al danna to ngarfield, Darrell, Andre, Jan, Beverly, me, June, chrismo7865, Steve, Diane

Dear Sir:

I am writing to thank you for bouncing my check with which I endeavored to pay my plumber last month. By my calculations, three nanoseconds must have elapsed between his presenting the check and the arrival in my account of the funds needed to honor it. I refer, of course, to the automatic monthly deposit of my entire salary, an arrangement which, I admit, has been in place for only eight years.

You are to be commended for seizing that brief window of opportunity, and also for debiting my account $30 by way of penalty for the inconvenience caused to your bank. My thankfulness springs from the manner in which this incident has caused me to rethink my errant financial ways.

I noticed that whereas I personally attend to your telephone calls and letters, when I try to contact you, I am confronted by the impersonal, overcharging, prerecorded, faceless entity which your bank has become.

From now on, I, like you, choose only to deal with a flesh and blood person. My mortgage and loan repayments will therefore and hereafter no longer be automatic, but will arrive at your bank, by check, addressed personally and confidentially to an employee at your bank whom you must nominate. Be aware that it is an offense under the Postal Act for any other person to open such an envelope.

Please find attached an Application Contact Status which I require your chosen employee to complete. I am sorry it runs to eight pages, but in order that I know as much about him or her as your bank knows about me, there is no alternative. Please note that all copies of his or her medical history must be countersigned by a Notary Public, and the mandatory details of his/her financial situation (income, debts, assets and liabilities) must be accompanied by documented proof.

In due course, I will issue your employee with a PIN number which he/she must quote in dealings with me. I regret that it cannot be shorter than 28 digits but, again, I have modeled it on the number of button presses required of me to access my account balance on your phone bank service.

As they say, imitation is the sincerest form of flattery. Let me level the playing field even further. When you call me, press buttons as follows:

1. To make an appointment to see me.
2. To query a missing payment.
3 To transfer the call to my living room in case I am there.
4. To transfer the call to my bedroom in case I am sleeping.
5. To transfer the call to my toilet in case I am attending to nature.
6. To transfer the call to my mobile phone if I am not at home.
7. To leave a message on my computer, a password to access my computer is required. Password will be communicated to you at a later date to the Authorized Contact.
8. To return to the main menu and to listen to options 1 through 7.
9. To make a general complaint or inquiry. The contact will then be put on hold, pending the attention of my automated answering service. Uplifting music will play for the duration of the call. Regrettably, this may, on occasion, involve a lengthy wait.

Following your example, I must also levy an establishment fee to cover the setting up of this new arrangement.

Your Humble Client

Federal Reserve Policy Audit Legislation ‘Gutted,’ Paul Says

The central bank is also buying $1.25 trillion of securities tied to home loans, so I guess the central bank is going to be hiring a lot of lawyers to fight us.

Federal Reserve Policy Audit Legislation ‘Gutted,’ Paul Says

Posted October 30th, 2009 by McPond
!! DIGG IT !!

By Bob Ivry | Bloomberg

Oct. 30 (Bloomberg) — Representative Ron Paul, the Texas Republican who has called for an end to the Federal Reserve, said legislation he introduced to audit monetary policy has been “gutted” while moving toward a possible vote in the Democratic-controlled House.

The bill, with 308 co-sponsors, has been stripped of provisions that would remove Fed exemptions from audits of transactions with foreign central banks, monetary policy deliberations, transactions made under the direction of the Federal Open Market Committee and communications between the Board, the reserve banks and staff, Paul said today.

“There’s nothing left, it’s been gutted,” he said in a telephone interview. “This is not a partisan issue. People all over the country want to know what the Fed is up to, and this legislation was supposed to help them do that.”
The Fed, led by Chairman Ben S. Bernanke, has come under greater congressional scrutiny while attempting to end the financial crisis by bailing out financial firms and more than doubling its balance sheet to $2.16 trillion in the past year. The central bank is also buying $1.25 trillion of securities tied to home loans.

Paul, a member of the House Financial Services Committee, said Mel Watt, a Democrat from North Carolina, has eliminated “just about everything” while preparing the legislation for formal consideration. Watt is chairman of the panel’s domestic monetary policy and technology subcommittee.

Keith Kelly, a spokesman for Watt, declined to comment and said Watt wasn’t immediately available for an interview. Watt’s district includes Charlotte, headquarters of Bank of America Corp., the biggest U.S. lender.

Original Language

Paul said he intends to introduce an amendment to the bill when it comes to the House floor for a vote restoring the legislation’s original language.

Representative Barney Frank, a Democrat from Massachusetts and chairman of the committee, said in interview that he intends to ensure legislation would provide a time lag between FOMC actions and the reporting of them.

Such a provision would “lessen the market impact,” he said on Oct. 20. “The importance is to see that there are no abuses and to judge what they did.”

The legislation will probably be included in a broader Democratic package of financial-regulation changes in the House, Frank said.

Last Updated: October 30, 2009 17:48 EDT

[link to www.dailypaul.com]

US Regulators Ask Banks’ Help For Commercial Realty

So I guess the banks can continue to sell the toxic assets at the fake inflated value forever then. The regulators are in bed with the banksters to shaft the homeowners forever.

Banks are being encouraged to modify troubled commercial real estate loans, which by U. S regulators say loom as a danger spot for the industry.

Issuing guidance to financial institutions, regulators such as, Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp and the Office of Thrift Supervision advised prudent loan workouts, often in the best interests of both the bank and borrower.

The troubled CRE sector has especially hit the community banks hard, basically because many of the smaller banks believing they could compete with larger banks began building up heavy concentrations of commercial loans.

Sheila Bair, FDIC Chairman says, increasingly CRE exposure will be a driver of bank failures, with the tally of failures passing the 100-mark last week, reaching 106 for the year so far, the highest since 1992.

Many of the deteriorating loans the banking industry continues to grapple with, were extended before the housing market went bust.

Even as many CRE borrowers see their financial conditions deteriorating, the regulators’ guidance says many will continue to be creditworthy borrowers, able to repay their debts.

Regulators say, taking a balanced approach, should the weaknesses in restructured CRE loans result in adverse credit classifications, institutions will not necessarily be criticized by bank examiners.

Commercial real estate loans, as of June totaled over $1-trillion or 14.2% of all banking industry loans and leases.

Since their peaking in 2007, commercial property prices have fallen 35 to 40%, with more declines anticipated, as rising job losses and high vacancy rates weaken the demand for commercial property.

N.Y. Judge Approves State Street’s $90M ERISA Settlement Despite Bank’s Objections

So the investors are hitting back, see? we were right all along.

N.Y. Judge Approves State Street’s $90M ERISA Settlement Despite Bank’s Objections

Andrew Longstreth

The American Lawyer

October 30, 2009

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There will be no do-over for State Street Bank in an $89.75 million ERISA class action settlement it agreed to in June. On Wednesday, despite the bank’s attempt to renege on the deal, Manhattan federal district court judge Richard Holwell granted preliminary approval to the settlement Wednesday.

Bernstein Litowitz Berger & Grossmann filed the class action complaint in 2007, alleging that State Street breached its fiduciary duty when it made reckless investments in subprime mortgages. On June 25 of this year, the bank received a Wells notice from the Securities and Exchange Commission, which was also engaged in an investigation of its subprime investments. The next day State Street agreed to settle the ERISA class action.

But when plaintiffs’ lawyers moved for preliminary approval of the $89.75 million deal, the bank’s lawyers at Ropes & Gray filed an objection, arguing that State Street’s ongoing negotiations with the SEC make it impossible to determine the fairness of the settlement. State Street tried to persuade Judge Howell, for instance, that class members might receive compensation from a potential settlement between the bank and the SEC — and any such SEC settlement, State Street noted, wouldn’t involve plaintiffs’ attorneys’ fees. Ropes & Gray asked the judge to defer preliminary approval of the ERISA settlement until the SEC case is resolved.

Judge Holwell said no. “The ERISA settlement is, as plaintiffs point out, a bird in the hand,” he wrote, concluding that it was premature to predict what class members might recover in a possible SEC settlement. He also seemed skeptical of State Street’s concern for the class members it allegedly harmed. “Notwithstanding State Street’s laudable efforts to protect the interests of the ERISA plans,” he wrote, “the ongoing SEC negotiations provide no basis for the denial or postponement or preliminary approval.”

Neither State Street counsel Harvey Wolkoff of Ropes & Gray nor plaintiffs’ lawyer William Fredericks of Bernstein Litowitz was immediately available for comment.

This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.

Saudis drop WTI oil contract

This is huge news

Saudis drop WTI oil contract

By Javier Blas in London

Published: October 28 2009 20:27 | Last updated: October 28 2009 20:27
Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.

The decision by the world’s biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the world’s most heavily traded oil futures contract. It is the main contract traded on Nymex.

EDITOR’S CHOICE
Q&A: Have oil prices broken free? – Oct-28

Restructuring boosts Conoco’s production – Oct-28

Energy source blog – Jul-15

In depth: Oil – Sep-02

Corporate earnings diary – Oct-08

US petrol supplies force crude retreat – Oct-28

The move reveals the growing discontent of Riyadh and its US refinery customers with WTI after the price of the price of the benchmark became separatedfrom the global oil market this year.

The surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America’s pipeline system, depressed the value of the WTI against other global benchmarks, throwing the global oil market into disarray.

In January, WTI, which usually trades at a premium of $1-$2 a barrel to Brent, fell sharply, leaving it at a discount of almost $12 – a record gap. This dislocation in the market continued well into the summer.

From January, Saudi Arabia will base the price of oil for its US customers on a new index developed by Argus, the London-based oil pricing company.

The Argus Sour Crude Index will track the price in the physical market of a basket of US Gulf Coast crudes, including Mars, Poseidon and Southern Green Canyon.

Argus said the change in policy reflected the “increased importance of the US Gulf coast sour crude market, in which both production and trading activity was rising sharply”.

Paul Horsnell, head of commodities research at Barclays Capital in London, said Saudi Arabia’s decision was likely to reflect a “wider discontent” from its customers in the US about WTI performance.

ExxonMobil, Marathon and Valero are among the US’s biggest buyers of Saudi crude oil.

Edward Morse, chief economist at LCM Commodities in New York, said: “It is a recognition by large players that WTI sometimes does not reflect the true value of crude oil in the waterborne market.”

Saudi Arabia has priced its oil using WTI since 1994.

The price was based on quotes from the physical market which were compiled by Platt’s, a unit of McGraw-Hill.

Oil companies then covered their exposure to WTI using the futures market on Nymex.

Bob Levin, managing director of market research at the CME Group-owned Nymex, said the exchange was ready to move with the market.

“We plan to introduce a cash-settled futures contract tracking the new Argus index,” he said.

Mike Vinciquerra, equity research analyst at BMO Capital Markets, said the new Argus index would not replace WTI. “It’s more a supplement,” he said.

Copyright The Financial Times Limited 2009. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web.

AIG is chump change — let’s find corporate America’s hidden billions

AIG is chump change — let’s find corporate America’s hidden billions

It’s time to reform offshore banking, and see what untaxed wealth big business is hiding in overseas tax shelters.

By Joe Conason

March 23, 2009 | The popular urge to claw back the bogus bonuses paid by American International Group is irresistible and fully justified, but should the Treasury someday retrieve every single bonus dollar, that total of $165 million will make no difference to anyone except a few disgruntled traders. From the jaded perspective of the financiers, the uproar over the AIG bonuses may provide a welcome distraction from far more important (and lucrative) abuses in the world’s offshore tax havens.

So rather than continue arguing over chump change, it is long past time for the United States, with its international friends and allies, to demand accountability from the long list of tiny countries and principalities, from Andorra and the Cayman Islands to Singapore and Switzerland, where corporations, wealthy clients and unrepentant evildoers hide their assets.

The big claw-back will reach into quaint islands and mountainous principalities, because the same banks, hedge funds and private equity firms responsible for the world financial meltdown keep their profits in those “secrecy spaces” — alongside the ill-gotten gains of numerous drug dealers, dictators and delinquents of every description.

According to the Government Accountability Office, nearly all of America’s top 100 corporations maintain subsidiaries in countries identified as tax havens. As the GAO notes, there could be reasons other than avoiding the IRS to set up branches in places such as Singapore, Luxembourg and Switzerland, where taxes are light or nonexistent and keeping clients’ illicit secrets is considered a matter of national pride.

But what reason other than evasion could there be for Goldman Sachs Group to set up three subsidiaries in Bermuda, five in Mauritius, and 15 in the Cayman Islands? Why did Countrywide Financial need two subsidiaries in Guernsey? Why did Wachovia need 18 subsidiaries in Bermuda, three in the British Virgin Islands, and 16 in the Caymans? Why did Lehman Brothers need 31 subsidiaries in the Caymans? What do Bank of America’s 59 subsidiaries in the Caymans actually do? Why does Citigroup need 427 separate subsidiaries in tax havens, including 12 in the Channel Islands, 21 in Jersey, 91 in Luxembourg, 19 in Bermuda and 90 in the Caymans? What exactly is going on at Morgan Stanley’s 19 subs in Jersey, 29 subs in Luxembourg, 14 subs in the Marshall Islands, and its amazing 158 subs in the Caymans? And speaking of AIG, why does it have 18 subs in tax-haven countries? (Don’t expect to find out from Fox News Channel or the New York Post, because News Corp. has its own constellation of strange subsidiaries, including 33 in the Caymans alone.)

When the cost of these shenanigans was last estimated two years ago, the U.S. government’s annual loss in revenue due to tax avoidance by major corporations and super-rich individuals was pegged at about $100 billion — considerably more than a rounding error, even today. But of course that is only a rough assessment, as is the estimate of $12 trillion in untaxed assets hidden around the world. Nobody will know for certain until the books are opened and transparency is established.

Whatever the accurate accounting proves to be, it is certain to exceed hundreds of billions annually worldwide. That is money every country will need badly for years, to repay debt, finance reconstruction, and fund services, as the world economy struggles to revive itself. Even in the developing countries, where incomes are much lower and billionaires tend to be scarce, the annual revenue loss could be as much as $50 billion — enough to meet the U.N.’s Millennium Development Goals (if only the money were not stolen by local elites and wired away to numbered accounts in tax havens).

None of these tax havens could exist without the connivance or at least the cooperation of the world’s most powerful governments, which remain dominated by financial industry lobbyists even now. The Organization for Economic Cooperation and Development has sought greater transparency from the tax havens for years, hearing promises from most and defiance from a few.

But in reality almost nothing was accomplished until last year, when U.S. law enforcement authorities began to pursue Union Bank of Switzerland (UBS) executives with criminal indictments. The UBS probe led to a settlement last month that included a fine of $780 million and an agreement to provide information about tens of thousands of American clients maintaining secret accounts at that huge bank.
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Over the past several years, however, the trend has gone the other way, with abuse of bank secrecy and the expatriation of investment and profits growing rapidly. On the tiny island of Jersey in the English Channel, for instance, the authorities responded to political pressure from hedge funds, which have placed more than $80 billion in deposits there, by establishing a “zero regulation regime” last year that literally removed all restrictions and reporting on financial transactions. Jersey’s counterparts in Guernsey and the Cayman Islands responded by assuring the hedge funds that they, too, would consider abolishing all regulation.

Perhaps the UBS case indicates a change in that unwholesome trend and a renewed willingness on the part of American authorities to crack the tax havens — which was not a priority, to put it mildly, of the Bush administration. As a senator, Barack Obama supported legislation to break open the secret financial regimes, by retaliating against countries and principalities that refuse to cooperate. Now Congress and the White House should pass such legislation and make breaking the tax havens a high priority in partnership with the European Union, the OECD and World Bank. They could start by threatening to outlaw transactions between American banks and financial institutions in any country that rejects new rules for transparency and reciprocal information.

If Americans want to make the authors of our misery pay up, then the auditors must go where the money is, as Willie Sutton might have explained — and take hundreds of billions back.

http://www.salon.com/opinion/conason/200….

If Lenders Say ‘The Dog Ate Your Mortgage’

This is just a classic case, but all or the vast majority of the cases are like this, this is the prototype.

By GRETCHEN MORGENSON

Published: October 24, 2009

FOR decades, when troubled homeowners and banks battled over delinquent mortgages, it wasn’t a contest. Homes went into foreclosure, and lenders took control of the property.

On top of that, courts rubber-stamped the array of foreclosure charges that lenders heaped onto borrowers and took banks at their word when the lenders said they owned the mortgage notes underlying troubled properties.

In other words, with lenders in the driver’s seat, borrowers were run over, more often than not. Of course, errant borrowers hardly deserve sympathy from bankers or anyone else, and banks are well within their rights to try to protect their financial interests.

But if our current financial crisis has taught us anything, it is that many borrowers entered into mortgage agreements without a clear understanding of the debt they were incurring. And banks often lacked a clear understanding of whether all those borrowers could really repay their loans.

Even so, banks and borrowers still do battle over foreclosures on an unlevel playing field that exists in far too many courtrooms. But some judges are starting to scrutinize the rules-don’t-matter methods used by lenders and their lawyers in the recent foreclosure wave. On occasion, lenders are even getting slapped around a bit.

One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order.

So the ruling may put a new dynamic in play in the foreclosure mess: If the lender can’t come forward with proof of ownership, and judges don’t look kindly on that, then borrowers may have a stronger hand to play in court and, apparently, may even be able to stay in their homes mortgage-free.

The reason that notes have gone missing is the huge mass of mortgage securitizations that occurred during the housing boom. Securitizations allowed for large pools of bank loans to be bundled and sold to legions of investors, but some of the nuts and bolts of the mortgage game — notes, for example — were never adequately tracked or recorded during the boom. In some cases, that means nobody truly knows who owns what.

To be sure, many legal hurdles mean that the initial outcome of the White Plains case may not be repeated elsewhere. Nevertheless, the ruling — by a federal judge, no less — is bound to bring a smile to anyone who has been subjected to rough treatment by a lender. Methinks a few of those people still exist.

More important, the case is an alert to lenders that dubious proof-of-ownership tactics may no longer be accepted practice. They may even be viewed as a fraud on the court.

The United States Trustee, a division of the Justice Department charged with monitoring the nation’s bankruptcy courts, has also taken an interest in the White Plains case. Its representative has attended hearings in the matter, and it has registered with the court as an interested party.

THE case involves a borrower, who declined to be named, living in a home with her daughter and son-in-law. According to court documents, the borrower bought the house in 2001 with a mortgage from Wells Fargo; four and a half years later she refinanced with Mortgage World Bankers Inc.

She fell behind in her payments, and David B. Shaev, a consumer bankruptcy lawyer in Manhattan, filed a Chapter 13 bankruptcy plan on her behalf in late February in an effort to save her home from foreclosure.

A proof of claim to the debt was filed in March by PHH, a company based in Mount Laurel, N.J. The $461,263 that PHH said was owed included $33,545 in arrears.

Mr. Shaev said that when he filed the case, he had simply hoped to persuade PHH to modify his client’s loan. But after months of what he described as foot-dragging by PHH and its lawyers, he asked for proof of PHH’s standing in the case.

“If you want to take someone’s house away, you’d better make sure you have the right to do it,” Mr. Shaev said in an interview last week.

Published: October 24, 2009
(Page 2 of 2)

In answer, Mr. Shaev received a letter stating that PHH was the servicer of the loan but that the holder of the note was U.S. Bank, as trustee of a securitization pool. But U.S. Bank was not a party to the action.

Mr. Shaev then asked for proof that U.S. Bank was indeed the holder of the note. All that was provided, however, was an affidavit from Tracy Johnson, a vice president at PHH Mortgage, saying that PHH was the servicer and U.S. Bank the holder.

Among the filings supplied to support Ms. Johnson’s assertion was a copy of the assignment of the mortgage. But this, too, was signed by Ms. Johnson, only this time she was identified as an assistant vice president of MERS, the Mortgage Electronic Registration System. This bank-owned registry eliminates the need to record changes in property ownership in local land records.

Another problem was that the document showed the note was assigned on March 26, 2009, well after the bankruptcy had been filed.

Mr. Shaev’s questions about ownership also led to an admission by PHH that, along the way, it had levied an improper $450 foreclosure fee on the borrower and had overcharged interest by an unstated amount.

John DiCaro, a lawyer representing PHH at the hearing, was in the uncomfortable position of having to explain why there was no documentation of an assignment to U.S. Bank. He did not return a phone call seeking comment last week. Ms. Johnson, who couldn’t be reached for comment, did not attend the hearing.

According to a transcript of the Sept. 29 hearing, Mr. DiCaro said: “In the secondary market, there are many cases where assignment of mortgages, assignment of notes, don’t happen at the time they should. It was standard operating procedure for many years.”

Judge Drain rejected that argument, concluding that what had been presented to the court just did not add up. “I think that I have a more than 50 percent doubt that if the debtor paid this claim, it would be paying the wrong person,” he said. “That’s the problem. And that’s because the claimant has not shown an assignment of a mortgage.”

Mr. Shaev said he was shocked when the judge expunged the mortgage debt.

“We are in uncharted territory,” he said. “Right now I am in bankruptcy court with a house that has no discernible debt on it, yet I have a client with a signed mortgage. We cannot in theory just go out and sell this house because the title company won’t give a clear title on it.”

Among the next steps Mr. Shaev said he would take is to file an amended plan or sue to try to get clear title to the property.

Late last week, PHH appealed the judge’s ruling. But Mr. DiCaro and PHH are in something of a bind. Either they will return to court with a clear claim on the property — including all the transfers and sales that are necessary in the securitization process — or they won’t be able to produce that documentation. If they do produce it, they will then have to explain why they didn’t produce it before.

Oh, what a tangled web these mortgage lenders weave.

Detroit house auction flops for urban wasteland

Detroit house auction flops for urban wasteland

Buzz up!605 votes
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By Kevin Krolicki – Sun Oct 25, 3:26 pm ET

DETROIT (Reuters) – In a crowded ballroom next to a bankrupt casino, what remains of the Detroit property market was being picked over by speculators and mostly discarded.

After five hours of calling out a drumbeat of “no bid” for properties listed in an auction book as thick as a city phone directory, the energy of the county auctioneer began to flag.

“OK,” he said. “We only have 300 more pages to go.”

There was tired laughter from investors ready to roll the dice on a city that has become a symbol of the collapse of the U.S. auto industry, pressures on the industrial middle-class and intractable problems for the urban poor.
On the auction block in Detroit: almost 9,000 homes and lots in various states of abandonment and decay from the tidy owner-occupied to the burned-out shell claimed by squatters.

Taken together, the properties seized by tax collectors for arrears and put up for sale last week represented an area the size of New York’s Central Park. Total vacant land in Detroit now occupies an area almost the size of Boston, according to a Detroit Free Press estimate.
The tax foreclosure auction by Wayne County authorities also stood as one of the most ambitious one-stop attempts to sell off urban property since the real-estate market collapse.

Despite a minimum bid of $500, less than a fifth of the Detroit land was sold after four days.

The county had no estimate of how much was raised by the auction, a second attempt to sell property that had failed to find buyers for the full amount of back taxes in September.

The unsold parcels add to an expanding ghost town within the once-vibrant town known worldwide as the Motor City.
Critics say the poor showing at the auction underscores the limits of using a market-based system to clean up property tax problems. They say the system has enriched a few but failed to deliver a way for Detroit to staunch its dwindling population and could worsen the vacancy crisis.

One proposed alternative would have officials take control of the tax foreclosure process through a land bank program of the kind being used to revitalize the nearby city of Flint.

The stakes in the debate are rising.

The number of Detroit properties in tax foreclosure has more than tripled since 2007 and seems certain to rise further. The lots for sale last week represented arrears from only 2006, well before the worst of the downturn for U.S. automakers.
“We have to keep in mind that GM and Chrysler filed for bankruptcy this year,” said Terrance Keith, chief deputy treasurer of Wayne County. “Some people are going to be totally tapped out next year.”

Detroit, already stuck with a $300 million budget deficit, is responsible in the meantime for cutting the weeds and responding to fire calls for thousands more abandoned lots.

‘WHY AM I COMPETING AGAINST A BANK?’

Many potential homeowners that Detroit desperately needs said they felt penalized by the auction process.
They mostly found themselves outbid by deeper-pocketed investors from California and New York who were in a race to claim the auction book’s relatively few livable properties.
Dozens of potential bidders, mostly local residents, were turned away on the first day of the auction by deputies after they failed to meet the morning deadline for registration.

Ross Wallace, a lieutenant in the U.S. Army, turned in his check for $500 and waited on the auction floor in full dress uniform for a chance to buy a Detroit house on the cheap.

Wallace, 27, said he did not want to leave his fiancee and two children with a mortgage before shipping out to Iraq later this year.
“I still have student loans and I’m trying to be responsible. I don’t want to leave debt,” he said.
Wallace waited for the auction to roll around to Detroit’s Boston-Edison district, a once stately area that was home to boxing legend Joe Louis and Motown founder Berry Gordy.

But he was quickly outbid. An unidentified investor at the front of the room who had scooped up several dozen properties took the home Wallace wanted for about $15,000.

“Why am I competing against a bank?” he said later. “It would be common sense to have a separate process for people who want to move back to the city or it’s going to stay empty.”

Nearby, a Dutch-born local woman, Riet Schumack, 54, knitted patiently through the auction for a chance to bid on a lot in Brightmoor, one of the most blighted neighborhoods.

Schumack, who runs a community garden near her home that employs 14 neighborhood children, said she had been battling through a maze of bureaucracy for years to try to buy an abandoned lot nearby to expand and plant fruit trees.
She learned the lot had been taken back from its previous owner — an absentee investor with more than 100 abandoned lots in Brightmoor — only because of her constant calls to city and county officials, she said.

When officials told her she would have to wait for a fourth day to bid on the property, Schumack broke down into tears.
“Anybody with a job is not able to sit here for days. So you are left with the sharks,” she said.

Opinions were divided on whether the investors buying lots and homes by the dozen were a sign of better times ahead.
“They weren’t here two years ago. So why are they here now? Unless, as speculators, they believe this is the bottom,” said Keith of the Wayne County treasurer’s office.

Bill Frank, a Detroit realtor trying to buy a small house for a just-married friend, found himself repeatedly outbid.
“Speculators are often not good for a city and, from my experience, they are going to lose a fortune,” he said. “But there are no easy answers. It’s a declining city.”

(Editing by Peter Bohan and John O’Callaghan)

South Florida homeowners walking away from underwater mortgages

From the Miami Herald this morning… Interesting to say the least…

South Florida homeowners walking away from underwater mortgages

Many South Florida homeowners who can afford to make their mortgage payments are choosing not to, forcing the lender to foreclose. It’s called strategic default.

Andres Duque thought he got a real steal when he paid $125,000 for his Little Haiti condo. But four years later, similar units are selling for $35,000 and even less.

And so, faced with the prospect of being underwater on his mortgage — owing more than the unit is worth — for the next 20 years, Duque, 33, made what seemed to him like a rational choice: to cut and run.

He stopped paying the mortgage, basically forcing the lender to take the condo off his hands through foreclosure.

“I was able to pay off all my credit cards,” said Duque, who is biding his time in the condo, waiting until they come and evict him. “In a way, it was the best thing that happened to me because all my income is not being consumed by this freaking monster of a debt.”

Duque’s game plan is known as a strategic default — when borrowers walk away from loans, even if they can afford the payments. Here is a look at the benefits, the risks and the ethics of such a move.

As property values have plummeted by an average of 50 percent, such strategic defaults now make up a sizable chunk of South Florida’s foreclosures. In the fourth quarter of last year, they accounted for an estimated 28 percent of all defaults in Miami-Dade and Broward counties, according to recent research from the credit bureau Experian and Oliver Wyman, a New York-based international consulting firm.

That’s up from 8 percent in the same quarter two years ago. With property values down even further now, researchers are certain the numbers have risen even more.

With the social stigma of foreclosure eroding, experts say it is becoming easier for discouraged borrowers to justify throwing in the towel.

“People are saying, ` Everyone is doing this, and I do not feel any compunction in fashioning my own bailout,’ ” said Roy Oppenheim, a Weston real-estate and foreclosure defense attorney who conducts weekly seminars that discuss strategic defaults and other financial options for distressed borrowers.

South Florida is already a veritable Atlantis of underwater borrowers. In September, homeowners here collectively owed $62.7 billion more than their homes were worth, (OUCH!) according to an analysis by First American CoreLogic. The analysis found that about half of all outstanding mortgages in Miami-Dade and Broward are underwater.

Among those who bought in Broward in 2006, the median negative equity was $75,000 as of March. In Miami-Dade, the figure was $63,000, the Web-based real-estate service firm Zillow.com reports. Negative equity refers to the difference between a loan balance and the market value of a home.

“I wouldn’t blame borrowers who knew they were facing significant losses even if they could afford to stay,” said Andrea Heuson, a finance professor at the University of Miami. “Every day you wake up, you are reminded how much you paid for something, and then you read every day in the newspaper how much prices have fallen.”

THE MANY CONSEQUENCES

Walking away, however, is fraught with financial, legal and ethical dilemmas. Lenders, government and the credit industry are starting to pay more attention to how strategic defaulters think and behave — in an effort to convince them to tough it out.

“It’s a huge problem, and it doesn’t get addressed in the process right now,” said Ron Kaniuk, a Boca Raton foreclosure and bankruptcy attorney. He said lenders are encouraging the trend by primarily offering loan modifications only to those who have fallen behind or are seriously at risk of foreclosure.

Duque, in fact, said he shunned a modification because it didn’t reduce his balance.

“It’s really a social change in the way debtors think, and it’s taking creditors some time to absorb that,” said Mark King, an attorney with the Miami office of Jones Walker who represents banks in commercial foreclosures. Commercial property owners also have started walking away.

William Hardin, a real-estate professor at Florida International University, said people have a moral obligation to honor their mortgages when they can.

“The vast majority knew what they were doing and were taking a risk, and the fact of the matter is [the mortgage] is a contract. We live in a world where contracts have to be honored. It’s the way our economy works.”

High default rates have already meant higher loan costs and tougher underwriting standards for all borrowers.

Tracking strategic defaults is an inexact science. Experian researchers identified possible strategic defaulters as homeowners who have gone straight from current on their payments to not paying at all, but remained in good standing on other credit obligations. Nationally, Experian estimated 588,000 borrowers defaulted on purpose in 2008.

Also fueling the phenomenon has been a shift from viewing a home as a place to live to an investment, valued insofar as its potential resale price goes up.

Frustration with the tax-funded bailout of banks and Wall Street may have also emboldened depressed borrowers to default out of anger and a desire to stick it to the banks. Duque’s resolve, for example, hardened after watching Michael Moore’s movie Capitalism: A Love Story. In the movie, Moore makes a case that corporations preying on consumers led to the housing crisis and recession.

“In the movie, there were Congress people telling the American public to stay in their homes, to squat and do what you have to do to fight. A lot of it struck home in many, many, many ways, and I am going to stay here until [my bank] comes to get me out,” Duque said.

Aside from the new philosophical justification for stopping his payments, Duque said his decision was fundamentally an economic one. “My mortgage was killing me, even before things went to hell. I was being choked by the property,” said Duque, who works at the Mondrian Hotel in Miami Beach.

Most strategic defaulters find themselves weighing whether the hit to their credit scores is easier to bear than paying underwater mortgages for years to come.

The most optimistic analysts say it could be three years before prices begin to appreciate. Others say prices have another 30 percent-plus to fall before flat-lining.

Prepared for the worst, Duque has been surprised by the seemingly minimal consequences so far. His credit limits on two cards were slashed by a few thousand dollars, but they were not canceled.

“I went to BrandsMart and applied for a card, and they denied me, so my credit score must be pretty low,” he said. “That’s fine with me, as long as I have a couple of credit cards.”

Surprisingly, strategic defaulters with good credit scores who remain current on their other credit lines can quickly rehabilitate their credit scores after foreclosure — faster than many realize, according to Sarah Davies, a senior vice president at VantageScore, a credit scoring and consumer analytics firm owned jointly by the nation’s three major credit reporting agencies. “You can pull yourself out of any major impact from foreclosure in 24 months,” she said.

And five years down the road?

“A foreclosure is going to be very easy to explain, seeing there are thousands of others who have also defaulted. So, there is a safety-in-numbers issue there,” Heuson said, referring to a possible borrower rationale.

Consumers are essentially putting a price on their credit score, said Piyush Tantia, a partner in the retail and business banking practice of Oliver Wyman.

But there are other risks.

Foreclosure defense attorneys warn of the growing threat that lenders will obtain deficiency judgments against borrowers. Such judgments allow them to collect the difference between the loan balance and the market value of the properties. They also allow lenders to garnish wages and seize assets.

While the risk is not great now statistically, Marc Ben Ezra, a Fort Lauderdale attorney who files foreclosures for banks, said it’s possible that lenders may begin pursuing legal rights to collect.

Jim Angleton, senior vice president of Miami-based Republic Federal Bank, estimated lenders are going after borrowers 15 percent of the time. “You know they are not being forthright with you about their assets when they are keeping their credit cards, their very fine cars and other assets current.”

Oppenheim recommends homeowners bulletproof themselves by hiring a lawyer and perhaps an accountant to explore the possible consequences.

Other real-estate experts say walking away may not be worth it in the short term, when you factor in the cost of finding new shelter and the increased consumer interest rates that stem from any foreclosure.

TACTIC NOT FOR EVERYONE

Defaulting, though, is not for everybody whose mortgage is underwater, and plenty of people stick with their homes out of a sense of financial responsibility, integrity and faith that prices will recover eventually. There are also people who forked over tens of thousands of dollars in down payments and face a real financial loss by walking away.

Analia Vence, who is renting her underwater town house in Homestead to a tenant for less than the monthly mortgage payment, said she has no intention of walking away. She paid $170,000 in 2006, and now nearby foreclosed homes are selling for $80,000.

“We bought the property as an investment, and we never thought to sell it immediately. We’re only paying $200 or $300 for the mortgage, so it doesn’t make sense to hurt our credit for that much,” Vence said.

I am an attorney who has taken “produce the note” one step further.

I am an attorney who has taken “produce the note” one step further.

I am current on my mortgage, and actually what prompted me to take the action I am taking is that I had paid off my second mortgage but my lender refused to surrender my paid off second mortgage note. My lender also refused to prove to me that it had my first mortgage note or that it had the authority to make payment demands.

So I decided to sue my lender.

I decided that if the “produce the note” strategy was working for people who were in default, it would work for those who are not in default. If the bank doesn’t have the right to foreclose, it doesn’t have the right to demand payment either.

The Uniform Commercial Code is the homeowner’s best friend.

UCC 3-501 requires a lender to “exhibit the note” when the lender makes demand for payment, and the borrower demands to see the note. Technically a demand for payment occurs every month, and it also occurs when a bank begins foreclosure proceedings.

UCC 3-501 also requires a servicer to show authority to make a demand for payment, if it does not own the note, but is merely servicing it. In the event a noteholder or servicer or will not exhibit the note or perform other legal requirements when requested to do so by the borrower, this UCC section allows the borrower to discontinue payments WITHOUT DISHONOR until such time as the noteholder or servicer complies with all laws or contract provisions.

Also helpful is UCC 3-309. UCC 3-309 requires the lender go through certain steps to prove up a note (make it enforceable) that is lost or destroyed. This is not easy for the lender to do, if one is willing to contest everything the lender does to try to prove up the note. This proof takes witnesses, who may not be able to say what the law requires, if the witnesses are thoroughly cross-examined. (Tip: Don’t let the lender get by with self-serving affidavits; take their witnesses’ depositions). Moreover, this section requires the lender to give adequate protection in the event the lender can make the lost note enforceable. That may be difficult for a lender that is under FDIC scrutiny and whose stock is in the tank.

I filed suit in March and so far my lender has vigorously put off answering my suit with what I believe was a meritless motion to dismiss, but has not yet produced either note, and has confirmed my unpaid note was sold to Fannie Mae. This is clearly a justiciable controversy as will be clear when I ask the court to allow me to put my future payments into the registry of the court until the note is proven up and authority to make demand is proven.

If the bank really believed it had the evidence to compel me to pay, it would have gladly produced the note by now with proof of authority to demand payment. They have steadfastly avoided having to do this. Chances are the note is lost or destroyed.

It gets even better. MERS is the sole beneficiary of my Deed of Trust (quite often the case for homeowners on Deeds of Trust since 2000). The Arkansas Supreme Court has just ruled in March of this year that MERS was not the beneficiary of a Deed of Trust (with language verbatim to mine) despite what the Deed of Trust said, because MERS has no interest in the note payments or in the corpus of the trust (homeowner’s obligation to pay). No beneficiary means the Deed of Trust is fatally flawed.

More and more it is looking like I will have the lien on my home removed and I may well never have a noteholder to pay. I could even get some of my money back.