Second-lien holders put drag on short sales

San Francisco Chronicle ^ | July 28, 2012 | Gopal and John Gittelsohn

[Cincinatus' Wife]

........Facing an onslaught of pending foreclosures, banks increasingly are turning to short sales. They lose about 15 percent less on short sales than they do on repossessions, which can take years to complete while taxes accumulate along with legal, maintenance and other costs, according to Moody's Investors Service. To encourage short sales, banks are streamlining the closing process, forgoing their right to pursue unpaid debt, and giving some homeowners cash incentives of as much as $35,000 for relocation expenses.

Roadblocks involving second liens are standing in the way of even more short sales, which reached the highest number in three years in the first quarter-133,192 total transactions, said Daren Blomquist, vicepresident at RealtyTrac. While about 39 percent of homes that have entered the foreclosure process have more than one lien, just 4.2 percent of short sales completed in the second quarter-5,658 transactions-were on homes with second mortgages, according to an analysis RealtyTrac performed for Bloomberg.

"It appears that short sales with multiple liens aren't happening as frequently and are taking longer to complete," said Blomquist, adding that when a short sale doesn't go through, the home often ends up in foreclosure.

...The four largest U.S. banks-JPMorgan Chase, Bank of America, Citigroup and Wells Fargo-held 48 percent of the $849.5 billion in second liens as of March 31, according to the newsletter Inside Mortgage Finance. Some banks sell second mortgages to outside investors such as Franklin Credit Management for anywhere from a quarter of a cent to 60 cents on the dollar...

....While Franklin's Axon declines to say how much his company collects on the loans it buys, he said it averages more than the industry standard of 6 percent of the unpaid balance. His company focuses collection efforts on younger, more educated borrowers, he said....

[Neidermeyer]

Anybody who believes banks collectively lost their corporate minds starting in the ‘90’s without being frog marched into it by Uncle Scam should buy a bridge from me. I have an extra good deal on several.
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Do they come with clear title? or are they clouded? There’s enough clouded , unsalable real estate for the next 100 years on the market already just looking for the right rube to lay a down payment on it.

The banks didn’t “lose their minds” ,, they simply didn’t GIVE A SH*T because they had interest rates at rock bottom ... meaning the pension funds and other buyers were DESPERATE for higher yields... They had the product to sell (and could manufacture more with rules changes), and they had NO RISK to themselves because it was pre-sold... The banks knew the loans were CR*P and bet against the revenue streams ... Where do you think their record profits came from? They booked large chunks of every loan as “trading profits” rather than fees ... and hid the fact that they were doing so with multiple closings (you attended the one with the straw man entity) ...

[Neidermeyer]

You spew government propaganda. No one believes it.
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I “spew” the truth ,, my positions and arguments have been unchanged for the last 4 years... it’s you bankster apologists that have been slowly coming around... If I’m not right why is the entire gov’t structure running interferance for the banks... buying them time to unwind and attempt to unscramble the omelet the created... YOU SHOULD CARE ... THIS IS WHAT IS DRAGGING THE ENTIRE US ECONOMY DOWN ...

[Neidermeyer]

The private mortgage insurer was AIG and the government stepped in (bush) and bailed them out in TARP one. It was the sole cause of AIG Failure.
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MARY ... Please get the facts straight ... AIG insured the cash flow for the investors (and the creators of the issues created ) entire tranches and certificate issues ,, NOT INDIVIDUAL LOANS ,, NOT PMI ... people with no clue about the facts are annoying.

P.S. I suspect you were making an attempt at sarcasm with the line about robosigning... the truth is that the document trail , the assignments and sales never took place as a firewall to isolate the banks... so yes now they are creating a document trail out of whole cloth and YES it IS FRAUD ...

[marygonzo]

You sir are badly disillusioned to believe your own bs.It is common to talk oneself into erroneous conclusion. Always test your delusions with hard fact and you will come to grips with reality. Bank policy had zero impact on government regulation. absolutely zero. Bad loans were 100% demanded by government. You might enjoy the DU website. Are you Barney Frank?

[marygonzo]

And the dead beat folks that stole the money for the house they couldn’t pay for were innocent as lambs.
AIG was the insurer of PMI . I refuse to do your research. They were both direct and reinsurer of the whole glob of crap. Why do you think they were bailed?

[Neidermeyer]

You would think they would forgo the $35,000 relocation incentive and give that to the lien holder at the very least.
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Two problems here ,, first the banks REALLY REALLY want a new buyer to paper over the fraud they perpetrated That’s why they have incentives ,, they want that short sale , they want that old transaction buried as far as they can... and anyone that simply denies denies denies and forces discovery will cost the banks far more than that $35k ... they will (by recent reports from 2nd DCA FL ) be offered forgiveness and a 75% to 90% haircut to sign new paperwork and not countersue.

second ,, there is no first lien on the vast majority of these properties... when the mortgages were sold to create the certificate issue by OCC rules the original note/obligation is destroyed (so the issuer/banks cannot sell it a second time)... there is no mortgage ,, only collection rights on an anticipated income stream.

[marygonzo]

http://seekingalpha.com/article/122484-why-is-aig-backing-fannie-freddie-enhanced-mortgages
Awe heck. Education is a gift. Here it is.

[Neidermeyer]

And the dead beat folks that stole the money for the house they couldn’t pay for were innocent as lambs.
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testy testy ... you’re almost as ill informed on economics as Rush Limbaugh ... AIG doesn’t/didn’t issue PMI ... in almost every instance the SERVICER was required in the PSA to make payments on behalf of the borrower for (usually 6 months) if the borrower didn’t make payments ...

It’s the banks that are the deadbeats that want a “free house” that they have NO REAL INTEREST IN ,, never had an interest in as they table funded and pre-sold ,, just collected fee income ... they were more-or-less just another (undisclosed) broker collecting a BIG slice ... wake up and smell the fraud.

[Neidermeyer]

http://www.pmi-us.com//

AIG doesn’t do onesies and twosies ,, they may have backed consolidated groups of loans at FNM and FRE but they don’t sell to you and me..

[Kartographer]

The only thing hurt the banks right now is the lost of income from managing these mortgages. The banks were long ago paid for these loans and never lost a penny on them despite all their crying as they sold the mortgages off the investors or the government after making a healthy market. In fact in most cases not one penny of the banks money was ever involved in the transaction as the mortgages were bundled and sold long before the loan was even made.

Now the trouble is as many on here have been warning that no one knows who actually owns the mortgages. The servicers aren’t even sure any more and as they don’t want to be out money for up keep on homes that they aren’t sure who to go to to get their money back they have stopped keeping up the foreclosed and abandoned properties. We have a few ring here in my subdivisions at lest two had pipes burst and ruined the house to a point where the city has issued no occupancy notices and the HOA is getting one hell of a run around on who owes the yearly fees and are at a point of having to place liens on a number of properties.

And it just isn’t here here a story from Florida on the same thing:

Now It’s the Big Banks That Are Getting Foreclosed On

http://www.cnbc.com/id/48259827

Face it the mortgage industry has twisted and broken long standing real estate law to the point it will take years to straighten out and many honest home owners who pay off their mortgage will have to spend thousands of dollars to uncloud titles for YEARS.

[Post Toasties]

I see that you don't deny that Fannie and Freddie were buying the majority of these bad mortgages, especially toward the end of the housing bubble, thus encouraging financial institutions (not just 'banks') to make low quality loans, becaue they knew they had a ready market in the GSE's for this low quality debt.

It's impossible to honestly deny that this was the real catalyst for the real estate meltdown. To try to assert that this is all 'the banks'' fault is not credible.

Banks do not have the level of social responsibility that Federal Government agencies and GSE's do, thus are not as culpable as the Federal government for encouraging the type of irresponsible lending that occurred during the last decade and a half.

And blaming only banks is also missing the fact that the Federal Government under the 0bama administration is working hard to relax mortgage lending rules once again - it is far wiser to acknowledge these things rather than indulge in 'hate banks' rants which are ultimately not just ineffective, but counterproductive if the goal is truly solving the problem.

[Kartographer]

The real damage was done by these financial institution who in a hurry to unload these bad loans as soon as possible and in an effort to cover up just how bad they were was their criminal breaking of long standing property laws. Much of the required paperwork and legally required documentation has been ‘lost’(but more than likely purposely so)and destroyed in their efforts to cover up they culpability and now its coming back to bite not only them, but eventually honest home owners who will end up ‘buy’ a a home that will in the end cost them thousands to get their title cleared.

[Post Toasties]

You know the 0bama administration DoJ will never prosecute this behavior because they condone and encourage it. And HUD, Fannie and Freddie are Leftist strongholds. What's the point of just going on about how it's all the banks' fault? We need an administration and Federal Government that will enforce these laws and no Democrat controlled one will, and the banks know it.

Contrast this to the savings and loan crisis in the '80's which was far smaller. The Reagan administration sent hundreds to prison.

Chewing rugs and turning blue in the face about bank wrongdoing in the mortgage market will result in almost no improvement until you get a presidential administration and Federal agencies that don't actively encourage this behavior. Blaming banks only is a non-starter. Why do so many people fail to see this?

[Post Toasties]

Also, blaming ‘banks’ only and exculpating everybody else is really not doing much but giving anticapitalists new life and vigor. IMO, this is something Federal Government agencies and the DoJ should be working to correct, but under Democrat administration they are doing the opposite.

[Post Toasties]

Also, blaming ‘banks’ only and exculpating everybody else is really not doing much but giving anticapitalists new life and vigor. IMO, this is something Federal Government agencies and the DoJ should be working to correct, but under Democrat administration they are doing the opposite.

[Kartographer]

I never said that the banks were the only ones guilty, but what you propose is like say, why prosecute these flash mobs the present administration is encouraging them? You can’t blame someone’s illegal behavior with excuses like ‘Well everyone was doing it’ or ‘They were lead astray by others’. They knew what they was doing was illegal when they did it, that’s one of the reasons they worked so hard at covering it up. Yes the present administration won’t prosecute them and neither will a new one there are to many in government with attitude that we should let them slide on this.

I and others have been pointing out how the rule of law was being usurped and that it wasn’t just the ‘dead beats’ that were going to pay, but eventually honest paying home owners will be left with properties so clouded they won’t be able to sell or borrow money on them, because they won’t be shielded like the banks are and it will be up to them to spend lots of money and lots of their time to clean up these titles. And the government already made a deal it you can be sure that no one is going to get a dime out of the banks to clean these titles up.

[marygonzo]

Its very simple to transfer a mortgage and a note and it is easily fixed with a simple affidavit.A Rhesus monkey with a law license can fix it in 20 minutes. The blame falls on people who did’nt pay back what they promised to pay. The Government knew they wouldn’t pay so they guaranteed the crappy loan at your expense and justified it as “a piece of the pie”. to get votes. It was a component of the inexorable march to communism led by Democrats like Barney Frank and Chris Dodd. It has ruined our country and our economy. Banks were told to make these loans. They didn’t care to lose their charters and after all, they sold the loans that were guaranteed by government agencies like fannie mae , freddie mac and FHA actually bought the junk . What a disaster.All government driven transfer of wealth. “Banks” my eye.

[Kartographer]

If it that easy to fix then why is it not being done, even by the banks? Maybe because the shredded and destroyed much of the required documentation? Why are so many lawyers, banks, Foreclosure firms in trouble up to their eyeballs over fake documents and flase affidavits and notary? People keep saying its easily fixed, but yet so many people invovled are commiting perjury, forgery and fraud on the court trying to fix it. SO answer me if is so easy why are so many commiting mulitple felonies in their efforts to 'fix' it?

[longtermmemmory]

in foreclosure the 2nd gets ZERO.

in ch13 OR ch7 bankruptcy the 2nd gets ZERO.

the second was usually the downpayment for the fist mortgage and was based on an inflated (fraud) valuation.

usually the second was a default swap with the owner totally unknowable. (robosigning, securities fraud, recording fraud, etc...)

the second mortage is easily stripped in a ch13.

[marygonzo]

I just don’t agree at all with your blaming banks. Do you understand that successful foreclosures in 2011 were 3.8 MILLION properties? That is 23% higher than 2 years before.No problems there. There were 211,000 In January of this year. Banks agreed to use real ballpoint pens rather than robo signing machines and foreclosure delays are no more and mortgage holders are now “blowing and going” glutting the real estate markets and driving down homeowner equity in the $trillions. All because dead beats didn’t pay as they agreed and the stupid guarantees by the taxpayers. And It is not over. Some estimate go as high as 10 million more properties are destined for foreclosure.