The ytd growth is up 100% and the mtm growth is up 1000%. The # of AVMs for the Oct 07 is 43% of the 2007 total. Are the investors paying them to run AVMs on all the loans that they service? A majority of the loans they originate are sold to Fannie Mae. Is this something that Fannie might have paid for?
Interesting Article at the Implode-o-meter regarding Deutsche Bank foreclosure being tossed due to lack of standing,sorry not able to link,need caffeine.
Nice catch. Wonder if somebody is looking at real values, who it might be but more importantly who else should be.
Did y'all catch the CNBC coverage the other day on the footnote in CFC's SEC filings that one more notch down in credit ratings and they'll have to stop servicing loans and pass their assets to somebody else ?
Could be they are pulling AVMs from multiple vendors, and each counts as a unit? Or maybe some are being re-evaluated each month, or however often. That's not too unusual - the big CC companies pull fresh FICOs all the time.
<a href="http://iamfacingforeclosure.com/article/20071113_Boyko/01.html>Deutsche bank pOnw3d
This development is nothing short of revolutionary; if should strike fear into the hearts of anyone owning MBS. If upheld (assuming Deutsche bank has an appeal process), it means the end of MBS. Good riddance.
Is this something that Fannie might have paid for?
Why would Fannie pay CFC to run an AVM? Fannie can run its own.
It doesn't mean they got paid for it.
Well, no, it doesn't. But why would they show it on the operations report if it doesn't flow through to some fee account?
Could be they are pulling AVMs from multiple vendors, and each counts as a unit?
Well, again, I didn't assume this is reporting AVMs used by CFC; I wondered if they aren't AVMs sold by CFC. You're right that porfolios request AVMs and FICOs all the time. But do you show those on your report of operations under "Loan Services"?
The LTV is very important for many option ARMs. Above the cap of 115%LTV and the loan terms will change, sort of like getting a margin call.
THis could be the next shoe to drop.
There are even some investment portfolios that mark the LTV daily.
Above the cap of 115%LTV and the loan terms will change
No. For the eleventy-jillionth time, OA caps are applied to the original loan balance, not the property value. A loan with a 115% cap is reset when the unpaid principal balance hits 115% of the original principal balance, regardless of LTV. If you are at 50% LTV when you hit your balance cap, you get reset.
There are no mortgage products I know of that can change payment terms to the borrower because of changes in the value of the collateral. I can't think they'd be legal if you offered one.
This is a hugely important point: lenders do not get loan term "do-overs" because the value of the collateral changes. That is why setting original LTVs and having good appraisals is so damned important: the lender lives with whatever happens to the collateral.
I don't think you want to cheer that kind of action. Let's keep something in mind. People with money aren't going to make ANY more loans to people WITHOUT if this is the road we go down. If you think the divide between have/have-nots is wide now... just wait. At the end of that road is a life you don't want. Credit has been plentiful, but money is always scarce - by definition most don't have it. The majority of the population cannot provide for themselves... careful biting the hands that feed you.
I most definitely will cheer it. I am sick of these Wall St. pigmen getting rich at the expense of the rest of us. If Deutsche bank and some investors take a hit because they got sloppy and didn't really own the collateral, great. Some poor folks get to keep their houses, and we get to stick it to the man. Power to the people!
Central Scrutinizer's link might be the story of the day - Tanta, you might want to take a look at that one for us... lotsa mortgage-nurd mechanics involved there.
Gotcha. Well, it is a noticable rise, I'll give you that.
I found the prepayments in full impossibly low. 13k out of 9M loans? that is like, what - a CPR of one or two, depending on balances. Any thoughts on that one?
This is a quote from the Deutsche Bank story Tom mentions:
This court order is what I have been saying in my cases. This is rampant fraud on every court in America or nonjudicial foreclosure fraud where the securitized trusts are filing foreclosures when they never own/hold the mortgage loan at the commencement of the foreclosure.
That means that the loans are clearly in default at the time of any eventual transfer of the ownership of the mortgage loans to the trusts. This means that the loans are being held by the originating lenders after the alleged "sale" to the trust despite what it says per the pooling and servicing agreements and despite what the securities laws require.
This also means that many securitized trusts don't really, legally own these bad loans.
In my cases, many of the trusts try to argue equitable assignment that predates the filing of the foreclosure, but a securitized trust cannot take an equitable assignment of a mortgage loan. It also means that the securitized trusts own nothing.</i>
My understanding of this is that these loans went into default before the a legal transfer was completed.
Is this because they went into default so quickly, or because the legal transfer is so slow in coming?
It does seem rather remarkable the parties involved couldn't get this right.
I am sur Anglo is doing this out of a sense of pubic service.after all,that is how he serviced his shareholders.
Tom Stone | 11.13.07 - 9:11 am | #
Ahem, in the same way that the bull services the cow.
Let's keep something in mind. People with money aren't going to make ANY more loans to people WITHOUT if this is the road we go down.
I don't think the borrowers are out of the woods on this at all... But the MBS flying monkey's aren't the one's who can make the claim. Its the holder of the actual mortgage note - whoever did the tranching has to have it & pursue the foreclosure... So DB has to lean on them OR get a hold of the mortgage... A or B.
That is what the court has said from what I read. All the MBS owner has is a claim to revenue from a collection of mortgages according to the tranching formula... the 'dude' servicing the loans needs to hold those. These MBS from DB's perspective should be called vMBS 'virtual mortgage backed' if they are servicing and DON'T have the loans in possession...
And if so it is a very good ruling for everyone.
That assumes I read the piece right... any of you real lawyers not working today?
Tanta, you might want to take a look at that one for us... lotsa mortgage-nurd mechanics involved there.
Sorry, guys, but I'm underwhelmed. This breathless leap from failure to include assignment with FC filing (sloppy work there) to outright fraudulent intent (trying to FC a loan you don't service) is unconvincing.
Here's de thing: there are two relevant documents at stake: the note, which is the promise to pay part and which is collectable, and the mortgage/DOT, which is the pledge of the property as security against the promise to pay.
If you are trying to collect on a debt, you must prove your right to do that. That means you are either the noteholder (original lender or party to whom note is endorsed by the original lender), or the servicer on behalf of the noteholder.
If you are trying to foreclose, you must prove your right to do that via a copy of the mortgage or DOT showing that you are the mortgagee, or an Assignment of Mortgage showing that the beneficial interest in the property was assigned to you from the original mortgagee.
So DB didn't include both a copy of the note and a copy of the mortgage or assignment of mortgage showing that it has standing to collect and foreclose. As I said, sloppy work. It's possible that at some point in the past they never got an Assignment recorded correctly. This is a common screw-up in the industry. It is the kind of mess up that people like me throw hissy fits over, but that during the boom was too low-priority for busy shops. Remember that we were in that "hell, we'll never have to foreclose" mindset.
So now that we do have to foreclose, these sloppy servicers are getting kicked around by a judge because they didn't even get elementary paperwork right in their filings. I say, you go, your honor; I have no problem with servicers getting beaten up for this kind of Mortgage 101 stuff.
But breathless speculations of OMG FRAUD!!1!? Not today.
I don't think you want to cheer that kind of action. Let's keep something in mind. People with money aren't going to make ANY more loans to people WITHOUT if this is the road we go down. If you think the divide between have/have-nots is wide now... just wait. At the end of that road is a life you don't want. Credit has been plentiful, but money is always scarce - by definition most don't have it. The majority of the population cannot provide for themselves... careful biting the hands that feed you.
gamma |
Beyond the GSE's what sort of demand is there for mortgage debt these days? Have we come to the point were the taxpayers underwrite each others mortgage loans; I will buy your house for a million if you buy my house for a million etc.
Did anyone notice the story yesterday about the selling of discharged debts? (Not merely delinquent - DISCHARGED) Was wondering what people thought about that and all the weirdness associated with it.
Forgive the OT, but wondering if anybody has any idea of the volume, relevent indices (ala ABX), etc. for this new acronymic entry - the ARS. "Auction Rate Securities are floating rate securities that are marketed by financial institutions with auction reset dates at 7, 28, or 35 day intervals to provide short-term liquidity. " They sound like an Option Arm for CP.
But breathless speculations of OMG FRAUD!!1!? Not today.
I don't think its fraud - never did. I was wondering if the MBS fund was getting out in front of their servicers and initiating FC without technically holding the note... you don't think this is likely?
But you think this is just a technical screw up where MB's people go back to the bowels of the county courthouses where the titles reside, find Eunice... take some of her wrath but then also get the assignments straightened out THEN go back to the judge to enforce the FC?
My understanding of this is that these loans went into default before the a legal transfer was completed.
Here's the deal:
The transfer of rights in a loan sale is effected legally by two things:
Endorsing the note. This is just like endorsing a check: you stamp the back of the note with "pay to the order of" and put the loan buyer's name in there and sign it.
Assigning the mortgage or DOT: this involves executing a document called an Assignment from the original mortgagee (the party named in the mortgage) to a new mortgagee.
It is quite typical in securitized transactions for the endorsement on the note to be blank. If you sell a loan to Fannie Mae, for instance, you don't endorse it to Fannie Mae, you endorse it in blank and give physical custody of the note to Fannie's custodian. The whole idea is that if and when someone has to take legal action to collect on the loan, the endorsement can be filled in at that time. Until then, the party with actual rights to payments made under the note is an MBS or a fractional interest in an MBS or something. That's why the notes are endorsed in blank: custody is evidence of ownership. This has been going on all over the place for decades, and is not a new practice.
With assignments, they are legally binding documents when you execute them, but they are supposed to be recorded in the land records where the original mortgage or DOT was recorded. There is a very widespread practice of getting assignments "in recordable form" but not actually recording them, unless and until you have to FC. Just like the note endorsements. The GSEs have been doing this for decades as well. It saves the cost and effort of recording assignments because you only need it to be recorded if 1) you want to foreclose or 2) you want to re-assign it (and therefore you want the assignment to you to become recorded, while the new assignment to the new buyer is the lastest unrecorded assignment).
There is of course some risk in doing things this way, and it is complicated by the MERS loans (electronic tracking of ownership without individual recorded assignments). The risk is that you need to go back and complete an endorsement or file an assignment and you either can't find the original document or you just notice, years later, that the original note or mortgage has an error on it. That has to get fixed before the assignment can be recorded or the note endorsed.
In other words, if you have a sloppy back room, you run the risk that it will cost you big money when you really don't need it to: at the point of foreclosure.
You do not need to theorize nefariousness when mere incompetence fits the bill. And we are seeing, as far as I can tell, the results of sloppy operations. Quel surprise.
Anyway, I don't know where this claim that "a securitized trust cannot take an equitable assignment of a mortgage loan" comes from. I don't know what they mean by a "securitized trust," what they mean by "equitable assignment," and what jailhouse they learned law in. It sounds to me like people who almost but not quite know all the lingo.
How much does it really cost to run one of these Tanta? Not askin' what they charge wondering what the unit cost would be...
So if they ran the thing every month for everyone... computer power what it is now would it really be an issue? A lot of processes like this are 100% fixed cost so if they run a million cycles or ten million it doesn't change the net cost one penny? That is as long as they don't exceed capacity...
Unit cost would be effected of course (unit cost for 10 mil cycles would be 1/10 thet of a mil)... but nothing else rally changes... total cost still the same IF all fixed like many of these things are.
If so why do they even report the AVM units - instead just report the revenue from AVM services charged for... or are they required to?
mal - I think there plenty wierd in that article. Not the least of which that Mr. Rathavonga files BK in 2002, and in 2003 he is closing on a mortgage for $274k.
My guess is that much of Countrywide's October AVM volume was part of push to market refis/home equities to borrowers with loans in their portfolio.
Ever since the mortgage sh** started hitting the fan, I have been getting postcards from Countrywide saying my home is worth X, and that if I refi with them I can extract Y of equity. They are using their AVM to calculate X.
BlastMail_OEV Restriction IMPORTANT NOTICE RE: ALL LANDSAFE APPRAISAL ORDERS
OWNERS ESTIMATE OF VALUE
Due to recent clarifications of regulatory issues and changes in Countrywide
Policy, the Owners Estimate of Value will not be provided on appraisal orders.
LandSafe will continue to provide:
Loan amount for refinance transactions
Sales price and loan amount for purchase transactions
In some states there are restrictions on providing a loan amount. In those states,
the loan amount will not be provided.
LandSafe understands that when an appraiser inspects a property and interviews
a homeowner/occupant or realtor, an opinion of value may be expressed by the
person or persons being interviewed. If the property contact person
communicates an opinion of value, it is important that you do not allow this
information to unduly influence your opinion of market value. Your value
conclusion should always be supported with market data, sound reasoning, and
logic. In addition, the data considered should be factual and verifiable.
Please remember that USPAP 2006, Ethics Rule, Conduct Section states: In
appraisal practice, an appraiser must not perform as an advocate for any party or
issue An appraiser must not accept an assignment that includes the reporting
of predetermined opinions and conclusions
Nothing has changed regarding LandSafes quality expectations for all appraisal
products. LandSafe continues to expect all appraisals to be consistent with
USPAP and represent a high level of quality and reliability.
AVM performed to assess real position on a (problem) loan already owned...waste of time and money IMO. These valuation products "work" sometimes, but not oftentimes, and any good news they deliver as regards an owned loan should be taken with a grain of salt. But good luck with that Countrywide, if that's your game.
Anyway, I don't know where this claim that "a securitized trust cannot take an equitable assignment of a mortgage loan" comes from. I don't know what they mean by a "securitized trust," what they mean by "equitable assignment," and what jailhouse they learned law in. It sounds to me like people who almost but not quite know all the lingo.
Thanks - I thought as much. That was why I wanted your ruling... Think of this as a track relay... I was wondering if the trusts got too smart by half and didn't set up transfer & assignment correctly (structure issue in which they intentionally didn't even worry about the baton) or whether it was just dropping the baton (just a bad relay exchange). Sounds like the later from what you describe.
I take it they can easily go back and pick up the baton (unlike track where you are disqualified)... correct? How much does that drag out the process, another month? Meanwhile Eunice gets visitors... they better bring cookies.
"Ever since the mortgage sh** started hitting the fan, I have been getting postcards from Countrywide saying my home is worth X, and that if I refi with them I can extract Y of equity. They are using their AVM to calculate X."
I don't think its fraud - never did. I was wondering if the MBS fund was getting out in front of their servicers and initiating FC without technically holding the note... you don't think this is likely?
The authors of the post we're discussing are the ones alleging fraud.
No, that's not likely. First of all, "an MBS" is either just a legal entity or it's a collection of investors in the MBS. Either way, it's not an operation. It doesn't get paid on performing loans unless those payments come through the servicer. Think about it. If you own shares of a mutual fund that owns parts of an MBS, you are (one of many) parties with a legal right to some fraction of the underlying mortgage payments. You, however, do not collect those payments, nor are you going to try to foreclose a loan all by yourself in your spare time.
No actions happen except by servicers, unless the servicer literally fails to perform its duty and the legal noteholder steps in and asserts its direct standing to foreclose. Say, if Fannie had a servicer that went belly-up, Fannie might have to step in and take assignment of mortgage back from the servicer so Fannie could be a direct party to the proceedings. But they never do that: they find another servicer to take the work over from the failed servicer.
Think about it like a checking account: sure, it's your money. But if your bank fails, you don't take over your money and start printing checks that you can then write off your account. You take your money to a new bank and use their checks.
My point is that if there was never evidence that a given MBS owned a beneficial interest in the notes to start with, the MBS would never have received any monthly distributions from the servicers to start with. You have to be the noteholder to get paid until the borrower stops and then you FC.
dryfly - AVMs ain't free. Figure about one-tenth the cost of a traditional appraisal. For a 800lb-er like CFC, probably less than that.
I understand that. My question is it all fixed cost or what...
Is it a million dollar worth of software and ten IT guys on salary (all fixed cost) or do they actually have individual labor inputs.
So if they run a million units this month does it cost X... if they run ten million units next month does it still cost X or is it X + 10*Y... with X being the fixed cost and Y being additional variable cost per unit.
If Y=0... then why the hell even report the units consumed, the number that is of interest is the revenues received for the services rendered...
tanta - thanks for your input patience on this. I find teasing away the structure quite interesting. I think a lot of the outcome will be determined by these structures more so than by the parties intentions or desires...
As always you have provided a clear and detailed explanation. Perhaps this is not the beginning of "la revolucion" that I pine for, que pena.
However, I am not entirely convinced that this is "much ado about nothing."
At a minimum, DB is going to have to spend significant resources to clear up this mess, and they are in legal jeopardy of losing the rights to the collateral. It doesn't take a big imagination to see some other judges in cases such as this getting frisky.
And I need not mention that in CA, the 9th circuit court of appeals has appelate jurisdiction on US district courts and is infamous for judicial "innovations". I bet that lawyers everywhere from Alaska to Nevada are already salivating.
While the models I work with are sometimes literally not on the same planet as AVMs I can tell you it isn't unheard of for me to use my model to test your composite racing boat hull if you test my composite satellite boom. It is amazing what these tests sometimes uncover. While good engineering practice caution needs to be taken that by cooperating you don't converge techniques to the point that they give the same answers the same way and thus defeat the purpose. If I were Countrywide I'd be anxious to test someone else's pool and have them test mine. The plausible deniability alone is worth the effort.
Thanks for clearing up thr DB matter Tanta.I suspect the paerwork problems will be huge,and expensive.I have also seen a judge dismiss a case "with prejudice" when he got REALLY TIRED of paperwork screwups by a lender.I saw it in August,in a case involving "A Soviet Finance" in small claims court.Amusing.I was there because not everyone pays me as agreed,at least not voluntarily,and horsewhips have gone out of fashion to my occasional regret.
dryfly, the 'Y' factor for a big customer like CFC is indeed negligible. Why do they report these items (AVMs, flood det, credit reports) in units? - beats me. I'd guess just so others cannot easily back into their unit costs on these items.
Tanta - what are your thoughts on the prepays? Am I crazy to think 13 thousand PIFs is way too few in this period?
Uh Dryfly,
As much as Tanta can turn a phrase with the best of them somebody already has this one covered:
"Never ascribe to malice, that which can be explained by incompetence." - Napoleon Bonaparte
First off... "some people get to keep their homes". Way to perpetuate the fantasy. It's not THEIR home to begin with. They have to pay for it with THEIR money to own it.
And as far as "some investors get burned, so be it" type of attitude. You might stop and recognize that some of those investors might be the people you supposedly are trying to "bring power to". Alot of retirement accounts are going to be hurting from this.
AVM's cost 10-20 bucks each. Volume discounts can drive the price lower, but not much.
And 100 bucks says cwide is ordering them on the bulk of their portfolio to find lending opportunities and second, try to figure out their loss exposure on said portfolio.
I think that says volumes about their appraisal process back in the day....doing it now is kinda like the horse and barn door thing.
However, I am not entirely convinced that this is "much ado about nothing."
I am certainly not trying to say this isn't important. FUs of this nature can double your loss severity on a loan, once you factor in the time and expense and person-hours of fixing a thoroughly hosed assignment chain. Plus pissing of a judge in a judicial foreclosure state is not going to assure you of a long string of rulings in your favor. All in all, it's a huge expense and servicers can go under if they do too much stupid stuff like this.
What frustrates me is the assumption that anyone does this on purpose. We are so hard-wired to the "Enron" story that I guess we just can't quite believe that massive world-class high-risk stupidity, short-sightedness, and layoffs of backroom staff are the causes of a lot of this.
I make this argument periodically: those who are most vigilant for "the next Enron story" are missing a lot of the real dirt.
Tanta - what are your thoughts on the prepays? Am I crazy to think 13 thousand PIFs is way too few in this period?
No, I don't think you're crazy. I don't know what the PPC was on whatever loans we're talking about (original projection of prepayment), but whatever it is the current speeds are nightmarish.
Another fine example of a really ugly problem that the headline writers miss. That's cause they don't understand how slowing prepayments are nitro for a stressed loan portfolio.
Of course it's possible that these are AVMs on CFC-owned loans, requested by CFC for any number of purposes including refi solicitations, etc.
But it is being reported under "Loan Services." That suggests that it is part of CFC's money-making line of business: providing AVMs.
If CFC is its own customer here, then I have some real problems with an operations report that might lead a shareholder to think that CFC is making money on those 5 million AVMs.
Perhaps I am misreading the point of this press release, but I did not expect it to include expenses incurred by CFC or work ordered by CFC. I expected it to include revenue-generating items. CFC also orders a lot of copier paper in a given month, but I wouldn't expect to see that on an operations report either.
That led me to wonder who wanted 5 million AVMs from CFC's loan services business in one month.
Look, I'm all for individual responsibility and you are right that if these people never made the payments and built equity, they own nothing.
But in a mad rush to get in on the housing gravy train, DB bought a bunch of mortgages (or so it thought) and then to top it off didn't do the paperwork correctly. Let 'em rot, I say.
As for pension funds, the hit is already baked in, nothing we can do to stop it. Better to make an example of DB to save future generations from this MBS stupidity.
Let me remind everyone what an AVM is: it's a piece of software that accesses a big database.
Owning one is like owning a chain saw. You can use it to cut your own trees, or you can use it to cut other people's trees for a fee, or you can rent it out to other people so they can saw their own limbs off.
If CFC owns a proprietary AVM it can run its own loans through that baby as often as it wants to.
CFC does also own a services business, LandSafe, that provides AVMs for third parties.
Many other outfits also own their own proprietary AVMs. Fannie and Freddie do, and they don't have to buy them from anyone else.
Owning one is like owning a chain saw. You can use it to cut your own trees, or you can use it to cut other people's trees for a fee, or you can rent it out to other people so they can saw their own limbs off.
Emergency rooms are full of those folks every weekend... so are the financial pages right now.
FYI, I read "equitable assignment" as the judge deciding after the fact that an assignment should have taken place, and that the fairest thing would be to act as though the assignment took place. Apparently DB was asking the judge to do this.
I don't know whether "securitized trust" is a legitimate term, but I would be willing to bet that it is not considered kosher to issue securities based on an "equitable assignment" that hasn't yet been declared by a judge.
I am more involved in real estate than securities, but I do know that issuing securities is pretty serious business. I would think that issuing securities without nailing down the collateral probably is at least a 5 minute major, and maybe an ejection from the game.
albrt, I don't want to sound like I'm making claims about facts I'm not privy to, but here's how it often happens:
The issuer of the security did get an assignment, which it may or may not have recorded. So the security is issued in good faith.
But nobody noticed until very late in the game that the original legal description of the property on the original mortgage says lot 6 block 7, and it should say lot 7 block 6.
Now the original mortgage has to be corrected and re-recorded, and then every single assignment in the chain has to be corrected and re-recorded, in order, up to the current assignment.
Well, that isn't going to work if the original mortgagee didn't get an enforeceable E&O signed by the borrower, since you don't get borrowers in foreclosure to drop by your office to initial a correction to their mortgage. Or if Loans R Us is in the assignment chain someplace and they went out of business, you could spend years trying to get an intervening assignment re-recorded.
So you go to the judge and ask for permission to consider the existing assignment chain valid. As you note. I don't think that's somehow impossible because a loan was securitized.
Here's what the post actually says:
The Court's amended General Order No. 2006-16 requires Plaintiff (Deutsche Bank) to submit an affidavit along with the complaint, which identifies Plaintiff as the original mortgage holder, or as an assignee, trustee or successor-interest.
Apparently Deutsche bank submitted several affidavits that claim that Deutsche was in fact the owner of the mortgage note, but none of these affidavits mention assignment or trust or successor interest.
Thus, the Judge ruled that in every instance, these submissions create a "conflict" and they "do not satisfy" the burden of demonstrating at the time of filing the complaint, that Deutsche Bank was in fact the "legal" note holder.
My reading of that is that some idiot filled out boilerplate affidavits that all say DB is/was owner of note, instead of saying DB took assignment/is successor in interest to noteholder/etc.
His honor said take your sloppy shit back to your office and meditate on the meaning of a sworn statement.
Back in August, this report surfaced about lien holders losing seniority because skanky subprime MBs failed to disclose the ARM terms in the TIL. You may have commented on it at the time, but it's similar to the DB screw up.
As an appraiser, I try to guess where an AVM value will be when researching a property -- and I'm usually within the AVM range, or very close. There are properties where the value is legitimately higher than the AVM, but an appraiser needs to have strong supporting data to go there.
AVMs are accurate for average properties in average locations, but both superior and inferior properties can be value outliers -- which is why accurate appraisals still have a place in the process.
I have some rather strong opinions about the appraisal post the other day, but those will have to wait -- other than to say that ethical appraisers who piss off an LO just as likely to be put on a blacklist as the hit-any-value appraisers. At the appraisersforum, there have been a number of threads on the subject -- along with the opinion that blacklists are illegal.
Countrywide loans drop 48 percent. It ended Oct w/52,775 worried employees down 2,077 from Sept and 8,092 from Aug. It plans to eliminate 12,000 jobs by Dec. Countrywide loans drop 48 percent
| Reuters
Tanta, I agree that a mortgagee who screws up can usually start the foreclosure process over and get the collateral eventually.
My point is that the authorities in charge of overseeing the other end of the financial daisychain might be interested to know how big a percentage of the collateral on these deals was never really nailed down before the securities were issued.
My point is that the authorities in charge of overseeing the other end of the financial daisychain might be interested to know how big a percentage of the collateral on these deals was never really nailed down before the securities were issued.
Absolutely. It's running with scissors, at the very least.
I am more interested, however, in the question of how these sloppy practices came into being, and on issues like laying off your back room and making do with temps who don't understand the documents they're handling, than I am in Master Theories Of Orchestrated Fraud.
If I am right about a lot of this stuff, it happened because companies pared operations in the wrong place and didn't care about the risk they were running. I find that much more frightening than the idea that a security cannot take conveyance of a loan via equitable assignment, or whatever theory of law is being asserted here.
Tanta - what are your thoughts on the prepays? Am I crazy to think 13 thousand PIFs is way too few in this period?
Shnaps, i think you're calculating something more like the SMM rather than the CPR (you forgot to annualize)...i believe the CPR is more like 10 ($13B prepays on a $1.46T servicing portfolio), which makes perfect sense given the most recent fannie and freddie factors and everything else i've seen. i guess Tanta couldn't figure that out without the PPC (zing!)
You are absolutely right about the Deutsche Bank thing--this is the black helicopter crowd at work.
Back on topic, a lot of servicers now periodically get AVMs just as they get FICOs--for portfolio review purposes. This allows them to apply their servicing resources where they're needed most--they might want to call the person with a 580 FICO and 105% current LTV (per the AVM) first, maybe even before the payment is due. Countrywide has a subsidiary, LandSafe, that provides closing services to both its CW affiliates and other customers. My guess is that CW runs its AVMs through LandSafe. They may have an algorithm based on geographical price trends that is causing them to order more.
Goodmorning,
Coffee Talk is Good.
Renowned Paper:
Buffett to purchase any public company at the request of their BOD, to pay premium on current stock price.
I am sur Anglo is doing this out of a sense of pubic service.after all,that is how he serviced his shareholders.
The ytd growth is up 100% and the mtm growth is up 1000%. The # of AVMs for the Oct 07 is 43% of the 2007 total. Are the investors paying them to run AVMs on all the loans that they service? A majority of the loans they originate are sold to Fannie Mae. Is this something that Fannie might have paid for?
Interesting Article at the Implode-o-meter regarding Deutsche Bank foreclosure being tossed due to lack of standing,sorry not able to link,need caffeine.
It doesn't mean they got paid for it. That was in units.
They may be assessing the damage below the water line.
Nice catch. Wonder if somebody is looking at real values, who it might be but more importantly who else should be.
Did y'all catch the CNBC coverage the other day on the footnote in CFC's SEC filings that one more notch down in credit ratings and they'll have to stop servicing loans and pass their assets to somebody else ?
Now that's funny that is.
Could be they are pulling AVMs from multiple vendors, and each counts as a unit? Or maybe some are being re-evaluated each month, or however often. That's not too unusual - the big CC companies pull fresh FICOs all the time.
Tom,
Here is the link:
<a href="http://iamfacingforeclosure.com/article/20071113_Boyko/01.html>Deutsche bank pOnw3d
This development is nothing short of revolutionary; if should strike fear into the hearts of anyone owning MBS. If upheld (assuming Deutsche bank has an appeal process), it means the end of MBS. Good riddance.
Go US District Judge Boyko, you rock!!
Is this something that Fannie might have paid for?
Why would Fannie pay CFC to run an AVM? Fannie can run its own.
It doesn't mean they got paid for it.
Well, no, it doesn't. But why would they show it on the operations report if it doesn't flow through to some fee account?
Could be they are pulling AVMs from multiple vendors, and each counts as a unit?
Well, again, I didn't assume this is reporting AVMs used by CFC; I wondered if they aren't AVMs sold by CFC. You're right that porfolios request AVMs and FICOs all the time. But do you show those on your report of operations under "Loan Services"?
The LTV is very important for many option ARMs. Above the cap of 115%LTV and the loan terms will change, sort of like getting a margin call.
THis could be the next shoe to drop.
There are even some investment portfolios that mark the LTV daily.
PD
Very off topic, but the perfect comic strip for the markets and for the Fed:
Cornered
Above the cap of 115%LTV and the loan terms will change
No. For the eleventy-jillionth time, OA caps are applied to the original loan balance, not the property value. A loan with a 115% cap is reset when the unpaid principal balance hits 115% of the original principal balance, regardless of LTV. If you are at 50% LTV when you hit your balance cap, you get reset.
There are no mortgage products I know of that can change payment terms to the borrower because of changes in the value of the collateral. I can't think they'd be legal if you offered one.
This is a hugely important point: lenders do not get loan term "do-overs" because the value of the collateral changes. That is why setting original LTVs and having good appraisals is so damned important: the lender lives with whatever happens to the collateral.
There are even some investment portfolios that mark the LTV daily.
That's one of the most ridiculous statements ever made in a CR comment thread.
Central Scut:
I don't think you want to cheer that kind of action. Let's keep something in mind. People with money aren't going to make ANY more loans to people WITHOUT if this is the road we go down. If you think the divide between have/have-nots is wide now... just wait. At the end of that road is a life you don't want. Credit has been plentiful, but money is always scarce - by definition most don't have it. The majority of the population cannot provide for themselves... careful biting the hands that feed you.
I hear Countrywide never met a fee it didn't like-why wouldn't they reassess their marginal loans if it means more revenue?
I most definitely will cheer it. I am sick of these Wall St. pigmen getting rich at the expense of the rest of us. If Deutsche bank and some investors take a hit because they got sloppy and didn't really own the collateral, great. Some poor folks get to keep their houses, and we get to stick it to the man. Power to the people!
Central Scrutinizer's link might be the story of the day - Tanta, you might want to take a look at that one for us... lotsa mortgage-nurd mechanics involved there.
To give fair credit, Tom Stone discovered it. I just linked.
Gotcha. Well, it is a noticable rise, I'll give you that.
I found the prepayments in full impossibly low. 13k out of 9M loans? that is like, what - a CPR of one or two, depending on balances. Any thoughts on that one?
This is a quote from the Deutsche Bank story Tom mentions:
This court order is what I have been saying in my cases. This is rampant fraud on every court in America or nonjudicial foreclosure fraud where the securitized trusts are filing foreclosures when they never own/hold the mortgage loan at the commencement of the foreclosure.
That means that the loans are clearly in default at the time of any eventual transfer of the ownership of the mortgage loans to the trusts. This means that the loans are being held by the originating lenders after the alleged "sale" to the trust despite what it says per the pooling and servicing agreements and despite what the securities laws require.
This also means that many securitized trusts don't really, legally own these bad loans.
In my cases, many of the trusts try to argue equitable assignment that predates the filing of the foreclosure, but a securitized trust cannot take an equitable assignment of a mortgage loan. It also means that the securitized trusts own nothing.</i>
My understanding of this is that these loans went into default before the a legal transfer was completed.
Is this because they went into default so quickly, or because the legal transfer is so slow in coming?
It does seem rather remarkable the parties involved couldn't get this right.
I am sur Anglo is doing this out of a sense of pubic service.after all,that is how he serviced his shareholders.
Tom Stone | 11.13.07 - 9:11 am | #
Ahem, in the same way that the bull services the cow.
Let's keep something in mind. People with money aren't going to make ANY more loans to people WITHOUT if this is the road we go down.
I don't think the borrowers are out of the woods on this at all... But the MBS flying monkey's aren't the one's who can make the claim. Its the holder of the actual mortgage note - whoever did the tranching has to have it & pursue the foreclosure... So DB has to lean on them OR get a hold of the mortgage... A or B.
That is what the court has said from what I read. All the MBS owner has is a claim to revenue from a collection of mortgages according to the tranching formula... the 'dude' servicing the loans needs to hold those. These MBS from DB's perspective should be called vMBS 'virtual mortgage backed' if they are servicing and DON'T have the loans in possession...
And if so it is a very good ruling for everyone.
That assumes I read the piece right... any of you real lawyers not working today?
Tanta, you might want to take a look at that one for us... lotsa mortgage-nurd mechanics involved there.
Sorry, guys, but I'm underwhelmed. This breathless leap from failure to include assignment with FC filing (sloppy work there) to outright fraudulent intent (trying to FC a loan you don't service) is unconvincing.
Here's de thing: there are two relevant documents at stake: the note, which is the promise to pay part and which is collectable, and the mortgage/DOT, which is the pledge of the property as security against the promise to pay.
If you are trying to collect on a debt, you must prove your right to do that. That means you are either the noteholder (original lender or party to whom note is endorsed by the original lender), or the servicer on behalf of the noteholder.
If you are trying to foreclose, you must prove your right to do that via a copy of the mortgage or DOT showing that you are the mortgagee, or an Assignment of Mortgage showing that the beneficial interest in the property was assigned to you from the original mortgagee.
So DB didn't include both a copy of the note and a copy of the mortgage or assignment of mortgage showing that it has standing to collect and foreclose. As I said, sloppy work. It's possible that at some point in the past they never got an Assignment recorded correctly. This is a common screw-up in the industry. It is the kind of mess up that people like me throw hissy fits over, but that during the boom was too low-priority for busy shops. Remember that we were in that "hell, we'll never have to foreclose" mindset.
So now that we do have to foreclose, these sloppy servicers are getting kicked around by a judge because they didn't even get elementary paperwork right in their filings. I say, you go, your honor; I have no problem with servicers getting beaten up for this kind of Mortgage 101 stuff.
But breathless speculations of OMG FRAUD!!1!? Not today.
OT
I don't think you want to cheer that kind of action. Let's keep something in mind. People with money aren't going to make ANY more loans to people WITHOUT if this is the road we go down. If you think the divide between have/have-nots is wide now... just wait. At the end of that road is a life you don't want. Credit has been plentiful, but money is always scarce - by definition most don't have it. The majority of the population cannot provide for themselves... careful biting the hands that feed you.
gamma |
Beyond the GSE's what sort of demand is there for mortgage debt these days? Have we come to the point were the taxpayers underwrite each others mortgage loans; I will buy your house for a million if you buy my house for a million etc.
Did anyone notice the story yesterday about the selling of discharged debts? (Not merely delinquent - DISCHARGED) Was wondering what people thought about that and all the weirdness associated with it.
Prisoners-of-Debt: Personal Finance News from Yahoo! Finance
Forgive the OT, but wondering if anybody has any idea of the volume, relevent indices (ala ABX), etc. for this new acronymic entry - the ARS. "Auction Rate Securities are floating rate securities that are marketed by financial institutions with auction reset dates at 7, 28, or 35 day intervals to provide short-term liquidity. " They sound like an Option Arm for CP.
Link is at Five Things You Need to Know: Paulson on Super-SIV: "Anything Worth Trying"; E*Trade Fighting for Survival; Countrywide Too; Also, Beazer; Keep Hope Alive!-Minyanville
But breathless speculations of OMG FRAUD!!1!? Not today.
I don't think its fraud - never did. I was wondering if the MBS fund was getting out in front of their servicers and initiating FC without technically holding the note... you don't think this is likely?
But you think this is just a technical screw up where MB's people go back to the bowels of the county courthouses where the titles reside, find Eunice... take some of her wrath but then also get the assignments straightened out THEN go back to the judge to enforce the FC?
My understanding of this is that these loans went into default before the a legal transfer was completed.
Here's the deal:
The transfer of rights in a loan sale is effected legally by two things:
It is quite typical in securitized transactions for the endorsement on the note to be blank. If you sell a loan to Fannie Mae, for instance, you don't endorse it to Fannie Mae, you endorse it in blank and give physical custody of the note to Fannie's custodian. The whole idea is that if and when someone has to take legal action to collect on the loan, the endorsement can be filled in at that time. Until then, the party with actual rights to payments made under the note is an MBS or a fractional interest in an MBS or something. That's why the notes are endorsed in blank: custody is evidence of ownership. This has been going on all over the place for decades, and is not a new practice.
With assignments, they are legally binding documents when you execute them, but they are supposed to be recorded in the land records where the original mortgage or DOT was recorded. There is a very widespread practice of getting assignments "in recordable form" but not actually recording them, unless and until you have to FC. Just like the note endorsements. The GSEs have been doing this for decades as well. It saves the cost and effort of recording assignments because you only need it to be recorded if 1) you want to foreclose or 2) you want to re-assign it (and therefore you want the assignment to you to become recorded, while the new assignment to the new buyer is the lastest unrecorded assignment).
There is of course some risk in doing things this way, and it is complicated by the MERS loans (electronic tracking of ownership without individual recorded assignments). The risk is that you need to go back and complete an endorsement or file an assignment and you either can't find the original document or you just notice, years later, that the original note or mortgage has an error on it. That has to get fixed before the assignment can be recorded or the note endorsed.
In other words, if you have a sloppy back room, you run the risk that it will cost you big money when you really don't need it to: at the point of foreclosure.
You do not need to theorize nefariousness when mere incompetence fits the bill. And we are seeing, as far as I can tell, the results of sloppy operations. Quel surprise.
Anyway, I don't know where this claim that "a securitized trust cannot take an equitable assignment of a mortgage loan" comes from. I don't know what they mean by a "securitized trust," what they mean by "equitable assignment," and what jailhouse they learned law in. It sounds to me like people who almost but not quite know all the lingo.
Back on the topic of AVMs...
How much does it really cost to run one of these Tanta? Not askin' what they charge wondering what the unit cost would be...
So if they ran the thing every month for everyone... computer power what it is now would it really be an issue? A lot of processes like this are 100% fixed cost so if they run a million cycles or ten million it doesn't change the net cost one penny? That is as long as they don't exceed capacity...
Unit cost would be effected of course (unit cost for 10 mil cycles would be 1/10 thet of a mil)... but nothing else rally changes... total cost still the same IF all fixed like many of these things are.
If so why do they even report the AVM units - instead just report the revenue from AVM services charged for... or are they required to?
As a costing wonk, just curious.
mal - I think there plenty wierd in that article. Not the least of which that Mr. Rathavonga files BK in 2002, and in 2003 he is closing on a mortgage for $274k.
" You do not need to theorize nefariousness when mere incompetence fits the bill."
Another classic is born !!
My guess is that much of Countrywide's October AVM volume was part of push to market refis/home equities to borrowers with loans in their portfolio.
Ever since the mortgage sh** started hitting the fan, I have been getting postcards from Countrywide saying my home is worth X, and that if I refi with them I can extract Y of equity. They are using their AVM to calculate X.
Anything to drum up business.
Recent notice from landsafe to appraisal vendors:
BlastMail_OEV Restriction
IMPORTANT NOTICE RE: ALL LANDSAFE APPRAISAL ORDERS
OWNERS ESTIMATE OF VALUE
Due to recent clarifications of regulatory issues and changes in Countrywide
Policy, the Owners Estimate of Value will not be provided on appraisal orders.
LandSafe will continue to provide:
Loan amount for refinance transactions
Sales price and loan amount for purchase transactions
In some states there are restrictions on providing a loan amount. In those states,
the loan amount will not be provided.
LandSafe understands that when an appraiser inspects a property and interviews
a homeowner/occupant or realtor, an opinion of value may be expressed by the
person or persons being interviewed. If the property contact person
communicates an opinion of value, it is important that you do not allow this
information to unduly influence your opinion of market value. Your value
conclusion should always be supported with market data, sound reasoning, and
logic. In addition, the data considered should be factual and verifiable.
Please remember that USPAP 2006, Ethics Rule, Conduct Section states: In
appraisal practice, an appraiser must not perform as an advocate for any party or
issue An appraiser must not accept an assignment that includes the reporting
of predetermined opinions and conclusions
Nothing has changed regarding LandSafes quality expectations for all appraisal
products. LandSafe continues to expect all appraisals to be consistent with
USPAP and represent a high level of quality and reliability.
soory that copied over so poorly.
dryfly - AVMs ain't free. Figure about one-tenth the cost of a traditional appraisal. For a 800lb-er like CFC, probably less than that.
But still - there is cost involved.
AVM performed to assess real position on a (problem) loan already owned...waste of time and money IMO. These valuation products "work" sometimes, but not oftentimes, and any good news they deliver as regards an owned loan should be taken with a grain of salt. But good luck with that Countrywide, if that's your game.
Anyway, I don't know where this claim that "a securitized trust cannot take an equitable assignment of a mortgage loan" comes from. I don't know what they mean by a "securitized trust," what they mean by "equitable assignment," and what jailhouse they learned law in. It sounds to me like people who almost but not quite know all the lingo.
Thanks - I thought as much. That was why I wanted your ruling... Think of this as a track relay... I was wondering if the trusts got too smart by half and didn't set up transfer & assignment correctly (structure issue in which they intentionally didn't even worry about the baton) or whether it was just dropping the baton (just a bad relay exchange). Sounds like the later from what you describe.
I take it they can easily go back and pick up the baton (unlike track where you are disqualified)... correct? How much does that drag out the process, another month? Meanwhile Eunice gets visitors... they better bring cookies.
"Ever since the mortgage sh** started hitting the fan, I have been getting postcards from Countrywide saying my home is worth X, and that if I refi with them I can extract Y of equity. They are using their AVM to calculate X."
The vultures are descending.
Wooley,
A direct link can be made between this action and AG Cuomo's suit. That's the sound of backsides being covered.
I don't think its fraud - never did. I was wondering if the MBS fund was getting out in front of their servicers and initiating FC without technically holding the note... you don't think this is likely?
The authors of the post we're discussing are the ones alleging fraud.
No, that's not likely. First of all, "an MBS" is either just a legal entity or it's a collection of investors in the MBS. Either way, it's not an operation. It doesn't get paid on performing loans unless those payments come through the servicer. Think about it. If you own shares of a mutual fund that owns parts of an MBS, you are (one of many) parties with a legal right to some fraction of the underlying mortgage payments. You, however, do not collect those payments, nor are you going to try to foreclose a loan all by yourself in your spare time.
No actions happen except by servicers, unless the servicer literally fails to perform its duty and the legal noteholder steps in and asserts its direct standing to foreclose. Say, if Fannie had a servicer that went belly-up, Fannie might have to step in and take assignment of mortgage back from the servicer so Fannie could be a direct party to the proceedings. But they never do that: they find another servicer to take the work over from the failed servicer.
Think about it like a checking account: sure, it's your money. But if your bank fails, you don't take over your money and start printing checks that you can then write off your account. You take your money to a new bank and use their checks.
My point is that if there was never evidence that a given MBS owned a beneficial interest in the notes to start with, the MBS would never have received any monthly distributions from the servicers to start with. You have to be the noteholder to get paid until the borrower stops and then you FC.
dryfly - AVMs ain't free. Figure about one-tenth the cost of a traditional appraisal. For a 800lb-er like CFC, probably less than that.
I understand that. My question is it all fixed cost or what...
Is it a million dollar worth of software and ten IT guys on salary (all fixed cost) or do they actually have individual labor inputs.
So if they run a million units this month does it cost X... if they run ten million units next month does it still cost X or is it X + 10*Y... with X being the fixed cost and Y being additional variable cost per unit.
If Y=0... then why the hell even report the units consumed, the number that is of interest is the revenues received for the services rendered...
tanta - thanks for your input patience on this. I find teasing away the structure quite interesting. I think a lot of the outcome will be determined by these structures more so than by the parties intentions or desires...
"Form always follows function".
Tanta,
As always you have provided a clear and detailed explanation. Perhaps this is not the beginning of "la revolucion" that I pine for, que pena.
However, I am not entirely convinced that this is "much ado about nothing."
At a minimum, DB is going to have to spend significant resources to clear up this mess, and they are in legal jeopardy of losing the rights to the collateral. It doesn't take a big imagination to see some other judges in cases such as this getting frisky.
And I need not mention that in CA, the 9th circuit court of appeals has appelate jurisdiction on US district courts and is infamous for judicial "innovations". I bet that lawyers everywhere from Alaska to Nevada are already salivating.
Keep hope alive!
While the models I work with are sometimes literally not on the same planet as AVMs I can tell you it isn't unheard of for me to use my model to test your composite racing boat hull if you test my composite satellite boom. It is amazing what these tests sometimes uncover. While good engineering practice caution needs to be taken that by cooperating you don't converge techniques to the point that they give the same answers the same way and thus defeat the purpose. If I were Countrywide I'd be anxious to test someone else's pool and have them test mine. The plausible deniability alone is worth the effort.
" You do not need to theorize nefariousness when mere incompetence fits the bill." - Tanta
Another classic is born !!
Tanta's Razor...
If I were Countrywide I'd be anxious to test someone else's pool and have them test mine.
But I wouldn't report it or the results, would you? That'd be kept pretty close the vest.
Thanks for clearing up thr DB matter Tanta.I suspect the paerwork problems will be huge,and expensive.I have also seen a judge dismiss a case "with prejudice" when he got REALLY TIRED of paperwork screwups by a lender.I saw it in August,in a case involving "A Soviet Finance" in small claims court.Amusing.I was there because not everyone pays me as agreed,at least not voluntarily,and horsewhips have gone out of fashion to my occasional regret.
dryfly, the 'Y' factor for a big customer like CFC is indeed negligible. Why do they report these items (AVMs, flood det, credit reports) in units? - beats me. I'd guess just so others cannot easily back into their unit costs on these items.
Tanta - what are your thoughts on the prepays? Am I crazy to think 13 thousand PIFs is way too few in this period?
Hasn't CFC been offering people the value of their home(AVM) when they call about a no closing cost home loan?
Uh Dryfly,
As much as Tanta can turn a phrase with the best of them somebody already has this one covered:
"Never ascribe to malice, that which can be explained by incompetence." - Napoleon Bonaparte
Tanta and CR, if I haven't said it lately, thank you very much for your analysis. I only wish you both had slots on the financial channels.
Central Scut:
First off... "some people get to keep their homes". Way to perpetuate the fantasy. It's not THEIR home to begin with. They have to pay for it with THEIR money to own it.
And as far as "some investors get burned, so be it" type of attitude. You might stop and recognize that some of those investors might be the people you supposedly are trying to "bring power to". Alot of retirement accounts are going to be hurting from this.
AVM's cost 10-20 bucks each. Volume discounts can drive the price lower, but not much.
And 100 bucks says cwide is ordering them on the bulk of their portfolio to find lending opportunities and second, try to figure out their loss exposure on said portfolio.
I think that says volumes about their appraisal process back in the day....doing it now is kinda like the horse and barn door thing.
However, I am not entirely convinced that this is "much ado about nothing."
I am certainly not trying to say this isn't important. FUs of this nature can double your loss severity on a loan, once you factor in the time and expense and person-hours of fixing a thoroughly hosed assignment chain. Plus pissing of a judge in a judicial foreclosure state is not going to assure you of a long string of rulings in your favor. All in all, it's a huge expense and servicers can go under if they do too much stupid stuff like this.
What frustrates me is the assumption that anyone does this on purpose. We are so hard-wired to the "Enron" story that I guess we just can't quite believe that massive world-class high-risk stupidity, short-sightedness, and layoffs of backroom staff are the causes of a lot of this.
I make this argument periodically: those who are most vigilant for "the next Enron story" are missing a lot of the real dirt.
This wouldn't be someone kicking the tires to value the portfolio would it?
Tanta - what are your thoughts on the prepays? Am I crazy to think 13 thousand PIFs is way too few in this period?
No, I don't think you're crazy. I don't know what the PPC was on whatever loans we're talking about (original projection of prepayment), but whatever it is the current speeds are nightmarish.
Another fine example of a really ugly problem that the headline writers miss. That's cause they don't understand how slowing prepayments are nitro for a stressed loan portfolio.
If I were Countrywide I'd be anxious to test someone else's pool and have them test mine.
But I wouldn't report it or the results, would you? That'd be kept pretty close the vest.
I would think it important to show you are actively engaged in improving your AVM and making an effort to revalue your portfolio.
Re: the AVMs
Of course it's possible that these are AVMs on CFC-owned loans, requested by CFC for any number of purposes including refi solicitations, etc.
But it is being reported under "Loan Services." That suggests that it is part of CFC's money-making line of business: providing AVMs.
If CFC is its own customer here, then I have some real problems with an operations report that might lead a shareholder to think that CFC is making money on those 5 million AVMs.
Perhaps I am misreading the point of this press release, but I did not expect it to include expenses incurred by CFC or work ordered by CFC. I expected it to include revenue-generating items. CFC also orders a lot of copier paper in a given month, but I wouldn't expect to see that on an operations report either.
That led me to wonder who wanted 5 million AVMs from CFC's loan services business in one month.
Gamma,
Look, I'm all for individual responsibility and you are right that if these people never made the payments and built equity, they own nothing.
But in a mad rush to get in on the housing gravy train, DB bought a bunch of mortgages (or so it thought) and then to top it off didn't do the paperwork correctly. Let 'em rot, I say.
As for pension funds, the hit is already baked in, nothing we can do to stop it. Better to make an example of DB to save future generations from this MBS stupidity.
"That led me to wonder who wanted 5 million AVMs from CFC's loan services business in one month."
BofA? Just asking....
Let me remind everyone what an AVM is: it's a piece of software that accesses a big database.
Owning one is like owning a chain saw. You can use it to cut your own trees, or you can use it to cut other people's trees for a fee, or you can rent it out to other people so they can saw their own limbs off.
If CFC owns a proprietary AVM it can run its own loans through that baby as often as it wants to.
CFC does also own a services business, LandSafe, that provides AVMs for third parties.
Many other outfits also own their own proprietary AVMs. Fannie and Freddie do, and they don't have to buy them from anyone else.
BofA? Just asking....
A very likely suspect, I imagine. BoA's got a number of mortgage-related contracts with CFC.
Owning one is like owning a chain saw. You can use it to cut your own trees, or you can use it to cut other people's trees for a fee, or you can rent it out to other people so they can saw their own limbs off.
Emergency rooms are full of those folks every weekend... so are the financial pages right now.
FYI, I read "equitable assignment" as the judge deciding after the fact that an assignment should have taken place, and that the fairest thing would be to act as though the assignment took place. Apparently DB was asking the judge to do this.
I don't know whether "securitized trust" is a legitimate term, but I would be willing to bet that it is not considered kosher to issue securities based on an "equitable assignment" that hasn't yet been declared by a judge.
I am more involved in real estate than securities, but I do know that issuing securities is pretty serious business. I would think that issuing securities without nailing down the collateral probably is at least a 5 minute major, and maybe an ejection from the game.
..That's cause they don't understand how slowing prepayments are nitro for a stressed loan portfolio
Couldn't agree more. If this was such a bullish indicator why would CW's market cap be less than the book value of its servicing portfolio.
Man, Cornered is a great comic! It's like the second coming of Gary Larson!
albrt, I don't want to sound like I'm making claims about facts I'm not privy to, but here's how it often happens:
The issuer of the security did get an assignment, which it may or may not have recorded. So the security is issued in good faith.
But nobody noticed until very late in the game that the original legal description of the property on the original mortgage says lot 6 block 7, and it should say lot 7 block 6.
Now the original mortgage has to be corrected and re-recorded, and then every single assignment in the chain has to be corrected and re-recorded, in order, up to the current assignment.
Well, that isn't going to work if the original mortgagee didn't get an enforeceable E&O signed by the borrower, since you don't get borrowers in foreclosure to drop by your office to initial a correction to their mortgage. Or if Loans R Us is in the assignment chain someplace and they went out of business, you could spend years trying to get an intervening assignment re-recorded.
So you go to the judge and ask for permission to consider the existing assignment chain valid. As you note. I don't think that's somehow impossible because a loan was securitized.
Here's what the post actually says:
The Court's amended General Order No. 2006-16 requires Plaintiff (Deutsche Bank) to submit an affidavit along with the complaint, which identifies Plaintiff as the original mortgage holder, or as an assignee, trustee or successor-interest.
Apparently Deutsche bank submitted several affidavits that claim that Deutsche was in fact the owner of the mortgage note, but none of these affidavits mention assignment or trust or successor interest.
Thus, the Judge ruled that in every instance, these submissions create a "conflict" and they "do not satisfy" the burden of demonstrating at the time of filing the complaint, that Deutsche Bank was in fact the "legal" note holder.
My reading of that is that some idiot filled out boilerplate affidavits that all say DB is/was owner of note, instead of saying DB took assignment/is successor in interest to noteholder/etc.
His honor said take your sloppy shit back to your office and meditate on the meaning of a sworn statement.
I don't know if AVMs are a purely automated, computerized value deviration engine, or if they are a function of real-world, eyeballs-on reviews.
I CAN tell you that the number of lender-ordered BPOs (Broker Price Opinions) are taking off like a rocket. This little niche is keeping us VERY busy.
The unit cost to the lenders on these are in the neighborhood of $100 or more though...
Tanta's quote has an ancestor
Never ascribe to malice that which is adequately explained by incompetence.
Napoleon Bonaparte
Napoleon Bonaparte Quotes
Tanta --
Back in August, this report surfaced about lien holders losing seniority because skanky subprime MBs failed to disclose the ARM terms in the TIL. You may have commented on it at the time, but it's similar to the DB screw up.
Truth-in-Lending Disclosure Failure Leads to Mortgage becoming "UnSecured"
As an appraiser, I try to guess where an AVM value will be when researching a property -- and I'm usually within the AVM range, or very close. There are properties where the value is legitimately higher than the AVM, but an appraiser needs to have strong supporting data to go there.
AVMs are accurate for average properties in average locations, but both superior and inferior properties can be value outliers -- which is why accurate appraisals still have a place in the process.
I have some rather strong opinions about the appraisal post the other day, but those will have to wait -- other than to say that ethical appraisers who piss off an LO just as likely to be put on a blacklist as the hit-any-value appraisers. At the appraisersforum, there have been a number of threads on the subject -- along with the opinion that blacklists are illegal.
Appraisers Forum - Real Estate Appraisal Forums
Countrywide loans drop 48 percent. It ended Oct w/52,775 worried employees down 2,077 from Sept and 8,092 from Aug. It plans to eliminate 12,000 jobs by Dec.
Countrywide loans drop 48 percent
| Reuters
Tanta, I agree that a mortgagee who screws up can usually start the foreclosure process over and get the collateral eventually.
My point is that the authorities in charge of overseeing the other end of the financial daisychain might be interested to know how big a percentage of the collateral on these deals was never really nailed down before the securities were issued.
My point is that the authorities in charge of overseeing the other end of the financial daisychain might be interested to know how big a percentage of the collateral on these deals was never really nailed down before the securities were issued.
Absolutely. It's running with scissors, at the very least.
I am more interested, however, in the question of how these sloppy practices came into being, and on issues like laying off your back room and making do with temps who don't understand the documents they're handling, than I am in Master Theories Of Orchestrated Fraud.
If I am right about a lot of this stuff, it happened because companies pared operations in the wrong place and didn't care about the risk they were running. I find that much more frightening than the idea that a security cannot take conveyance of a loan via equitable assignment, or whatever theory of law is being asserted here.
Tanta - what are your thoughts on the prepays? Am I crazy to think 13 thousand PIFs is way too few in this period?
Shnaps, i think you're calculating something more like the SMM rather than the CPR (you forgot to annualize)...i believe the CPR is more like 10 ($13B prepays on a $1.46T servicing portfolio), which makes perfect sense given the most recent fannie and freddie factors and everything else i've seen. i guess Tanta couldn't figure that out without the PPC (zing!)
You are absolutely right about the Deutsche Bank thing--this is the black helicopter crowd at work.
Back on topic, a lot of servicers now periodically get AVMs just as they get FICOs--for portfolio review purposes. This allows them to apply their servicing resources where they're needed most--they might want to call the person with a 580 FICO and 105% current LTV (per the AVM) first, maybe even before the payment is due. Countrywide has a subsidiary, LandSafe, that provides closing services to both its CW affiliates and other customers. My guess is that CW runs its AVMs through LandSafe. They may have an algorithm based on geographical price trends that is causing them to order more.
and while i'm pointing out her silly mistakes, i think Tata omitted an "n":
I'd sure love to know whether somebody is busy getting a AVM on every loan it's exposed to
BDz - trust me, I know my SMMs from my CPRs.
We can't truly do either, since the PIFs are expressed in COUNTS here, not $$.
Still, if we assume average balance sizes, 13k units out of 8.9M units - that is a pretty damn low corresponding CPR. Far less than 10.
the 13 has a dollar sign in front of it...
A-ha. I thought PIFs were expressed in unit counts. Those are $. My bad.
Still, pretty sluggish. 9-10 range.
Missing 'n'? --
geez, I thought I was nitpicky.
bd: 1
shnaps: 0
/curses
hey, Tanta stole my "n"!
Bacon - so long as you are clearing everything up, what are your thoughts on the original topic? - What's with the spike in AVM pulls?
beats me, but i would guess they were legit third party dealies...
damnit, ignore this, i'm just replacing my "n".