Another Foreclosure Denied
Here's another example of a court refusing to roll over for an attempted Foreclosure by a bank, that may -- or may not -- actually be the lien holder to the property.
Another mortgage relief from stay denial by Judge Adler
Saturday, January 12, 2008 | 04:55 PM | Permalink
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Yup!! That's got to be happening all over the country - if not the world at this point...
I heard a sound bit of Hillary Clinton proposing as part of her economic plan, a 90 day moratorium on foreclosures. If the bank is going to foreclose tomorrow, then you will have 90 days to try to renegotiate the loan...
Thats definitely not free market...
Posted by: SINGER | Jan 12, 2008 5:32:53 PM
Awesome.
Posted by: jag | Jan 12, 2008 5:50:46 PM
So this means investors (in the bank or in the securities representing a share of the mortgage) are screwed. No tears for them 'cos they didn't pay attention to the risks. But the homeowner is equally responsible for taking on a debt burden he/she should have known is above his/her means.
Appears that the middlemen, the folks who sold the mortgage to the homeowner and the folks who sold the securities to investors and all the agencies that didn't do their homework should be held accountable for a lion's share of the losses.
Posted by: bt | Jan 12, 2008 6:15:42 PM
So what happens? The "homeowner" would get a brief reprieve and a moment to snicker at the foreclosing entity, but they aren't off the hook. Is it simply a matter of the bank having to dig through records and trace the provenance of the loan to resubmit the foreclosure motion? Or is there more to it? This will delay matters and waste a lot of court time, but it's just chocolate sprinkles on a giant poopcake.
As for Billary, she couldn't fix breakfast, much less a worldwide debt bubble. I don't envy anyone vying for captain of the Titanic when the bow's already underwater. Whoever wins is a one-termer.
Posted by: j-daddy | Jan 12, 2008 6:27:11 PM
Many of us thought Bill Clinton was a 1-termer lame duck in 1994. Never underestimate the predictability of stupidity.
Posted by: red95king | Jan 12, 2008 6:39:21 PM
This is an odd duck. In the short term it only delays the inevitable so as a "solution" it is poppycock. But I suspect in the longer term it will force the mortgage industry to dot all the I's and cross all the T's in this type of stuff so that is probably as it should have been all along. But make no mistake, the overhead of the business will rise because of all the extra work needed for the red tape.
I agree Hillary or Edwards are about the last people we need in a weakening economy, but I can't say I'm having a better time with the Bush talk of "tax breaks" for these folks. Nothing against the so-called poor and middle-class, but given the historic success by the GOP of getting their tax rates so low (and in many cases zero) what the the hell kind of tax break to them is going to juice up the economy? How does that math work? NFW.
Still, Edwards/Clinton's gift of $ from the gov't isn't the solution either. The problem doesn't need a fiscal solution, it needs a monetary policy solution. Cut corporate taxes, don't double tax foreign earnings of US companies, and make Bush's tax cuts permanent.
Just my $.02 (Read it now because in 10 years it'll only be about $.015!)
Posted by: Mike G. | Jan 12, 2008 6:51:39 PM
I'm amused by the idea that the banks will have to bring in what is in effect a "gigantic ball of knotted string" AKA CDO and explain to the judge how using that knot you get from the borrower, to the bank to the lien holder.
By the time they do that, someone will realize that they sold the same mortgages to 2 different investors, and have been collecting 2x as much insurance as they were supposed to... and tons of other....
Bank Steinery
Posted by: Eric Davis | Jan 12, 2008 6:52:06 PM
more proof the answer is 'yes.'
Posted by: m3 | Jan 12, 2008 7:02:50 PM
Mike G.:
What is Huckabee's solution? McCain? Romney? None of them have practical solutions. The solutions any of them have would just add on to the debt of the US.
Posted by: Joe Klein's conscience | Jan 12, 2008 7:05:32 PM
Repeat after me, "there's no place like home, a tranche is not a bond..."
These relatively quiet judicial pronouncements are even more esoteric than spreads, CDO re-pricing, and other events but no less important.
Thanks for shining some light.
Posted by: teraflop | Jan 12, 2008 7:22:47 PM
Good for Judge Adler. Sloppiness by the 'big guys' helped get us all into this mess, and it is time for them to get back in line. Do the job you are supposed to do or go pound sand.
Posted by: wally | Jan 12, 2008 8:07:24 PM
"Yup!! That's got to be happening all over the country - if not the world at this point..."
uhh these never happened before all over the country, if not the world? Let's put this in perspective.
Posted by: Adam | Jan 12, 2008 8:22:12 PM
Actually, there are two Adversary Proceedings in San Diego Bankrutpcy Court right now attempting to avoid the liens on mortgages like these. The trustee is a bonafide purchasor for value on the date of the bankruptcy filing. If the creditor has not perfected its interest on that day, they are now unsecured and the trustee can avoid under 11 USC 544. This happens regularly with auto loans.
So if the lien is avoided under 544, the bank stands in line with the rest of the creditors. The benefit for the debtor is that some of his non-dischageable debt can get paid (taxes, student loans).
So this may be more than just a nuisance.
Before you start hammering me remember: liens are a creature of state law. So California law will govern the issue of lien stripping.
Have at me.
Posted by: k2613 | Jan 12, 2008 8:35:23 PM
Poor Jennifer Wong. This is her second wiff in front of Adler.
She was the attorney on the first one here:
http://bigpicture.typepad.com/comments/2007/12/another-loan-se.html
Sucks to be her right now.
Posted by: k2613 | Jan 12, 2008 8:49:46 PM
I never hear anyone say anything good about Hillary and yet she's the "frontrunner"? I never met anyone who voted for Bill either. Hmmmmm. Really makes you ponder on the first season of "24"...how things get done in a political campaign.
One thing is apparent from this situation with mortgages. Lawyers will continue to get paid.
We should elect all the seats of the US Congress and Senate to lawyers so they can pass even more ambiguous and faulty legislation (like the energy bill) to continue their incestuous feasting on all us dummies in our ignorance.
Posted by: Phoc Yu | Jan 12, 2008 8:56:32 PM
Joe Klein's conscience :
It hasn't been a much talked about issue so far so I am assuming that until they put forth some specific plan that they plan on letting the market work. And yes indeed, that means that some people who took on loans they had no business having are going to feel some pain. As are the idiots that lent them the money. As are the mortgage insurers who insured the mortgages. So you see, the pain gets spread just as the benefit of the ridiculous mortgage did. You may be one of those people who thinks the vast majority of subprime lenders were somehow snookered into these loans at the point of a gun. I have no such illusions. Do I enjoy their current hardship? Of course not. But if they all get a pass now for their collective stupidity then are you really going to be surprised when they do something equally or even more stupid down the road? I say we help them by letting them reap the consequences of a bad decision. Is that so heartless? If so, explain how. Are you not expected to suffer/benefit from your decisions, especially in investments? I am!
The solution needs no presidential candidate's plan, which may be why I'm not hearing one from the GOP. The solution is already taking place. Loan criteria is tightening up drastically. Applicant-provided data is being checked. Mortgage insurers are getting re-funded by those who have money to risk. If those investors are correct, they got in at what are no doubt firesale prices. Kudos to them. If they are wrong and take a bath, well, that's the "risk" part of risk/reward now, isn't it?
Posted by: Mike G. | Jan 12, 2008 9:07:06 PM
Proving that you own the property you're trying to foreclose on is more than a technicality; it is a very basic part of the case. Whatever it might add to overhead, etc is worth it to stop the unscrupulous from trying to pick up properties by foreclosing on houses they don't own. (Anyone think this wouldn't happen?) Besides protecting personal property, it may well end up providing some insight into the chain of debt sales.
I think the really interesting development is Cleveland suing 21 lenders over subprime mortgages: "The Cleveland suit, filed Thursday in Cuyahoga County Common Pleas Court under the state’s public nuisance law, asserts that the financial institutions created nuisances across broad swaths of Cleveland because their loans led to widespread abandonment of homes. “We’ve torn down 1,000 abandoned houses, and haven’t even made a dent,” Mr. Jackson said."
http://www.nytimes.com/2008/01/12/us/12cleveland.html
Posted by: paul | Jan 12, 2008 9:30:04 PM
" But the homeowner is equally responsible for taking on a debt burden he/she should have known is above his/her means."
The homeowner can only get him or herself in trouble, but the business idiots and sleazeballs screwed over thousands if not millions.
The businesses screwed up, and they don't have any excuse - they can afford good lawyers and MBAs and finance experts.
That, IMHO, is why the hammer should come down harder on the financial industry than on people stuck with bad loans and at risk of losing their only place of residence.
I'm less concerned about people who were speculators or flippers that got caught, or people at risk only of losing a second home or a convenience condo apartment near the kids' school or something.
Posted by: Jon H | Jan 12, 2008 10:41:37 PM
"So you see, the pain gets spread just as the benefit of the ridiculous mortgage did. "
Ah, but the pain of a foreclosure for the businesses is miniscule - just numbers on a spreadsheet and a smaller bonus for the rank and file (the executives will still get fat bonuses) - compared to the pain of the person who is now homeless and probably bankrupt.
Posted by: Jon H | Jan 12, 2008 10:51:47 PM
CDO's had the effect of spliting loan risks in tranches. A pool of mortgages would be split into 10 tranches and an investor would buy a tranch...what I am getting at is that the borrower owes the debt but the lien on title may not belong to the investor. It may belong to Goldman or Merrill but not joe investor Barclay.
Posted by: Johnny Vee | Jan 12, 2008 11:13:12 PM
One more thing. The lawyers are now at the feeding trough. Predatory lending, meaning selling a loan that the borrower cannot afford when it adjusts inorder to collect fees now is going to be headlines everywhere. If the gov doesn't figure out how to stop the foreclosures, the lawyers will.
Posted by: Johnny Vee | Jan 12, 2008 11:18:08 PM
Phoc Yu, you never met anyone who voted for Bill Clinton??? where do you live exactly? my experience is the exact opposite.
i live in a city on the east coast. everyone i know, live nearby or work with voted for clinton if they were old enough at the time. i only know a handful of republicans and they are either relatives of my wife who live in out in the country or white blue collar types like the security guard or the maintenance staff.
i am always curious about that stuff.
Posted by: sebs | Jan 12, 2008 11:25:31 PM
John H:
[quote] The homeowner can only get him or herself in trouble, but the business idiots and sleazeballs screwed over thousands if not millions.
The businesses screwed up, and they don't have any excuse - they can afford good lawyers and MBAs and finance experts.
[end quote]
Well, it depends what business we are talking about. The mortgage companies knew the borrowers best (or should have) so I give them the least slack. They did what they did knowing they could repackage the crap and fob it off. I am more forgiving to the people that bought the CDOs etc. because they were complex instruments and they had AAA ratings from the big rating houses.
[quote]
Ah, but the pain of a foreclosure for the businesses is miniscule - just numbers on a spreadsheet and a smaller bonus for the rank and file
[end quote]
*L* Did you miss the billions of dollars in stock market value that have been lost in stocks related to this industry? The buyout of CFC for a pittance? The 94% loss or whatever it was of E-Trade? You know, plenty of pension funds and retirees own those stocks. What about the thousands of jobs being lost? Whether you think they deserve it or not, your above statement is folly. I'm willing to bet your paycheck it just numbers on someone's spreadsheet too!
Posted by: Mike G. | Jan 13, 2008 2:52:08 AM
k2163,
I think your observations are reasonable. I did not object to your prior assessment except that it was being offered by someone you quoted seemingly as evidence of BK judge advocacy for the benefit of debtors.
All of this continues to support my contention that a National Ombudsman Program is needed to facility a sorting out of these problems.
It's time for Congress and the administration to act.
Posted by: Eclectic | Jan 13, 2008 3:00:13 AM
The note and the mortgage are owned by the trustee, not the investor. If title passed every time the investment changed hands it would be a nightmare.
Posted by: rob | Jan 13, 2008 8:47:10 AM
