Foreclosures on the rise but mortgage lenders still not helping homeowners
How Banks Can Avoid a Repeat of the 2008 Foreclosure Crisis
U.S. homeowners are struggling to stay on top of their mortgages — and the problem is likely to get worse. According to real-estate data firm Black Knight, 4.6 million American homeowners were in some type of non-repayment as of June 16, representing 8.7% of all mortgages.
If precedent is anything to go by, in many cases it’s unlikely that the mortgage lenders will ever see much of the money they’ve lent. I’ve identified one mortgage borrower in foreclosure who hasn’t made a mortgage payment in more than 13 years. This borrower took out a $342,165.10 home loan and made their last payment in August 2006. As of April 2020, they’re still living in their house and don’t appear likely to go anywhere.
This borrower’s loan, on which at least a first payment was made at some point, was bundled with 6,911 other loans into a trust called Carrington 2006-NC1, according to data from the Carrington 2006-NC1 March 2020 remittance report available at Wells Fargo Securities Link. The same bundle of loans lists several houses as “Real Estate Owned” or REO for short. These are bank-owned houses that were foreclosed on. As a group, they have a current actual shortfall that is higher than the original principal value of the loan. That is, the investors who funded these loans are losing more money than the amount they actually lent.
If this seems impossible, think again. At one point following the 2008-09 crisis, the average loss severity of subprime loans — the amount lost as a ratio of the loan amount — was 73%. Lend $250,000 and, eventually, recoup an average of $67,500. Loss severities greater than 100% were not uncommon. In these cases, it was actually costing some investors, relying on work done by servicers, more to repossess houses and then sell them than it would have cost just to give them away. Read More
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The HBR article is excellent — but it starts from the wrong premise. The people in charge have no losses so they have no incentive to mitigate.
Nearly all foreclosures are business ventures for profit — not remedies for unpaid debt.
According to Neil Garfield: “The problem that everyone seems to be actively avoiding is that no investor ever paid money in exchange for a document that conveyed ownership or any right, title or interest to any debt, note or mortgage of any homeowner.
Bottom Line: Despite all documents, arguments assumptions, presumptions to the contrary, there was no securitization. Securitization of residential debt is a legal nullity because nobody ever acquired the debt. Nobody acquired the debt because nobody wanted to be a lender under the lending laws. So they left us with a “loan” that has no lender, no creditor and nobody authorized to make a claim. But that hasn’t stopped them.
All claims arising from the existence of securitization of residential loans are void. If the debt was not sold, it wasn’t securitized by definition. Everything filed in court or in official property records to the contrary is a false utterance. Assignments of mortgage based upon claims arising from claimed securitization are legal nullities because there is never a conveyance of the debt concurrent with the assignment or even before or after the assignment.
As Olenick’s article points out it makes sense to mitigate damages. It is to everyone’s advantage — if the transaction was really a loan. The fact that the investment banks didn’t mitigate is evidence of their lack of incentive to do so. The fact that they aggressively pursued foreclosures is evidence of their incentive to foreclose. Since they didn’t own the debt there would only be one incentive —PROFIT!
The entire reason why “modifications” have been so random is that they were only done as a PR stunt to hide the fact that there was no authority or ownership of any claim against any homeowner arising out of claims of securitization. They are also a handy tool to create the illusion that the subsericer like Ocwen et al is now the new lender, thus cutting off all rights to assert claims or defenses related to the fraudulent organization of the loan.
In fact, if you read what they file in court, foreclosure mills specifically do not allege that the loan was securitized, sold or even owned by any party much less the party (sometimes nonexistent party) that they claim to represent. All of their allegations relate to possession of the note, not ownership of the mortgage which under Article 9 §203 UCC requires the claimant to have paid value for the underlying debt.
PRACTICE NOTE: The Uniform Commercial Code is not a guideline or a suggestion. It is statutory law, confirming and ratifying previous statutes and common law in all U.S. jurisdictions. It is the law, adopted by every legislature. And even if you slept through UCC two semesters in law school, it is still the law.
If you are defending a foreclosure start with the premise that the named claimant did not pay value for the underlying debt and therefore can’t own it. As such it could not have suffered any injury — financial or otherwise — as a direct or proximate result of any action or inaction of the homeowner.
Be ready to counter, directly and indirectly, any sub silentio assumptions that even if there are deficiencies in the paperwork the proceeds are going to someone who paid value for the debt. That is not what is happening. Nearly all foreclosures are business ventures for profit — not remedies for unpaid debt.”
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