The Flawed Assumption?
-by the Mysterious Flying Miser
The following questions were sent to the FDIC, OTS, OCC, and Federal Reserve. Answers from the FDIC were posted previously. Answers from the OTS and OCC are pasted below. The Federal Reserve has not responded. It seems to this author that these two agencies are skirting the question.
The OCC insists that banks have no incentive to hoard or delay foreclosures. Well, that’s the point we’ve been making all along. If there is no incentive for them to do so, then how does one explain the plain fact that they are? One can’t resist the creeping inkling that these guys are colluding, and the collusion is organized on a grand scale.
The answer from the OTS is classic.
From the OCC (Office of the Comptroller of the Currency):
Initial Response:
While I’m working answers, the questions seem to stem from the flawed assumption that the banks have a financial incentive to delay foreclosures and the liquidation of foreclosed properties, and as a result are purposely creating what you referred to as a shadow inventory. On the contrary, the financial incentive is to liquidate as quickly as possible to avoid maintenance costs and increased risk of greater loss later. Like other federal financial regulators, we require banks to charge off mortgages on their balance sheet down to fair market value at 180 days delinquent and quarterly thereafter - based on valid valuation methods - regardless of whether the loan is in foreclosure. This is consistent with the Generally Accepted Accounting Principles (GAAP). The OCC only regulates national banks.
The OCC, with the Administration and other financial regulators, encourages banks to work with troubled borrower in an effort to avoid preventable foreclosures if it is in their best economic interest. Those that participate in the federal Home Affordable Modification Program (HAMP) are required to exhaust all modification efforts prior to consummating foreclosure. In many cases this might “extend” the foreclosure process beyond what used to be considered “normal” while the bank is working with the borrower. This can contribute to the perception of a “shadow inventory” that you referred to. There are also other factors that contribute to what you referred to as a “shadow inventory” First, homeowners continue to feel the stress of difficult economic conditions resulting in more delinquencies overall. Second, the length of time required to complete a foreclosure has increased due to the volume of mortgages in the pipeline. Foreclosure processes are governed by state law and vary from state to state; processes range from 2 to 15 months. This means the backlog of properties grows as more properties enter the foreclosure pipeline than result in a foreclosure sale each quarter.
Final Response:
Hopefully, my initial response provided some help to you because it generally answers the concerns reflected in all your questions. Attached are responses to your specific questions. In many cases, your questions start from an incorrect assumption or present an unsupported hypothetical situation and it would be inappropriate for me to engage in those kind of hypotheticals. But, I tried to give you context that I think you were missing. Please let me know if this is helpful.
If you would like to call me to discus, please do.
Bryan Hubbard
bryan.hubbard@occ.treas.gov
(202) 874-5770
1. Are there any laws, regulations, or rules governing the length of time that can pass between the mortgagor’s first default and the initiation of the foreclosure process?
Answer: Foreclosure proceedings are typically governed by state law and vary from state to state. They can range from 2 to 15 months. Many states and municipalities have placed temporary moratoriums on foreclosure proceedings in the past couple years to provide time to develop effective workout strategies and larger scale programs to assist responsible homeowners in avoiding preventable foreclosures.
2. Are there any laws, regulations, or rules governing the length of time that can pass between commencement and finalization of the foreclosure process?
Answer: Foreclosure proceedings are typically governed by state law and vary from state to state. They can range from 2 to 15 months. Many states have placed temporary moratoriums on foreclosure proceedings in the past couple years to provide time to develop effective workout strategies and larger scale programs to assist responsible homeowners in avoiding preventable foreclosures.
3. Are there any laws, regulations, or rules governing the length of time that can pass between foreclosing and marketing properties?
Answer: No. There are no federal laws or regulations pertaining to foreclosure processing. Timelines are dictated by state law and/or investor requirements. The only federal marketing regulation limits loans held as other real estate owned to 5-years. Furthermore, delaying the sale of bank-owned properties incurs additional maintenance cost and may result in financial disadvantage to banks holding foreclosed properties. So, the financial incentive is to liquidate properties as quickly as possible as to avoid maintenance costs and the risk of greater loss later.
4. Are there any laws, regulations, or rules preventing banks from colluding to manipulate the perceived market value of properties they own?
Answer: I’m not sure what you mean by colluding to manipulate perceived market value. Banks will, and should, attempt to market properties that they have taken possession of and actually own in a way maximizes the recovery of everything owed to them (plus additional funds they may have invested to ready the property for sale and market it.) They are not required to sell at current perceived market value if it is less than the amount they have invested in the loan/property.
5. Are there any laws, regulations, or rules preventing banks from individually attempting to manipulate the perceived market value of the properties they own?
Answer: Again, I’m not sure what you mean by “manipulate the perceived market value.” Banks will, and should, attempt to market properties that they have taken possession of and actually own in a way that maximizes the recovery of everything owed to them (plus additional funds they may have invested to ready the property for sale and market it.) They are not required to sell at current perceived market value if it is less than the amount they have invested in the loan/property.
6. Is it acceptable to the OCC for banks to stall the foreclosure process on nonperforming assets in an attempt to manipulate financial statements for regulatory purposes?
Answer: It is not acceptable, and the process does not support that such manipulation occurs. The OCC requires banks to charge mortgages down to Fair Market Value on their balance sheets at 180 days delinquent and quarterly thereafter - based on valid valuation methodologies - regardless of whether the loan is in foreclosure (Retail Credit Classification Guidelines and Call Reports). At 180 days delinquent, the nonperforming assets typically are “written off” well before foreclosure. This process complies with Generally Accepted Accounting Principals (GAAP) and is not a manipulation of the financial statements. Because the asset is written down prior to foreclosure, the “hit” to the financial statement occurs regardless of the foreclosure status. Furthermore, there is no financial advantage or incentive to stalling foreclosure processes because delays in foreclosure may result ultimately in greater loss to investors and continued maintenance costs.
7. Is it acceptable to the OCC for banks to stall the foreclosure process on nonperforming assets in an attempt to prevent the properties from coming to market, which would make true supply available to the public?
Answer: It is not acceptable to the OCC for banks to “defer losses” on nonperforming assets, and the agency has stressed to banks and examiners that banks should account for losses on nonperforming assets in accordance with GAAP through the Trouble Debt Restructuring process (TDR). Additionally, there is no financial advantage or incentive to stalling foreclosure processes. Because banks have already realized the loss related to the nonperforming asset, delaying foreclosure results in additional maintenance costs and may result ultimately increased loss.
8. Did the TARP money given to banks cause fewer properties to be liquidated/marketed?
Answer: Questions about TARP should be directed to the Department of the Treasury’s public affairs office. The effect of federal programs to help homeowners avoid preventable foreclosures can be found in the most recent report on the Making Home Affordable Web site at http://www.makinghomeaffordable.gov/pr_04142010b.html.
9. If banks are purposely keeping properties off the market, then how can consumers know whether or not a house bought today will hold its value? Doesn’t the consumer need to know how many houses are in the pipeline to discern the direction of the market?
Answer: The first question sets up an unsupported hypothetical situation, that I’m not going to address. More importantly, like any other markets, home values fluctuate and nothing can guarantee that a house bought today will hold its value in the future. There are a number of publicly available resources for consumers to understand the number of foreclosures in process and the number of seriously delinquent mortgages that are at risk of foreclosures, including the OCC and OTS Mortgage Metrics Report (http://www.occ.gov/mortgage_report/MortgageMetrics.htm).
In the past couple years, the national emphasis to assist responsible homeowners with avoiding preventable foreclosure has helped many troubled families keep their homes. Keeping families in their homes supports the families, helps protect communities from the blight of vacant properties, and protects the property values of neighboring homes. While homeowner assistance programs have helped many, others will eventually move to foreclosure. Servicers report that they expect new foreclosure actions to increase in upcoming quarters as alternatives to prevent foreclosure are exhausted and a larger number of seriously delinquent mortgages slip into foreclosure.
10. If consumers are buying houses today that are destined to slowly lose value over time (as the rest of the inventory inevitably comes onto market), then won’t many of these consumers be underwater in the future? Doesn’t this practice actually raise the probability of future foreclosures?
Answer: The key to preventing future foreclosures is to ensure mortgage originators use sound underwriting standards. The Comptroller of the Currency has called for establishing national and international underwriting standards to be used by all mortgage originators. Sound mortgage underwriting standards consider the borrowers’ ability and willingness to pay the debt, avoids the layering of debt risk, and ensures reasonable loan-to-value origination, which all help mitigate the risk associated with fluctuations in housing market values. The first questions, again, sets up an unsupported hypothetical situation that would be inappropriate for me to speculate about. While there are no guarantees that a house bought today will retain its value in the future, it is also impossible to assume homes purchased today will lose value in the future. Furthermore, being “underwater” does not necessarily lead to foreclosure. The driving factor behind foreclosure is the borrowers’ ability to meet their debt obligations.
11. Does your agency have a plan to protect consumers and limit future foreclosures by ensuring that banks are not hiding nonperforming assets and accumulating a shadow inventory?
Answer: The agency has emphasized guidance that banks are not to defer loss related to nonperforming assets. Banks must account for their losses in accordance with GAAP, and are examined to ensure that they do. The OCC has also worked closely with other financial regulators and the Administration to implement guidance and support programs to assist homeowners with avoiding preventable foreclosures, including the Administration’s Home Affordable Modification Program. The agency also acted with other regulators to shore up lending underwriting standards related to nontraditional mortgage products and has called for stronger underwriting standards to be applied to all mortgage regulators.
The question also incorrectly assumes that growth in the number of foreclosures in process and those that are seriously delinquent which may enter foreclosure (referred to as “shadow inventory”) is a result of specific actions taken by banks. This is not the case at all. The growth in the number of foreclosures in process and the large number of serious delinquencies is a result of the increased time associated with processing foreclosures which varies from state to state and can range from 2 to 15 moths and the fact that delinquent loans are held in delinquent status longer as servicers work with borrowers through the federal and proprietary programs to help responsible homeowners. In fact there is no financial incentive to create a “shadow inventory” which incurs both a maintenance cost and increased likelihood of greater loss. On the contrary, the incentive is to liquidate more quickly, consistent with the banking adage, “the first loss is the best loss.”
From the OTS (Office of Thrift Supervision):
Are you investigating or reporting on a specific incidence? If so, please give me the details. I cannot answer these questions in a hypothetical context.
Number 10: Real estate never goes down (in the future). Right.
What happens when underwater people don’t have skin in the game and are underwater? Jingle Mail. LTV doesn’t tell you how the FB scared up the down payment. As in, didn’t sneak it from other sources.
“The Federal Reserve has not responded.”
Too busy preparing for the Congressional audit, perhaps?
Too busy trying to PREVENT the audit. I doubt they’ve gotten to the point of throwing documents in the fire. (Or hard drives in the magnetizer.)
Ryan Grim
ryan@huffingtonpost.com | HuffPost Reporting
Reid Backs Breaking Up Banks, Auditing Fed
First Posted: 05- 6-10 12:41 PM | Updated: 05- 6-10 01:12 PM
Read More: Audit The Fed, Harry Reid, Reid Audit The Fed, Reid Break Up Banks, Reid Fed, Reid TBTF, Reid Wall Street, The Financial Fix, Business News
Harry Reid will make sure that an amendment to break up megabanks and cap their size comes up for a vote, the Senate majority leader said. He added that he was leaning heavily toward voting for the amendment, cosponsored by Sens. Sherrod Brown (D-Ohio) and Ted Kaufman (D-Del.).
Reid will also support an amendment from Sen. Bernie Sanders (I-Vt.) that will authorize an audit of the Federal Reserve, he said.
On Wednesday, Reid was noncommittal when asked by reporters at a briefing about the two major amendments. In an interview in his office with the Huffington Post on Thursday, Reid went further when asked if he’d considered the amendments since the briefing.
“I’ll probably vote for it,” Reid said. Does that mean it’ll come up for a vote?
“Oh, it’s going to come up. I’ll make sure it comes up,” said Reid of the Brown-Kaufman amendment. “Unless my staff convinces me differently. But what I know about it, I’ll vote for it.”
Reid said he has not been lobbied by the White House to oppose either Brown-Kaufman or the Sanders amendment. “No one’s talked to me,” he said.
Economists largely agree that the only way to end the bailout of big banks is to reduce banks to a size small enough so that if they fail, they don’t bring down the entire system.
…
“Economists largely agree that the only way to end the bailout of big banks is to reduce banks to a size small enough so that if they fail, they don’t bring down the entire system.”
Exactly. It’s time to send these greedy pigmen out to pasture.
“Economists largely agree that the only way to end the bailout of big banks is to reduce banks to a size small enough so that if they fail, they don’t bring down the entire system.”
——————-
Have to disagree with the belief that a multitude of smaller banks is better than a few large banks (not that I am opposed to breaking up the banks — I favor it, but mostly because a few huge banks have too much political power, IMHO).
I believe that a million small banks **all engaging in the same risk-taking activities** are just as dangerous as a few big banks who do the same. Not only that, but it’s more difficult to regulate a larger number of small banks than it is to regulate a few large ones.
Just saying…I think it’s the **type of risk** being engaged in that poses the greatest risk to the general economy, not the size of the institutions.
“Just saying…I think it’s the **type of risk** being engaged in that poses the greatest risk to the general economy, not the size of the institutions.”
I agree. Smaller banks would have a harder time “bribing” officials to bend to their will which would be a positive, but I think you’d see a lot more small banks created to engage in the most risky behavior and line the pockets of the creators only to have the bank entirely disappear once the risky “investment” flies south.
Banks should be banks. Investment firms should offer investments from low to high risk. And ratings agencies should properly rate the risk. And huge consequences for any that don’t do what they are supposed to do.
Banks should be banks. Investment firms should offer investments from low to high risk. And ratings agencies should properly rate the risk. And huge consequences for any that don’t do what they are supposed to do.
————–
Absolutely agree with you.
Theoretically, the large INVESTMENT banks WERE separate from the retail banking system. But after Lehman Brothers, it was decided that they were TBTF, so they were allowed to get the same sorts of protection offered to regular banks. Now I’m not a fan of the way that BA has assimilated the retail banking business like the borg, because it HAS led to a great degree of “regulatory capture.” Although as we have seen that can go both ways, the Farmers bank of East Waukegan doesn’t get hauled into a meeting and told to buy a failing investment bank. But it was the investment banks that represented a combination of TBTF and less oversight that led to the banking crisis. So there needs to be a limit to the size of investment firms before they come under the increased level of oversight that retail banks. Perhaps once an investment bank exceeds certain capital limits, it should be regulated in a way similar to the way that FDIC institutions is REGARDLESS of whether their is deposit insurance or not.
And the dow drops 998 points.
Damn Greeks.
Shock wave across Wall St.
Dow rebounds some after plunging nearly 1,000 points
Fox Business shows the market at the day’s worst levels. MarketWatch
Fox Business News screen shot captures the market near a highly dramatic day’s worst levels.
EURO ZONE IN CRISIS | Topics: Greece
Greek parliament approves government austerity plan
Severe austerity measures win assent of Greek lawmakers as anxious public protests in Athens.
Nightmarish day ends with steep losses; blue chips sink 992.6 points midday, a record drop.
…
Thankfully the market tanked. I was able to get out of my gold PUTs with a small profit.
I don’t see why questions which might compromise monetary policy independence could not be excluded from the Fed audit?
* The Wall Street Journal
* May 6, 2010, 12:19 PM ET
Volcker Letter to Lawmakers Opposing Amendments to Audit the Fed
The following is the full text of a letter sent by former Federal Reserve Chairman Paul Volcker to Senate Banking Committee Chairman Christopher Dodd and Ranking Member Richard Shelby about proposed amendments to financial overhaul aimed at auditing the Fed.
Dear Chairman Dodd and Senator Shelby:
I am writing about an issue bearing upon the Federal Reserve’s independence in conducting monetary policy that has long concerned me. I understand legislation is now being considered by the Senate.
The desire of the Congress to review the auditing arrangements for the Federal Reserve in the light of the extraordinary actions taken during the financial crisis is understandable. The Congress and the public need to be assured that such emergency action be taken with regard for professional standards and protecting the taxpayer’s interest.
Decades ago, during my own tenure at the Federal Reserve, an agreed approach toward GAO audits of the Federal Reserve carefully protected, as the relevant Senate Committee report of the time indicated, the Fed’s ability to “independently conduct the Nation’s monetary policy”. The point is that a threat to expose the details of active debate within the Federal Reserve about monetary policy decisions would tend to constraint that debate, expose the policy-making process to greater political pressure, affect markets, and risk the release of sensitive information about particular institutions and relationships with foreign authorities.
Consequently, I encourage the Senate to consider measures as now proposed in S.3217 that would provide the Congress with the information it needs to assess the implementation of the Federal Reserve’s unusual lending activities. At the same time it would preserve the confidentiality of the Federal Reserve in its deliberative processes to the extent needed to conduct monetary policy independently.
I am sending copies of this letter to Senators Cardin, Feinstein, Landrieu, Levin, Merkeley and Murray.
Sincerely,
Paul Volcker
Similar straw man tactics to those employed by HBB trolls are also used by WH staffers:
abc NEWS
Political Punch
Sanders: White House Lobbies Against Amendment to Audit Fed with “Bogus” Arguments
May 06, 2010 1:07 PM
White House chief of staff Rahm Emanuel called Sen. Bernie Sanders, Independent of Vermont, to explain to him that the White House officials oppose Sanders’ amendment to allow an audit of the Federal Reserve because their economic advisers believe it “would get Congress involved in the day-to-day affairs of Fed in monetary policy,” Sanders told ABC News.
“That’s just not true,” Sanders said. “It’s not accurate. I know that’s what the Fed is saying. I know that’s what Treasury is saying. But it’s bogus.”
The amendment would allow the Government Accountability Office to conduct an audit of the $2 trillion in taxpayer dollars that went to financial institutions. It states: “Nothing in this [amendment] shall be construed as interference in or dictation of monetary policy to the Federal Reserve System by the Congress or the Government Accountability Office.”
“What people are saying is the Fed has enormous power and while Congress absolutely should not be doing monetary policy – raising interest rates, lowering interest rates — it is unacceptable to give trillions of dollars in zero or near-zero interest loans to large financial organizations, with the American people having no idea which organizations,” Sanders said.
…
I would think the questions for the auditors to explore could be drawn up very narrowly, in order to steer far clear of any appearance of compromising either Fed monetary policy independence or any issues of national security concern.
For instance, suppose the question was limited to that of what (if any) actions did the Fed undertake in the period from 2008 onwards which were deliberately intended to give some of the largest private banks on Wall Street a huge market advantage which enabled them to keep paying out gargantuan bonuses and to post huge 2009 profits while Main Street America was left with trickle down scraps and high unemployment.
Wouldn’t that pretty much cover it?
U.S. senator says narrows his Fed audit amendment
Thu May 6, 2010 5:22pm EDT
WASHINGTON, May 6 (Reuters) - U.S. Senator Bernie Sanders, an independent, said on Thursday he has narrowed his proposal to expose the Federal Reserve’s use of its emergency lending authority in the 2008-2009 financial crisis.
Sanders’ proposal is being offered as an amendment to a broader Wall Street reform bill being debated in the Senate. A vote on the amendment was possible late on Thursday.
Sanders modified the measure to limit congressional investigators to a single audit of the Fed’s use of emergency lending authority since Dec. 1, 2007, a Sanders aide said. That closes the door to further audits, the aide said.
In addition, Sanders would give the Fed more time to comply with a requirement to disclose information about its role in the Wall Street bailouts during the crisis.
He would give the Fed until Dec. 1 to comply, instead of 30 days after enactment of the law if approved.
Senator Christopher Dodd, the Democratic chairman of the banking committee who is steering the Wall Street reform bill through the Senate, said he supports the modified measure.
…
What this boils down to is Sanders is far from being independent. He folded on health care and folded on auditing the Fed. He is bought and paid for like all the rest.
Don’t say that, SFBayGal. You’re popping my bubble. I really liked Bernie Sanders.
“White House chief of staff Rahm Emanuel called Sen. Bernie Sanders, Independent of Vermont, to explain to him that the White House officials oppose Sanders’ amendment to allow an audit of the Federal Reserve because their economic advisers believe it “would get Congress involved in the day-to-day affairs of Fed in monetary policy,” Sanders told ABC News.”
For this very reason alone, I will NEVER vote for Obama in the next election.
I reserve my right to vote for Obama if either Hillary Clinton or Sarah Palin run against him.
God help us if that’s what the ticket looks like.
Shouldn’t the U.S. Treasury be in charge of monetary policy instead of the Fed (do we really need a privately controlled central bank, and why?)? And shouldn’t the Treasury/Fed be accountable to the taxpayers who ultimately will be affected by the Treasury’s/Fed’s decisions?
Not yet on files missing, unexplained little fires in the basement that could not be stopped untel the contents were burned, sorry! Deep down the Federal Reserve, “private bankers”know the congressmen will protect them from any serious violations . Nothing to fear.
That 1000 pt drop in the DJIA today was solely due to the Greeks rioting, and had nothing to do with the Fed audit measure discussion, right?
P.S. I noticed a Greek bank had a fire problem this week, too…
This idea sounds damn familiar…
* The Wall Street Journal
* POLITICS
* MAY 6, 2010, 6:51 P.M. ET
Proposal to Audit Fed Modified to Limit Impact on Monetary Policy
By SUDEEP REDDY and MICHAEL R. CRITTENDEN
Last-minute maneuvering in the Senate allowed the Federal Reserve to side step legislation that would have exposed its interest-rate decision-making to congressional auditors.
Pressure from the Obama administration led Senate lawmakers to alter a provision pushed by Sen. Bernie Sanders (I., Vt.) that was gaining momentum despite opposition from the Treasury and the Fed. It would have largely repealed a 32-year-old law that shields Fed monetary policy from congressional auditors.
The compromise, endorsed by Senate Banking Committee Chairman Christopher Dodd (D., Conn.) and the Treasury, would require the Fed to disclose more details about its lending during the financial crisis. It would also require a one-time audit of those loans as well as a one-time review of Fed governance. A formal vote was scheduled for later on Thursday.
Thursday’s Senate showdown came after senators on the left and right joined forces to support Mr. Sanders’ provision.
“At a time when our entire financial system almost collapsed, we cannot let the Fed operate in secrecy any longer,” Mr. Sanders said. “The American people have a right to know.”
But Fed Chairman Ben Bernanke, while insisting on his commitment to “openness” at the Fed, said in a letter to Congress that the Sanders amendment would “seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation.”
Deputy Treasury Secretary Neal Wolin, in a statement, endorsed the revisions to the Sanders provision, saying they would provide a comprehensive audit of the Federal Reserve Board’s operations in response to the financial crisis, “while preserving the existing protections of the Federal Reserve’s independence with respect to monetary policy.”
…
More
* Letter: Bernanke Outlines His Opposition
* Letter: Volcker Outlines His Opposition
But Fed Chairman Ben Bernanke, while insisting on his commitment to “openness” at the Fed, said in a letter to Congress that the Sanders amendment would “seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation.
———————-
I’m sick and tired of these worthless threats. Prove that we need an opaque central bank.
I’m all ears.
Hey…isn’t that LTC. Ollie North that I see peeking out of the Fed’s basement window !?!
Audit the Fed Up Today
By Annie Lowrey 5/6/10 9:52 AM
Yesterday, the Senate passed by overwhelming margins two amendments to Sen. Chris Dodd’s (D-Conn.) financial regulatory reform bill: One sponsored by Sen. Barbara Boxer (D-Calif.), to ensure no further taxpayer dollars go to Wall Street bailouts, and one agreed to by Dodd and Sen. Richard Shelby (R-Ala.) to drop the $50 billion resolution authority fund from the bill.
Now, on to the controversial amendments.
Up today: Sen. Bernie Sanders’ (I-Vt.) amendment to authorize the Government Accountability Office to perform a more thorough audit of the Federal Reserve’s books — that is, Audit the Fed. But would auditing the Fed really do? And why is the Fed and the administration so afraid of it? Mike Konczal, the blogger also known as Rortybomb and a fellow at the Roosevelt Institute, speaks with The Center for Economic and Policy Research’s Dean Baker to find out.
…
Ben,
It all boils down to GADS(Government Accepted Doubletalk Standards)
They need to identify exactly what you are saying to correctly misled and mis-inform you.
For instance, your highly complex terms, such as “shadow inventory”, doesn’t actually officially exist within the simple lexicon of their Government Standard Operating Proceedure Manual of Immediate Bull$hit Responses.
How can you expect them to produce good spin and a decent lie if they themselves are confused ? Avoid confusing these God’s of Government, as they have spent all of our money and they therefore tend to be shy, defensive and slightly embarassed when confronted and questioned by mere mortals.
Had you instead used the simple beltway term, “Taxpayer Owned Upsidedown POS Floating Ghost Houses in the Vast Dead Sea of Consumer Spending Stupidity”, our public servants in the Department of Goldman Sac… Ooops!!…I meant the OCC and others, would have understood and known exactly what you meant and therefore would have been much more cooperative and forthcoming in their deceptions.
The governments assumption is that they can improve the economy so to stall for time, “Time heals all wounds”. They’ve been able to postpone armageddon many times in the past and they see no difference this time.
My belief is that the contagion is so huge that it is global and is now affecting our currencies. The derivative time bomb is nothing more than a large speculative leveraged hedge that is about to end badly. The consumer was used to living a high living standard on borrow and spend. Todays economy is unsustainable, too many people are in debt, and do not have job security. This does not end well.
I believe house prices in many parts of the country might look like Detroit in a few years. We’ve seen part 1 to this crisis, I believe we’ll see part II reveal itself soon enough, probably via a currency crisis.
And now you get to bail out greece with electronic money.
I believe many parts of the country may look like Detroit in a few years at the rate we’re going.
I’m sure the coming tax increases (after election year, of coures) such as VAT, Tax and Trade, etc. will do wonders to fix our dying economy.
Since the late 1940’s, the US Government has collected, spent and to a truly magnificient extent, totally wasted the hard earned monies of it’s taxpayers.
This fiasco is the end return on that great investment by the comman man and woman?
“Beware — Lots of Very Unhappy Campers Ahead”
How much did Soros lose on his dollar/euro shorts today. hahahahahaha
“The OCC insists that banks have no incentive to hoard or delay foreclosures. Well, that’s the point we’ve been making all along. If there is no incentive for them to do so, then how does one explain the plain fact that they are? ”
Because if they were to foreclose on and sell all their bubble era mortgage properties all at once, they would be insolvent, and so would the federal government.
But if they are making money on post-bubble loans, they can gradually use these profits to gradually admit losses.
This gets back to the whole “mark to market” debate, which affects the big banks and their securities. Even if the market has marked down the value of their securities, Wall Street argues, it should not have to admit losses until those losses — interest payments not made and principal not redeemed — actually take place. As if they were holding whole loans.
The next step is that by not foreclosing and selling, the mortgage servicers — often those same Wall Street firms — don’t admit that the actual losses have taken place either.
We’ve had 30 years of selling our future, individually and collectively, and paying the resulting debts would result in a level of sacrifice that would create a possible Greek response. The debts will not be paid. The choice is inflation or default. The preferred solution for those in power is keep the game going and defer the consequences. In the end, the choice may not be made in the United States, just as it wasn’t made in Greece.
The fun part about the ongoing inflation attempt is that wages are declining as unemployment continues at a high rate (and going higher once one factors in the real numbers, the people who have fallen off unemployment benefits, etc.) So, they want to inflate prices while people are making less money; this will end badly, IMHO.
Not for those whose income is automatically adjusted upward for inflation: retirees on Social Security, unionized public employees, top executives, etc.
The rest will become “independent contractors.”
Nice post WT…
What happens if the “fair market value” calculated by their “valid valuation methods” is below the price that anyone will offer them for the house?
What happens if the mortgage is bundled into a thinly traded security (i.e people laughing at asking prices) that may be considered a level 3 asset? Then how do they take write off?
Who is responsible for the maintenance costs and taxes when a bank threatens to foreclose but then backs down the last minute because they know they won’t be able to get as much money for the house as their “valid valuation methods” predict?
Is their any transparency on these “valid valuation models”?
Here are a couple of questions that need to be asked:
1-Is there a maximum amount of time after a loan is delinquent that the foreclosure process has to start? I’ve heard numerous cases of people not paying their mortgage for 2 years without any type of action taken.
2- If banks are holding mortgages on their balance sheets at approximately their true value, why are there 25-50% losses on assets held by banks that have been shut by the FDIC?
#1 probably depends on state law, but more likely should be found within the terms of the mortgage contract itself. Then there is the statute of limitations for written contracts, which I’ve seen vary from 3 to 8 years by state. The SOL would probably run from the last payment made so the lender would have a long time to stall.
Yeah, we’re going to have to chase down some state laws and even look into the securities themselves. And they want specific examples? We’ll give em’ specifics then.
Don’t be silly!
Enforcing the law would limit PROFITS and SALES!!!
By not foreclosing, we can “extend and pretend” while letting the non-paying home-moaner use the money that they used to put into the mortgage to instead buy junk they can’t afford and thus grow more green shoots for the “recovery.”
Looks like Miser directly asked that question about time limits, but an actual answer wasn’t given. The guy responded with typical process times, but completely ignored the question asked.
What the response said over and over again is that they require the banks to start writing down the loans on their books when the loans become non-performing. As long as they do the write downs, the regulator doesn’t really care what they do with the property.
He said that the banks have no incentive to keep the property if they have already taken the loss, but they do have an incentive if the individual people involved are still thinking in a bubble mentality and believe prices are going back up. Imagine a manager with a house that is underwater but really believes that prices are coming back in a year or two (or his kids aren’t going to college and he will never be able to retire). If he makes his business decision based on the idea that prices are at risk of going down more, he has to face kids not going to college/no retirement. If he makes his business decisions based on prices bouncing back, he can pretend life will be good for a long while to come.
Also, imagine a loan on the books made for $100K. Borrower stops paying. Bank has to write down loan to $60K. OCC is assuming they will forclose right away to avoid the carrying costs and risk of future losses. But manager thinks that price will come up enough to offset carrying costs. So if he can wait to actually forclose until some theoretical future when he can foreclose and dump for $80K after expenses, then he gets a profit of $20K ($80K - $60K) and gets a big fat bonus. Forclosing and selling when he can only get the $60K the loans was written down to makes no profit and no bonus.
The regulatory system in place (as he describes it) is about accounting, forcing the banks to acknowledge what sort of shape they are in. The banks, as private institutions, are expected to make decisions to keep themselves from becoming worse on their own. That will never happen if the managers are still in a bubble mentality. Does anyone really want to substiture regulators predictions about where the market will go for the bank managers’ predictions? That is what you would have to have to justify forcing the banks to forclose/sell as soon as they possibly could. And you would have to also force them to hire more people to do it. Pretty intrusive regulation if you ask me.
My thing is that I don’t understand why none of these regulators will tell us whether or not such a regulation exists. He didn’t say yes and he didn’t say no.
I’m not here to debate whether or not such a regulation should exist, but if it does exist, then it’s not being enforced. If it doesn’t exist, then there’s no reason why this guy can’t just say so.
He does say REOs have to be sold within 5 years.
The other question (not for a regulator) would be “Is there anything in the mortgage contract or the security detailing the minimum/maximum time that can/must pass between first default and initiation of foreclosure proceedings?”.
“The other question (not for a regulator) would be “Is there anything in the mortgage contract or the security detailing the minimum/maximum time that can/must pass between first default and initiation of foreclosure proceedings?”.”
I can answer that, having read a number of mortgage contracts: No.
The mortgages are written by the bank’s lawyers, and are intended to protect their rights to the collateral. It would be silly for them to put in any clauses that _require_ them to act in any given timeframe. Why would they intentionally restrict their own flexibility, and put in clauses that could put them in breach?
Their only goal in framing the contracts is to protect their interests and maximize their ability to act. They would never restrict it.
I think they’re missing/desperately trying to obfuscate one hidden piece of information here.
When a bank takes a loss on a loan, it has to take that money out of profits (if it has any), and then out of equity capital.
The way the banking system is arranged, losses that are replaced from equity capital, lower the amount a bank can lend by 10 times - not 1 as all the replies here are assuming.
The vast majority of banks - you can check this for yourself at the FDIC’s call report site - maximise their lending, so they have no ability to reduce their lending, beyond not making any new loans. And banks found violating the relationship between equity capital, and loans, are required to be shut down, and are indeed being shut down - every friday.
The reality for most banks is that they have a very real incentive not to foreclose these houses - their existence.
“The driving factor behind foreclosure is the borrowers’ ability to meet their debt obligations.”
Nope. It is a business decision.
A strategic walk-away is, at best, a one-time “business decision”, because anyone who finds out about it will do everything in their power to avoid giving you the opportunity to screw them. It’s cash on the barrel-head from then on.
Anyway, the answer you quote was in response to how being underwater supposedly leads to foreclosure.. but the two are unrelated. The equity (or lack of it) in a house has nothing to do with one’s ability to pay the mortgage bill.
another question for them:
1-How long can banks claim non-payments as non-cash income? At what point do they have to recognize the non-payment of a mortgage, and do they then need to go back and restate the income?
It’s my understanding that nonpayments become nonpayments upon foreclosure.
So now we have two “incentives” for banks to collude in order to keep foreclosures off the market:
1. To avoid price discovery, and, in turn, marking their crap to market every 180 days.
2. To avoid reporting losses (a practice that’s supposedly “not acceptable”, so why’s it being allowed?).
You still in SD? If so, let’s do lunch some time. Let me know if this sounds good…
By now it should be clear that you are barking up the wrong tree here. Foreclosure is not an issue under federal regulations. From a federal regulatory standpoint asset values are determined by generally accepted accounting standards whether an asset is in foreclosure or not.
Under federal regulations payments can not be accrued after 90 days of non-payment, or sooner if the bank itself does not believe that payment will be forthcoming.
For national banks, under the OCC, asset write downs appear to begin after 180 days. Banks do in fact sometimes recover losses already written down after final disposition of assets acquired in foreclosure.
Foreclosure rules are set by states not the national government under our constitutional division of powers. Foreclosure times are set by state law and delays are a function of local (mostly county) court systems.
It might be easier to understand if some grand conspiracy headed by mysterious national figures were running all this, but the reality is that the housing bust is a very complicated state-by-state, county-by-county, and perhaps even neighborhood-by-neighborhood problem.
Moreover, it is a mistake to try and make a national issue of this. The federal government already has its hand in too many pots. Better work to make state and local governments more responsible to the needs to their residents.
‘you are barking up the wrong tree’
That’s your opinion. I’ll decide what what to do with my time and efforts. Don’t give me this ‘grand conspiracy’ bullshit; we didn’t say that, those are your words. There’s a big difference between collusion and conspiracy.
You know, I’ve been at this for a while, and I can smell a skunk. And my nose says we are onto something.
You know, I’ve been at this for a while, and I can smell a skunk. And my nose says we are onto something.
———————
Absolutely.
And the vague answers and insistence that he wasn’t going to address the “collusion” aspect makes me think he was very uncomfortable with the questions. He was clearly very defensive.
I didn’t say stop barking. I said stop barking at the federal regulators. The skunks are much closer to home
’stop barking at the federal regulators’
We have put a bit of thought into this. For example, if this is coming out of the states, why don’t we hear of shadow inventory being in one place but not the other?
Another thing; if some lenders are holding back on REOs in a falling market, why wouldn’t one or two rush everything to market and take sales from those who are limiting supply? That suggests collusion, and most lenders we are concerned with are national.
Note that we don’t hear that the state of Nevada closed this bank, or the Illinois dept of whatever taking that action. It’s the Fed, the FDIC, the OCC, the OTS, etc. We are going to chase stories down to the state level to see if what the feds are telling us holds water. There are MBS investor angles, and we are contacting lawyers that have dealt with specific cases of what we are looking for.
Tim Geither, in a Newsweek interview in the December 28, 2009 issue, on page 51 has the following exchange:
NewsweekWhat about housing? There seems to be universal dissatisfaction with the process for helping people who are facing foreclosure.
GeithnerWe were very careful from the beginning - but the qualifications get lost - to say that were are going to focus the bulk of the financial force on bringing interest rates and mortgage rates down to cushion the fall in housing prices and help stabilize home prices, which will feed into people’s basic sense of financial stability. [We tried to make clear] that what we’d do to prevent foreclosure would be very targeted and limited. …
Geithner himself says there are federal efforts underway to prevent foreclosure.
The accounting may be the difference between a “Non-preforming” asset that has some face value and the market value is unknown and the actual “seizer” of the asset where their may be some regulations that allow its “value” to be determined through its liquidation…In either case, the impact to the balance sheet may take a very long time…
They have very specific accounting rules that require them to report non-performing loans.
I’m not sure on valuations of collateral, which they don’t need to do until the house is sold in a regular sale. A short sale IS considered a regular sale and effects comps. An auction is not.
Have to remember there are a lot of refi’s and rolling debt out there. So, hard to tell.
Big V? You are alive. Hope your SO found work.
Foreclosure Moratorium = Shadow Inventory
Yep. And you can probably add TARP and all the various “lending facilities” and debt guarantees, and…
I am shocked - shocked! - to find crooked collusion going on among our crooked banker masters! Why, it’s almost as if they are above the rule of law and will do whatever it takes to steal even more money!
I do like how the Fed just didn’t bother to respond. If Congress can’t touch them, nobody can. After all, they are “independent!”
Don’t smile like you know; they’ll strengthen your medications.
“The OCC, with the Administration and other financial regulators, encourages banks to work with troubled borrower in an effort to avoid preventable foreclosures if it is in their best economic interest.“
???
I have to wonder, how does Mr. Hubbard explain why a bank would need “encouragement” to do something that’s already in its own economic interest?
I submit that the truth is this “encouragement” is another government giveaway program, designed to win votes, manipulate market prices, and increase the influence of government. Yet another penalty my kids presumably have to pay for even though they didn’t do anything to cause it.
But I do applaud Mr. Hubbard’s willingness to answer all the questions provided.
Sometimes a foreclosure is not in the bank’s best economic interest, but they are prone to do it anyway..
For instance, someone gets laid off and can’t make the payments, and applies for a refinancing. The bank has a choice between taking the house or working with the borrower.
The bank might lose money foreclosing, compared to working it out with the re-fi and continuing to collect on the mortgage, but the bank doesn’t want to take the risks associated with the re-fi.
“The bank has a choice between taking the house or working with the borrower. ”
OK, but you haven’t answered my question: why would a bank need “encouragement” to do something in its own best interest?
Bankers already perform the calculations you are speaking of. Why in the world would they be doing anything other than what is already in their interest based on those calculations? Answer is: they wouldn’t; the answer from Bryan Hubbard is more government spin for another giveaway and nothing else.
Not that anybody should be shocked about that.
I did answer..
The lender would make MORE money working with the borrower but doesn’t want to. This is the more profitable option, but the bank doesn’t want to do it (for whatever reasons.. perhaps they think it’s risky).
So, the bank needs encouragement to do something that already is in their best “economic interest” to do.
Perhaps that encouragement would come in the form of some 3rd party guaranteeing the loan and reducing risk..
HAHAHA thats funny you really wrote this guy with these questions hahaha and he just lied right back at you or possible is such a tool he doesn’t know whats going on
funny I should send this to my Brother who works at B of A formely Countrywide coding somthing for the “walk away” crowd they expect a big surge
BTW most employess there are Indian and promote there Indian coders over other backgrounds maybe they don’t like the questions other than Indian coders may ask..???
This am while listening to the local radio I learned that prime foreclosures here in Salinas are being taken over by the NSP program and being held off the market. What this means is that if a property comes into foreclosure that the bank has to give the local government first claim to the property and not the local RE client base. The crap properties in need of repair are not being repaired but are left for the RE industry to sell. Just more trying to artificially control prices.
That just stinks!
I’ve been a state-level bank regulator for 14 years and I worked the scratch & dent side of banking for 10 years before that.
On the Federal level there are no written FDIC regulations mandating at what point the official foreclosure process must occur (I don’t deal with OCC/OTS/Fed so cannot speak to them). The only written regulation is the one requiring writedown to FMV at 180 days delinquent and subsequently quarterly. That said, there are numerous unwritten expectations that banks will move REO property as quickly as possible because banks really don’t want to be carrying large amounts of non-performing assets on their books. Doing so leads to written criticism in examination reports.
Back when I was a banker during the 88-92 New England debacle, we quickly learned that the way to lose the least money was to aggressively write down values to get the stuff off our books. Attempts to hold for illusory market gains always ended up in the carrying costs eating up any expected profits.
Finally, there is nothing in my state’s law mandating at what point foreclosure proceedings must begin and there’s nothing in the standard Fannie/Freddie mortgage document that discusses mandatory foreclosure timing. From my limited experience in other states, there’s nothing written that says “you must commence foreclosure by X days or you’ve waived that right.”
At least in my state, where REO holdings by my local banks are quite small, there is no concerted effort to hold properties for perceived market gains. Since our foreclosure rate is one of the five lowest in the country, any of this potential collusion among the bigs really doesn’t play here.
Thanks, Cap’n Ned, that was very illuminating.
I have another question.
I banks are required to mark down to FMV every 180 days, and it can be shown they are holding foreclosures off the market in an attempt to avoid discovering true FMV, then would said banks be in violation? It seems they are trying to get out from under the rule.
Also, of course, all this can ONLY happen in the presence of collusion (at least amongst the “bigs”, as you call them), so I guess that would be the biggest issue.
As long as the REOs are marked-to-market and there is some evidence of marketing attempts, there will generally be no examination criticism of REO management. If we as field examiners saw litlle or no effort to market REO properties management would be criticized in the report for not timely reducing its non-performing assets but there’s no written rule or reg I could cite to say “do it my way or else”.
Much of the bank examination business is highly subjective and obtaining corrective action is rarely as simple as “my way or the highway”. In many cases it can take 2-3 years to bring bank management around to seeing things our way and it’s always a persuavive process rather than a dictatorial process. Safety & Soundness are abstract concepts and the applicable FDIC reg, 12 CFR Part 364, is written in terms of should rather than must. It’s section on asset quality reads:
“G. Asset quality. An insured depository institution should establish and maintain a system that is commensurate with the institution’s size and the nature and scope of its operations to identify problem assets and prevent deterioration in those assets. The institution should:
1. Conduct periodic asset quality reviews to identify problem assets;
2. Estimate the inherent losses in those assets and establish reserves that are sufficient to absorb estimated losses;
3. Compare problem asset totals to capital;
4. Take appropriate corrective action to resolve problem assets;
5. Consider the size and potential risks of material asset concentrations; and
6. Provide periodic asset reports with adequate information for management and the board of directors to assess the level of asset risk.”
There’s not much hammer in that reg.
FDIC rules & regs (12 CFR Part 362) set a maximum REO holding period of state law or what’s permitted for national banks, whatever is shorter. National banks are allowed to hold REO resulting from foreclosure for 10 years. My state’s law reads “over whatever period of time may reasonably be necessary to avoid loss on an investment or loan previously made or an obligation created in good faith.” The exact meaning of this has not yet been tested, so I’m operating on the assumption that the national bank 10 year rule holds in my state.
Thank you very much for your insights, Captain Ned.
Big V –
I don’t think one can accurately describe action by individual banks to time the release of REO inventory to the market as “collusion.” By contrast, if some higher power (say from the Fed, the Treasury, the FDIC, the State of California, the San Diego City Government, or other government entity) intervened across banks to encourage all of them to withhold inventory, that would meet the definition of collusion, and would likely have the effect of artificially supporting prices above fair market value under competition.
Am I correct in my understanding then?
Banks are only forced to sell in case they are insolvent?
How are the banks determining “Fair Market Value?”
Banks are required to get an appraisal at the time they acquire the property and are required to write down the loan balance to FMV less estimated costs to sell (my regulatory rule of thumb is 10%).
The requirements for subsequent appraisals are decidedly more squishy and tend to be negotiation items during exams.
So when surrounding properties are selling for significantly less than the appraisal six months later and the bank holds to their appraised value in the face of recent sales… what then?
We met a realtor lately who has been crabbing about the shenanigans of banks who have been sticking to their appraisals that are 9+ months old and 30% higher than recent sales and refusing to accept offers from her clients making offers that reflect the actual fair market value.
Shouldn’t there be a requirement to accept offers for what IS actually fair market value? Who owns the definition of this term?
That’s where we, as field examiners, hope that our bosses back in the political world back us up. My state’s banking law gives our banking Commissioner the power to require banks to obtain appraisals and to write down asset values to market values. However, living in a state obsessed with due process, that power cannot be exercised ex parte, but may only be exercised after administrative hearings. Getting the political side to take that step, which means everybody’s dirty laundry is now public record, is always the tough part. In the real world, once a bank understands that we intend to take that route, they tend to do as we would have asked.
That said, I come from a state with a low foreclosure rate and an REO inventory that is not a depressing force on the RE market as a whole, so disagreements over asset values that might rise to an administrative proceeding are exceedingly rare.
As for forcing banks to take today’s market value despite their 9 month old appraisal, you run into the classical conundrum for regulators. We want to see the REOs and other non-performing assets off the books, but we also want to see it done in the manner that best preserves capital. Banks with healthy capital ratios will aggressively write down to market and blow out REOs. Banks with marginal capital levels will push hard to minimize REO losses (my assumption for what’s happening in your area). In areas unlike mine where REOs are the majority of sales, banks with large REO inventories and marginal capital are just trying to hang on. Sooner or later the FDIC will take them and the REO will instantly be marked to market and blown out. The pace of this process depends on the ability of FDIC to staff up and process bank closures.
Like the OP asked, it’s difficult to establish “market value” when most of the inventory is being kept off the market.
Many of us buyers believe that “market value” can only exist when all pertinent information is fully transparent — and that would include houses where the existing “owners” haven’t made payments for an extended period of time…but the lenders are holding off on foreclosure or even filing a NOD because they are trying to “avoid losses.”
Well of course the problem is that we have created a generation of “hit the number” appraisers. If inflated appraisals will help the upper bank managers keep the bank regulators off of their backs and continue in their jobs, it isn’t unreasonable to think that will influence those hiring the appraisers, and ultimately the appraisals. Really, until the bank regulators start doing their own, or at least hiring their appraisals, I see little preventing bankers from salting away alot of “phantom value” in overvalued REO.
Over the medium to long term, one can look to see how bad the pattern is of a discrepency between the value that REO is held on the books at and it’s ultimate price at disposition. The problems are: that’s backward looking, and everybody will say that nobody could have predicted how quickly prices would go down, so OF COURSE the appraisals came in high.
Back when I was a banker during the 88-92 New England debacle, we quickly learned that the way to lose the least money was to aggressively write down values to get the stuff off our books. Attempts to hold for illusory market gains always ended up in the carrying costs eating up any expected profits.
This hits the proverbial nail right on the head.
The problem is that it’s real easy to write down and blow out when your Tier 1 Capital ratio is in double digits. When you’re down around 7% or lower T1C (the bigs run with the thinnest capital ratios possible, because they’re all about ROE, which is meaningless to regulators), there’s limited room for blow-out writedowns.
So, basically, you’re saying that banks on the verge of collapse are loathe to admit it? That’s to be expected, sure.
Seems like the FDIC, at the very least, would want these banks to just hurry up and collapse already, rather than allowing them to dig bigger holes, which then must be filled back in with taxpayer money (since they’re too big to fail and all).
Here’s what bothers me the most about the shadow inventory thing: Getting a current buyer on 1 out of 10 foreclosed houses may just save the bank from taking the whole loss on today’s loan. However, when inventory is being held off market, thereby preventing true market value from being easily known, methinks today’s current buyer is really just another source of “hole-filling” for the bank. The bank knows for NEAR CERTAIN that this current buyer will be a foreclosee in the near future, and that even bank losses are merely being deferred, not prevented.
If it weren’t for the government coming in and giving bailouts, suddenly backing Fannie Mae securities, etc, then I would say “All’s fair in war in finance”. But when we can see the government patching this quilt together in such a way as to make banks whole at the expense of current buyers and future taxpayers, it just rubs me the wrong way.
It ain’t fair.
I don’t run with tbe bigs; I’m just a peon state regulator in a state where there is no shadow inventory (as of 3/31/2010 the 1-4 family REO held by the 14 banks domiciled in my state totalled $1,433,000).
That said, I and the FDIC field staff with whom I work on a regular basis know that the price/median income ratio is still far above the historic level. No matter how many times those of us on the pointy end of the stick tell our political bosses that things are upside down, it’s the politicians that get to make the decisions in the long run. No politician ever got re-elected by saying that housing prices were too high and still needed to come down by 40% or so.
Those here who believe in the shadow inventory collusion theory need to stop focusing on written rules & regs (because there’s nothing to support your theory there) and should focus instead on executive-level political decisions designed to minimize the number of physical foreclosoures and corresponding sales.
If shadow inventory is being held from the market it’s not the banks’ idea. They’re responding to cues from much further up the political chain, and I’m pretty sure that the field examiners are screaming bloody murder but are (as usual) being ignored.
Kudos to both the Mysterious Flying Miser and Bryan Hubbard of the OCC.
Very informative and helpful.
Looks like we heading for Dow 10,000! Again.
I wonder if they can run the tape of the celebration on CNBC the first time, just for the irony.
Interesting action there. Dow plunges almost 700 points and comes back up almost 300, right now, anyway. What a complete joke. If that isn’t manipulation, I don’t know what is.
Free markets. Boo-YAH!
It’s an old technique.. like primitive hunters taking the opportunity to stampede herd animals off a cliff, and the rest of the clan collects the meat down below.
ponzi scheme
Nice description, Joey. I was thinking it was kind of like the Nineteenth Century seal hunts, where the seals would be pursued on land until they were tired, then clubbed over the head for their skins.
that’s a good one too.. Capturing prey that is bigger, faster or stronger than the hunter often requires brains and/or trickery.
——
but a couple hours ago i read that people are blaming the dip on a trading glitch in Proctor Gamble (of which i own a few shares) or of Apple… or both.. or more than just those two.
Haven’t seen the latest news..
As a general rule when an organization does things that do not appear to be in it’s best interests, it’s worth looking to see if those actions are in the best interests of those making the decisions, rather than the organization that they’re making the decisions for. And for employees longer employment is often a good idea. Extend and pretend means more salary and another round of bonuses, even is it does put a hurtin’ on their stock options.
So the question is, does the management legitimately believe that recovery in the RE market is just around the corner, and therefore that losses would be minimized by holding on until prices improve? Or is the management just getting some final nest feathering done before the inevitable crash and burn? While it is certainly tempting to belive the latter, stupidity is certinaly as common as criminality. And of course since the fundamental incentives and access to information are the same across the industry* there’s no reason for any coordination/conspiracy/collusion to be assumed.
*I hate to use the word “industry” to describe the banking/money lenders/debt pushing business, but it’s a nice simple wore where several migh otherwise be necessary.
If I were to try and determine the strategies and motivations of lenders, I would first try to see things from their point of view, which is for the most part focused long-term… looking 5, 10, 20 years and more down the road.
Deeds recorded with confidential sales price (transaction price). Public never knows how much was paid for the property that was supposed to be sold at the trustee sale.
Can someone on here tell me how this is possible?
Can’t happen in my state as the property transfer tax return, which must include the sales price, is a land record and is recorded in the land records with the deed.
I believe they have the recorder put the tax stamp on the back of the deed so it cannot be seen by the public when recorded.It is a sign of a sophisticated investor from what I’ve read.
I’ve seen this, too, but have also heard that bulk REO investors do not necessarily buy properties piece-by-piece. They pay for the whole “tape” and somehow an individual price is not recorded for each individual house.
If anyone knows more about how they do this, I’d like to hear about it.
Just checked Boise Real Estate Data. We have about as many on the market as sales so Supply=Demand and last month the average sales Price was higher than the asking price. Still a lot of foreclosures but the market seems to be absorbing them.
“… the market seems to be absorbing them.”
Before or after the end of the $8K stimulus and the Fed’s MBS purchase program?
Thanks to Captain Ned for writing as much as he did today. I learned some new things.
Ben,
What’s the next step? And what can we all do to help?
Thank you very much for your attempt to get to the bottom of this collusion (and yes, it’s collusion).