by: Peter J. Gallagher
The New York Times is reporting that the government is soliciting ideas for turning its glut of vacant, foreclosed houses into rental units that could be managed by private parties or sold in bulk ("U.S. Seeks Ideas On Renting Out Foreclosed Property"). The goal of the program would be to "stabilize neighborhoods where large supplies of empty, foreclosed properties have hurt property values" and "clear the nation’s balance sheet of real estate holdings that, because they have been difficult to sell individually, have hung over the housing market and stunted sales of existing homes and new construction." The request for ideas comes from the Federal Housing Finance Agency, the Department of Housing and Urban Development, and the Treasury Department, and you can click here to submit your ideas.
As the article notes, the percentage of homes owned by the government that are currently in foreclosure is somewhat staggering:
Of the 248,000 homes owned by Fannie Mae, Freddie Mac and the F.H.A. at the end of June, 70,000 were listed for sale, said Corinne Russell, a housing finance agency spokeswoman. The remainder were not yet on the market or the agencies had already received an offer from a prospective buyer.
But it is possible that hundreds of thousands of more homes that are now in the foreclosure process could come into the possession of the federal government in the next few years, housing experts say.
The government is now looking for a few good men ideas for how to deal with this crisis. Among those already proposed are "rent-to-own programs, in which previous homeowners or current renters could lease properties as a path to ownership, and ways in which the properties can be used to support affordable housing."
If you have any thoughts, be sure to let us know when you let the government know.
by: Peter J. Gallagher
In the movie Wall Street, Gordon Gekko famously claimed that "greed is good." A new book out by Pulitzer Prize winning New York Times reporter Gretchen Morgenson begs to differ. In her book, "Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon," Morgenson lays the blame for the financial crisis squarely at the feet of Fannie Mae, and particularly its CEO James Johnson, who built the quasi-governmental entity into "the largest and most powerful financial institution in the world." While government regulators sat idly by, Fannie Mae allegedly "fudged accounting rules, generated big salaries and bonuses for its executives, used lobby and campaign contributions to bully regulators, and encouraged the risky financial practices that led to the crisis." To read more about the book, including an excerpt, check out "How 'Reckless" Greed Contributed To Financial Crisis" on NPR's website.
by: Peter J. Gallagher
In a recent post, "Not Fade Away: Could The 30-Year Fixed Rate Mortgage Survive In A World Without Fannie And Freddie," I discussed the growing drumbeat surrounding the efforts of some members of Congress and the administration to do away with, or at the very least reign in, Fannie Mae and Freddie Mac. Now, Republicans in the House of Representatives have taken the first steps towards this goal, putting forth legislature that would reduce the role both enties play in the market and cut the pay of their executives.
Continue reading “Fannie And Freddie On The Firing Line”
News coverage of the most recent foreclosure crisis abounds:
"The house that set off the national furor over faulty foreclosures is blue-gray and weathered." So begins a recent New York Times article - From a Maine House, a National Foreclosure Freeze on the small home in Maine that was the epicenter of the latest foreclosure crises. The owner of the the home contacted a nonprofit group, Pine Tree Legal Assistance, for help defending against foreclosure. Thomas A. Cox, a retired lawyer who formerly represented banks seeking to foreclose on properties but now works for Pine Tree trying to help owners avoid foreclosure, immediately noticed irregularities in the foreclosure documents. The article notes that Mr. Cox eventually won the right to depose the bank employee that signed the foreclosure documents, who "casually acknowledged that he had prepared 400 foreclosures a day for GMAC and that contrary to his sworn statements, they had not been reviewed by him or anyone else."
ALM has an interview with Mr. Cox about his experience at the center of the storm.
Ratings agency Fitch Ratings issued a statement predicting that "procedural defects in the judicial foreclosure process implemented by U.S. mortgage servicers may stall the foreclosure process in some states and ultimately lead to increased [losses for residential mortgage backed securities]."
The Washington Post ran an article For foreclosure processors hired by mortgage lenders, speed equaled money casting blame for the most recent foreclosure crisis on lenders who emphasized speed over accuracy during the foreclosure process. The article points out that large mortgage companies rewarded law firms and other companies for moving cases quickly through the foreclosure process, and imposed penalties for those that moved too slowly.
The Wall Street Journal article Niche Lawyers Spawned Housing Fracas reports on the lawyer who is being credited with first devising the strategy of defending against foreclosure by aggressively challenging the paperwork relied upon by lenders, and seeking discovery from lenders regarding this documentation.
Finally, Chief Judge Jonathan Lippman of the New York Court of Appeals, in his role as administrator of the New York court system, issued an edict requiring lawyers to file an affirmation that they have taken reasonable steps to verify the accuracy of papers they file to support residential foreclosures. Read the law.com story on the issue N.Y. Courts to Require Attorneys to Verify Foreclosure Papers.