One key quote from the story: “Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.” In other words, pretty much what you heard coming out of Wall Street during this period of time were lies. Has the street reformed itself now in 2011? The banks were out of money folks and if the Fed hadn’t secretly stepped in it looks like most of our biggest banks would have failed along with several international banks as well. Should they have been allowed to fail? It’s easy to make that argument today because the Fed made the decision that they were too big to fail (TBTF). So now we are living with the consequences 3 years later. We have a sluggish economy. Housing is still flat at best and the banks as well as the Feds and the US Government have a lot of bad mortgages that still need to be written down.
Wall Street and International Banks Received $1.2 Trillion in Loans from the Federal Reserve – Bloomberg
Today was the much anticipated public comments from the Federal Reserve and Chairman Ben Bernanke specifically. He stated that they would continue with the zero interest rate policy at least until in to 2013. (The Fed will try to stay out of getting in the way of the election I suppose). Larry Kudlow says it’s no time to panic. Karl Denninger says the Fed is basically expecting a recession. The markets initially weren’t quite sure what to do with the statement but several minutes later they took off. The DOW ended positive by over 400 points and interest rates on bonds plunged.
I received a note today from my friend and business partner, Alex Stenback, who said just because bond yields on government bonds are falling sharply does not necessarily mean mortgage interest rates will follow. This is going to be a very interesting and important topic for us to follow.
Here’s one example of the robo signing foreclosure fraud that has gone in. Once you click the link, look down towards the bottom of the page and you’ll see the various signatures for the particular officer who was supposed to be signing the foreclosure documents. Many home owners are rightfully upset about this and thus suing their mortgage companies that are foreclosing. Yes, these people are behind on their mortgages, but America is still a county of laws and it’s expected that the money men (and women) follow the law when evicting home owners.
That said, the States Attorneys Generals are working on a scheme with the banks to allow the law to be bypassed…the States Attorneys General will get upwards of $25 billion to spread around, the bankers will get their houses back and the American citizens will be denied their day in court.
Just heard word that there are some lenders now who will not fund transactions when the seller’s property is in the redemption period. Apparently Wells Fargo now has a corporate policy that it will not fund these. There are other mortgage lenders doing the same thing. It’s not clear yet whether the other big lenders such as Bank of America, Citi, or JP Morgan Chase will follow suit.
There is confusion as to whether or not the underwater home seller who has had the Sheriff’s sale but is now in the redemption period, can actually redeem the property after it has been sold and closed by the new buyer. In Minnesota the seller trying to do the short sale has to sign the Certificate of Redemption from the Sheriff’s department. There is record then that the seller redeemed the property as it is being transacted and closed with the new buyer during the short sale.
This is not good news in any way for short sales or for the housing market.
If you are a seller who is facing foreclosure or are in some state of trying to sell your home short, in Minnesota, you have the right to delay the Sheriff’s sale by 5 months, but you have to file the proper paperwork with the county in a timely manner. You may want to seek legal counsel. At a minimum, check out the Minnesota Home Ownership Center for how to do this. When you do extend the Sheriff’s sale, your redemption period goes from 6 months to 5 weeks.
If you’re looking at a property and wondering if it’s already had the Sheriff’s sale or not, check out the site here. It’s a great research tool.
I’m beginning to think it might be best if short sales were just made illegal. Perhaps everything should just go to foreclosure. That way we would either have traditional sellers or banks, but at least we’d know what we’re dealing with. It’s hard to know with short sales if you actually have a house you can sell or not.
It used to be that all the uncertainty in the transaction was on the seller’s side. Now it appears we have guesswork as well on the buyer’s side. This is going to make a complicated and challenging transaction – i.e. shorts sales – even more so.
If you are a seller who is in default – i.e. you are starting to miss your house payments – and you happen to bank at the same place that services your mortgage, please pay attention. The bank may have a right to seize the funds in your account to pay your late mortgage. For example, if your mortgage is with Bank of America and you have a checking or savings account with Bank of America, they have the right to take those funds out of your account without your permission to pay the mortgage. You have no choice. If you need money for clothes, food, gas, whatever, too bad. It’s there’s.
Here’s a tip…open a bank account or two right away. Make sure they are not with the banks that hold or service your mortgage(s). Move your money out of the bank that has your mortgage. It’s your choice whether you keep that account open or not, but I think most banks today are charging $6-8 per month to keep an account open – because it’s such a privilege you know to bank with XYZ bank.
So, if you are behind or thinking of doing a short sale, please pay attention to this immediately for your own sake. The banks will eventually take back every dime they can get their hands on. That giant sucking sound is not jobs going to Mexico like Ross Perot once said, it’s the mortgages sucking away all of your money.
Be smart and good luck!
Citi Mortgage has partnered with RE/MAX on a nationwide short sale initiative. They are hoping to proactively list, and hopefully sell, these properties that are under water. Citi is going through it’s portfolio loans and proactively soliciting those sellers to let them know about the short sale program. Citi will control what price to list the property at and will certainly decide what they will sell it at.
If you have a Citi Mortgage and you are currently behind on your mortgage payments, you may expect a letter from Citi as well as RE/MAX.
The banks are getting more and more active with short sales. It appears they do not want these properties back.
If you live in Minnesota and are behind on your payments and not sure what to do, please fill out this form and we can have a confidential conversation.
For more information on avoiding foreclosure and the short sale process, please visit my site dedicated to this important topic at Short Sale Minnesota.