Certified Fraud Examiner and forensic accounting epert, Jay Patterson, a member of the faculty at Max Gardner’s Boot Camp training programs for lawyers.  In that photo above, Max is all the way on the left and just to the right of Max is Jay.

Jay Patterson teaches lawyers how to use the SEC Edgar database, among others, in order to find out who owns a loan.  How to identify the trust a loan is in and find the Pooling and Servicing Agreement. how to figure out whether a trust is modifying loans and what the characteristics of the modifications are… and he can take apart the accounting of a loan to show where just about every nickel went.

Jay knows loans and what can go wrong with them, and in a field where scams are far too common, Jay Patterson is one of the most respected names in the industry nationwide.  In 30 minutes, Jay and I talk about what homeowners should and shouldn’t do related to loan audits, securitization audits, and why accounting is an important, but often overlooked issue when fighting foreclosure.

Turn up your speakers and click the PLAY button below, and listen to one of the top loan and securitization auditors and forensic accounting experts in the country, Jay Patterson… on this Mandelman Matters Podcast.

1. Mississippi Woman Was Sold Wrong Foreclosed House (VIDEO)
2. Lee Camp on the Settlement | Oh My Gawd! Fun With Big Bank Fraud!
3. FREDDIE and FANNIE Loans are Clearly COMPROMISED, Many Likely Sold MULTIPLE Times

1. Mississippi Woman Was Sold Wrong Foreclosed House (VIDEO)
2. Lee Camp on the Settlement | Oh My Gawd! Fun With Big Bank Fraud!
3. FREDDIE and FANNIE Loans are Clearly COMPROMISED, Many Likely Sold MULTIPLE Times

1. “Ghetto Loans” City accuses Wells Fargo of engaging in illegal “Reverse Redlining”
2. Deadbeats | Cape Coral Couple Sues Wells Fargo for Selling them Home it didn’t Own
3. SEC Files Subpoena Enforcement Action Against Wells Fargo for Failure to Produce Documents in Mortgage-Backed Securities Investigation

1. AFSCME | End Dimon Double Duty – “Jamie Dimon has gone from the ‘Last Man Standing’ to ‘the Most Dangerous Man in America
2. Fraudclosure | WSBTV 2: GA Official Vows to Investigate Notary Misuse Claims
3. County of Washington Pennsylvania vs U.S. Bank N.A. | County Brings Class Action to Recover Recording Fees Lost to Wall Street

1. Subprime Standardization: How Rating Agencies Allow Predatory Lending to Flourish in the Secondary Mortgage Market
2. William Black | Lenders Put the Lies in Liar’s Loans and Bear the Principal Moral Culpability
3. Understanding the Securitization of Subprime Mortgage Credit

Solyndra part deux

Good news, everybody! A gang of government bureaucrats who couldn’t run a business if their lives depended on it are about to start shoveling billions of your tax dollars at alternative energy firms that are on track to start producing a significant percentage of America’s energy sometime around two thousand never. The Energy Department said [...]

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1. Sorry Suckers! | FHFA Releases Analysis that Excludes Principal Forgiveness As Loss Mitigation Tool
2. Statement of Edward J. DeMarco Director FHFA On the State of the U.S. Housing Market: Removing Barriers to Economic Recovery
3. Fannie BofA Probe | Letter From Rep Issa to FHFA Director DeMarco

1. Sorry Suckers! | FHFA Releases Analysis that Excludes Principal Forgiveness As Loss Mitigation Tool
2. Statement of Edward J. DeMarco Director FHFA On the State of the U.S. Housing Market: Removing Barriers to Economic Recovery
3. Fannie BofA Probe | Letter From Rep Issa to FHFA Director DeMarco

1. OCC Mortgage Metrics Report for the Third Quarter of 2011
2. FHFA Statement on Freddie Mac “Refinance” Story RE Betting Against American Homeowners
3. OCC and OTS Mortgage Metrics Report First Quarter 2010

1. L. Randall Wray | Memo to Banks: You are Toast
2. Stress Tests | State-by-State Data Shows More Than 25% of U.S. Community Banks Will Be Undercapitalized
3. L. Randall Wray | Requiem for MERS (and the Banks That Created the Frankenstein Monster)

1. Fearmongering, Economic Terrorism, or End Game? Obama “I cannot guarantee that those checks go out on August 3rd”
2. Obama Criticized For Living In Lavish Mansion While Most Americans Struggle To Make Ends Meet
3. Fraudclosure Smoking Gun? Liar Loans – JP Morgan Chase Loan Officer Lied on Borrowers Loan Applications to Make Numbers Work

Wall Street Journal Reporter Jessica Silver-Greenberg casts a spotlight on the market for fertility treatment loans - including loans that enable the purchase of other women's eggs  - in the article "In Vitro a Fertile Niche for Lenders."  (subscription required). Perhaps this will prompt some coverage of the adoption loan market, which also has very interesting not-for-profit lending options; the direct financial price of the credit may be low but some complicated strings are attached. My earlier efforts to broadly evaluate the impact of loans in these markets are here and here. 

1. Rep. Grayson Calls on FBI and US Attorney to Prosecute Bank Crimes: “We do not have an apology-based legal system”
2. Naked Capitalism | Banks Win Again: Weak Mortgage Settlement Proposal Undermined by Phony Consent Decrees
3. Asshat Alert | Ajay Rajadhyaksha, Managing Director of Barclays Capital – Legalizing the Mortgage Electronic Registration System (MERS) Will Streamline the Legal Process to Accurately Transfer Loans

1. MIT, Harvard Report: Forced Sales and House Prices – Foreclosures Reduce Home Values by 27%
2. CoreLogic | House Prices Decline for Seventh Straight Month, 6.7% Over the Last Year, Off 34.5% from the Peak
3. Bank of Japan | U.S. Foreclosures, House Prices, and the Real Economy

1. MIT, Harvard Report: Forced Sales and House Prices – Foreclosures Reduce Home Values by 27%
2. CoreLogic | House Prices Decline for Seventh Straight Month, 6.7% Over the Last Year, Off 34.5% from the Peak
3. Bank of Japan | U.S. Foreclosures, House Prices, and the Real Economy

1. Faulty Loans Top $72 Billion as Banks Seek Deal With Regulators: Mortgages
2. WHEN DOES THE DOJ “break the ice” with CRIMINALS? Foreclosure Deal with U.S. Banks Elusive
3. Pending Mortgage Servicing Deal Should Not Give Banks Broad Legal Immunity or Infringe on Future Investigations into Mortgage Securities Market

The critical point made in the Democratic Congressmen's letter to FHFA is this:  Director DeMarco's widely reported claim that principal write-downs on Fannie and Freddie mortgages will cost taxpayers $100 billion is simply false.  There are two reasons the statement is a complete misrepresentation.  First, the $100 billion is simply the aggregate amount of underwater mortgage principal on all Fannie and Freddie loans, not just those at risk of foreclosure or where borrowers are seeking modifications.  Second, Fannie and Freddie will lose more than $100 billion on underwater loans in foreclosure sales, according to their own projections, if the loans aren't given principal write-downs.

The relevant comparison is between the foreclosure losses on underwater and defaulted mortgages, on the one hand, and the net payouts from modified mortgages with principal reduction on the other hand; in other words, the dollar difference between doing the write-downs and not doing them.  FHFA's own analysis shows that changing from the current policy--to postpone but not eliminate excess mortgage principal--to a policy of writing down that excess principal, would yield a positive net present value of $28 billion.  This is because fewer homes would end up in foreclosure sales, where losses exceed 50% of principal, and more homeowners could pay their (reduced) debt.

$193 million for American ... layoffs.

Last we heard from the Fisker Karma, the electric vehicle in which US taxpayers sunk $193 million so far, the loans were paying off by creating jobs … in Finland.  As it turns out, even that report was too optimistic.  With Fisker having burned through about 40% of the stimulus funds guaranteed by the Obama [...]

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It’s an issue that begs to be turned into a riddle, such as…  Who lives hopelessly underwater and in the desert at the same time?

Answer: Arizona’s homeowners.

Over this past year, Arizona State Senator Michelle Reagan (R) began a careful study of what appeared to be some very frightening numbers about her home state, but she was never willing to view them as a fait accompli.

“In Arizona we don’t ignore problems, nor do we pretend they aren’t there,” Sen. Reagan explains.  “Obviously, the federal programs aren’t going to address our state’s needs, and that’s fine.  We’re perfectly capable of doing what’s best for Arizona.”  

This past week Sen. Reagan brought her historically significant solution bill, SB 1451, to the Arizona State Senate.

According to CoreLogic, as of the third quarter of last year, more than 50 percent of Arizona’s homeowners were underwater, meaning they owed more on their mortgage than their homes were worth… 52 percent, to be specific.

If that weren’t bad enough, according to the latest Case-Schiller survey, which uses data from the Federal Housing Finance Agency (“FHFA”), by the third quarter of 2012, home prices in the Phoenix metro area are expected to drop another 9.6 percent, and the same study shows an additional 3.4 percent drop a year after that.

And the really frightening thing about such forecasts is that for at the last four or five years, the actual numbers have, in all cases, exceeded forecasted amounts.  The reverse is never true.

Now, run a tape on all that and you’ll be looking at 65 percent of Arizona homeowners being underwater by the third quarter of 2013, then add in the eight percent or so to account for the homeowners “effectively underwater,” meaning they would be underwater were real estate sales commissions and the like factored in, and we’re talking about well over 70 percent of Arizona homeowners underwater within a couple of years, which is to say nothing of the amounts involved.  Recently, one Arizona homeowner wrote to me about the sale of a home across the street from his for $310,000.  He was very upset.  His mortgage, I later learned, was $860,000.

Why hadn’t he just walked away, was my immediate question.  His response was the his adjustable rate mortgage had been reduced annually and was now at 2.25 percent.  Were interest rates to rise even to five percent and he’d be out of there in no time flat.

Want to know why there aren’t more strategic defaulters in places like Phoenix, AZ?  Now you know.

So, what’s the federal government’s response to the soggy situation?  Well, last fall the Obama Administration loosened restrictions on the HARP program, so now it can be used to refinance your home no matter how far it’s underwater… 100 percent, 200 percent… 300 percent… it doesn’t matter.  Of course, you’ll still be just as underwater as you were before, but you might shave a point or two off your interest rate, which might save you a couple hundred bucks a month… maybe.

Not surprisingly, the new HARP program has not exactly taken off like gangbusters in Arizona or anywhere else for that matter.  And just imagining someone signing a promissory note that obligates one to pay an amount two or three times the market value of  the property, will give you an idea why it doesn’t happen all that often.

Moody’s now pegs Arizona’s recovery in the housing markets at 2034, without adjusting for inflation.  One might as well have forecasted recovery as coming… never.  When 70 percent of a housing market is underwater, and recognizing that under normal circumstances at least two-thirds of home buyers are also home sellers, it’s easy to see that future demand will look nothing like demand seen in past years.

More homeowners realizing they are hopelessly underwater and walking away would seem a certainty.  Costs associated with foreclosed homes being incurred by the state are mounting beyond all previous forecasts and the resulting state budget deficits are becoming increasingly difficult to close.  By 2013, many state economies will be caught up in negative feedback loops that will prevent recovery as, for example, requisite budget cuts and tax increases further surpress consumer spending.

Foreclosures breed foreclosures…

So, after five years of being told that next year would be better… Sen. Reagan had enough.

First, she set out to learn everything about the economic meltdown and the situation related to foreclosures and underwater homes, and once she understood the dynamics, she set out to find a way to free homeowners in her home state from the downward spiral in which they were clearly locked, because she came to understand that otherwise the state’s future could only be bleak.  She assembled a team of experts in various disciplines and the result is found in Senate Bill 1451, The Housing Finance Reform Act of 2012.

I like to refer to it as… Raising Arizona… or, sometimes as, “The shot heard ’round the world.”  You’ll see why soon enough.

Senator Reagan’s bill represents BREAKTHROUGH THINKING as far as solutions to the housing crisis are concerned.  To be blunt, there’s been nothing like it proposed anywhere as yet, nothing close… but that’s not going to be the case for long… already other state legislatures are taking a close look.

Want a little taste?  How’s this just for starters… 

• Writes down mortgage balances for Arizona homeowners to up to 125% of  current market value.
• Lowers monthly mortgage payment by at least 33%.
• NO COST to taxpayers, not a dime.
• No credit score requirement, borrower must be current on mortgage or be able to bring loan current.

But, I’m not going to spoil it for you… CLICK PLAY BELOW and listen in on the conversation with Senator Michelle Reagan, along with key members of her team, Ira Hecht, Steve Kravitz and of course, yours truly, as we talk all about… what the bill is all about.  

(You’ll also find a copy of the bill below.)  

Mandelman out.

*******

ATTENTION ARIZONA HOMEOWNERS…

IF YOU WANT IT, YOU HAVE TO SPEAK OUT!

Sen. Reagan NEEDS YOUR SUPPORT to get this revolutionary mortgage financing bill passed into law.  It’s crucial that you email your state representatives and tell them how important this bill is to your life and your future.

To find email addresses for your state assembly and senate representatives…

 CLICK HERE. 

It’s easy and only takes a few seconds, I promise.

AZ Housing Finance Reform Act Bill

1. Abigail Field | NV AG Masto Defends Nevadans Against a Rushed and Bad Servicer Settlement
2. Abigail Field | What a Strong Servicer Settlement Looks Like
3. Abigail Field | Schneiderman Sues BNY; Homeowners Validated; Will Deutsche Bank Be Next?

1. Texana Hollis | Evicted Woman, 101, Can’t Go Home as Promised – HUD Says Foreclosed Detroit Home is Unsafe
2. JPMorgan Chase Advised Homeowners to Stop Making Loan Payments…and Then Foreclosed
3. Deadbeat | Ex-Marine, Single Father of Three, Who Payed on Time, Foreclosed, Facing Eviction

1. Freddie Mac Seek $6 Billion of Treasury Aid After Executives Get Big Cash Bonuses (MILLIONS)
2. NY Times | Banks Want Pieces of Fannie-Freddie Pie
3. Fannie Mae Begs Treasury for $7.8 Billion MORE to Stay Afloat After HUGE Bonuses Given to Executives

1. Freddie Mac Seek $6 Billion of Treasury Aid After Executives Get Big Cash Bonuses (MILLIONS)
2. NY Times | Banks Want Pieces of Fannie-Freddie Pie
3. Fannie Mae Begs Treasury for $7.8 Billion MORE to Stay Afloat After HUGE Bonuses Given to Executives

1. Bloomberg | Goldman Sachs Will Sell Litton Loan Servicing to Ocwen for $264 Million
2. Litton/Ocwen Foreclosure Threats | Not missed a payment and yet foreclosure warnings keep arriving
3. Veteran’s Four Year Foreclosure Fiasco Finally Comes to an End – Ocwen Gives Back Stolen Title to Paid Off Home

1. William Black – Lenders Put the Lies in Liar’s Loans
2. William K. Black | 2011 Will Bring More de Facto Decriminalization of Elite Financial Fraud
3. MBS – Lisa Epstein of Foreclosure Hamlet on with Dylan Ratigan and William Black

1. “Ghetto Loans” City accuses Wells Fargo of engaging in illegal “Reverse Redlining”
2. Wells Fargo Loses Bid to Dismiss Fraud Claims | GUSTAVO REYES, ET AL., Plaintiffs, v. WELLS FARGO BANK, N.A., Defendant
3. Judge Slaps Wells Fargo in Foreclosure | KENG HEE PAIK, Plaintiff, v. WELLS FARGO BANK, N.A.

1. MTD Denied | FDIC has to Face a $10 Billion Lawsuit Tied to the Failure of Washington Mutual Bank
2. Washington Mutual JPMorgan Chase FDIC Deal NOT Finalized? So how can JPMorgan Foreclose on WAMU Loans?
3. FDIC Sues WaMu Executives, Kerry Killinger, Stephen Rotella, David Schneider and their Wives

1. Asshat Alert | Ajay Rajadhyaksha, Managing Director of Barclays Capital – Legalizing the Mortgage Electronic Registration System (MERS) Will Streamline the Legal Process to Accurately Transfer Loans
2. Fannie Mae SEC 10-Q Report “MERS System could pose counterparty, operational, reputational and legal risks for us.”
3. Statement by CEO of Mortgage Electronic Registration Systems (MERS) “The MERS System is not fraudulent, and MERS has not committed any fraud.”