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Troll is 1st. Do not feed the troll
Well there you go, foolishly using logic and common sense again. Won't you EVER give it up???
This is all nice and informative, by I missed the key point you are making here Tanta. Are you saying their loan should not have been modified because it is too expensive for the investors (CDO holders), or are you saying the investors do not know how much more cost will come in future, or are you saying servicing business is not a profitable one?
It's not necessary that having a brain will make you a fortune, but not having a brain will make you lose your fortune and your pants.
The guys from that story are a pastor and a teacher. If they are dumb like a piece of wood, what brain those who they teach/preach have?
I'm saying that if you spent at least as much time trying to emulate my reading skills as you do trying to make up cute little variations on my name, your questions might have been auto-answered.
Incentives are misaligned. A bond was sold (the CDO) to the noteholder with a guarantee of future payment streams that are possible only in the mind of the guy who's selling it on Wall Street. So, either sell the house short and get something for the investors or foreclose and get nothing.
IMHO the point is that yet another reporter swung and missed.
Ummmm ... How do you lose your job as a minister? Especially with events spiralling, one would think lots of folks are needing ministering out there.
Suplementing one's income form the collection plate?
They could have done a Dreamaker 100% with Stated Secondary Employment to make the deal fly ... lol
The Finches had $168,500 of debt forgiven. Do you think the Rev. Finch will ever forgive HomeVestors when he receives the 1099?
theroxylandr, define "dumb."
Let's play let's imagine.
Would your point of view change if I told you that Denise's mom owed $10,000 on that house, and she took the net $420,000 that her daughter and son-in-law paid her for it, and opened up a HomeVestors franchise with it?
Or that mom owed $420,000, and the sale got her off free and clear, so the Finches just took the burden over from mom?
I did my share of short sales in the early 90s So Cal bust (as an agent). It was often a new lease on life for a family in the midst of some hardship- job loss, illness, etc. The lenders asked for a lot of documentation before approving such deals. A good number were turned down if the lender could tell that the borrower probably had other options.
I am not presently working in RE, but I have pondered how the whole thing will work this time around. In the 90s, we just picked up the phone and called the lender, got transfered a couple times, found out what sort of documentation they wanted, provided it and waited for a decision. Now, with all the securitization, who do you call? When you call, what are the chances that you get someone on the line who cares? The distance from "lender" to "borrower", both transactionally and geographically, is so great, it is not going to be such a straight forward process.
The other thing that is very different this time, at least in SoCal, is the fact that the borrower in trouble is often not actually unemployed, or ill, or in the midst of some crisis. They simply borrowed too much under really lousy terms. Their circumstances may have not changed much since they got the loan. If the borrower went "stated", do they have to fess up to their actual income in order to qualify for the short pay? Do they have to admit to fraud? The borrower will now have to provide all those documents that the lender should have asked for during the loan approval process.
This is the usual MSM BS:
What Countrywide needs to do to save its stock - Aug. 23, 2007
But it give us a hint.
If indeed CFC will be prevented from falling it must involve larger GSE involvment. My guess is that we will see that within the next 6-8 weeks.
I was going to use the name Tonta here, but then I'm not desperate for attention I was denied early in life, so I picked another.
Tanta,
Personally, I think this couple sounds sort of smart. They payed almost half a million dollars to Ma for living in a home that they were probably staying in to begin with.
Ma's probably sitting on the beach enjoying her retirement.. or that's how I like to imagine it.
deb, I never did any day-to-day work with the process of approving short sales (lucky me!). I was the one who had to write the policy for the bank-owned loans regarding just how "competitive" a bid had to be before we'd accept it.
But we had our own staff appraisers who knew our markets intimately, and who could tell us if we (and the borrower) were about to get taken by a sleazeball.
It's awfully hard these days to verify that a short sale bid is "the best the market will bear."
I'm from the Boston area and read that story too. In my mind, something did not seem quite right with the figues even without doing the math!! Would a lender really forgo that amount - $168,500???
1099s are a courtesy. The forgiveness of debt is a taxable event that is the responsibility of the taxpayer to calculate.
Tanta, why do you say there was no rapid market clearing? In a few short months we went from $430,000 of mispriced and nistaxed reasidential real estate to two market priced transactions in two states that generated recent comps for neighbors to compare and possibly lower their taxes and insurance.
Tantra,
i think u should consider changing your name given Tanta is the lead girl here. it does get a little confusing and theres no really good reason for the similarity.
Given that HomeVestors is a franchise available for anyone with 45-50K (maybe taken from a home equity loan), don't you think that there will be major stumbles with some of the franchisees?
Like ARM loans, this idea worked well in a rising market.
How long are these relatively small operators prepared to hold on to the houses?
Robert Coté, to me, "market-priced" is adjusted for all incentives and costs and gains and so on.
What do you have to assume about the NC home purchase to describe it as "market-priced?"
They're still "unqualified borrowers" being shoehorned in by stupid subprime lending (probably). The seller of the NC home is the buyer of the old home, which is a classic non-arm's-length transaction.
Do you see why I said I wonder about this being what most people think of as "market-clearing"?
I'm sorry, I saw "Finch", and all I could think was "Serin". I started laughing hysterically.
My guess is that the $168,000 loss was real, because an older house needing renovations really is deeply disadvantaged in a market like this. Very few of the lenders have the time and staff to supervise the renovations to upgrade and resell a home right now.
My reaction was that the original purchase was completed with a fluffy, non-critical appraisal. Those days are over! Tanta, wouldn't you have wanted a second appraisal on the original transaction? I would have. The return of review has generated some rather hefty price downgrades!
Look, defenders of "stated income" are defending the borrower's "need" to not tell me the source of the income as much as the amount of it.
Defenders of "stated asset" are defending the borrower's "need" to not tell me the source of the funds used for down payment.
Every underwriter past the orientation period has run into one of these in-family "gifted equity" loans where mom is selling the house to the kids for a lot less than market. That works, mostly.
Then there are these in-family transactions where mom is selling the house to the kids for a damned sight more than anyone else could be manipulated into paying. That does not work.
My guess is that the $168,000 loss was real,
Oh, I think it's possible that the "real" loss on the MA home was worse than that.
But if HomeVestors had a contract to sell the NC home to these people for enough of a profit? Perhaps they'd be willing to overpay a little for the MA home?
1099-C's are federally mandated statutory requirement for forgiveness of debt, by an institution in the business of lending, in excess of $600 in any calendar year.
Penalties for intentional failure to file are; the greater of $100 or 10% of the corrected amount of the information return.
first of all, your soylent milk ruined my damn raisin bran.
second, maybe the question should have been, 'if the bid is coming from the guy with yellow billboards who renovates houses then re-sells them, and this house was just renovated by the Finches less than a year ago, there might be something wrong with this bid if the guy with the yellow billboard is going to make a profit...'
U.S. NEW-HOME SALES RISE 2.8% IN JULY TO ANNUALIZED 870,000 PACE
Looks like we hit rock bottom a couple of months ago. Go team!
It's fun to speculate about who made the loan on the NC home, isnt' it?
Losing a job as a minister is a double wammy, especially if he was at a church where he got a "double dip". Many churches offer (for historical reasons) a housing allowance which is non-taxed.
Tanta,
If you want to claim the process is imperfect then yuo'll get no arguement. If you want to claim the specific example stinks I'll continue to applaud your much appreciated efforts. Suspicious; $31k for a MA cert teacher is awfully low for but one instance.
I am comparing before ang after as component in valuing the larger market(s). Before we had one unreasonably high valuation that would have remained hidden in a mod versus a transaction at a much lower price that certainly couldn't have been any worse than the bogus $430k. Imperct, yes. Probaly not entirely transparent, yes. More transparent and more representative of the true market, also yes.
What a complete pile of manure.
Home sales up to 870K per annum and prices ROSE slightly.
yet,
"The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions are common. The standard error of 12% is so high, in fact, that the government cannot be sure in most months whether sales rose or fell.
It can take up to five months for a trend in sales to emerge. New-home sales have averaged 867,000 per month over the past five months, compared with 861,000 in the five months ending in June. The five-month sales average is now down 19% from last July's 1.07 million pace.
Home builders have piled on incentives, including offering free vacations and new cars, to sell homes and reduce inventories. Such incentives are not subtracted from the sales price reported to the government.
Sales are reported when a contract is signed, not at the closing of the sale. Home builders have reported a large increase in cancellations in recent months. Cancellations are not reflected in the government data, so the reported sales are likely overstated."
So this report is effectively not worth the paper its printed on.
All: CR is in process of posting on July sales. You'll get a thread for that in a minute.
He's PT, I'm ET. It's still dark-thirty at his house.
31k for a MA cert teacher is awfully low
Not if it's at Jesus Wants You To Be Rich Charter School.
wait, so you think homevest overpaid in ma to ensure a nice profit in nc? so isn't that good for the noteholders?
Sounds to me like a new breed of hustler/vultures figured out a brand new scam.
When are Americans going to remember that money arises from making stuff (manufacture, mining, and agriculture) rather than trading paper chits?
It's apparent there has to be a whole lot more pain felt before we wake up. Anyone calling a bottom is way premature.
Stuart: Please watch what the MSM actually tells you. Prices of real estate did not rise. The MEDIAN price of houses that SOLD rose. Why? People who can provide for a 20% down full-doc jumbo will have no problems. The big houses will always have a market.. it's the normal folk who will have trouble.
Hmm... One of the funny little zigs in the tax code is that neither service members or ministers pay taxes on housing that is provided by their employers or a housing allowance if it is provided instead. Maybe he's no longer a minister because he used his tax-free housing allowance to provide a windfall for his mom. THAT could piss of the parishiners enough to put him out of a job. If the price that he paid his mom is significantly higher than market rate, he might have committed tax fraud already.
so isn't that good for the noteholders?
Quite possibly it is. If so, it's quite possible that that was pretty damned lucky. The next deal might not be. I am only bringing up the "due diligence" thing because, well, it matters.
OTOH, the NC house deal could be a bite for the next set of noteholders. Who knows?
I am simply trying to examine the knot, not claim I can untie it.
unsympathetic: Even good credit jumbos are paying alot more interest now. A conspiracy minded person would say that keeping the median price up is why there are so many whining for F&F to raise the conforming limit. Personally, I don't think so, but...
I mean, if this deal got done because HomeVestors had an incentive to pay more than another investor would have for the house, then there goes your "new comp."
As soon as I saw "Short Arms" in the title, I knew there was some 'inspecting' to be done. For those of you who were not in the military: never mind.
This whole thing has the appearance (in retrospect) of having been orchestrated by the family.
As to the $10m renovation money - yes, that's what they told the loan officer but who's to say that's what actually became of the cash?
Robert Coté,
I think the take home pay was $3,100/month so that would be probably around $50-55k/year gross income - sounds about right for Mass. teacher.
While they moved from a 5.5% loan to an 8.25% loan in order to take out $10,000, I suspect there is more to the story. Most likely, they refinanced with a 2/28, meaning they were paying much less for the first two years (note they refinanced in 2005) say 3%, and then the reset kicked in at 8.25%. With the family spending all income and saving none, once the reset happened, it was "game over." I suspect that scenario will replay millions of times in the next year or so as all those 2/28's taken out in late 2005 and in 2006 kick in.
JMHO
yeah, but if the ma noteholder can get inflated bids, i'm sure they'll happily take them all day long. screw due diligence if someone offers you 10% more than you think the house is worth, who cares why they're doing it. of course, it's quite likely a noteholder somewhere else will get bitten by this sort of system, so on the whole the due diligence is obviously importanta.
take home pay was $3,100/month so that would be probably around $50-55k/year gross income Yup. Good enough to qualify for a nice $140,000 home.
note they refinanced in 2005)
No, it says they bought in 2005 with a 30-year fixed and refinanced in 2006 with (something) that increased the loan amount by $10K and the payment by $900.
All lenders use GMI, not take-home. I assumed that GMI was $3,100.
Does it really take $50k to foreclose on a home, on top of the funds the lender needs to pay off the loan itself? That seems like an awful lot of money to shuffle some papers.
p.s. you should title a post that. "Due Diligence is Obviously Impor-Tanta."
Gee whiz.
Were they really that stupid?
Taking out a loan for $10,000 that increased payments $900 per month? That's only 12 months into a 30 year mortgage for you to be net underwater. They would've been better off going to the local loan shark.
That seems like an awful lot of money to shuffle some papers.
That's including expenses like broker commission, taxes and insurance, maintenance, eviction, etc.
And you obviously are assuming that those papers aren't being shuffled by any of the lawyers I know.
They would've been better off going to the local loan shark.
They did.
ORIGINAL LOAN:
Recorded Date: 12/20/2005
Sale Price: $ 420,000 (Full Amount)
Legal Description: CITY: JAMAICA PLAIN
*************************** MORTGAGE INFORMATION ***************************
Lender: ACCREDITED HOME LEND
Loan Amount: $ 378,000
REFI PART 1:
Recording Date: 8/23/2006
Book/Page: 40249/240
Document Number: 00099040
Assessor's Parcel Number: W:10 P:01915 S:000
Legal Description: CITY: JAMAICA PLAIN
********** MORTGAGE INFORMATION **********
Mortgage Type: NON-PURCHASE MONEY
Lender: WMC MTG CORP
Loan Amount: $ 83,000
REFI PART DEUX:
Recording Date: 8/23/2006
Book/Page: 40249/223
Document Number: 00099039
Assessor's Parcel Number: W:10 P:01915 S:000
Legal Description: CITY: JAMAICA PLAIN
********** MORTGAGE INFORMATION **********
Mortgage Type: NON-PURCHASE MONEY
Lender: WMC MTG CORP
Loan Amount: $ 348,000
OK, if $50k is accurate, how's that going to work out for Countrywide's rapidly growing pile of REO that it doesn't appear very eager to unload? I'd think they are sitting on a time bomb there.
oh speaking of stated income, did you see BofA has stopped doing SISA, SIVA, NINA, NoRat, 80/20, as of today?
Yes, I get the statistical effect of shifting the sample up the price scale, but you missed the point of what I was referring too as manure. The high margin of error, omission of incentives and the high rate of cancellations all but negate any accuracy in the report making it next to useless in terms of absolute accuracy. Even in terms of relative accuracy to prior periods, who knows how accurate it is there as well. We don't know the cancellation rates and incentives offered with certainty. BTW, when I say price, was referencing the stated median price. But hey, thanks for nit picking anyways.
" keeping the median price up is why there are so many whining for F&F to raise the conforming limit "
Raising the conforming limit will not bring down the median price, unfortunately.
1) More of the current "homeowners" with bad ARM's are nonconforming.. raising the limit won't change their ability to conform. Besides, if they were conforming but a broker pushed 'em into a bad ARM anyway.. that's more fraud than my brain wants to process on a Friday.
2) You can't raise the limits - nobody will buy their paper at that point. Fannie and Freddie simply aren't equipped to make the giant NAFTA sucking sound and magic the country into health.
a) They're barely maintaining their existence as it is.. I'm pretty sure I was an undergrad the last time they filed a healthy 10-K.
b) Who is going to buy a Fannie or Freddie bond if they slurp up KNOWN bankrupt houses? It's better for Fannie and Freddie to limp along with their current status and not be infected any more than they already are.
I'm kind of amazed at times about how little the truly smart people on this board know about how other people work and make money.
The easiest way for a minister to lose his job is for the church to go under because he/she can't fill the collection plate high enough. Many churches are self-supporting or nearly so.
$31k is not necessarily a low salary for a MA teacher. It's a low salary for a full-time PUBLIC school teacher in an urban/suburban community. But the article didn't say full-time or public and the area could be rural.
Thanks, Pop. Another reporter gets hosed.
a house doesn't go bankrupt.. let this post be an edit to my last one.. that para should read
b) Who is going to buy a Fannie or Freddie bond if they slurp up loans that the entirety of the banking world knows are nearing foreclosure? Nobody trusts any company in the US to be honest at this point about the contents of its bonds.. this move would be an admission that they're taking in bad mortgages and repackaging them as investment-grade bonds.
It's better for Fannie and Freddie to limp along with their current status and not be infected any more than they already are.
oh for all you workout-haters, all you need is a little motivation...bacon dreamz is here to help:
YouTube
- Broadcast Yourself.
So, in December 2005, the Finches bought the home for a sales price of $420,000. They borrowed $378,000, or 90%, from our favorite subprime lender Accredited.
Nine months later, they refinanced that $378,000 loan with a "piggyback" deal from WMC (our other favorite subprime lender) totalling $431,000. That would be cash out of $53,000.
Possibly WMC used an "as complete" appraised value, assuming renovations of $43,000 that add $43,000 worth of value, for only $10,000 in net cash to the borrower. If WMC had an LTV max of 90% on a cash-out (which is nuts for subprime, of course), that would require an appraised value one year ago of $479,000. Nice appreciation. It is hard to imagine what HomeVestors has to do on this house at this point to make it salable.
More likely, dope was smoked in the appraiser's den of iniquity, and WMC happily enjoyed the contact high.
As Pop previously illustrated...
SUFFOLK REGISTRY OF DEEDS
"Document Search" mid page.
For those who would care to play with live ammo and get the full picture from the registry...
Must I be the one to say it:
Out of the frying pan, into the fire.
theroxylandr:
A pastor and a teacher. Hey we aren't dealing with Einsteins you know. 190 IQ total at most.
Tanta More likely, dope was smoked in the appraiser's den of iniquity, and WMC happily enjoyed the contact high.
Yup. It turned out to be a bad trip, though. I'd think that if Homevestor does many of these types of deals underwriters are going to push them to the top of the "review" list.
Which leads me to suggest that if I were a noteholder here, I would suggest that WMC repurchase this stinking fraudulent POS at par, and take the $168,500 write off its own pathetic self.
Which is quite possibly what happened.
Sometimes when I hear all this stuff in the press about how hard it is for servicers to get those short sales approved, I wonder whether the problem isn't that, well, the servicer doesn't really want to bring this deal to anyone's attention, actually.
Tanta, I think you've hit the proverbial nail with that statement... Servicers don't want to screw up the deal they have going and don't want to call any attention to it. Period
They're still subject to self employment tax on the "housing allowance" (along with all ministerial income). So even if they are getting a break on his 1099 income they're paying 15% on the housing allowance. Bet those quarterly payments were fun to come up with.
Since the Housing allowance is simply excluded from declared income on your 1040, rather than being deducted, they may have been pushed into a stated income product (though it would not be that hard to document what was going on since the housing allowance has to be declared in writing in advance).
All of this is based on what the laws were a few years ago when I passed through Bible College (I dug the old faithful Pastor, Church, and Law to double check facts, but it is also a few yeas old)
Nice pic of the Rev and his wife in the "testimonials" section of the HomeVestors web site. Also, Google the string "legal notices pharmacy blog mineral oil 10612" and the first hit should be a hopelessly distorted summary of a legal notice having to do with foreclosure proceedings involving the Rev and WMC as of 8-18-06. You are met with the Boston Globe registration page when you try to access the full text of the notice.
In fairness, they bought the house when he was working as a minister and she as a teacher. If you assume $52K for her ($31K takehome as calc'd above) and something slightly more than that for him (not unreasonable), they could have been almost within spitting range--say, the cost of a moderate sized house in rural Ohio or Indiana--of being able to qualify for the initial mortgage.
Refinancing for $10K more in principle only eight months later seems an inevitable side-effect.
A Google search of Denise Finch shows a person of that name at 44 Round Hill Street, Jamaica Plain. A Google search of that address will take you to the Police Beat from August 11 issue of the Jamaica Plain Gazette (year unclear.) Here you find a reference, under the date 8/3, to one Jeffery S. Finch and a woman (not Denise), both of 44 Round Hill, and a Roxbury resident. Something to do with Class D drugs. Don't mean to imply it's the same person, of course, but it kind of arouses one's curiosity.
Very nice forensic accounting, Tanta.
I can't do anything to defend this reporter so I won't, but I would like to explain a little bit about this story and give anyone interested some idea of how the newspaper was looking at it. For what it's worth I was a reporter/editor for several small to midsize papers for 15 years. I'm no longer in the business.
Here's my guess about how that story came to be:
Somebody assigned this reporter the task of doing a story on a short sale. Other than that, there was likely little input from above until after the piece was written, and that was only a very brief review, if anything at all.
The reporter didn't bother to ask a lot of pertinent questions, as noted by Tanta, if not due to time constraints, then what she believed (or chose to believe because it was convenient) were time constraints.
Sadly, any math beyond subtracting 900 from 3,300 is probably more than the reporter can handle. While she should have had details about the interest rates and amounts of other loans, I doubt she did.
The paper wanted a short sale story. They got one. The how and why of that sale were never a question.
For me, most of the blame falls on the editor. You don't need a finance degree to see the questions this story raises.
Tanta,
I've been through this thread and noone seems to have fact checked your numbers.
Contrary to your assumption, the $3300 and $2400 are payments these folks made, meaning they include tax and insurance.
If you assume a property tax rate of 1% and annual insurance of $700, making about $5000 of their annual payments for "T&I", then back that out, you'll find they likely had an ARM with a 3.75% introductory rate that jumped to 7% when it reset. This is a far cry from "loan sharks".
This Florida short sales may be a Florida short sales if the foreclsoure doesn't beat the Florida short sales and bankruptcy of real estate.
Nil writes:
A Google search of Denise Finch shows a person of that name at 44 Round Hill Street, Jamaica Plain. A Google search of that address will take you to the Police Beat from August 11 issue of the Jamaica Plain Gazette (year unclear.) Here you find a reference, under the date 8/3, to one Jeffery S. Finch and a woman (not Denise), both of 44 Round Hill, and a Roxbury resident. Something to do with Class D drugs. Don't mean to imply it's the same person, of course, but it kind of arouses one's curiosity.
Nil | 08.24.07 - 2:54 pm | #
theres a jeff junior who is not a minister. those reports were me, not my father. i didn't follow his footsteps you can say