Recession or depression?

I try to be a "glass half full" person on current economic issues, knowing that, to some degree, believing is seeing on economic trends and projections.

But, is "The Great Recession" more than that? Give this blog post a read. The blogger primarily talks about the steepness and rapidity of the drop in housing prices.

And, given apparent fraud, failure to secure titles, etc., the backlog of foreclosed homes could take years to clear.

Foreclosures, financiers and judges

The latest dispatch shows just how bad the banksters' tentacles are, but what judges are willing to do, too.

As we wonder just how tough states will get with mortgage brokers and investment banks, vs. how non-tough the Obama Administration (or Congressional Republicans) will get, here's food for thought, of how we still have right-thinking judges, vs. how even a professor of finance can be a sellout financier.

First, the "good" professor:

Joseph R. Mason, a finance professor who holds the Louisiana Bankers Association chair at Louisiana State University, said that concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.

“You borrowed money,” he said. “You are obligated to repay it.”

Uhh, if the paperwork is fraudulent, we don't know who owes money, Profy-Woffy. We don't know if anybody owes. We do know that people have been evicted from homes on which their mortgages were up to date, or even paid off!


Meanwhile, some judges, at both state and federal level, get it:

A decision in October 2007 by Judge Christopher A. Boyko of the Federal District Court in northern Ohio to toss out 14 foreclosure cases put lenders on notice. Judge Boyko ruled that the entities trying to seize properties had not proved that they actually owned the notes, and he blasted the banks for worrying “less about jurisdictional requirements and more about maximizing returns.”

And

Frederick B. Tygart, a circuit court judge overseeing a foreclosure case in Duval County, Fla., recently ruled that agents representing Deutsche Bank relied on documents that “must have been counterfeited.” He stopped the foreclosure. Deutsche Bank had no comment on Wednesday.

And, that's why 23 states, thank doorknob, still require judicial procedures on foreclosures.

Beyond that, that's the problem with corporately-endowed university chairs, universities being run more like businesses, the chancellors and presidents who want to do that, etc.

Half of recent mortgages are "iffy"

Well, at least from January 2006-June 2007, almost half of U.S. mortgages failed financial institutions' underwriting guidelines. According to a firm they hired to check that out!

So, what happened? They kept underwriting the loans. Moody's, Fitch and S&P deliberately declined to accept this information.

Part of (a Financial Crisis Inquiry Commission hearing held in Sacramento on Sept. 23) focused on the role that Clayton Holdings, a firm that reviews loan files on behalf of investment banks, played in the mortgage securitization process by which one home mortgage after another got packaged up into mortgage-backed securities by Wall Street and sold to investors all over the world. The banks hired Clayton to do some forensics — to examine the mortgages that went into the securities and determine if they complied with some basic level of credit underwriting guidelines and “client risk tolerances,” as well as with state and local laws. If a loan met the underwriting “guidelines,” Clayton would rate the loan “Event 1”; other ratings meant that the loan did not meet the guidelines, with varying degrees of flaws.

According to Vicki Beal, a senior vice president at Clayton who testified at the Sacramento hearing, one of the main services Wall Street paid Clayton for was a detailed examination of the loans that deviate “from seller underwriting guidelines and client tolerances.” ...

Of the 911,039 mortgages Clayton examined for its Wall Street clients ... for the six quarters between January 2006 and June 2007 ... only 54 percent were found to meet the underwriting guidelines. Standards deteriorated over time, with only 47 percent of the mortgages Clayton examined meeting the guidelines by the second quarter of 2007.

So, did Wall Street throw all those mortgages back into the pond as being too risky for securities they were going to sell to clients? Of course not — many were packaged right into their product. ...

The Times’ Gretchen Morgenson reported on that Clayton Holdings had in fact offered to make its data available to the three ratings agencies that rated mortgage-backed securities, but that each rejected Clayton’s offer.

And yet, as Krugman notes, the hacks at the WSJ say we should just accept bankers' words that the recent uncovering of fraud is nothing more than a paperwork issue.

And, the Obama Administration keeps its thumbs up its collective ass, perhaps hoping for campaign contributions. You know, if the GOP weren't up shit creek on being Wall Street shills, they'd have a ready made slogan ....

That instead, the Greens can use in 2012:

Let's foreclose on the White House!

Obama is both stupid and lying on foreclosures

I don't know how else to explain his administration's mix of tone-deafness, cluelessness to the seriousness of the situation, and cluelessness to potential political capital.

First, in a number of ways, this is like the pre-bank bailout situation. And, more and more people are seeing the fraud, the big bank shadow and more looming in the background.

Plus, there's no excuse, not even the lying excuse of 2008, that nobody could have seen this coming.

So, for Obama mouthpiece David Axelrod to say a foreclosure moratorium is off the table is both stupid and idiotic.

Stupid because he knows better, he, like top bloggers, knows action is needed. Idiotic because you put down the shovel when you're already in a political hole - or you pick up a different tool when a new approach can be a winning one.

Already, the Wall Street types are pushing back against even basic elements of paper verification. So, is Obama's opposition to a moratorium motivated by campaign cash issues? We know that ultimately, folks like Goldman Sachs are behind CDO tranches behind this whole mess. And, G. Sachs took no bailout haircuts when AIG was made good 100 cents on the dollar.

At the same time, Obama can't punt, really, because the title insurance market runs on as tight a margin as did all the investment banks peddling CDO crap.

And, let's not forget the John Paulsons of the world who bet against those CDOs, and therefore have an interest in no moratorium.

Let's also note this type of fraud ain't exactly new.

Next, the idea of Bank of America self-insuring titles? Are state agencies going to accept and validate that? In many states, probably not. I'm no expert on the state-fragmented regulation of mortgages and related issues, but, at least in states that require court hearings for foreclosures, I don't think it's likely.

Beyond that, real estate financiers, by using computerization without any legal warrant, have brought this moment on themselves in other ways.

So, whether or not Obama is saying this shit for the darkest of neoliberal reasons, it sure looks that way. Or, option 2, it reinforces the idea that he's simply clueless.

As Andrew Leonard notes:

As Elizabeth Warren said in an interactive chat session broadcast at Whitehouse.gov while I was writing this post "the foreclosure problem is big and it is serious." Either she, or Obama, needs to make it clear to the general public just how serious it is and what the government plans to do. David Axelrod, obviously, is not the man for that job. Republican politicians are equally tongue-tied. For the most part, they've been remarkably quiet, aware that it is political suicide to defend the banks but ideologically opposed to any government intervention in favor of homeowners.

But time is short. Fumble this ball, and the game might be over.

Yep, that's about right.

Next round of foreclosures coming

The L.A. Times details what I first looked at more than a year ago — the likelihood of a second peak in foreclosures.

The Times primarily notes that many people who applied for mortgage modifications didn’t get them, and now their application-time grace periods are about to expire. However, it overlooks that many people either bought new, bought second houses, or refinanced, at the end of the housing bubble, in many cases with Alt-A, if not subprime, loans.

In turn, from my (until now) professional perspective, means more tough times for newspapers. Banks don’t take out ads to sell foreclosed homes. Sheriff’s may do legal ads for tax-delinquency sales, but that’s it. And, more individuals looking to sell, to pinch pennies, will do “for sale by owner” routes.

Foreclosure forecast for 2008 to be revised upward

At the start of the year, the national residential foreclosure forecast was for 2 million for 2008.

Just one not so small problem. We’re already at 1.4 million foreclosures.

And, bank repos as a percentage of foreclosures are up from 24 percent a year ago to 30 percent.

The one possible silver lining. Per the story, California in general and the Central Valley in particular remain Ground Zero.

Why a silver lining?

We might get some people moved out of the more water-unsustainable parts of the Golden State sooner rather than later.

Of course, the dark cloud would be Californios moving out and “discovering” some other place.