Posts filed under “Foreclosures”
Fannie & Freddie have finally begun to investigate the self-dealing and often fraudulent practice of Force-Placed Insurance. Both the New York State Insurance Regulator and the Consumer Financial Protection Bureau have been way ahead of the GSEs on this.
For those of you who may be unfamiliar with Force-Placed Insurance, it is an optional bank insurance product that sometimes gets forcibly jammed down the throats of home owners and mortgage investors at grossly inflated prices. As Jeff Horowitz detailed in 2010 (Losses from Force-Placed Insurance Are Beginning to Rankle Investors), most of the fees, commissions and revenues from this “product” went straight back to the banks holding the related mortgage, typically to wholly owned subsidiaries.
It was an abusive practice, and in quite a few instances, the additional costs actually tipped homeowners into foreclosure.
Here’s the WSJ:
“The Federal Housing Finance Agency, which regulates mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC) plans to file a notice Tuesday to ban lucrative fees and commissions paid by insurers to banks on so-called force-placed insurance . . .
Forced policies have boomed in the wake of the housing bust, as many homeowners struggled to keep up with mortgage payments. Some borrowers may try to save money by dropping the original standard coverage, only to be hit by policies with premiums that are typically at least twice as expensive as voluntary insurance, and sometimes cost as much as 10 times more. Nearly six million such policies have been written since 2009, insurance industry data indicate. Consumers are free at any point to replace a force-placed policy with one of their own choosing.”
The Consumer Financial Protection Bureau has issued new rules on this, but the real action seems to be the variety of civil suits from investors; additionally, New York State just reached a settlement with forced-placed insurer Assurant, including a $14 million penalty, and a long list of practice changes (after the jump). If it were up to me, I would have insisted on profit disgorgement and jail time for the CEO (But I am “unreasonable”).
Hopefully, this is the first of many . . .
Latest Mortgage Scandal: Force-Placed Insurance (November 10th, 2010)
Rule of Law: Banker Criminality Demands Prosecution (May 20th, 2011)
A modern Pecora Commission could right Wall Street wrongs (February 5th, 2012)
U.S. Cracks Down on ‘Forced’ Insurance
ALAN ZIBEL And LESLIE SCISM
WSJ, March 25, 2013
Losses from Force-Placed Insurance Are Beginning to Rankle Investors
Amaerican Banker, NOV 9, 2010
NY Post: “While foreclosures nationally fell 3 percent last year, New York City filings climbed 19 percent, or 13,116 properties, according to a new report. The outer boroughs were the hardest hit, with Queens seeing a 164 percent rise year-over-year and Staten Island rising 19 percent over the same time frame, according to RealtyTrac, which…Read More
The banks are thrilled at the latest settlement, confirming yet again their ability to break the law with impunity. Consider the following, from the litigation between Syncora Guarantee (formerly XL Capital Assurance) vs EMC Mortgage Corp, and Ambac Assurance vs vs EMC Mortgage Corp:
Compare Comments made by Consultants Hired to do Foreclosure Reviews:
“Oversight by the regulators was nearly nonexistent, the reviewers said. Some employees hired by one of the consultants, Promontory Financial, to pore over hundreds of thousands of Bank of America foreclosures said that without a watchdog some consultants worked to minimize the number of homeowners found to be harmed. One reviewer described how her supervisors routinely kicked back loans where she had identified harm. The reviewers would speak only if they were not named because they were searching for work…”
With comments made by Whistelblowers about due diligence on mortgages before they were securitized – full transcript attached:
19 Q. So as I understand it, through the team leads you received directions that the clients wanted the underwriters to ignore certain defects in loans?
24 A. That is correct.
Q. Turn to paragraph 17 of your affidavit, which is on page 5.It says here in the first line: “Clayton supervisors would often inform the due diligence underwriters that the purchasers wanted the underwriters to approve loans that often did not satisfy the underwriting guidelines.”
11 A. That is correct.
12 Q. Is the same statement true for Watterson Prime?
14 A. Yes.
15 Q. Was this a practice which was pervasive at Watterson and Clayton?
17 A. Yes.
18 Q. Across all clients?
19 A. Yes.
I see if I can find the PDF of the full deposition; most of the transcript is after the jump
Pay attention to this, its quite fascinating and has potentially awesome and amusing consequences. There is a former bank defense attorney named Thomas Cox. You may not recognize his name, but after he retired, he decided to switch sides, defending people on the receiving end of bank litigation, typically foreclosures. You should know him as…Read More
Source: Miller Samuel Inc.
Jonathan Miller shows us the above chart (via RealtyTrak) and ask the question: How does flat to falling incomes, high unemployment, rising taxes and tight credit = housing recovery?
The short answer is a combination of record low mortgage rates and held back distressed activity. Following a weak 2011, year-over-year comparisons also look good.
The combination goosed housing sales and prices. The question for the housing bulls is, can it continue?
The answer, at least from this (personally long) housing bear is low rates in 2013 will confront rising foreclosure sales. That battle — plus the state of the consumer as outlined by Jonathan — will determine whether this year’s improvement in housing will continue next year.
Additional bullet points after the jump
The other day, someone asked me when foreclosure activity would begin to reflect what I wrote earlier this year (Foreclosure machinery creaks back to life). After peaking in Q2 2009 & Q3 2010 respectively, Foreclosure Starts and Bank Repossessions have trended downwards ever since. The voluntary mortgage abatements of 2011 during the robosigning negotiations kept…Read More
Foreclosure Inventory by State Map click for larger map Here is CoreLogic’s key data points: • The five states with the highest number of completed foreclosures for the 12 months ending in August 2012 were: California (110,000), Florida (92,000), Michigan (62,000), Texas (58,000) and Georgia (55,000). These five states account for 48.1 percent of all…Read More
Today’s Housing Bulls are pumped full of antibiotics and steroids, corn fed, genetically modified creatures from a lab. They are not natural; They are not grass fed, free-range, organic Angus cattle. They are unnatural, not found in the wild. These artificial constructs are a joint project of Congress and the Attorney General’s office and the FOMC.
Consider the Case Shiller data — up 2.2% monthly and down 1% year over year — disappointed slightly. But to really understand where Housing is in the cycle, we need to do more than merely look at the chart; we needs to put those data points into broader context. We need to imagine what an organic housing sector would look like versus the Frankenstein creature we have today.
In order to get these flat to negative numbers, an extraordinary amount of firepower has been thrown at Housing:
1. First time home buyers tax credit
2.FOMC QE, Twist, driving mortgage rates down 100+ bps
3.Foreclosure abatements during robosigning
You can see the impact of these efforts reflected in the annotated chart:
Non-annotated origianl Case Shiller charts after the jump