Fannie Mae & Freddie Mac now hold $24 billion in foreclosure inventory:
Fannie Mae and Freddie Mac’s combined inventory of foreclosed residential property has quadrupled in just three years and now stands at a record $24 billion. The number of properties on their rolls -- now at nearly 242,000 -- has increased fivefold.
That’s roughly a third of the total U.S. portfolio of repossessed homes.
So far, Fannie & Freddie have been holding those foreclosures to not flood the real estate market. With foreclosures projected to increase 20% in 2011, eventually they are going to have to sell those foreclosed properties, which will cause home prices fall. On top of Fannie & Freddie there is a glut of shadow inventory, all being held back to avoid the inevitable foreclosure dump. Bottom line, housing prices must fall and you can't pay for a house when don't have a paycheck or a shrinking one.
Now, Banks want to securitize mortgages held by the GSEs, yes those derivatives which caused the financial crisis, plus have the government guarantee them.
The Banks have set their lobbyists upon this socialize the risk, privatize the gain Freddie and Fannie agenda and notice how lobbyists write white papers full of spin to met their objective of more taxpayer subsidies.
Right now, a cottage industry of analysts, lobbyists, regulators, financiers and elected officials is hard at work formulating a future course for the mortgage finance giants, which have been under government conservatorship since September 2008. White papers are now spewing from think tanks and trade associations, and the Treasury is set to issue its recommendations early next month, to be followed by a round of congressional hearings.
One solution proposed is for Fannie & Freddie to raise their fees for guaranteeing a mortgage. Of course this recommendation is not coming from a banking or finance lobbyist, so no doubt it will be promptly ignored.
I have the free market solution to the Fannie and Freddie situation – and – I hate to say it – it is dead obvious.
Answer: raise Frannie’s pricing.
At the moment there is nobody doing conforming mortgages except Fannie and Freddie. Indeed there is almost nobody doing mortgages of any kind except Fannie and Freddie. If the free market wants the business they can have it. (They just don’t want it at this sort of interest rate spread – and I don’t blame them.)
All the government need to do is tell Frannie to raise their price a little each quarter. Currently they charge 20-25bps for guaranteeing mortgages. (The free market won’t take credit risk at that price.) So it is entirely open to the FHFA (and hence the Treasury) to tell Fannie and Freddie to raise their prices by 5bps. The government will get paid better for the risk they are taking (and what free market ideologue will disagree with that) and the private sector can compete if they want to.
I doubt the free market will. But then in a quarter or two Frannie can raise their pricing by another 5 bps. And a quarter or two later Frannie can raise by another 5bps.
At some stage you will get to a level where the private sector chooses to compete. Frannie should not set its price competitively though. In another quarter they should raise the price another 5bps. And in another quarter they should raise again.
Mandate for Homeowners to File for Quiet Title
1. Banks and note holders are complicit in building the balloon, the true market value for homes being what we are seeing right now, not what you paid 5 years ago. "Underwater Mortgages" are the new reality, and every homeowner needs to ask why that is. Simply, GSEs and the banking industry distorted the markets so grossly that for every qualified homeowner bidding on a property, there were 9 or more unqualified bidders. In any other instance, it would be called "shill bidding", artificially driving up the price and as a side note, prosecutable under the RICO Act.
2. Broken title robs the States and Counties of revenue (of interest now that many are near insolvent) and individuals of certainty (more later). What's more, proprietary land registration attempts to circumvent real property laws and State sovereignty, but then through Foreclosure proceedings, the same folks that circumvented the law rely upon it for relief. Just another case of privatizing gains while publicly claiming losses.
3. Mark my words, the foreclosure crisis hasn't even hit us yet. When the accountants and lawyers get to work, we'll see even paid up mortgages will end up in foreclosure because the servicing arrangements are as shoddy as the registration process. The note holders and MBS holders will reconstitute and go after home owners that believed their payments through servicers were paid up, when in fact the servicers will probably be holding back to preserve capital reserve requirements and when the dam breaks, it will be found the individual accounts are in arrears. If Bernie Maddoff could keep it up for 10 years with a staff of less than a dozen, just imagine what BofA, JPMorgan, and the usual suspects can pull off. Too big to fail, or too big NOT to fail?
4. Whether Broken Chain of Title (like MERS), or unregistered Servicer/Holder arrangements (check your county land title office, see who holds your note, good chance it's not even recorded), especially in non-judicial states, it's up to YOU to check with your bank/servicer to see the status of your payments applied against the loan. Good luck, if GSEs hold the notes, where can you even begin. If it's a private investor, do you even know who it is?
5. If you move first, you can file for Quiet Title and expunge the mortgage note (Deed of Trust), especially if it wasn't properly reconveyed after the originator sold the note into a traunche. If you know your servicer isn't the note-holder, then ask who it is. Then ask the bank to provide verification of payment.
6. More importantly, ask the note holder to verify they hold both the Deed of Trust and the Loan Note. If they don't, it's broken chain of title, if they don't respond, you simply file to Quiet Title. If your bank won't/can't tell you who holds the note, file to Quiet Title. If the note holder/investor won't respond in 30 days, file to Quiet Title.
7. When FDIC (already insolvent) takes BofA and other banks into conservatorship, don't be surprised that loans haven't been properly credited. You could be paying your servicer for years just to find out the money went into a black hole in the Bankosphere (TM). You'll have no recourse but foreclosure and bankruptcy or to somehow repay what you've already paid.
8. Don't think it can't happen. It's already written in the cards because it already happened in the 1910s and again in the 1930s. Behind the facade of smiles from friendly tellers and loan officers, there's no law protecting you except basic property rights which if you don't timely exercise, will be forfeit and you'll be at the mercy of much more powerful players.
9. Don't say you weren't forewarned.
filing for quiet title
How will filing for a quiet title help me?
Do the math
242,000 homes totalling $24 billions? The average foreclosed home is worth less than $100,000?
Did my math go wrong somewhere?
Scary thought that the Math is Correct
Don't assume that the GSEs aren't fudging their numbers, or at least selectively presenting them. It may actually be a fair representation of their foreclosure portfolio to mark down property prices to an average of $100,000 because they might not even fetch that in a market already saturated with 100,000s of distressed properties. Consider that over 100,000 homes are being intentionally kept out of foreclosure and off the market in certain markets like Las Vegas, Phoenix, Miami, and places in Southern California. The real loss to FMAE/FMAC is probably in the 100s of $Bs, but the value of the properties through foreclosures and lack of lending liquidity for new buyers to pick them up is really much less. Consider also, Mark-to-Market rules of 30 days, and if it takes 90 to 120 days to move an abandoned home with mold now growing on the walls and gators living in the pool, $100,000 isn't that hard to grasp.
How do you file for "Quite Title"