by participants in this lending chain from this level of the lending chain was in fact approximately $369,460 (almost equal to the loan itself). Adding customary interest ($232,759.80) and treble damages ($1,108,380) under the Federal Truth and Lending Act the net actual dollar liability for yield spread premium at said level due from the lending chain on debtor’s loan would therefore be expressed as $ $1,341,139.80 due to borrower. This amount is subject of course to a determination of all other claims and defenses each or any of the parties may have.
The notion that nobody is going to approve of borrowers getting a free house is a myth. It isn’t up to anyone but the people who own those homes. If given the choice they would negotiate in good faith. Given no choice, they won’t pay.
Just Say NO. That is the battle cry of more and more people as they survey their situation. They were snookered by a false appraisal and “borrowed” money on “collateral” that wasn’t worth anywhere near what was told to them and confirmed by their “lender.” Steered into loopy loans by people whose “commission” grew with each added element of stupidity, they ended up with payments that they either can’t afford or simply refuse to pay.
We’ve written about strategic defaults before. Now it is the obvious choice for many homeowners who find that they can keep their homes months or years without making ANY payments. The servicers, aggregators and investment banks who are running this show had their own reasons for not modifying the loans down to true fair market value on reasonable market terms — as long as the loan is non-performing they make more money. Sounds counter-intuitive but nonetheless true.
Now enters the NY Times with a front page article that says what I have been saying for years — if the financial services industry doesn’t get their act together and do something smart like addressing REALITY, the people are going to take matters into their own hands. Their greed may land them in jail because when the smoke clears and thousands of these people end up with clear title to their property the investors are going to realize that it is not the servicer they should be suing so much as the investment banker who created this show.
In my view the only way for the investor to improve their outcome is by settling directly with borrowers. They will see far more money from homeowners who are motivated to keep their homes than they will be relying on an industry that is consumed with greed and gaming the system for every penny they can get.
If the investors as creditors don’t get engaged in this process their losses are going to mount. The only way they can plug the leak is by entering this three-ring circus and bring it to a halt. The notion that nobody is going to approve of borrowers getting a free house is a myth. It isn’t up to anyone but the people who own those homes. If given the choice they would negotiate in good faith. Given no choice, they won’t pay.
That litigation is starting to grow. In discovery the investor is going to find out that the investment banker made a profit, called a yield spread premium, the moment they bought a mortgage backed security which started a transaction that ended with a borrower signing a mortgage or deed of trust. The investors had no idea they were the start of the scheme. They presumed that the loans had been made and that someone in the line of securitization had been at risk when they approved the underwriting of the loan.
When the truth emerges that the investment banker was pocketing as much as 40% of the investments in mortgage backed securities, using the investor’s money to fund mortgages whose nominal value was 60% of the investment, and whose actual value was close to zero both for reasons of false appraisal, false ratings, etc., they may have something to say about it.
The Obama administration needs to give up its mythological belief that nobody would be that stupid and make policy and direct actions that start with giving in to reality. The people on Wall Street are just as stupid as anywhere else. Like a kid in candy store without parental controls, they scarfed down everything they could because they could.
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May 31, 2010Owners Stop Paying Mortgages, and Stop Fretting
By DAVID STREITFELD
ST. PETERSBURG, Fla. — For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.
Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.
“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”
A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.
This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.
“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.”
Foreclosure procedures have been initiated against 1.7 million of the nation’s households. The pace of resolving these problem loans is slow and getting slower because of legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with so many souring mortgages.
The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.
While there are no firm figures on how many households are following the Pemberton-Reboyras path of passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise.
There is no question, though, that for some borrowers in default, foreclosure is only a theoretical threat for a long time.
More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.
In some states, including California and Texas, lenders can pursue foreclosures outside of the courts. With the lender in control, the pace can be brisk. But in Florida, New York and 19 other states, judicial foreclosure is the rule, which slows the process substantially.
In Pinellas and Pasco counties, which include St. Petersburg and the suburbs to the north, there are 34,000 open foreclosure cases, said J. Thomas McGrady, chief judge of the Pinellas-Pasco Circuit. Ten years ago, the average was about 4,000. “The volume is killing us,” Judge McGrady said.
Mr. Pemberton and Ms. Reboyras decided to stop paying because their business, which restores attics that have been invaded by pests, was on the verge of failing. Scrambling to get by, their credit already shot, they had little to lose.
“We could pay the mortgage company way more than the house is worth and starve to death,” said Mr. Pemberton, 43. “Or we could pay ourselves so our business could sustain us and people who work for us over a long period of time. It may sound very horrible, but it comes down to a self-preservation thing.”
They used the $1,837 a month that they were not paying their lender to publicize A Plus Restorations, first with print ads, then local television. Word apparently got around, because the business is recovering.
The couple owe $280,000 on the house, where they live with Ms. Reboyras’s two daughters, their two dogs and a very round pet raccoon named Roxanne. The house is worth less than half that amount — which they say would be their starting point in future negotiations with their lender.
“If they took the house from us, that’s all they would end up getting for it anyway,” said Ms. Reboyras, 46.
One reason the house is worth so much less than the debt is because of the real estate crash. But the couple also refinanced at the height of the market, taking out cash to buy a truck they used as a contest prize for their hired animal trappers.
It was a stupid move by their lender, according to Mr. Pemberton. “They went outside their own guidelines on debt to income,” he said. “And when they did, they put themselves in jeopardy.”
His mother, Wendy Pemberton, who has been cutting hair at the same barber shop for 30 years, has been in default since spring 2008. Mrs. Pemberton, 68, refinanced several times during the boom but says she benefited only once, when she got enough money for a new roof. The other times, she said, unscrupulous salesmen promised her lower rates but simply charged her high fees.
Even without the burden of paying $938 a month for her decaying house, Mrs. Pemberton is having a tough time. Most of her customers are senior citizens who pay only $8 for a cut, and they are spacing out their visits.
“The longer I’m in foreclosure, the better,” she said.
In Florida, the average property spends 518 days in foreclosure, second only to New York’s 561 days. Defense attorneys stress they can keep this number high.
Both generations of Pembertons have hired a local lawyer, Mark P. Stopa. He sends out letters — 1,700 in a recent week — to Floridians who have had a foreclosure suit filed against them by a lender.
Even if you have “no defenses,” the form letter says, “you may be able to keep living in your home for weeks, months or even years without paying your mortgage.”
About 10 new clients a week sign up, according to Mr. Stopa, who says he now has 350 clients in foreclosure, each of whom pays $1,500 a year for a maximum of six hours of attorney time. “I just do as much as needs to be done to force the bank to prove its case,” Mr. Stopa said.
Many mortgages were sold by the original lender, a circumstance that homeowners’ lawyers try to exploit by asking them to prove they own the loan. In Mrs. Pemberton’s case, Mr. Stopa filed a motion to dismiss on March 17, 2009, and the case has not moved since then. He filed a similar motion in her son’s case last December.
From the lenders’ standpoint, people who stay in their homes without paying the mortgage or actively trying to work out some other solution, like selling it, are “milking the process,” said Kyle Lundstedt, managing director of Lender Processing Service’s analytics group. LPS provides technology, services and data to the mortgage industry.
These “free riders” are “the unintended and unfortunate consequence” of lenders struggling to work out a solution, Mr. Lundstedt said. “These people are playing a dangerous game. There are processes in many states to go after folks who have substantial assets postforeclosure.”
But for borrowers like Jim Tsiogas, the benefits of not paying now outweigh any worries about the future.
“I stopped paying in August 2008,” said Mr. Tsiogas, who is in foreclosure on his house and two rental properties. “I told the lady at the bank, ‘I can’t afford $2,500. I can only afford $1,300.’ ”
Mr. Tsiogas, who lives on the coast south of St. Petersburg, blames his lenders for being unwilling to help when the crash began and his properties needed shoring up.
Their attitude seems to have changed since he went into foreclosure. Now their letters say things like “we’re willing to work with you.” But Mr. Tsiogas feels little urge to respond.
“I need another year,” he said, “and I’m going to be pretty comfortable.”
Since the entire scheme was based upon using money advanced by investors, why are they not the beneficiaries on the mortgage or deed of trust and why were they not the payee on the note?
The investors would not have advanced any money without getting a certificated or non-certificated interest in the pool of assets “purchased” with money from a pool of money collected from a group of investors.
There could be no certificate of asset backed series xxx-2006A without there being something in existence bearing the name asset backed series xxx-2006A.
There could be no entity (SPV) bearing the name asset backed series xxx-2006A without a framework of securitization of money (SIV) and assets (SPV).
That framework could not exist but for the existence of securitization documents including the pooling and service agreement.
Thus all this must be in place before accepting the first application for a loan.
Therefore when the loan closed the true beneficiaries and payees on the note were known and should have been named as such without a nominee (MERS) or any other intermediaries. Of course THAT would have ceded control over the pool of assets to the owners of that investment, something that neither the investment bank nor any of the other intermediaries wanted. It would mean that loans and claims could be modified or settled easily since all parties are known.
It would also mean that if the intermediaries did anything wrong, like for example investing only part of the money into mortgages and keeping the rest, BOTH the investor and the borrower would probably find out. And it would mean that third party payment would be made to the investors and the investors would deduct those payments from the balance due on the obligation and statements sent out to borrowers would reflect the change _ i.e., either a deduction or subrogation of rights, spreading the ownership out to the third parties who made the payments.
And THAT would mean all those illicit profits would be the subject of liability and damages in lawsuits and maybe criminal liability. So the pretender lenders are right. This is a simple matter — or would be — if they had played by the rules and named the right parties to begin with. Maybe they would even have used industry standard underwriting principles since there was real risk involved.
Morgan Stanley’s head of European leveraged credit trading has resigned. Robert Lepone, who oversaw various teams, including high yield bonds, leveraged loans, credit default swaps and distressed debt, left Morgan Stanley’s London office for personal reasons, a spokesman said. His replacement will be announced in the coming weeks, the spokesman said, declining to comment further. Lepone’s departure comes less than two weeks after Joseph McManus, a vice president with Morgan Stanley’s investment-grade credit products group, left to join CastleOak Securities’ fixed-income sales team.
Discovery Tips – A summary and reminder!!
In the discovery for each link in the securitization chain there must be: a note, a purchase and sale agreement; a transfer receipt; a delivery receipt; a bond if the notes are endorsed in blank; a receipt of funds for the purchase of the note; and a disbursement of funds for the acquisition of the note.
In the very simple RMBS model, there has to be transfers from the originator to the sponsor, from the sponsor to the depositor, from the depositor to the Trustee of the Trust, and from the Trustee to the Master Document Custodian for the Trust. The MDC would have all of the documents referred to above.
Editor’s Note: This article might help you understand the workings of a yield spread premium. For every 1% difference in interest rate the “cost” of the loan to you goes up 19%. Now if you look at it from the point of view of the “lender” that means the “value” goes up by 19%. That means, on a $100,000 loan an increase of $19,000.
So if you have a $100,000 loan and you qualified for a 5% loan, then a smooth-talking mortgage broker or mortgage originator might get you confused enough to get into a loan that looks better but ends being worse.
The result might be that you pay a 10% rate when the loan re-sets. This increases the “cost” of the loan (oversimplifying here for the purpose of education) to the borrower and the “value” of the loan to the “lender.” How much? 19% for every 1% increase, so in our example here, to keep it simple, the cost to you on a $100,000 loan is increased by 19%x5=95%. So you will pay $95,000 more for that increase. And the lender will get $95,000 more for their “investment.”
The mortgage broker gets a “share” of that increase as a reward for having talked you into a worse loan product even if it means that the viability of the loan (the likelihood that you will pay it off) has been diminished. This “share” is called a premium and it is caused by the spread between the original 5% that you could have had and the 10% loan they you bought. Hence yield spread premium, and I call that “tier 1.”
Tier 2 occurs because the source of funds is not the bank, it is an investor who is kept in the dark much as you are. They think they are getting 5% on a $200,000 loan. But what Wall Street did was they actually funded your $100,000 loan, valued it at 10%, and then kept the balance of the $200,000 investment for themselves. To the investor the numbers look the same — they expected 5% on their $200,000 purchase of mortgage backed securities which is $10,000 per year. Wall Street gave them what looked like an investment that yielded $10,000 per year simply by creating toxic loans and used it against the borrowers who would have otherwise paid on the loans because they could.
It is the same yield spread between 5% and 10%, but used in reverse against the investor.In my opinion this gives rise to recovery of the undisclosed tier 2 yield spread premium payable to the borrower. It might also give rise to a cause of action for securities fraud that the investor could claim. At the moment, few people are pursuing this. Eventually as the mystery unravels, there will be competing claims for this money, and the first one to the finish line is probably going to be the winner.
Even as prospects for the American economy brighten, consumers are about to face a new financial burden: a sustained period of rising interest rates.
That, economists say, is the inevitable outcome of the nation’s ballooning debt and the renewed prospect of inflation as the economy recovers from the depths of the recent recession.
The shift is sure to come as a shock to consumers whose spending habits were shaped by a historic 30-year decline in the cost of borrowing.
“Americans have assumed the roller coaster goes one way,” said Bill Gross, whose investment firm, Pimco, has taken part in a broad sell-off of government debt, which has pushed up interest rates. “It’s been a great thrill as rates descended, but now we face an extended climb.”
The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump. The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 last week, the highest level since last summer.
Along with the sell-off in bonds, the Federal Reserve has halted its emergency $1.25 trillion program to buy mortgage debt, placing even more upward pressure on rates.
“Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market,” said Christopher J. Mayer, a professor of finance and economics at Columbia Business School. “It’s a really big risk.”
Each increase of 1 percentage point in rates adds as much as 19 percent to the total cost of a home, according to Mr. Mayer.
The Mortgage Bankers Association expects the rise to continue, with the 30-year mortgage rate going to 5.5 percent by late summer and as high as 6 percent by the end of the year.
Another area in which higher rates are likely to affect consumers is credit card use. And last week, the Federal Reserve reported that the average interest rate on credit cards reached 14.26 percent in February, the highest since 2001. That is up from 12.03 percent when rates bottomed in the fourth quarter of 2008 — a jump that amounts to about $200 a year in additional interest payments for the typical American household.
With losses from credit card defaults rising and with capital to back credit cards harder to come by, issuers are likely to increase rates to 16 or 17 percent by the fall, according to Dennis Moroney, a research director at the TowerGroup, a financial research company.
“The banks don’t have a lot of pricing options,” Mr. Moroney said. “They’re targeting people who carry a balance from month to month.”
Similarly, many car loans have already become significantly more expensive, with rates at auto finance companies rising to 4.72 percent in February from 3.26 percent in December, according to the Federal Reserve.
Washington, too, is expecting to have to pay more to borrow the money it needs for programs. The Office of Management and Budget expects the rate on the benchmark 10-year United States Treasury note to remain close to 3.9 percent for the rest of the year, but then rise to 4.5 percent in 2011 and 5 percent in 2012.
The run-up in rates is quickening as investors steer more of their money away from bonds and as Washington unplugs the economic life support programs that kept rates low through the financial crisis. Mortgage rates and car loans are linked to the yield on long-term bonds.
Besides the inflation fears set off by the strengthening economy, Mr. Gross said he was also wary of Treasury bonds because he feared the burgeoning supply of new debt issued to finance the government’s huge budget deficits would overwhelm demand, driving interest rates higher.
Nine months ago, United States government debt accounted for half of the assets in Mr. Gross’s flagship fund, Pimco Total Return. That has shrunk to 30 percent now — the lowest ever in the fund’s 23-year history — as Mr. Gross has sold American bonds in favor of debt from Europe, particularly Germany, as well as from developing countries like Brazil.
Last week, the yield on the benchmark 10-year Treasury note briefly crossed the psychologically important threshold of 4 percent, as the Treasury auctioned off $82 billion in new debt. That is nearly twice as much as the government paid in the fall of 2008, when investors sought out ultrasafe assets like Treasury securities after the collapse of Lehman Brothers and the beginning of the credit crisis.
Though still very low by historical standards, the rise of bond yields since then is reversing a decline that began in 1981, when 10-year note yields reached nearly 16 percent.
From that peak, steadily dropping interest rates have fed a three-decade lending boom, during which American consumers borrowed more and more but managed to hold down the portion of their income devoted to paying off loans.
Indeed, total household debt is now nine times what it was in 1981 — rising twice as fast as disposable income over the same period — yet the portion of disposable income that goes toward covering that debt has budged only slightly, increasing to 12.6 percent from 10.7 percent.
Household debt has been dropping for the last two years as recession-battered consumers cut back on borrowing, but at $13.5 trillion, it still exceeds disposable income by $2.5 trillion.
The long decline in rates also helped prop up the stock market; lower rates for investments like bonds make stocks more attractive.
That tailwind, which prevented even worse economic pain during the recession, has ceased, according to interviews with economists, analysts and money managers.
“We’ve had almost a 30-year rally,” said David Wyss, chief economist for Standard & Poor’s. “That’s come to an end.”
Just as significant as the bottom-line impact will be the psychological fallout from not being able to buy more while paying less — an unusual state of affairs that made consumer spending the most important measure of economic health.
“We’ve gotten spoiled by the idea that interest rates will stay in the low single-digits forever,” said Jim Caron, an interest rate strategist with Morgan Stanley. “We’ve also had a generation of consumers and investors get used to low rates.”
For young home buyers today considering 30-year mortgages with a rate of just over 5 percent, it might be hard to conceive of a time like October 1981, when mortgage rates peaked at 18.2 percent. That meant monthly payments of $1,523 then compared with $556 now for a $100,000 loan.
No one expects rates to return to anything resembling 1981 levels. Still, for much of Wall Street, the question is not whether rates will go up, but rather by how much.
Some firms, like Morgan Stanley, are predicting that rates could rise by a percentage point and a half by the end of the year. Others, like JPMorgan Chase are forecasting a more modest half-point jump.
But the consensus is clear, according to Terrence M. Belton, global head of fixed-income strategy for J. P. Morgan Securities. “Everyone knows that rates will eventually go higher,” he said.
The house flipper, the symbol of real estate fever—the investor who buys, fixes, and sells homes quickly—is back. This time it’s a good thing.
Real estate – United States – Business and Economy – Business – Foreclosure
In the NY Fed disclosure of the TARP payments, they show various certificates that were tendered for cash. In Maiden Lane I, it shows the CDS’s for 11 certificates from the WFHET_05-2, mostly M8 but also an M9 and M7 certificate. Some of the values show a positive amount (8,200,000, i.e) and some show negative balances (-10,000,000 i.e.). This was a Bear-Stearns counterparty deal. What are these values representative of? The amount of the loss on the swap? Amounts vary among the M8’s. They show 9 M8’s, 1 M7, one M9.
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