COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

NOTABLE QUOTES:

“The rise in repossessions and decline in loan modifications are further signs that problems in the US housing market are persisting, in spite of forecasts by some analysts of a recovery before the year-end.”

“The number of homes entering foreclosure rose 31 per cent compared with the second quarter and 3.7 per cent compared with the year-earlier period, according to the Office of the Comptroller of the Currency and the Office of Thrift Supervision.”

“As these properties come on the market, they are expected to depress home prices by between 5 per cent and 10 per cent during the next year.”

“fewer borrowers qualified for loan modifications that would have reduced their monthly payments, bank regulators have said.”

“Even when borrowers receive loan modifications, they are redefaulting at high rates. According to a report by the Congressional Oversight Panel, 40 per cent of borrowers who receive a Hamp modification are expected to redefault over the next five years.”

EDITOR’S ANALYSIS: The usual number of civil litigation cases that settle is 85%. The usual number of cases sent to mediation that eventually settle is even higher. The number of foreclosure cases that settle is negligible, and even that is falling. To make matters worse at least 40% of the negligible number of mortgage cases settled end up back in foreclosure. What is wrong with this picture? The bottleneck is evident. What is causing it?

Cases that don’t settle are composed of at least one party that has determined they either have an incredibly strong position or that they have nothing to lose by shooting for the moon. In mortgage cases there is an actual disincentive to settle because (1) the lenders are not involved and (2) their “agents” are making money hand over fist by NOT settling. But the main reason is that the wrong parties are at the table. The agents lack both power and any incentive to settle. As a result BOTH the lenders (investors) and the borrowers (also investors under securities laws) are the ones to suffer.

This is not a revelation. Look anywhere on the Internet or mainstream media and you will find analysis that says exactly what I have stated above. So if everyone, and I mean EVERYONE knows what is going on, what is actually driving this train wreck to more and more head-on collisions? I’m afraid the answer is that the investment megabanks have dug in their heels and have decided to ride this out since they are sitting in the drivers seat both in the legislative forums and in the judicial forums, although in the latter, an increasing number of Judges are subtly altering their positions and getting uncomfortable with the presumption that naturally arises when a debtor comes into court and says they are innocent, at least as to the party that is making the claim. “You signed the note, you owe the money, you didn’t make the payments. Everything else is irrelevant.”

Now Judges are starting to get the point that the title system of their state is being corrupted on as grand a scale as the mortgage meltdown itself. Most Judges still have trouble with what seems like a counter-intuitive position proposed by borrowers. But a great many Judges are subtly altering the rules of their court and demanding better explanations for why the payee on the note and the secured party on the mortgage is not in court one way or another. And there is a troubling thought about the whole “free house” PR stunt played by the megabanks. The distraction worked for about three years but is wearing thin because the logic is exploding in their faces. It is apparent under any analysis that SOMEBODY IS GETTING A FREE HOUSE regardless of outcome, if one accepts the arguments of the pretender lenders.

The next step, before ordering the parties into mediation or modification as a stall tactic is to demand that the parties prove their status before going forward. That one step will cause the cases to settle in record numbers. Why? How do I know? Because virtually all cases that settle occur during discovery when the pretender lender gets to the point where they are court-ordered to disclose the identity of the creditor or lender. It is obvious that the investors are not demanding the “confidentiality” claimed by servicers, since they are coming out in the open and suing the servicers, aggregators, and investment banks themselves. It isn’t their privacy they are after, it is their money.

Every case will settle when it becomes clear that the investor and borrower are going to compare notes — i.e., when the intermediary is pulled out of the picture. At that point the deal becomes obvious: there was no agreement between lender and borrower. The whole thing was an illusion created by the intermediaries in a grand illusion called securitization of loans which could have happened but didn’t. The loans stayed where they were without transfer because everyone knew they did NOT contain the terms agreed by Lender and borrower and they were faked as to appraisal, viability and all other indicia.