Quote by Gen: As for the States, I have a solution there too - and perhaps that's where we should focus our ire, since we can't seem to get anyone's attention in Washington DC given all the bribed, er, "lobbied" lawmakers

Change state tax certificate laws. Sell off delinquent taxes in the fall following the delinquency (assuming a spring "due date") thereby putting the certificate in someone's hands six months after non-payment and shorten the allowed redemption ("cure") period to 12 months - after which the certificate holder can pay the delinquent taxes in full and gain a clear title. This will put an immediate stop to banks refusing to foreclose or dispose of delinquent properties, leaving them vacant (since they will wind up losing them to a tax sale) and it will stop the bleeding at the state revenue level. As a beneficial side effect it will force a clearing of the market and re-establish occupancy, maintenance and upkeep of these homes.


AMEN !!!!!!!!!!!!!!!!!!!!!

Unfortunately Karl, the fraudsters and thieves have other plans in mind,

Quote:

The Treasury Department's long-delayed initiative to purchase toxic assets from financial firms launched Wednesday...

"This is a good use of money to shore up institutions," said Ross, a leading investor in distressed businesses. "Frankly, the big part of the reason why bank lending has gone nowhere is because of these toxic assets."

Treasury officials said they believe $40 billion was the "right number" to spark interest in the securities and other assets that provide financing for all kinds of loans, including mortgages, commercial real estate debt, and credit cards. These officials said the announcement of the program made by Treasury Secretary Timothy F. Geithner in early February has already contributed to the recovery in prices of the toxic assets.
...
http://www.washingtonpost.com/wp-dyn/con....

Refusing to read the whole ticker
But on the first paragraph regarding indy loss sharing
There is a flaw on that, who was watching to make sure that first %20 loss was not the gravy ones and the rest were the turds that fdic takes %95 of the loss
Such a great bargain arrangement.
I would deal on that sort of **** all day If I was a crook

Nirvan, you can BET we got ****ed. HARD.

GUARAN-****ING-FEED.

But even without it - the incentives to NOT modify are ENORMOUS. You can easily make 10% of the loan balance in trash fees (late payment and other penalties, special servicer **** and such) between default and foreclosure. Since that exceeds the 5% "loss cap" for the P/E guys THERE IS NO ****ING INCENTIVE TO MODIFY THESE LOANS AT ALL.

BTW, here's an example...

$200,000 loan outstanding. LTV 120% at present (house is worth $166k)
P/E gets this at a blended cost of $150,000 (25% discount.)
Homeowner DEFAULTS.

Ok, what do you do:

1. Write down principal to $150,000? This gives the homeowner 10% equity, you now have a coupon-paying note that you paid PAR for. Heh, that's a good idea, right?

OR

2. Tell the homeowner to get ****ed. You say "but the costs will make it worth less and you'll eat some." Oh really? Not necessarily. Let's say that resale + foreclosure expenses are $33,000 (20% of value); you've now got a $133,000 "value" with a note of $150,000 and a $17,000 loss, right? Wrong. The loss is 95% the FDICs, so your loss is 5% of the gross, or $850, not $17,000! If you can manage to get more than $850 in junk fees between now and when the foreclosure happens out of the homeowner (or anyone else!) YOU WIN ****ING HUGE! Further, if you can hound the poor bastard in the house and he PAYS you now have a $200,000 note that you paid $150,000 for and you win the ****ing lottery. If even 1 in 20 of the people cure (5%) you're a ******n genius, and on the rest, you make more money foreclosing than modifying.

See how this works?

**** these crooks.

"The nine most terrifying words in the English language are, 'Hi. I'm from the government and I'm here to help.'"

Can anyone recommend a book, or possibly one of those how-to courses which explains how to go about buying property at tax sales?

I know enough to get confused with the nomenclature and be wary of the pitfalls, but possibly the environment may become favorable for this - if any money escapes the black hole of the collapsing bank system.

Buying tax certs almost NEVER winds up with a deed.

But that's ok - you get a nice coupon on the time while you hold the cert, set by law. Research what the interest is that you're due (its damn nice in today's low-rate environment) and bid accordingly.

Taking on this issue at the State level is a brilliant, truly American approach!

In order to drive the kind of changes proposed J6P has to get involved in State Government. How many here know who their representative is in their State Government? Now assume we are a special crowd because of our interests and that the average crowd response would be 5% of our response rate. Not pretty!

I am also wondering now, if I were a bankster how could I exploit such a thing? No answers yet (not to good at banksterism), maybe my friends at the TF have some ideas.

While there have been gov't-created incentives not to modify, isn't the main reason that banks don't modify simply the nature of the underlying securitizations? I've heard that typical mortgage-backed securities pools only allow for 5% of the pool to be modified (since that had been the upper end of what was imaginable). If more than 5% were modified, how to apportion the losses is in question given the multiple tranches, etc. If ABC Bank forecloses, the apportionment of the loss is legally pre-defined (with the bank's investors eating most of it), while if ABC Bank modifies they're at risk that their investors could second-guess their methodology in deciding when & how to modify. This first came to light (to me anyway) in Greenwich Capital V Countrywide in late 2007. Countrywide chose to modify some loans (under pressure from the gov't), passed on those losses to their investors (in the proportion that Countrywide saw fit) and Greenwich, being a big investor sued Countrywide over it. I honestly never heard the resolution of that case (does anyone know anything?). I think the basic situation is: Foreclosure = legally & contractually defined loss. Modification = big can of worms.

Gen,

Good comments.

Couldn't the states force transparency and mark the real property to market value if the mortgage holder doesn't pay up taxes? That would certainly force the banks to act.

The states have no interest in lowering the price of the property because that reduces the tax value. However, getting something at the expense of exposing the holding bank's financial position might actually be a good thing.

Quote:

Force banks to foreclose on all loans more than 90 days past due in a diligent fashion. To punish failure to do so provide that a foreclosure not diligently-prosecuted results in a clear deed being conveyed to the homeowner (that is, 100% loss to the bank!) That will get their attention - FAST.

I'm sorry Gen, but I have a better chance of winning the LOTTO than for that to happen.

Ilmaverick, that can absolutely be done AT THE STATE LEVEL.

"US Senate: STOP BEING STUPID"

You must be thinking of someone else's Senate. ;-)

Anti - I buy tax certs willing to either take the interest (18% per year) or the property. Each state, county, city is different. Talk to your local tax office's attorney off the record and read the materials that the tax collector has. That will give you an idea on what you need to do.

My little farm on a city ridge was a tax cert where no one even bid on the tax cert except the city and it ended up being carried on the books for an additional 2 years until I got it. $2,600 plus tax stamps and recording with clean title from the city.

Thanks for the great explanation. This explains a lot of what many agents are seeing out in the field.

Deejunk... Very Inspirational... I might have to find a new hobby :)

It appears that only GMAC, dumped the most foreclosed homes. Wells ****o will keep them "til death do us part" senerio.
I thought if you did not pay your prop tax, the locals would be all over you like a fly on horse****. If they had enough like wells properties, can't they go to court and pound them?
My dad got a ticket in Cali, on his birthday and the cop apoligized becuase they needed the money. A rolling stop, cost $210. And why, because foreclosed homes that have not been liquidiated in the market and held by gubberment tit sucking banksters are sitting, waiting.... waiting and sitting for a recovery?

Gen, You are one smart cookie. While I figured that anytime the U.S. Gov't sells and asset, the public gets screwed, I had no idea how FDIC's loss sharing agreement would affect the new owners' willingness to modify the loan. It is official U.S. policy to encourage banks to modify underwater loans. Yet Sheila effectively foreclosed on that possibility in the banks she has taken over. Should she be fired?

Steel, this is the problem with this sort of horse**** game. There is ALWAYS a "but" in there. Always.

Nobody takes a deal they don't think they can profit from.

Karl said:

"Let's say that resale + foreclosure expenses are $33,000 (20% of value); you've now got a $133,000 "value" with a note of $150,000 and a $17,000 loss, right?"

Can anyone tell me how Karl came up with the $133,000 figure? I'm assuming if you went to sell, the home's market value dropped to $100,000? I'm a bit confused.

$200,000 house, 20% underwater: $160,000 value.
20% foreclosure costs off $160,000 = $32,000 (roughly)
$128-133kish value ex-costs.

All rough numbers.

Note present value is $150,000 (they bought at 25% discount)

The bottom line is that with a 95/5% loss share so long as they can "junk fee" you in some fashion they win even with a fairly big loss on the foreclosure, simply because nearly none of the actual loss is theirs.

Thanks - starting to make sense now. So say that 19 out of 20 get foreclosed. $850*19 = about $16,000 of total loss for investors. But 1/20 cures for a $50,000 gain. Given this scenario, could it be conceivable that the cure rate need only be 1/58, or 1.7% just to break even on the portfolio?

Mike, no, its worse than that.

Let's say the current market value on the house is $166,000.
The mortgage (for $200k) was bought for $150k, so from the INVESTOR'S point of view, the house has equity. From the HOMEOWNERS point of view, they're upside down.

If there were NO loss-share, then the investor has EVERY REASON to give the homeowner a principal break down to close to $150k, because (1) they then have a PERFORMING interest-bearing note, and (2) they still bought at anywhere from par to a small discount from par.

Good deal.

BUT - with the loss-share where they only eat 5% of the loss its different. Now if the foreclosure would cost 20% of the home's value (rehab, legal, realty fees, etc) they have a powerful incentive to foreclose, because their out of pocket on that loss is under $1,000.

If they can manage to junk-fee up the process to the point where they make more than $1,000, its worth it for them to foreclose instead of modify, EVEN THOUGH ON PAPER IT LOOKS LIKE THEY LOSE MORE BY FORECLOSING, because they don't lose - THE TAXPAYER DOES!

These sorts of 'loss share' deals where there is ALSO an acquisition discount off face create HORRIBLE incentives the wrong way compared to claimed public policy.