News Brief: Foreclosure Across the Nation

Every morning I wake up, walk the dogs, make my coffee, and move towards the highlight of my pre-lunch day: reading the Wall Street Journal. Yesterday, I picked up the paper expecting to see the usual (albeit the WSJ always keeps me on my toes so I am not sure why I was “expecting to see the usual”) only to find that reporters across the nation had been doing overtime on researching the foreclosure industry. Which points out the fact that I too am so swamped with the foreclosure industry that I’m just now writing this article about yesterday’s WSJ. hmmm.

Anyways, what I found was a barrage of information about our twisted duality relationship with foreclosure. It then occurred to me that in most of my conversations with fellow REO industry professionals the conversation begins in a straight-line direction only to eventually derail in an attempt to converse about the umpteen different aspects, lawsuits, discoveries, etc. of foreclosure. The only logical step for me to take as an educator is to share this knowledge compiled by the WSJ and dozens of REO professionals across the nation with my fellow bloggers.

1. “Consumer Confidence Plummets” – The front page of the WSJ covers the statistics recently unveiling the fact that consumers are not confident enough to part with their hard-earned money. This could have two major impacts: It could send the economy into a recession (or more deeply into one if you are of the belief that we are already in recession), and it’ll keep interest rates steady.
2. “A foreclosure-rescue bill cleared a key Senate test, putting it on track for full Senate passage as early as today” – This bill would allow the government to back $300 billion in new, cheaper mortgages for debt-ridden homeowners facing foreclosure.
3. The 2 Bear Stearns employees, Ralph Cioffi and Matthew Tannin, who were arrested earlier this month are charged with conspiracy, securities fraud, and wiring fraud hiding mounting losses in funds. The debate now becomes, how much intentional conspiracy occurred versus working within the confines of the high-risk stakes within the hedge fund market. The argument becomes something along the lines of “these guys didn’t cook the books intentionally like Enron, but one manager did sell his stocks just before the hedge fund plummeted.”
4. “Small Banks Face a Looming Hit From Builder’s Interest-Reserve Loans” – A lending practice, which is more exposed to smaller banks, allows the lender to postpone payment of interest to real estate investments such as condo complexes until the investment becomes profitable or “cash flows”. The lender can then indicate on their books that the loans are performing, when in fact these real estate projects are failing.
5. GMAC, the lending branch of General Motors, whose business backbone has always been in the motor industry, followed by home loans, then credit cards, is feeling a huge crunch as their large vehicles are failing to sell and home loans are defaulting. In the true form of a trifecta, GMAC is finding it near impossible to sell off their credit card division.

So as you can see, we aren’t out of the woods yet. I’m not an economist with a PhD, but I can say with confidence that we are most likely in the middle of the woods. It’s the end of the 2nd quarter this week and I’d be willing to bet that before July 1st, 2008 we’ll be hearing more truths about the state of major corporations around the nation/globe. As we all know REO starts at Wall Street and works its way down.

New Paradigm: Asset Management Company Launches

Denver, CO –  ”Paradigm Default Services, LLC. announced last week that it has initiated REO, third-party servicing designed to serve the needs of clients and investors who are awash in a sea of sub-prime foreclosures nationwide. Paradigm is both an operational platform for handling lender acquired properties and an acquisitions vehicle for synergistic business units closely connected and supportive of its default servicing business. A company spokesman explains that Paradigm is creating a special default servicing unit which will provide “cradle-to-grave” hands-on servicing taking loans from initial default to re-performance or liquidation.”

This was a clip of Paradigm’s press release early last week.  Fortunately for us, we were able to forge a relationship with Paradigm prior to their going public.  Tom DiMercurio, the owner of Paradigm Default  Services, is a long-time acquaintance of Dan Waterman, CEO & Instructor of NFSTI.  Both Mr. DiMercurio and Mr. Waterman have seen a need for change in REO after their “in the trenches” attitude towards research.  By increasing the quality of work on both the servicer side and the broker side of the business, it is possible to curtail this seemingly endless road of foreclosure.

To understand more about what Paradigm Default Services has to offer, please visit their site at: http://www.paradigmdefaultservices.com.  

 

Arrests of Brokers, Agents and Officials Across USA

(From CNN - 6.19.08 )   Hundreds of people across the country have been arrested by law enforcement officials targeting crooked mortgage brokers, real estate agents, and other industry officials, the head of the FBI and a top Justice Department official said Thursday.

FBI Director Robert Mueller and Deputy Attorney General Mark Filip announced the arrests the same day two former Bear Stearns hedge fund managers, Ralph Cioffi and Matthew Tannin, surrendered to the FBI. The men are expected to face federal charges that they intentionally misled investors in two funds that collapsed last summer under the weight of wrong-way bets on mortgage-backed securities.

More than 400 people have been charged in the mortgage fraud probe, of whom nearly 300 have been arrested, including 60 in a coordinated sweep Wednesday, the Justice Department said.

The losses in the mortgage fraud cases cost consumers more than $1 billion, Mueller said.

“We will, as appropriate, seek prison terms,” Filip said. “It is a very, very serious matter.”

“Operation Malicious Mortgage,” the investigation by the FBI and Justice Department, began March 1, government officials said. It resulted in 144 fraud cases in which 406 defendants were charged.

The FBI is investigating about 1,400 more cases of potential fraud, Mueller said, calling it “a substantial number of investigations, unfortunately.”

The agency has 42 mortgage fraud task forces in operation, employing 180 agents, Mueller said.

Many agencies were credited as contributing to the investigation, including the Internal Revenue Service, the Secret Service, the Department of Housing and Urban Development, immigration and customs agencies, postal inspectors and the Federal Deposit Insurance Corporation.

Most of the arrests came Wednesday, federal law enforcement officials said, in Miami, Houston, San Antonio, Baltimore, Chicago, and other cities.

Officials indicated the suspects were involved mostly in small-scale schemes.

MBA Announces Record High Foreclosures & Pre-Foreclosures

As we continue to watch the statistics rise in foreclosure, patiently waiting and wondering when the the crest of this tsunami will rise to it’s highest potential, we are only able to determine one thing – the crest is not upon us.

Recently the MBA (Mortgage Bankers Association) announced that the overall delinquency rate, number of loans entering foreclosure and the number of foreclosures in inventory are at new highs after Quarter 1 2008.

The numbers go as follows:

• 8.82% of homes loans are >30 days past due.
• 6.35% of loans were past due on a seasonally adjusted basis, up 151 basis point from 1 year ago.
• Homes in foreclosure are up 2.47% (increase in 119 basis points from 1 year ago).
• Prime ARM loans account for 15% of the outstanding loans (an indicator that the prime loans are catching up with subprime).

Currently Florida and California are leading the country in foreclosure.  The vice president of research & economics for the MBA is calling these two housing marketing “extraordinary”.