by Calculated Risk on 4/13/2012 08:35:00 PM

Earlier I posted some thoughts and details on BofA suing BofA in a foreclosure case in Florida.

Here are some more details.

The condo was purchased in April 2005 for $210,000. The first was for $192,691.20. This was probably a 90% loan with costs rolled in (ht Z).

The HELOC was authorized in September 2006 for $150,000, although the borrower only used $75,000.

This suggests the property value increased by 60% to 70% in just over one year! Or BofA was giving out HELOCs with LTVs much greater than 100%. Either way, it makes me wonder ...

It does appear prices in Florida were still rising quickly during that period. According to Case-Shiller, prices in Miami increased 24% from April 2005 through September 2006, but that isn't close to 70%!

Maybe it was the name. This is a water front condo in buildings called "Wilshire East" and "Wilshire West". As I noted a few years ago, you could almost guess which projects would get in trouble by the name such as "Manhattan West" in Las Vegas and "Central Park West" in Irvine, California.

Here is a google map of the Florida building.


View Larger Map

by Calculated Risk on 4/13/2012 05:29:00 PM

Economist Tom Lawler wrote today: "Incoming data point to a YOY increase in the NAR’s Median Existing Home Sales Price of about 3% in March."

CR: Of course the median price is impacted by the mix, and the increase in the median is probably due to fewer foreclosures at the low end. Tom will probably send me a projection for March existing home sales early next week.

Tom also sent me an update to the following table for several distressed areas. For all of the areas, the share of distressed sales is down from March 2011, the share of short sales has mostly increased and the share of foreclosure sales are down - and down significantly in some areas.

Note: The table is a percentage of total sales.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share
	12-Mar	11-Mar	12-Mar	11-Mar	12-Mar	11-Mar
Las Vegas	26.6%	23.6%	40.7%	47.6%	67.3%	71.2%
Reno	34.0%	30.0%	32.0%	41.0%	66.0%	71.0%
Phoenix	25.7%	19.1%	21.1%	46.2%	46.7%	65.3%
Sacramento	29.0%	22.3%	30.7%	48.4%	59.7%	70.7%
Minneapolis	12.4%	12.8%	36.8%	45.9%	49.2%	58.7%
Mid-Atlantic (MRIS)	13.2%	13.1%	14.7%	26.3%	27.9%	39.5%

by Calculated Risk on 4/13/2012 03:08:00 PM

Earlier this week, Zach Carter at the HuffPo wrote: Bank Of America Sues Itself In Unusual Foreclosure Case (ht T. Stone)

Over the past two years, the nation's largest banks and the Obama administration have repeatedly vowed to clean up the foreclosure fraud mess. ... But in Florida's Palm Beach County alone, Bank of America has sued itself for foreclosure 11 times since late March, according to foreclosure fraud activist Lynn Szymoniak, who forwarded one such foreclosure filing, dated March 29, 2012, to The Huffington Post.

This sounds like BofA is making a mistake. Nope.

From the article:

"We are servicing the first mortgage on behalf of an investor and we own the second mortgage," Bank of America spokeswoman Jumana Bauwens told HuffPost. "Naming the second-lien holder in the suit is necessary to eliminate the junior interest," Bauwens said.

Correct.

With a little digging (credit: reader Z dug up the supporting documents, and sent me the following bullet points and more), here are a few details:
• April 28, 2005: property purchased for $210,000 with a BofA purchase mortgage for $192,691.20
• September 29, 2006: BofA second-lien home-equity line-of-credit mortgage for $75,000
• May 27, 2010: condo association lien for delinquent 2010 condo fees ($8,185)
• June 30, 2011: condo association lien for delinquent 2011 condo fees ($9,699)
• March 29, 2012: BofA files lis pendens on the first-lien purchase mortgage and names defendants including, in order, the borrowers, BofA (itself), the condo association, and any tenants (#1-4) that may be present

Here is the BofA filing in Palm Beach, Florida.

There are two reasons this is OK. First, as anyone who read the excellent overview "US mortgage and foreclosure law" by Kimball and Willen, at The New Palgrave Dictionary of Economics, the top priority for BofA as servicer of the first lien is to clear title. Suing the other lien holders is part of the judicial process in Florida. If BofA owned both loans, they could probably avoid suing themselves, but clearing title is priority one - so who cares.

Second, in this specific case, it appears the purchase loan was placed in an MBS and BofA is now only the servicer of the loan. (The BofA spokeswoman said "We are servicing the first mortgage on behalf of an investor and we own the second mortgage"). As the servicer, BofA has a legal obligation to the MBS investors. In this specific case, to clear the publicly recorded second lien that BofA owns, BofA, as servicer of the first lien, is obligated to sue BofA, as holder of the second, to clear title.

This is not evidence of "robo foreclosure" or anything remotely close. Yawn.

by Calculated Risk on 4/13/2012 01:20:00 PM

Note: Bernanke didn't discuss current monetary policy.

From Fed Chairman Ben Bernanke: "Some Reflections on the Crisis and the Policy Response"

On the originate-to-distribute model:

Private-sector risk management also failed to keep up with financial innovation in many cases. An important example is the extension of the traditional originate-to-distribute business model to encompass increasingly complex securitized credit products, with wholesale market funding playing a key role. In general, the originate-to-distribute model breaks down the process of credit extension into components or stages--from origination to financing and to the postfinancing monitoring of the borrower's ability to repay--in a manner reminiscent of how manufacturers distribute the stages of production across firms and locations. This general approach has been used in various forms for many years and can produce significant benefits, including lower credit costs and increased access of consumers and small and medium-sized businesses to capital markets. However, the expanded use of this model to finance subprime mortgages through securitization was mismanaged at several points, including the initial underwriting, which deteriorated markedly, in part because of incentive schemes that effectively rewarded originators for the quantity rather than the quality of the mortgages extended. Loans were then packaged into securities that proved complex, opaque, and unwieldy; for example, when defaults became widespread, the legal agreements underlying the securitizations made reasonable modifications of troubled mortgages difficult. Rating agencies' ratings of asset-backed securities were revealed to be subject to conflicts of interest and faulty models. At the end of the chain were investors who often relied mainly on ratings and did not make distinctions among AAA-rated securities. Even if the ultimate investors wanted to do their own credit analysis, the information needed to do so was often difficult or impossible to obtain.

CR Note: This wasn't just for subprime. Even worse were the Alt-A loans! Also I don't think Bernanke spent enough time on the failure of regulators to recognize the very loose lending.

I think the housing bubble (and subsequent bust) can be understood very well by looking at each step of originate-to-distribute model, and also at the willful lack of regulatory oversight. Bernanke suggests housing was just the trigger, but if the regulators couldn't see that loaning people 100+ LTV, with stated income, and a low teaser rate would end poorly, then there was no way they could see the systemic risk!

Bernanke concludes:

The financial crisis of 2007-09 was difficult to anticipate for two reasons: First, financial panics, being to a significant extent self-fulfilling crises of confidence, are inherently difficult to foresee. Second, although the crisis bore some resemblance at a conceptual level to the panics known to Bagehot, it occurred in a rather different institutional context and was propagated and amplified by a number of vulnerabilities that had developed outside the traditional banking sector. Once identified, however, the panic could be addressed to a significant extent using classic tools, including backstop liquidity provision by central banks, both here and abroad.

I disagree that the crisis "was difficult to anticipate". I think the potential for the housing bust to lead to a financial crisis was fairly obvious (I first mentioned the possibility of a financial crisis as a result of the then coming housing bust in 2005).

by Calculated Risk on 4/13/2012 11:54:00 AM

Earlier today the BLS reported:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in March on a seasonally adjusted basis ... The index for all items less food and energy rose 0.2 percent in March

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.2% annualized rate) in March. The 16% trimmed-mean Consumer Price Index increased 0.2% (2.7% annualized rate) during the month.
...
Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers increased 0.3% (3.5% annualized rate) in March. The CPI less food and energy increased 0.2% (2.8% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for March here.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.4%, the trimmed-mean CPI rose 2.4%, and core CPI rose 2.3%. Core PCE is for February and increased 1.9% year-over-year.

These measures show inflation on a year-over-year basis is mostly still above the Fed's 2% target.