Thursday, March 29, 2012

It's on: The Fed vs. gas prices - 2 - Bernanke & inflation - MSN Money

It's on: The Fed vs. gas prices - 2 - Bernanke & inflation - MSN Money

Here is an interesting snippet from MSN Money. It is a compelling argument against the continued 0 interest rate policy of the Fed and how it could have already started us on the road to extreme inflation. 

How cheap money can backfire

The bankers' warning was this: While lower interest rates ease the pain of high debt, they reduce the incentive for businesses and governments to fix their debt problems. You can see this in the way Washington keeps avoiding the hard choices on the national debt and deficit. You can see this in the way Americans aren't really shedding their debt, aside from those defaulting on mortgages, and are instead using low interest rates to roll over lofty credit balances.
Low rates and a dramatic expansion in the monetary base have also failed to encourage any meaningful new borrowing businesses would use to increase production or hire more workers, thus stimulating economic growth.
In other words, with the banking crisis behind us, we no longer have a problem the Fed can fix. We need the White House and Congress to address our structural problems -- including inefficient health care, a broken education system, dilapidated infrastructure and foreign trading partners not playing by the rules -- to get the economy we want. This will create the jobs and the income needed to cut our overall debt levels and return the economy to a more normal footing with less volatility and drama.
At this point, all the Fed and its unchecked cheap money can do is cause inflation, push up commodity prices and damage growth, Shirakawa warned. In fact, this has already begun to happen. Led by the impact on gas prices, all the extra money is beginning to act as a negative factor. And growth is slowing as prices rise.
Using data from this week's report on manufacturing activity from the Federal Reserve Bank of Dallas, the chart below illustrates this. New orders are down. Yet prices paid for raw materials are up. Worse than inflation, this smells like stagflation, the most dangerous of the modern economic ailments. It's like a drug-resistant staph infection -- easy to catch but hard to kill. (Anyone who lived through the early 1980s and 20%+ interest rates can tell you how hard.)

Tuesday, March 27, 2012

Monday, March 26, 2012

Chain of Title issues may be your leverage to get a new loan and stay in your home

 Here is another method to consider when dealing with the major banks and trying to get a loan modification or a short sale.  This may just give you the leverage you need to get a serious negotiator to step to the front and start coming to a compromise.  There seems to be a lot of mortgages that have been handled inappropriately and that were not properly delivered to the pooling trusts. 

Things could get very interesting. 

Sue Your Lender for Chain of Title

Your mortgage servicer may not have the legal right to foreclose on you. Whenever you do choose to sell your home, there assuredly will be a cloud on your title, preventing you from selling. If your title or deed was not transferred correctly from investor to investor as your mortgage was sold and re-sold, they have broken the chain of title and their foreclosure action is illegal. Many homeowners are choosing this litigation as a strategy to save their homes, and force the reduction of principal and interest rate on their mortgage; and they're succeeding with spectacular results depending on what state you’re in. This is at the heart of the Foreclosuregate and Robosigner scandal exposed in October of 2010.

It's too early in the history of this strategy to predict what any given judge will decide as a remedy for a broken chain of title, or corrupt title, but it is clear that the better prepared the homeowner is, and the more aggressive their attorney, the more you will gain. If your lender can't provide the title or deed to your property, you probably win big time. The likelihood of broken chain of title is extremely high if you bought your home since the year 2000. We have seen corrupt title cases as far back as 1994.

This is a spectacular strategy to force mortgage servicers to recognize Fair Market Value calculations, to lower the loan principal and interest rate on your mortgage to a Fair Market Value and competitive interest rate. It is not suitable to argue in court for the ‘Free house’ that you undoubtedly deserve. A successful broken chain of title suit would result in a new mortgage, as opposed to a mortgage modification, which is a re-writing of the terms of your current mortgage. Basically, it holds the mortgage servicer and mortgage investor accountable for the incredible loss in value to your property in the last few years as well as sloppy title compliance in their rush to get you into a house and sell your loan to investors. This is an especially suitable strategy for a homeowner who doesn’t qualify, or isn’t satisfied with, a mortgage modification.

You need the right attitude, and probably some funds available to you for a broken chain of title suit. You need a real ‘fire in your belly.’ You can’t expect much of a warm reception from an accomplished attorney without some retainer funds to pay for corrupt title prosecution. Perry Mason was not cheap – or idle.

Monday, March 19, 2012

Banks all in on buying back real estate that they foreclosed on earlier, Matt taibbii

 Wow another great article by Matt Taibbi on the mortgage industry. Banks are jumping back into the housing industry to buy property in bulk at huge discounts.  It looks a little like the back end of a scam as the banks get to buy up homes they foreclosed on already.  It looks like the big players are still working on shutting out the little guy in real estate.  This seemed like it was the major goal on Wall Street when they housing bubble was created.  It was the last opportunity for the long term investor that started with no cash to make their millions.  The years of consistent real estate values seemed to great an opportunity for the big players to let stay in the hands of main street.  Hopefully this will not end up being the case and once again the opportunities will be there for the little guy to create their fortune starting with very little. 

Here's yet another form of hidden bailout the federal government doles out to our big banks, without the public having much of a clue.
This is from the WSJ this morning:
Some of the biggest names on Wall Street are lining up to become landlords to cash-strapped Americans by bidding on pools of foreclosed properties being sold by Fannie Mae...
While the current approach of selling homes one-by-one has its own high costs and is sometimes inefficient, selling properties in bulk to large investors could require Fannie Mae to sell at a big discount, leading to larger initial costs.
In con artistry parlance, they call this the "reload." That's when you hit the same mark twice – typically with a second scam designed to "fix" the damage caused by the first scam. Someone robs your house, then comes by the next day and sells you a fancy alarm system, that's the reload.
In this case, banks pumped up the real estate market by creating huge volumes of subprime loans, then dumped a lot of them on, among others, Fannie and Freddie, the ever-ready enthusiastic state customer. Now the loans have crashed in value, yet the GSEs (Government Sponsored Enterprises) are still out there feeding the banks money through two continuous bailouts.
One, they continue to buy mortgages from the big banks (until recently, even from Bank of America, whom the GSEs were already suing for sales of toxic MBS), giving the banks a permanent market for home loans.
And secondly, they conduct these quiet bulk sales of mortgages, in which huge packets of home loans are sold to banks at a "big discount."
By now we've come full circle. Banks create the loans, make money selling them off on the market at high prices, then come back and buy them again when they're low. When the GSEs are in the middle of this transaction, it makes mortgage lending a basically risk-free proposition: Banks get paid for creating home loans and they end up owning valuable property on the cheap, but in between, they offshore the market risk to a government entity and/or to the idiot individual who bought the home mortgage in the first place.
Even better, many of the banks/investors who buy these home loans back from Fannie/Freddie will rent out their properties instead of reselling them, which can vastly increase their revenue streams. From the WSJ:
Economists at Goldman Sachs estimate the annual yield on an investment on rental property nationwide averages about 6.3%, but can exceed 8% in cities that were hit hard during the housing bust, including Las Vegas, Detroit and Tampa. By contrast, mortgage bonds have average yields of just over 3%, and investment-grade corporate bonds are yielding about 3.5%, according the Barclays Capital U.S. Investment-Grade Index.
It gets better:
Warren Buffett, considered a sage investor and chief executive of Berkshire Hathaway Inc., said in an interview with CNBC-TV last month that he would buy up "a couple hundred thousand" single-family homes if he could do so easily, given the high yields on rental investments.
Another potential buyer, according to the article, is John Paulson, the pillaging hedge-fund billionaire who was behind Goldman's notorious "Abacus" deal (in which Goldman allowed Paulson to pack a portfolio full of loser mortgages he was shorting before those same mortgages were dumped on a pair of Euro banks).
So congratulations, America, your quasi-governmental housing entity is about to subcontract out mass-landlording/slumlording jobs to the likes of John Paulson and Warren Buffett, so that they can add to their bottom lines collecting rent payments in the middle of a nationwide housing slump.
As one hedge fund analyst put it to me this morning: "Help inflate the bubble, create a foreclosure crisis, buy homes in bulk, and rent them out to the same average homeowner."
Is this what we had in mind when we created the "ownership society" – helping billionaires collect your rent?

More Financial Reality.

 This could have serious implications on the housing and banking industry.  The claim that MERS was illegal and an illegal move by the banking system to save tax payments and time in transferring property is at the heart of this matter.  The Electronic registration system was used to skirt the true county property records system that collected tax revenue every time a property was transferred to another party. This could open a a large can of worms that could reveal fraudulent activity for years.  It will be interesting to see if the current administration and bank loving politicians can keep the banks out of further trouble.  Most likely they will make every effort to brush this under the rug at least until after the election cycle. 

Read more on the story here.

 More Financial Reality.

Matt Taibbi takes on too big to fail Bank of America: Too Crooked to Fail

Bank of America: Too Crooked to Fail | Digg Politics

Thursday, March 8, 2012

GAO: Almost Half of Bailed Banks Repaid the Government With Money “From Other Federal Programs” « naked capitalism

Story today on Naked Capitalism
The Government Accountability Office continues its subtle war on the talking point used by Treasury that “TARP made money”. Here’s the GAO, with a report out today.
As of January 31, 2012, 341 institutions had exited CPP, almost half by repaying CPP with funds from other federal programs. Institutions continue to exit CPP, but the number of institutions missing scheduled dividend or interest payments has increased.
Much of the government-supplied TARP funding (to small banks) was replaced by the Small Business Lending Fund passed in 2010, which Republicans called “TARP 2.0″.  The larger banks, however, where much of the bank-based credit creation in the economy takes place, didn’t use this program.  Instead, they got an implicit subsidy of between $6B and $300B a year from the widespread belief that the government will not let their bondholders lose money.
The talking point that the Troubled Asset Relief Program made money for the taxpayer is an important structural argument for the Treasury Department and the political elements in the Obama White House.  Yves Smith quoted an earlier GAO report on this phenomenon a few months ago.
Although Treasury regularly reports on the cost of TARP programs and has enhanced such reporting over time, GAO’s analysis of Treasury press releases about specific programs indicate that information about estimated lifetime costs and income are included only when programs are expected to result in lifetime income.
Our banking system is still reliant on the government for support.  Officials can claim that TARP made money, but it’s becoming increasingly clear that this is a way of avoiding a description of the actual policy framework.

GAO: Almost Half of Bailed Banks Repaid the Government With Money “From Other Federal Programs” « naked capitalism

Wednesday, March 7, 2012



Servicer misconduct and housing crisis

Editor’s Note: It seems that we can’t go three months without hearing about yet another species of misconduct by mortgage servicers that shifts losses onto the lienholders they are supposed to protect. We’ve read reports about force-placed insurance, inflated appraisal and maintenance fees, robosigning and other foreclosure irregularities, interference with loan mods and short sales due to second lien holdings, and, most recently, reports of the ongoing collection of fees by servicers for loans that have already been liquidated. Why do we seem to be facing a near-constant stream of news stories about mortgage servicers behaving badly? It turns out that this problem is nothing new, and traces back to a fundamental issue that we discuss at length in Way Too Big to Fail - misalignment of incentives. In this revealing guest post, former insider Steve Ruterman draws on his experiences to illustrate the roots of this fundamental problem. – IM

These experiences with servicers have led me to believe that the current mortgage market meltdown, documentation deficiencies, robosigning and related foreclosure problems all stem from the same cause: the complete collapse of any regime of internal controls at mortgage originators, sellers and servicers resulting from a misalignment of incentives. Once the loan underwriter sells all of its originations, and expects to do so in the future, it concludes that it can do without the internal control provided by things like underwriting guidelines. In fact, it finds that it can dispense with all of its former internal controls, which only cost it money.

Once all internal controls are dispensed with, management and employees pursue the incentives given them by the owners, and you get the fiasco in the mortgage markets we are living with today.

read the full article here The Subprime Shakeout