ArnoldCountry

• More Clues Housing Bottom May Be Near in Sacramento [view article]

  This article is not only optimistic but completely out of touch of what is really going on in the Sacramento region. I handle mortgage based litigation in Elk Grove and my firm and others are reaching out to homeowners with a litany of options related to this crisis. To be direct, the legal machine of law offices across the country is organizing to address the outrageous behavior of real estate agents, lenders, title companies and mortgage companies. The first wave of the attack is Truth In Lending violations for refinance loans. Over half of the loans have Right to Cancel errors based on our sampliing because mobile notaries and title companies did not comply with the law. The rescissions are going to be wide spread.
  
  Where were all those real estate agents in California who were supposed to acting in a fiduciary compacity and advise and protect their clients? Well, many of those consumers are going to be litigating with many of them.
  
  I guess everyone forgot that California put a slow down in foreclosures legislatively. The tidal wave of foreclosures and inventory should begin around the first of the year. I expect that come this winter the last thing you will be talking about is a bottom.
  
  Its about to get way more uglier than we have seen! Sep 28 11:58 PM

• Common Sense: My Solution to the Mortgage Crisis [view article]

  Here is my solution to the problem:
  
  It’s tragic to see all these very smart people up in Washington panicking. You can see the lobbyist activity at work by their “selling” of the President and legislature that the solution is for the taxpayers to pay for the bad deeds of the lending and securities firms. There is another choice. If the folks back in Washington were to be focused on the taxpayers, the solution gets easy, here is a simple 4 step plan:
  
  1. Create a new agency to purchase NEW loans made with very solid lending criteria with the 700 billion. This would make plenty of money available in the economy to lend as it would only be used for NEW lending on purchases.
  a. This would stimulate new purchases and there would be plenty of money to lend.
  b. This new agency would be backed by the full faith and credit of the government thereby having lower risk which should keep rates low on this product.
  
  2. Provide a home purchase tax credit for the next two years that is equal to $10,000.00 per year for the next 3 years for a total of $30,000.00.
  a. This will also stimulate new purchases.
  
  3. Since the loans provided to consumers were so toxic (Washington’s words), provide a moratorium on all mortgage credit reporting for loans made during the period of January 2005 to December 31, 2008 (the dates and loan time frames could be tweaked).
  a. This would dramatically improve credit scores of those that have been victimized by this crisis and allow them to re-enter the market to purchase.
  b. This is an important point, if they are truly seen as victims, help them, if they are not victims, don’t do it. Depending on who you talk to, this point is not clear. Personally, I see them as victims and they should be treated as such. Of course there are exceptions.
  
  4. Modify the bankruptcy code for a new type of bankruptcy filing to allow cram downs on principal residence loans to the present market value of the property and at fixed rates of interest in line with the market. An alternative to bankruptcy is to just create a new Federal statute that allows a person to petition any court for that relief, not just bankruptcy court.
  a. In effect, this is the type of loan modification programs lenders should be giving but refuse.
  b. It would not impact any other debt, just modify the mortgage, call it a Chapter 8 or something similar. Do not allow it to have such a bad stigma.
  c. This would bring lenders to the table on loan modification and cut foreclosures dramatically almost immediately.
  
  You will notice, this plan is focused on the curing the problem. The problem is basic, supply and demand. We have way too much supply and no demand. The above focuses on the demand by the following:
  
  • Addresses the liquidity crisis by making loans available for purchases.
  • Addresses the supply side of the problem as it will stimulate sales thereby forcing a bottom to housing prices. Realistically, prices will most likely stay flat for a while and they should. Supply side is impacted by:
  o New money for sales.
  o Tax incentives to buy.
  o Brings buyers who traditionally have bought and a high percentage will return to buy (they are renters now, the folks who lost their homes).
  • Solution is citizen (taxpayer) focused.
  • The 700 billion is a profit driven investment, not a bailout.
  • The changes to the bankruptcy code would also impact the supply side as it would give more homeowners the ability to modify and stay in their homes instead of being foreclosed on.
  
  What it will not do:
  
  • It will not bail out the financial institutions and Wall Street for their bad loans they made.
  • It will not throw good money after bad. Those that invested in these bad products will have to take their losses as with any investment.
  
  As you can see, looking at the problem in a different way will cost the tax payers much less and focus on the “cure” for the problem.
  Sep 28 11:46 PM

• Mortgage Delinquencies Continue to Climb, Watch Out for Other Loans [view article]

  "While it may be true that borrowers did not understand them, they really didn't take the time to do so"
  
  I worked in a major bank who provided those and have a law degree and MBA. I was brought a TIL to examine when I was first hired on an Option ARM that was the payment was to be fixed for a 5 year term but the TIL showed the payment changing at 33 months. It took me about 4 hours and excel spreadsheets to figure out that the loan was resetting at 110% due to the high margin. No one, not even funders or the Account Execs were able to figure that out. It was such a major revelation, I put on an emergency training "clarification&qu... for all staff that handled those products, funders, account execs, loan officers, etc. (it took a couple of weeks) to explain what was going on. Reaction? I did not know that was one... other was... gee, if I tell my customers the truth, they would never take this loan.
  
  I will never accept that consumers, of average education, can ever understand the complexities of an option arms just by reading the documents... it took some doing on my part. Sep 24 10:07 AM

• More 'Workouts', But Will They Stem Foreclosure Tide? [Housing Tracker] [view article]

  A loan modification or workout from the lender is the last thing that should be pursued.
  
  First, the lender is not interested in helping the consumer really but interested in securing financial information and craft the workout that extracts the most amount of cash from the consumer that minimizes their currently way under water loan they have. It makes more sense for them to lower the interest rate on their 300k loan on a property that is worth 200k and turn that 100k loss into a performing asset which is not a loss.
  
  Second, if they discover the consumer did not tell the truth at application, even though they do a loan mod, they are required by law to report the consumer with a SAR (suspicious activity report) which could trigger criminal charges down the road for the consumer.
  
  Finally, it fails to address the legal remedies, even solves them in some cases, that the consumer could take against the lender. Lien stripping of jr. loans, rescission issues, unfair business practices, etc.
  
  In effect, while the media and government has been pushing this, going for help to the person who contributed to your woes is like asking for help from the guy that robbed you. Aug 25 09:43 AM

• Home Prices Have Stopped Falling: The Statistics Are Skewed [view article]

  So, we now base facts on a blog posting of "phantom" transactions without the data behind it to show how much they actually paid, the actual costs and then proof of the resale? Come on now, this may have worked in the past but consumers are way to smart today as they are seeing their neighbors lose their homes left and right all around them. I am in Sacramento and I live on a court with homes that were in the 700k range that are now down to the 350k range. This small court of about 10 houses now has 3 REOs of which none have sold and only one is on the market. A few blocks away, 14 homes have been foreclosed on a in 5 block radius, of which only 3 are on the market. Their is a shadow market of property that is not even in the data. Bottom... yeah there is one, we are soaring down to it and will hit it with a thud when we do. Aug 22 10:57 AM

• Second Mortgages: Why Absolve Consumers for Stupidity? [view article]

  On the flip side, the three C's of lending are alive and well, credit, capacity and collateral. These are three of the most important things the bank uses to determine if someone is going to get a loan.
  
  Capacity is the ability to pay back the loan. Collateral is equity. Credit is the credit standing of the person borrowing.
  
  But do not lose sight on which ones are most important... Capacity and Collateral.
  
  You are clearly seeing today that many consumers lack the capacity and collateral to support the loan. You may make the "personal assessment" of personal responsibilty but this is business and the risk of capacity and collateral was always a known risk by the lender. They are impacted today by their risk, not deadbeat consumers. Clearly, if consumers had the collateral and capacity, this would not be an issue which is why it is always a risk for lender!
  
  If I was a consumer in this situation, my first responsiblity would be to provide for my family.
  
  As a consumer, I would do whatever is lawful and best for me. Here in the 9th Circuit, consumers can strip seconds lawfully in a bankruptcy. It is time for consumers to look at all options and take those that are lawful. On the flip side, lenders should do the same. This is business, not personal responsiblity.
  
  
  Aug 17 02:29 PM

• Time To Cover Those Housing Shorts [view article]

  Mr. Hui, well done and fairlly accurate. I will take a risk (not) and call a bottom of sorts... sales have bottomed. I think if you look at the number of housing sales per month over the last several months have stabilized. The folks in real estate, adjusting for typical market adjustment months coming from September to March, can pretty much count on the sales that are taking place today is at bottom. With that said, nothing in that statement should be implying the real estate market has bottomed. Foreclosures are still on the rise and the shadow inventory (homes not on MLS) is huge. The laws of supply and demand are still increasing supply and (now) flat demand. I agree that it will become more difficult to short this market. Regardless of the credit supply, demand, interest rates, once the price hit a debt service plateu equal to rents, even lenders would be better off start renting property than to sell it at a further loss and turn it into a performing asset. I would imagine that even shifting home purchases (reo's) into some sort of alternative investment vehicle may make more sense than to further discount the property. Aug 17 02:08 PM

• Economic Report Summary: Housing Market Getting Worse, Not Better [view article]

  gabe and steve... I could not disagree with you more. The problems in the housing sector are accelerating, not improving. By first quarter of 2009 you will see foreclosures double of what they are today. I am in the Sacramento area and just on my court, where homes were in the 700k range, two REO's priced in the low 300's and no interest. A few blocks away in a development built in 2006 of roughly 60 homes, 14 are REO's and only 3 of those 14 have even been put on the market. I am in the biz of sorts, I handle litigation for consumers against lenders and I can assure you, the litigation cycle of this has truly just begun. I am working on a article for here that I hope to get published that addresses how property investors can use a Chapter 11 bankrupcty to cram down on lenders on their investment properties. Now that the downward curve on values is somewhat declining, using the cram down provisions of Section 506 of the Bankruptcy Code can essentially wipe out all of the debt above the value of the property. For example, if an investor owes 400k on a property that is now worth 200k, they can in a bankruptcy proceeding modify the loan from 400k to 200k and get a payment accordingly. That will dramatically wipe out loan value for lenders, improve cash flow for investors and maybe start to take more inventory off the market as investors hold onto property that is cash flowing. Why lose the property when you can cram down. Anyone that thinks we hit bottom and then property immediately starts increasing in value is dreaming. Historically, that has never happened, they remain flat for approximately 2 years.
  
  Finally, the credit crunch is alive and well and resetting option arms are just now getting full steam ahead. If you think things were bad before, they are about to get a whole lot worse. Lets mark this date and reflect on it again in February. Absent the Federal government declaring a state of national emergency in the economy and suspending all foreclosures, litigation and bankrupcy laws, it will get very ugly! Aug 10 12:38 PM

• Why Big Mortgage Losses Are Here To Stay [view article]

  So, lets step back and look at this... if someone is underwater today and they renegotiate their loan terms and balance today (I highly question lenders writing down loan balances, I have heard of it but never have seen it and I am in the business). Values drop another 25%. How can any attorney today recommend to his client today that renegotiating the loan today is good for them? Couple that with the fact that many of these loan modification agreements contain language that keep the borrower from suing or even having a jury trial in the future. Most agreements I have seen from lenders offer as little relief as possible based on the financial information they get from you, leaves the loan balance alone, small drops in interest rate and suck the life out of the consumer taking away the ability to do anything in the future.
  
  Best recourse is to review the original loan transaction for some sort of defect (about 40% of loans have serious ones) and then tie the lender up into litigation until they offer some real relief... i.e. walk away cleanly without credit dings and pay their legal fees and some moving costs. It makes no sense to stay in a home that the loan is 400k and the value is 200k. It makes even less sense to get the lender to write down the balance from 400k to 300k or 200k and then have the value fall to 150k.
  
  The better deal again is to buy at the 150k with those FHA programs that are out there with little down and when the market turns around years down the road and the value goes to 200k, you made 50k instead of being under water. Aug 07 09:54 AM

• Noose Tightens on Non-Conforming Loans [view article]

  No big surprise here except that it took them this long to do it. The wholesale market is slowly going away and mortgage brokers are on tract to be extinct if they are not careful. Its all about delivering lousy loans with high defaults and shoddy paperwork. They need good loans for the few loans they are doing and mortgage brokers are not delivering good loans. This statement is not based on the majority but based on the fact that wholesale business has a higher percentage of first payment defaults and delinquencies than their retail counterparts. Its a fact that mortgage brokers own. Aug 04 10:12 AM

• Credit Crisis Review: ARMed for Failure [view article]

  As the California Supreme Court stated in the case of Wyatt v. Union Mortgage way back in 1979:
  
  "In the context of insurance policies, this court has long recognized that oral misrepresentations made by an agent to a policyholder are actionable, despite the fact that the written policy itself accurately discloses all terms. "[If] the agent of the insurer undertakes to ad-vise [a policyholder], . . . it should be the duty of such representative to make no false or misleading statement in that respect." ( Glickman v. New York Life Ins. Co. (1940) 16 Cal.2d 626, 634 [107 P.2d 252, 131 A.L.R. 1292].)"
  
  These new hybrid option arms that were created were so complex, even though their terms were included in very complex documents, truth is, these products misled the public into believing they could afford homes that they could not. The lenders new that... or at the very least... they SHOULD have known it. Remember the golden rule, "he who has the gold, rules." Well, they did a poor job ruling!
  
  Aug 04 09:46 AM

• California Signaling A Housing Bottom? [Housing Tracker] [view article]

  Well, it does not seem to me a bottom is yet in sight. Any information coming from a real estate firm is not generally too trustworthy, they have been calling the bottom since the beginning. I know in my community here in Elk Grove, just down the road from the Stockton area, in a pocket of about 50 homes, I see 14 REO's that are not on the market. These are newer homes, built in 2005, front yards are dead, have key boxes on the doors, papers all over the porch, red tagged for no power. That is 14! I think what we have is homeowners who have given up and lenders who are overwhelmed and the data is skewed. That coupled with the Option ARM reset wave is going to make for a very hurting winter. P.S. Investors buying property does not define a market. Oops... maybe it does... arent they the ones who created the bubble? Oh well, let them eat cake. Aug 01 10:19 AM

• Boomberg: End of CA Housing Decline in Sight? [view article]

  Wishful thinking... the wave of option arm resets is on the horizon and the litigation is just now starting to get into full swing... couple that with the buckling of banks... rethink this around January 09 and tell us what you think. Aug 01 09:11 AM

• Breaking Down the Case-Shiller Index [view article]

  Many of the sales taking place at the low end of the market are not new entrants to the market but speculators... we are not at a true market, even at the bottom. New homebuyers are not really entering yet. Jul 31 03:13 PM

• Prime Mortgage Trouble Could Accelerate Bank Failures [Housing Tracker] [view article]

  To this comment I say: "I absolutely do believe that there will be more principal reductions," Michael Gross, Bank of America
  
  B.S. They will do it here and there so they can so they did it but truth is, they cannot afford the losses. If 50% of the loans made since 2005 have lost 20% of their value (more than that is likely) and then they right that off in a refiance, these guys will collapse. More important, unless they are a portfolio lender, the secondary market with its complex traunches used for the securities will never buy into that kind of loss in which some investors will be 100% under water by the thought. More important, people forget the disparate impact of helping a few by writing down their loan balances and then the rest who were not so fortunate. The lawsuits are coming over these kinds of issues. Jul 28 10:22 AM

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