LAWofPEK

California Mortgage Defaults Trend Down Again research 20091020

2009-12-19T14:31:00.001-08:00

http://www.dqnews.com/Articles/2009/News/California/CA-Foreclosures/RRFor091020.aspx

California Mortgage Defaults Trend Down Again

October 20, 2009

La Jolla, CA.--The number of mortgage default notices filed against California homeowners fell last quarter compared with the prior three-month period, the result of lenders' evolving foreclosure policies, an uncertain legislative environment and an uptick in the number of mortgages being renegotiated, a real estate information service reported.

A total of 111,689 default notices were sent out during the July-through-September period. That was down 10.3 percent from 124,562 for the prior quarter, and up 18.5 percent from 94,240 in third quarter 2008, according to San Diego-based MDA DataQuick.

The number of recorded default notices peaked in the first quarter of this year at 135,431, although that number was inflated by deferred activity from the prior four months.

"It may well be that lenders have intentionally slowed down the pace of formal foreclosure proceedings. If so, it's not out of the goodness of their hearts. It's because they've concluded that flooding the market with cheap foreclosures in this economic environment may not be in their best financial interest. Trying to keep motivated, employed homeowners in their homes might be the most cost-efficient way to stem losses," said John Walsh, DataQuick president.

The median origination month for last quarter's defaulted loans was July 2006, the same as during this year's first and second quarters. A year ago the median origination month was June 2006, so the foreclosure process has moved one month forward during the past 12 months.

"There's a batch of truly nasty loans that were made in mid 2006. There's another batch made in late 2006. These are worse than the mortgages before and after, and it's taking a long time to process them," Walsh said.

The lenders that originated the most loans that went into default last quarter were Countrywide (7,583), Washington Mutual (5,146) and Wells Fargo (4,425). Along with Bank of America (1,979) and World Savings (4,237), they were also the most active lenders in the second half of 2006. Last quarter's default rate on loans originated in the second half of 2006 ranged from 1.7 percent for Bank of America to 11.9 percent for World Savings.

Smaller subprime lenders had far higher default rates for that period: ResMAE Mortgage was at 73.9 percent, Ownit Mortgage 69.5 percent, BNC Mortgage 61.4 percent, Argent Mortgage 59.9 percent and First Franklin 59.4 percent. While these and most other subprime lenders are long gone, their loans were bundled, resold and now live on as "troubled assets".

Indeed, many, if not most, of the loans made in 2006 are owned and/or serviced by lending institutions other than those that made the loans. The servicers pursuing the highest number of delinquencies last quarter were ReconTrust Co, Quality Loan Service Corp and Cal-Western Reconveyance Corp.

While most foreclosure activity was still concentrated in affordable inland communities, the foreclosure problem continued to slowly migrate into more expensive areas. The state's most affordable sub-markets, which represent 25 percent of the state's housing stock, accounted for 52.2 percent of all default activity a year ago. In third-quarter 2009 it fell to 42.9 percent.

On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the notice of default. The borrowers owed a median $12,665 on a median $343,200 mortgage.

On home equity loans and lines of credit in default, borrowers owed a median $3,948 on a median $62,800 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

San Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

Although 111,689 default notices were filed last quarter, they involved 108,372 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit). Multiple default recordings on the same home are trending down, DataQuick reported.

Mortgages were least likely to go into default in San Francisco, Marin and Santa Cruz counties. The probability was highest in Merced, San Joaquin, and Riverside counties.

Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 50,013 during the third quarter. That was up 9.5 percent from 45,667 for the prior quarter, and down 37.1 percent from 79,511 for third-quarter 2008, which was the all-time peak.

In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The state's all-time low was 637 in the second quarter of 2005, MDA DataQuick reported.

There are 8.5 million houses and condos in the state.

Foreclosure resales continued to decline as a market factor, accounting for 42.8 percent of all California resale activity last quarter. It was 49.9 percent the prior quarter, and a year ago it was 47.5 percent. It peaked at 57.8 percent in the first quarter of this year. Foreclosure resales varied significantly by area last quarter, from 9.6 percent in San Francisco County to 70.2 percent in Merced County.

Of the homes foreclosed on statewide in an 18-month period ending this July, about 82 percent have re-sold on the open market, while 18 percent, or more than 57,000 homes, have not. Of those that have not re-sold, it cannot be determined from public records what portion is currently being marketed for sale, as opposed to, among other things, being used as rentals or being left vacant and not for sale. Over the past year California buyers have snapped up an average of nearly 18,000 foreclosure resales a month.

A year ago the percentage of foreclosures that had not yet re-sold was about twice as great, while the number of unsold foreclosures from the 18-month period ending in July 2008 was about 50 percent higher than it is now.

Notices of Default (first step in foreclosure process)
houses and condos

County/Region	2008Q3	2009Q3	Yr/Yr%

Los Angeles	17,073	21,850	28.00%
Orange	5,692	7,436	30.60%
San Diego	7,062	8,702	23.20%
Riverside	11,714	12,113	3.40%
San Bernardino	9,110	9,833	7.90%
Ventura	1,676	2,146	28.00%
Imperial	568	692	21.80%
SoCal	52,895	62,772	18.70%

San Francisco	353	607	72.00%
Alameda	3,482	3,940	13.20%
Contra Costa	4,103	4,753	15.80%
Santa Clara	2,814	4,035	43.40%
San Mateo	797	1,263	58.50%
Marin	258	428	65.90%
Solano	1,934	2,164	11.90%
Sonoma	1,021	1,282	25.60%
Napa	265	340	28.30%
Bay Area	15,027	18,812	25.20%

Santa Cruz	342	419	22.50%
Santa Barbara	593	739	24.60%
San Luis Obispo	370	539	45.70%
Monterey	1,260	1,115	-11.50%
Coast	2,565	2,812	9.60%

Sacramento	5,541	6,098	10.10%
San Joaquin	3,432	3,371	-1.80%
Placer	973	1,414	45.30%
Kern	2,774	3,166	14.10%
Fresno	2,202	2,758	25.20%
Madera	499	570	14.20%
Merced	1,399	1,245	-11.00%
Tulare	883	1,178	33.40%
Yolo	405	443	9.40%
El Dorado	342	629	83.90%
Stanislaus	2,636	2,482	-5.80%
Kings	140	247	76.40%
San Benito	202	210	4.00%
Yuba	307	312	1.60%
Colusa	68	62	-8.80%
Sutter	269	403	49.80%
Central Valley	22,072	24,588	11.40%

Mountains*	526	932	77.20%

North Calif*	1,155	1,773	53.50%

Statewide*	94,240	111,689	18.50%

* includes additional counties

Trustees Deeds Recorded (signal homes were lost to foreclosure)
houses and condos

County/Region	2008Q3	2009Q3	Yr/Yr%

Los Angeles	11,690	7,927	-32.20%
Orange	3,997	2,238	-44.00%
San Diego	5,797	3,601	-37.90%
Riverside	10,813	6,776	-37.30%
San Bernardino	7,930	4,999	-37.00%
Ventura	1,420	793	-44.20%
Imperial	476	365	-23.30%
SoCal	42,123	26,699	-36.60%

San Francisco	192	179	-6.80%
Alameda	2,521	1,760	-30.20%
Contra Costa	3,662	2,053	-43.90%
Santa Clara	2,165	1,237	-42.90%
San Mateo	515	370	-28.20%
Marin	149	110	-26.20%
Solano	1,754	1,025	-41.60%
Sonoma	933	585	-37.30%
Napa	202	143	-29.20%
Bay Area	12,093	7,462	-38.30%

Santa Cruz	276	158	-42.80%
Santa Barbara	629	340	-45.90%
San Luis Obispo	248	223	-10.10%
Monterey	1315	575	-56.30%
Coast	2,468	1,296	-47.50%

Sacramento	5,643	3,384	-40.00%
San Joaquin	3,862	1,919	-50.30%
Placer	766	610	-20.40%
Kern	2,488	1,855	-25.40%
Fresno	1,891	1,279	-32.40%
Madera	433	355	-18.00%
Merced	1,639	819	-50.00%
Tulare	687	536	-22.00%
Yolo	364	238	-34.60%
El Dorado	243	243	0.00%
Stanislaus	2,816	1,476	-47.60%
Kings	82	88	7.30%
San Benito	191	100	-47.60%
Yuba	297	196	-34.00%
Colusa	40	41	2.50%
Sutter	291	152	-47.80%
Central Valley	21,733	13,291	-38.80%

Mountains*	324	424	30.90%

North Calif*	770	841	9.20%

Statewide*	79,511	50,013	-37.10%

* includes additional counties

Source: DataQuick Information Systems

Media calls: Andrew LePage (916) 456-7157 or John Karevoll (909) 867-9534

Subprime Suits Unlikely to Succeed, Insurer Says 20091209 research Fwd: CAALA Eclips - Wednesday, December 9, 2009

2009-12-09T11:19:00.000-08:00

Subprime Suits Unlikely to Succeed, Insurer Says

Subprime mortgage-related lawsuits against company executives or board members have little chance of succeeding, according to a firm that provides insurance against such claims. XL Capital Ltd. CEO Michael McGavick said yesterday that it will be tough for investors to meet the legal threshold required to extract damages. Investors filed about 100 class-action securities lawsuits in 2008 seeking to recover losses related to more than $1.7 trillion in global writedowns and other credit losses. Jamie McGee, Bloomberg 12/09/2009

Read Article: Bloomberg

http://www.bloomberg.com/apps/news?pid=20601103&sid=aT1Y2wmqS91s#

Subprime Losses Don't Warrant Lawsuits, XL CEO Says (Update1)

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By Jamie McGee

Dec. 9 (Bloomberg) -- Investors have little chance of extracting damage awards from executives and board members at firms that lost money betting on subprime mortgages, said the chief executive officer of XL Capital Ltd., which insures directors and officers against legal claims.

"It's very hard to pick out the management team that did something wrong to the level that the law requires," Michael McGavick said yesterday at a Goldman Sachs Group Inc. conference in New York. "Being collectively stupid is not a basis for a lawsuit."

U.S. securities class action suits climbed to a four-year high in 2008 with almost half of the 210 claims related to the collapse of the subprime mortgage market, according to a report by Stanford Law School and Cornerstone Research. Investors are seeking to recoup losses from a crisis that contributed to more than $1.7 trillion in writedowns and credit losses worldwide.

XL is among insurers, including Ace Ltd. and Chubb Corp., that sell coverage for lawsuit costs tied to management errors or negligence. The Bermuda-based insurer and reinsurer said claims rose in its professional liability business in 2008 as the pace of lawsuits increased.

XL reported 45 claims related to Bernie Madoff's $65 billion Ponzi scheme and said it had three new subprime-related claims in the third quarter. The insurer said in October it has confidence in its reserve levels for claims.

'Early Days'

"You also have this global economic downturn, which will give rise to greater failure and greater opportunity for losses as well, and I think that's still pretty early days in evaluating" losses, McGavick said.

Federal securities class actions fell to 87 claims in the first half of 2009, a 22 percent drop from the year-earlier period, Stanford and Cornerstone said in a separate statement.

"The market was much more volatile in the second half of 2008," John Gould, vice president of Cornerstone research, said in the statement. "Moving forward, greater market stability may signal a reduced number of securities class action filings."

New directors and officers claims at Chubb dropped 5 percent in the third quarter, the insurer's Chief Operating Officer John Degnan said in October.

"The predicted wave of directors and officers litigation does not seem to be materializing yet," Degnan said in a conference call in July. "We are now about two years into this developing claims scenario in an arena which has been traditionally characterized by a rush to the courthouse on the part of plaintiffs' lawyers."

'Really Big'

Chubb's rates for the coverage increased 22 percent in the three months ending Sept. 30 for financial companies, Degnan said. This compares to a 5.8 percent rate decline in overall U.S. commercial insurance in the same period, according to the Council of Insurance Agents and Brokers.

"This is an issue that was six months ago a really big topic for insurance investors, and it has largely kind of gone away and the reason is we just haven't seen the lawsuits," Paul Newsome, an analyst at Sandler O'Neill & Partners LP, said yesterday in an interview.

XL has more than quadrupled this year and is the best performer in the 24-company KBW Insurance Index. The company closed at $17.74 yesterday after dropping 33 cents in New York Stock Exchange composite trading. Chubb, based in Warren, New Jersey, has fallen 4.7 percent this year.

McGavick said the acquittals last month of two former Bear Stearns Cos. hedge-fund managers bode well for the industry, and similar defenses will "for the most part hold ground."

Acquitted

Ralph Cioffi and Matthew Tannin were acquitted of six counts including conspiracy and fraud in the first trial stemming from a federal probe of the subprime crisis. The men were accused of misleading investors about the health of two hedge funds that later collapsed, erasing $1.6 billion of investor assets.

"You had at least some damning evidence," McGavick said. "And yet the defense was in essence, 'We were caught up in tsunami not of our own making, we didn't see it for what it was, we were more optimistic than that, but that's no crime.' And the jury agreed. That message I think is very positive and powerful for where this all goes."

The Bear Stearns hedge funds collapsed in 2007. Bear Stearns itself failed less than a year later and was bought by JPMorgan Chase & Co.

To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net.

Last Updated: December 9, 2009 09:09 EST

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research Justices Weigh Case Over Attorney Bankruptcy Advice Fwd: CAALA Eclips - Wednesday, December 2, 2009

2009-12-02T16:20:00.001-08:00

Justices Weigh Case Over Attorney Bankruptcy Advice

The U.S. Supreme Court heard arguments Tuesday in a case that challenges a 2005 law that restricts what advice bankruptcy lawyers may give their clients. At issue is whether provisions of the law are in violation of free speech protections. The justices seemed to indicate that they might. "Congress often forgets about the First Amendment," Justice Anthony M. Kennedy said, "but lawyers don't." Adam Liptak, The New York Times 12/01/2009

Read Article: The New York Times

http://www.nytimes.com/2009/12/02/us/02scotus.html?_r=3&ref=us

December 2, 2009

Federal Law Limiting Legal Advice Draws Particular Interest at the Supreme Court

By ADAM LIPTAK

WASHINGTON — Several justices seemed convinced on Tuesday that a federal law restricting the advice bankruptcy lawyers may offer was a bad idea. But they had differing ideas about what the Supreme Court should do about it.

"It's a stupid law," Justice Antonin Scalia said. "Where is the prohibition of stupid laws in the Constitution?"

Chief Justice John G. Roberts Jr., on the other hand, appeared receptive to the argument that the law violated the First Amendment by intruding into the relationship between lawyers and clients.

The justices, all of whom are lawyers, seemed to take particular interest in the case, presumably because it concerns lawyers' free speech rights.

"Congress often forgets about the First Amendment," Justice Anthony M. Kennedy said, "but lawyers don't."

The law forbids advising clients "to incur more debt in contemplation of" a bankruptcy filing. Piling on debt just before filing for bankruptcy in the hope that it will not have to be repaid is, all concerned agreed, an abuse of the system and may amount to fraud. But state ethics rules already forbid lawyers to advise their clients to break the law.

On the other hand, some new debt is both legal and prudent. It may be a good idea to refinance a mortgage to pay down credit card debt or to take out a loan to buy a car to get to work. The 2005 law seems to forbid lawyers to give advice about that second sort of action.

Justice Ruth Bader Ginsburg asked about medical expenses. Suppose, she said, that a woman was "just told by her doctor that she has a serious cancer that needs operation and radiation and she is at the end of the line on resources." Could the woman's lawyer advise her to take on more debt to treat the cancer?

It depends, said William M. Jay, a lawyer for the government. Lawyers may not advise clients to add debt in two situations, he said: in an effort to abuse the bankruptcy system or to defraud creditors.

That answer did not satisfy Chief Justice Roberts. "Under your construction," he told Mr. Jay, "it seems to me that a lawyer trying to give correct, legal, ethical advice has got to pause before every sentence" and worry about whether the advice will later be seen as a violation of the law.

The case, Milavetz, Gallop & Milavetz v. United States, No. 08-1119, was brought by a Minnesota law firm that objected to three parts of the law. In addition to the core First Amendment challenge, the firm argued that Congress had not meant to cover lawyers in the first place. That argument did not seem to gain much traction with the justices.

The firm also objected to a requirement in the law that its advertising include this statement or something like it: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code."

Justice Samuel A. Alito Jr. said he was troubled by that requirement. "A prospective client looks at that," he said, "and they say, 'Well, I don't want a debt relief agency, I want a lawyer.' "

Mr. Jay said the firm was free to add to and clarify the statement. "There is no restriction on what content goes in the ad," he said, "only that it include this disclaimer."

As for the part of the law restricting legal advice, Mr. Jay said it should be narrowed rather than struck down.

The law, the government said in a brief, should be read to bar "only advice to take on debt with an intent to abuse the bankruptcy laws, such as advice to charge a vacation, concert tickets or some similar purchase to a credit card, knowing that the purchaser will enjoy the full benefit of the purchase and then shed most or all of the debt in bankruptcy."

But G. Eric Brunstad Jr., a lawyer for the Minnesota law firm, said the law "whipsaws the attorneys who are trying to apply it." State ethics rules "say you have to give unfettered, candid advice to your client," he said, while the federal law says "you must give truncated advice."

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From: <stuart@caala.org>
Date: Wed, Dec 2, 2009 at 11:10 AM
Subject: CAALA Eclips - Wednesday, December 2, 2009
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CAALA Eclips

• CAALA Home • Search Litigation Bank • About	December 02, 2009

-	Texas Settles Suit Over Parking Permits for Disabled
-	Justices Weigh Case Over Attorney Bankruptcy Advice
-	City Settles Firefighter Promotion Lawsuit
-	Amazon Denied Overtime Pay, Lawsuit Claims
-	High Court Could Hear Pennsylvania Vaccine Case
-	Court to Consider Mass-Tort Status for Employee Benefit Suit
-	Jury to Weigh Case of Brain Injured Soldier
-	Lawsuit Filed Over Alleged Pension Switch

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Laws/Cases

Texas Settles Suit Over Parking Permits for Disabled

The state of Texas has agreed to pay $24 million to settle a long-running class-action lawsuit over a fee charged for disabled parking placards. According to the Texas suit and others filed nationwide, the practice violates the Americans with Disabilities Act. The settlement must still be approved by a federal judge before it becomes final. Eric Dexheimer, Austin American Statesman 12/02/2009

Read Article: Austin American Statesman

Justices Weigh Case Over Attorney Bankruptcy Advice

Read Article: The New York Times

City Settles Firefighter Promotion Lawsuit

A Connecticut fire department has agreed to promote twelve white firefighters who claimed they were discriminated against when the department threw out the results of a 2006 lieutenant promotion exam. Attorneys for the Bridgeport firefighters said that this summer's U.S. Supreme Court decision involving white firefighters in New Haven strengthened their case. In addition to promotions, the settlement calls for Bridgeport to compensate the plaintiffs for back pay and lost seniority. Keila Torres, The Connecticut Post 12/01/2009

Read Article: The Connecticut Post

Amazon Denied Overtime Pay, Lawsuit Claims

Attorneys filed a lawsuit last week on behalf of a former Amazon.com worker that accuses the online retailer of failing to pay overtime wages to warehouse employees nationwide. According to the lawsuit, Amazon.com rounded off overtime hours by requiring workers to clock in and clock out prior to their scheduled start and end times. The lawsuit seeks class-action status. Steve Green, Las Vegas Sun 12/01/2009

Read Article: Las Vegas Sun

High Court Could Hear Pennsylvania Vaccine Case

In a closely watched case, Georgia parents who claimed a childhood vaccine caused their son's neurological problems have decided to drop their lawsuit – at least for now. The move opens the door for a similar Pennsylvania case to be heard by the U.S. Supreme Court. In the Georgia case, the state high court previously ruled that drug makers could be held liable for vaccine-related injuries. Alyson M. Palmer, Law.com 12/02/2009

Read Article: Law.com

Court to Consider Mass-Tort Status for Employee Benefit Suit

An attorney for hundreds of former Prudential Insurance Co. employees is urging the New Jersey Supreme court to grant mass-tort status to a group of lawsuits alleging that the insurer conspired to defraud workers out of employment benefits. Attorney Angela Roper filed an application Monday to add the matter to the mass-tort docket. An attorney for another group of plaintiffs reportedly is opposed to a mass-tort designation. Henry Gottlieb, Law.com 12/01/2009

Read Article: Law.com

Jury to Weigh Case of Brain Injured Soldier

A federal jury is scheduled to hear arguments this week in a case involving a former soldier who suffered severe brain damage after slipping into a coma in an Arkansas jail. According to the lawsuit, the Garland County Sherriff's Office violated the plaintiff's civil rights by failing to provide necessary medical care. The sheriff's office maintains that the plaintiff's brain damage was caused by drugs he ingested prior to his arrest. Ginny LaRoe, Arkansas Democrat-Gazette 12/02/2009

Read Article: Arkansas Democrat-Gazette

Lawsuit Filed Over Alleged Pension Switch

A group of Verizon Communication retirees has filed a class-action lawsuit accusing the telephone company of illegally moving their pension funds to a now defunct company, the Boston Herald reports. In the lawsuit, plaintiffs claim their retirement funds were involuntary switched to the bankrupt spin-off company Idearc. The lawsuit seeks for class members to be returned to Verizon's pension plan Thomas Grillo, Boston Herald 12/01/2009

Read Article: Boston Herald

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A Pasadena school for kids in trouble finds a partner in Father Greg Boyle by Joe Piasecki 20091112

2009-11-19T00:18:00.001-08:00

Dear Joe:

Thanks for this article; it is a gift.

Father Greg and Mikala are believers who never give up and they are supported by courageous soldiers for peace. Their genius is an uncommon blessing to behold to be sure. I don't know how they do it, but they do it. By my reckoning, they are the only games in town and it looks like they will transcend tragic non-profit isolationism through this partnership!!!

You captured the irony of Senator Liu's statements. Sadly, the system ain't broke at all; it functions with death camp efficiency - just as it is designed and funded to function - in its vain attempts to immolate audacious youth. And it turns otherwise honorable men (mostly) and women into bumbling (or dutiful?) ushers of children into chambers of injustice. Most of us avert our gaze - these are not our kids after all - because of our misguided, anti-evolutionary superstitions about personal and family safety and we believe we are safer somehow for not knowing.

But you and Father Greg and Mikala remind us adults that no (human) being is more sacred than any other and our crystal spirits are indestructible. And that real children lead us everyday on the path to peace - if only we were brave enough to follow them.

with peace and respect,

PHiLiP KOeBeL
(626) 797-6342

http://pasadenaweekly.com/cms/story/detail/at_home_with_the_homeboys/7913/

At home with the homeboys

A Pasadena school for kids in trouble finds a partner in Father Greg Boyle

By Joe Piasecki 11/12/2009

Celebrated for his successful gang intervention and youth rehabilitation efforts in LA's inner city, Homeboy Industries founder Father Greg Boyle was in Pasadena Monday to announce a new education and job training partnership with Pasadena's Learning Works charter high school.

Learning Works serves some of Pasadena's toughest students. All have been expelled from or dropped out of the district's traditional public high schools, and more than one third are on criminal probation from LA County juvenile halls and camps — kids who had otherwise exhausted their chances to earn a diploma and, in some cases, to start adulthood outside a jail cell.

Starting in January, Homeboy Industries will provide job training and placement for the nearly 300 students at Learning Works, each of which receive individualized classroom attention and crisis intervention. In return, the school will help operate Homeboy Industries' downtown LA charter school, a recent addition to its longstanding social services network.

"This place stands at the margins with the poor, the powerless and the voiceless, with the easily despised and the readily left out," said Boyle to a crowd of several dozen gathered at the East Walnut Street school. "I think we both occasionally stand with the demonized so that the demonizing will stop and with the disposable so that the day will come when we stop throwing people away, especially kids."

The message resonated with state Sen. Carol Liu, D-Pasadena, who praised both programs for their efforts to rehabilitate formerly incarcerated youth.

"We know the juvenile justice system is broken and needs to be fixed, and with it the adult prison system. Spending on corrections [will in 2012] surpass spending on higher education in the state. We need to take another look at what we value," she said.

Each year some 20,000 youth spend time in LA County's 18 probation camps and three juvenile halls. The Children's Council of Los Angeles County reports that incarcerated LA youth, most of whom are 14 to 17 years old, read on average at below fifth-grade level and do little better in math.

State Assemblyman Anthony Portantino, D-La Cañada Flintridge, Pasadena City Councilwoman Jacque Robinson, Pasadena Unified School District Superintendent Edwin Diaz and Pasadena Star-News Public Editor Larry Wilson also attended the open-house event, as did Pasadena Board of Education members Bob Harrison, Elizabeth Pomeroy and Renatta Cooper.

"PUSD has a goal to cut our dropout rate in half this year, and a program like this is very helpful," said Harrison. "Comprehensive high schools don't work for every kid."

Learning Works' first graduating class last year numbered 42, but since then its student body has grown by 25 percent.

Portantino praised Learning Works and Homeboy Industries as part of the solution to the state's growing prison population. Instead of letting people out of prison early, "We need to focus on cutting down the supply of inmates by making sure people have access to education and opportunity," he said. "It's not about letting people out of prison; it's about keeping them out in the first place."

Many in the crowd were simply star-struck with Boyle, who in the 1980s served as a Jesuit missionary in Bolivia and LA's Boyle Heights neighborhood and for a brief time was a prison chaplain. Following the 1992 Los Angeles riots, Boyle founded his first of now five nonprofit businesses as both a job-training center and refuge from gang violence.

"He's my hero," said Learning Works Executive Director Mikala Rahn. "I remember someone asking him [during a forum at Pasadena's All Saints Church], 'So when do you give up on someone?' His answer was you never give up. They may decide to check out or check in, but it's not for us to give up.

"The kids are worth it."

Contributing Editor Joe Piasecki is currently pursuing a master's degree as an Annenberg Fellow with USC's Annenberg School for Communication and Journalism. Email piasecki@usc.edu.

Fwd: Check out Mortgage debt waived after bank can't find paperwork

2009-10-29T10:51:00.001-07:00

Mortgage debt waived after bank can't find paperwork

Martha C. White
Oct 27th 2009 at 4:30PM

Text SizeAAA

Filed under: Banks, Real Estate, Refinancing

Score: Little guy, 1; bank, 0. It's a nice change.

Two weeks ago, a bankruptcy court in suburban New York did the formerly unthinkable: It waived a homeowner's mortgage debt after the bank trying to foreclose on the home couldn't submit any proof that it actually had a claim on the property.

According to the New York Times, when lender PHH Mortgage was asked to provide proof that it actually held the deed for the $461,263 mortgage, it couldn't give the judge any records.

Operating on the entirely reasonable principal that someone who claims to possess a piece of paper that gives them ownership to a nearly half-million dollar house should actually have that piece of paper, the judge slapped a stiff and possibly game-changing punishment on the disorganized lender.

Real estate experts say this is a more common occurrence than many people realize, and the potential implications are huge.

During the go-go mortgage boom years, millions of loans were bundled into financial instruments called securities and sold to investors. They, in turn, often turned around and sold those securities to other investors. Making money hand over fist was the priority; keeping good records of who actually owned which mortgage wasn't.

The shambles that many banks' mortgage records are in today could cost them big -- and keep potentially thousands upon thousands of people from losing their homes.

The idea that banks should have to prove that they actually own the mortgage that gives them the right to foreclose if the homeowner falls behind on their payments isn't new. A group called Consumer Warning Network has been advocating for homeowners who feel railroaded into foreclosure by the lending industry by advising them to ask the lender to "produce the note" in court during foreclosure proceedings.

Good Morning America covered this tactic last spring. At the time, though, the advice was just intended to help beleageured homeowners buy some time to get their mortgage modified or find another way to come up with the money they owed. It was assumed that the banks had the proof of their claim buried in a filing cabinet somewhere.

Now, though, it's clear that some lenders don't have proof that they have the right to foreclose on a home, and at least one judge has put his foot down and refused to let the lender take the home without that proof.

It's a small step so far, but it's one that could have far-reaching implications because of the large number of mortgages that were repackaged and resold many times over earlier this decade.

Of course, if a homeowner is in foreclosure, he or she will still lose the house if the bank has all the proper documentation. But if the bank can't produce the documentation, it's comforting to think that a judge won't let them put a family on the street just on that lender's say-so that they have the proof... somewhere.

http://www.nytimes.com/2009/10/25/business/economy/25gret.html?_r=1&pagewanted=all

October 25, 2009

Fair Game

If Lenders Say 'The Dog Ate Your Mortgage'

By GRETCHEN MORGENSON

FOR decades, when troubled homeowners and banks battled over delinquent mortgages, it wasn't a contest. Homes went into foreclosure, and lenders took control of the property.

On top of that, courts rubber-stamped the array of foreclosure charges that lenders heaped onto borrowers and took banks at their word when the lenders said they owned the mortgage notes underlying troubled properties.

In other words, with lenders in the driver's seat, borrowers were run over, more often than not. Of course, errant borrowers hardly deserve sympathy from bankers or anyone else, and banks are well within their rights to try to protect their financial interests.

But if our current financial crisis has taught us anything, it is that many borrowers entered into mortgage agreements without a clear understanding of the debt they were incurring. And banks often lacked a clear understanding of whether all those borrowers could really repay their loans.

Even so, banks and borrowers still do battle over foreclosures on an unlevel playing field that exists in far too many courtrooms. But some judges are starting to scrutinize the rules-don't-matter methods used by lenders and their lawyers in the recent foreclosure wave. On occasion, lenders are even getting slapped around a bit.

One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn't proved its claim to a delinquent borrower's home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That's right: the mortgage debt disappeared, via a court order.

So the ruling may put a new dynamic in play in the foreclosure mess: If the lender can't come forward with proof of ownership, and judges don't look kindly on that, then borrowers may have a stronger hand to play in court and, apparently, may even be able to stay in their homes mortgage-free.

The reason that notes have gone missing is the huge mass of mortgage securitizations that occurred during the housing boom. Securitizations allowed for large pools of bank loans to be bundled and sold to legions of investors, but some of the nuts and bolts of the mortgage game — notes, for example — were never adequately tracked or recorded during the boom. In some cases, that means nobody truly knows who owns what.

To be sure, many legal hurdles mean that the initial outcome of the White Plains case may not be repeated elsewhere. Nevertheless, the ruling — by a federal judge, no less — is bound to bring a smile to anyone who has been subjected to rough treatment by a lender. Methinks a few of those people still exist.

More important, the case is an alert to lenders that dubious proof-of-ownership tactics may no longer be accepted practice. They may even be viewed as a fraud on the court.

The United States Trustee, a division of the Justice Department charged with monitoring the nation's bankruptcy courts, has also taken an interest in the White Plains case. Its representative has attended hearings in the matter, and it has registered with the court as an interested party.

THE case involves a borrower, who declined to be named, living in a home with her daughter and son-in-law. According to court documents, the borrower bought the house in 2001 with a mortgage from Wells Fargo; four and a half years later she refinanced with Mortgage World Bankers Inc.

She fell behind in her payments, and David B. Shaev, a consumer bankruptcy lawyer in Manhattan, filed a Chapter 13 bankruptcy plan on her behalf in late February in an effort to save her home from foreclosure.

A proof of claim to the debt was filed in March by PHH, a company based in Mount Laurel, N.J. The $461,263 that PHH said was owed included $33,545 in arrears.

Mr. Shaev said that when he filed the case, he had simply hoped to persuade PHH to modify his client's loan. But after months of what he described as foot-dragging by PHH and its lawyers, he asked for proof of PHH's standing in the case.

"If you want to take someone's house away, you'd better make sure you have the right to do it," Mr. Shaev said in an interview last week.

In answer, Mr. Shaev received a letter stating that PHH was the servicer of the loan but that the holder of the note was U.S. Bank, as trustee of a securitization pool. But U.S. Bank was not a party to the action.

Mr. Shaev then asked for proof that U.S. Bank was indeed the holder of the note. All that was provided, however, was an affidavit from Tracy Johnson, a vice president at PHH Mortgage, saying that PHH was the servicer and U.S. Bank the holder.

Among the filings supplied to support Ms. Johnson's assertion was a copy of the assignment of the mortgage. But this, too, was signed by Ms. Johnson, only this time she was identified as an assistant vice president of MERS, the Mortgage Electronic Registration System. This bank-owned registry eliminates the need to record changes in property ownership in local land records.

Another problem was that the document showed the note was assigned on March 26, 2009, well after the bankruptcy had been filed.

Mr. Shaev's questions about ownership also led to an admission by PHH that, along the way, it had levied an improper $450 foreclosure fee on the borrower and had overcharged interest by an unstated amount.

John DiCaro, a lawyer representing PHH at the hearing, was in the uncomfortable position of having to explain why there was no documentation of an assignment to U.S. Bank. He did not return a phone call seeking comment last week. Ms. Johnson, who couldn't be reached for comment, did not attend the hearing.

According to a transcript of the Sept. 29 hearing, Mr. DiCaro said: "In the secondary market, there are many cases where assignment of mortgages, assignment of notes, don't happen at the time they should. It was standard operating procedure for many years."

Judge Drain rejected that argument, concluding that what had been presented to the court just did not add up. "I think that I have a more than 50 percent doubt that if the debtor paid this claim, it would be paying the wrong person," he said. "That's the problem. And that's because the claimant has not shown an assignment of a mortgage."

Mr. Shaev said he was shocked when the judge expunged the mortgage debt.

"We are in uncharted territory," he said. "Right now I am in bankruptcy court with a house that has no discernible debt on it, yet I have a client with a signed mortgage. We cannot in theory just go out and sell this house because the title company won't give a clear title on it."

Among the next steps Mr. Shaev said he would take is to file an amended plan or sue to try to get clear title to the property.

Late last week, PHH appealed the judge's ruling. But Mr. DiCaro and PHH are in something of a bind. Either they will return to court with a clear claim on the property — including all the transfers and sales that are necessary in the securitization process — or they won't be able to produce that documentation. If they do produce it, they will then have to explain why they didn't produce it before.

Oh, what a tangled web these mortgage lenders weave.

---------- Forwarded message ----------
From: <MABELG1@aol.com>
Date: Thu, Oct 29, 2009 at 8:54 AM
Subject: Check out Mortgage debt waived after bank can't find paperwork
To: pkoebel@gmail.com

Produce The Note website...

http://www.consumerwarningnetwork.com/2008/06/19/produce-the-note-how-to/

LATimes.com Pace of foreclosures slows in California

2009-10-22T16:24:00.001-07:00

latimes.com/business/la-fi-foreclose21-2009oct21,0,7383725.story

latimes.com

Pace of foreclosures slows in California

Third-quarter declines in defaults and repossessions are probably due to an increase in loan modifications and lenders' reluctance to put more distressed properties on the market, data firm says.

By Peter Y. Hong

5:11 PM PDT, October 20, 2009

Fewer Californians entered the foreclosure process and fewer homes were repossessed by lenders during the third quarter, a real estate information firm reported today.

FOR THE RECORD: An earlier version of this article incorrectly stated that notices of default in California fell 19% from July through September compared with the prior three months. In fact, notices of default fell 10% from July through September compared with the prior three months but were up 19% from the same period in 2008.

Notices of default, which are issued when a borrower misses several mortgage payments, fell 10% from July through September compared with the prior three months, and were up 19% from the same period in 2008. But home repossessions were down 37%, according to MDA DataQuick, a San Diego-based research firm.

DataQuick said the declines were probably due to efforts by lenders to modify loan payments or postpone foreclosures as the possibility of further government intervention looms.

"It may well be that lenders have intentionally slowed down the pace of formal foreclosure proceedings. If so, it's not out of the goodness of their hearts. It's because they've concluded that flooding the market with cheap foreclosures in this economic environment may not be in their best financial interest," said John Walsh, DataQuick president. "Trying to keep motivated, employed homeowners in their homes might be the most cost-efficient way to stem losses."

Notices of default totaled 111,689 in the third quarter; home repossessions numbered 50,013. There are 8.5 million homes in California, DataQuick said.

peter.hong@latimes.com

On Thu, Oct 22, 2009 at 2:06 PM, <alfonso.lawofpek@gmail.com> wrote:

This story was sent to you by: Alfonso

Here is the story you wanted from the Times.

--------------------
Pace of foreclosures slows in California
--------------------

Third-quarter declines in defaults and repossessions are probably due to an increase in loan modifications and lenders' reluctance to put more distressed properties on the market, data firm says.

By Peter Y. Hong

October 20 2009, 5:11 PM PDT

Fewer Californians entered the foreclosure process and fewer homes were repossessed by lenders during the third quarter, a real estate information firm reported today.

The complete article can be viewed at:
http://www.latimes.com/business/la-fi-foreclose21-2009oct21,0,7383725.story

Visit latimes.com at http://www.latimes.com

Deutsche Bank Report Projects 25 Million Mortgages Underwater By 2011

2009-08-16T19:43:00.001-07:00

I found the Deutsche Bank Report by Karen Weaver and Ying Shen published August 5, 2009. it's at the website shown below and i've attached it as a .pdf file and here are the first five paragraphs below.

They looked at a Massachusetts study from the early 1990's that established a floor of 7% defaults for negative equity mortgages. Although they declined to project default rates today, their report suggests that default rates are significantly higher today.

It is very clear from this report that we are in a growth industry. For example, the report projects that 51% of Los Angeles County mortgages are underwater today, but that will rise to 62% by 2011.

http://www.docstoc.com/docs/9509772/Debt

Drowning in Debt - A Look at "Underwater" Homeowners [footnotes omitted]

The U.S. economy has been overwhelmingly a consumer economy. For much of the past decade, U.S. consumers have been greatly enriched by rising home
values coupled with "easy credit," enabling them to monetize their home equity early, and often. Some economists estimate that homeowners were extracting
25-30% of every dollar of increase in home equity, primarily for consumption.[2] But now, the Joint Center for Housing Studies reports that home equity had fallen
43%[1] - $5.9 trillion - from 2005 (peak) levels to the end of 2008.

Even if home prices stabilize, it seems unlikely that we will again see the confluence of factors (or one might say mistakes and debacles) that facilitated the
millennial wave of consumption. For many, the home has morphed from piggy bank to albatross. The questions now are, how will this wealth destruction drag on
consumption and how will outsized mortgage burdens be resolved?

In this paper we look at the issue of "negative equity,"[3] the situation where the borrower's total debt obligations exceed the home's current market value. We
estimate both the number of borrowers who currently have negative equity, and, using our home price forecast,[4] the number of borrowers who we believe will
reach a negative equity position before prices stabilize.

There are approximately 110 million households in the U.S. Of the 110 million, about 75.5 million are homeowners. Of those 75.5 million homeowners, approximately 68%, or 51.6 million have mortgages.[1] DB estimates that, as of the end of 01 2009, 14 million U.S. homeowners had negative equity, or approximately 27% of all homeowners with mortgages. Applying DB's most recent MSA-Ievel home price projections,[2] we estimate that 25 million homeowners will have negative equity before home prices stabilize, or 48% of all mortgagors.[3]

In Figure 1 below, we include other's estimates of the negative equity problem. First American CoreLogic,[4] estimated that 20% (or approximately 11 million) of U.S. homeowners had negative equity as of December 31, 2008 (their most recent work). According to the latest update from Economy.com[5], approximately 15 million homeowners had negative equity at the end of Q1 2009, and they project that number to climb to 17.5 million by Q1 2010. Economy.com's home price outlook calls for a further 9.8% decline from Q1 2009, on average nationwide, considerably less that [sic] our 14% HPD.[6]

--
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The contents of this email and attachments may be confidential, copyrighted and/or protected by the Electronic Communications Privacy Act, 18 U.S.C. § 2510, et seq.
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Deutsche Bank on those drowning US homeowners 20090806

2009-08-16T18:52:00.001-07:00

http://ftalphaville.ft.com/blog/2009/08/06/65536/deutsche-bank-on-those-drowning-us-homeowners/

Deutsche Bank on those drowning US homeowners

Posted by Stacy-Marie Ishmael on Aug 06 15:00.

Karen Weaver, Deutsche Bank's formidable global head of securitisation research, warned in a report on Wednesday that the percentage of US mortgage-holders facing negative equity would nearly double by 2011.

The term "negative equity" describes a situation currently faced by about 27 per cent of US homeowners with mortgages, who owe more than their houses are worth. According to Ms Weaver, that number will hit 48 per cent — or 25m households — within two years.

Still, Deutsche's projections are more aggressive than most, as the following chart makes clear:

Ms Weaver further argues that the negative equity problem has, not surprisingly, hit holders of subprime and Option ARM mortgages the hardest. Why?

According to Deutsche, there are several fundamental reasons:
First, because of the relative newness of these mortgage products and the tendency of these borrowers to refinance frequently (often to cash out equity), these loans are likely to be recent vintages. This means that many subprime and Option ARM loans were originated at the peak of home prices. A loan made in California in 2003 enjoyed three years of home price appreciation before prices began to fall, cushioning the impact. A loan made in September 2006 in Los Angeles has experienced nothing but depreciation.

Option ARM mortgages have negative amortization features, so that product cohort is obviously most likely to be underwater. Moreover, the starting LTV for these loans were particularly high, since they were higher credit loans (i.e. had higher FICO scores), which was believed to offset the higher loan amounts and other risk characteristics. Lastly, the popularity of this product was greatest in the bubble markets; like subprime, Alt-A and Option ARMs were also referred to as "affordability products" because they were designed to enable borrowers to buy homes in unaffordable areas. Hence, the geography of these products was adversely selected toward bubble markets

The second-worst product type vis-à-vis negative equity is subprime. There are two drivers. Once, again, the make-up of subprime is disproportionately skewed toward more recent vintages and hence the peak of the housing market. Two, the weighted average LTVs insubprime were higher than in, say, conforming mortgages or prime.

But by Deutsche's calculation, "the next leg of the decline will have the biggest impact on conforming borrowers" - or those borrowers with mortgages conforming to the guidelines set by mortgage giants Fannie Mae and Freddie Mac.

Deutsche estimates the per cent of conforming borrowers with negative equity will soar to 41 per cent by the first quarter of 2011, compared with just 16 per cent in the first quarter of this year. Negative equity among holders of prime jumbo mortgages — or loans above $417,000 made to borrowers with solid credit histories — will reach 46 per cent, compared with 29 per cent currently, the bank said.

And, as Deutsche points out:

The most obvious implication is for mortgage defaults; borrowers with negative equity may be forced to default after a life event (e.g. unemployment, underemployment, divorce, disability, etc.). Borrowers may also "ruthlessly" or strategically default even without such life events. Apart from default, this reversal of fortune for the middle class will surely suppress consumption. In the meantime, we don't expect a quick turnaround of the housing market due to the weakness in labor markets, excess supply and continued un-affordability in some regions.

This is significant not just on the consumer level (and the attendant feed-through to the real economy), but because conforming loans and jumbo loans represent the biggest share of outstanding RMBS products:

In short — more writedowns ahead.

Back in January, as part of her argument opposing a "bad bank" plan that would buy distressed assets from Wall Street, banking analyst Meredith Whitney highlighted the exposure of the largest banks to residential mortgages.

As FT Alphaville noted at the time:
By Whitney's reckoning (and others), Merrill and Citi have the biggest exposure to residential mortgages, at $44.6bn and $26.7bn respectively. Citi also has a fairly significant exposure to US ABS CDOs, at $18.9bn gross and $6.9bn net. So does Bank of America, with $11.9bn gross and $5.3bn net. (Gross means after writedowns but before hedges, in Oppenheimer parlance).

Moreover:
A large percentage of banks' exposures are to areas with the greatest home price declines and the most vulnerable negative equity positions.

An example? Bank of America — pre Merrill acquisition — had $94bn in exposure to Californian mortgages - or five per cent of the company's total assets.

Given that investment banks are also (if belatedly) preparing for a severe shakeout in commercial real estate and CMBS, further significant deterioration in RMBS would suggest that the pain on Wall Street is far from finished.

Related links:
The 20 worst housing markets in the US - FT Alphaville
What's driving defaults? It's not just negative equity - FT Alphaville
Charting the mortgage crisis - FT Alphaville

This entry was posted by Stacy-Marie Ishmael on Thursday, August 6th, 2009 at 15:00 and is filed under Capital markets. Tagged with CMBS, housing, negative equity, rmBS, us.

Housing market may return to normal in 2012 20090621

2009-08-09T11:27:00.001-07:00

California

Metro: Los Angeles-Long Beach-Glendale
What a home will be worth in 2012: $253,328
Q4 2008 price: $350,000
Projected price change by MSA: -27.6%
Projected price change by state: -13.2%

Los Angeles, best known as the home of Hollywood, is home to excellent universities such as the University of Southern California and large corporations such as aerospace contractor Northrop Grumman. Southern California has been particularly damaged by the downturn in the housing market and home values are expected to remain soft.

MSNBC.com

Housing market may return to normal in 2012

In 3 years, market will likely be governed by local issues, not credit crisis

Business Week

updated 9:23 a.m. PT, Sun., June 21, 2009

Americans have not seen a boring housing market since the last millennium. You know — the average, ordinary kind of market where supply just about matches demand, prices are steady, and real estate ceases to be a topic of daily conversation. Instead, we've had six years of upside craziness followed by three years of downside terror. Now we're in a tug-of-war between those who think we've finally found a bottom and those who are convinced that the overhang of unsold homes is going to push prices considerably lower.

By 2012 we may finally get back to blissful boredom. With any luck, three years should be long enough for the U.S. economy to recover and for the nation's housing inventory to shrink to more normal levels. At that point, housing will return to its old ways, with prices governed not by national mood swings and global credit crises but by local issues ranging from zoning to immigration to job growth.

Prices? While they're likely to keep falling a while longer under the weight of foreclosures, the market is definitely closer to the bottom than the top. "We expect prices to drop for another year and then stabilize before starting to rise with incomes," says Standard & Poor's chief economist David Wyss. Moody's Economy.com predicts the S&P/Case-Shiller U.S. National Home Price Index, maintained by data specialist Fiserv, will fall about 16 percent this year before regaining ground. Based on the National Association of Realtors national median home price of $180,000 for the fourth quarter of 2008, that would mean a median of $152,000 at the end of 2009 and then a rebound to $179,000 by the end of 2012.

All real estate is local
Of course, the national median price is an artificial construct, since there is no such place as National Median, U.S.A. Different trends can have a big impact on sales and prices across the U.S.

Local job growth is one of the most important factors to study when assessing a market's prospects. Omaha, for example, which has attracted employers such as Yahoo! and Google, missed out on the boom but is likewise dodging the bust. With the city adding jobs, the prospects for home prices look good. Detroit, where home prices fell by a third from 2003 through 2008, is likely to suffer even more in coming years as the auto sector continues to shrink. Demographic change, another trend examined here, is equally influential. For instance, Salt Lake City's youthful population is primed for house buying. While the bust left prices in once-bubbly Western markets such as Phoenix and Vegas lower in 2008 than in 2003, Salt Lake prices rose 51 percent over that period.

Other important factors are even more local than those, such as how far a house is from the nearest supermarket. You'll know we're back to an ordinary, boring real estate market when buyers focus less on the intricacies of foreclosures, short sales, and the like and go back to the things that used to matter most: What are the schools like? How quiet is the neighborhood? When am I going to have to replace that roof or cut down that diseased oak?

Sellers Mark and Maura Rampolla, who put their house in Oradell, N.J., on the market early this year, are coping with ultra-local issues such as their house being on a fairly busy road. They're also up against the national housing crisis angst. The Rampollas bought their house for $556,000 in 2004. Now they need to sell it because they're moving to the Los Angeles area to set up a West Coast distribution hub for their coconut-water sports-drink company, Zico. They listed the house for $599,000, which would represent a loss after factoring in closing costs and renovations. House hunters didn't even nibble on the property that the Rampollas and their two young daughters have grown to love. In mid-June the couple dropped the price to $559,000. "People say it's a beautiful house, but they're just very nervous right now," says Maura.

The Rampollas will probably end up being the first owners to lose money on the Oradell home since it was built in 1925 — a phenomenon that's happening across the U.S. The classic American foursquare, with four bedrooms and original chestnut molding, was sold by the Bonavita family to the Riccio family for $47,000 in 1972, the first recorded transaction price. The Riccios made out by selling to the DeSouza family for $285,000 in 1997. The DeSouzas sold just seven years later to the Rampollas for $556,000. "We actually bought the house in a day," laughs Maura. "Mark ran through the house in 10 minutes, I kid you not, because he had to get to a meeting in Queens. ... We had nothing to sell, and we just said: 'Great!' "

The good news is that the Rampollas' loss could wind up being some first-time home buyer's gain. From now through 2012, lots of families that couldn't afford to buy when prices went through the roof will be able to get in on the ground floor. Based on today's household incomes and mortgage rates, the National Association of Realtors' Housing Affordability Index is bobbing around the highest level since recordkeeping began in 1970. "To generalize, yeah, it is a good time to buy a house. I don't think there's any urgency because I think it'll still be a great time to buy a house a year from now," says economist Richard DeKaser of Woodley Park Research in Washington.

Homebuilders are helping by absorbing their share of the pain. In general, the U.S. needs about 1.5 million new homes a year to accommodate the growing population and the demolition of decayed properties. Builders exceeded that rate during the boom, but now they're building fewer than 500,000 homes per year. Their cutback should reduce the glut of homes and bring the market into better balance by 2012, if not sooner.

A still-murky picture
Most important, the economy should be growing briskly again by 2012, according to Moody's Economy.com. In May, the firm predicted gross domestic product would shrink 3 percent this year before growing 1.4 percent in 2010, 4.7 percent in 2011, and a robust 5.8 percent in 2012. It's also looking for home buying and building to return to their pre-bubble paces—no higher and no lower — by 2012.

Even if the economy performs as projected, there's still plenty that could go wrong in the housing market. Because conditions have been so unusual, "it's very hard for the model to extrapolate, based on past experiences, what's going to happen this time," says Moody's Economy.com Senior Economist Celia Chen. In a study of global real estate markets, economists Kenneth Rogoff of Harvard University and Carmen Reinhart of the University of Maryland found that home prices fall for an average of six years after a major financial crisis. That would put the U.S. bottom in 2012, or later.

Another risk is that potential buyers will stay out of the housing market, no longer trusting in home appreciation to do their saving for them. Writes David Rosenberg, the former Merrill Lynch economist who is now chief economist at Toronto-based asset management firm Gluskin Sheff & Associates: "Baby boomers are still in the discovery process on oversized real estate being more of a ball and chain than a viable retirement investment asset." Rosenberg also is concerned that an aging population won't need the kind of big houses erected during the boom. "The high end of the market will be in a bear phase," Rosenberg says in an interview.

So much has gone wrong with housing lately that it's easy to imagine worst-case scenarios. But in the more likely case, the market will fall some more, bounce off its lows, then gradually start growing. By 2012, families like the Rampollas may even get a warm, fuzzy feeling about homeownership again.

URL: http://www.msnbc.msn.com/id/31446244/

MSN Privacy . Legal

Mortgage modifications moving at snail’s pace 20090804

2009-08-09T11:13:00.001-07:00

http://www.msnbc.msn.com/id/32281959/ns/business-real_estate/

Mortgage modifications moving at snail's pace

Bank of America, Wells Fargo get low marks on plan to help homeowners

updated 4:06 p.m. PT, Tues., Aug 4, 2009

WASHINGTON - The government's $50 billion program to ease the mortgage crisis is helping only a tiny fraction of struggling homeowners, and a list released Tuesday showed which lenders are laggards.

As of July, only 9 percent of eligible borrowers had seen their mortgage payments reduced with modified loans. And the first monthly progress report showed that 10 lenders had not changed a single mortgage.

The report indicated that lenders such as Bank of America Corp. and Wells Fargo and Co. have lagged behind government expectations. Both banks received billions in federal bailout money.

BofA modified just 4 percent of eligible loans, and Wells Fargo 6 percent. Wachovia Corp., which was taken over by Wells Fargo in December, modified only 2 percent.

"We think they could have ramped up better, faster, more consistently and done a better job serving borrowers and bringing stabilization to the broader mortgage markets and economy," said Michael Barr, the Treasury Department's assistant secretary for financial institutions. "We expect them to do more."

Wells Fargo says it plans to speed up its efforts, signing up most borrowers for the Obama plan with one phone call and sending customers a trial offer within two days.

The report is "only part of the story" because the numbers do not reflect an additional 220,000 loans that Wells modified outside the Obama plan this year, a company executive said.

BofA said it would improve its "processes for reaching those in need" and continue working with the Treasury Department to help homeowners who fall outside the program's eligibility requirements.

Increase in foreclosures
Meanwhile, foreclosures continue to rise. About 1.5 million households received at least one foreclosure-related notice in the first half of this year, according to RealtyTrac Inc.

"There are certainly more foreclosures going on in the country then there are modifications — by a long shot," said Bruce Dorpalen, director of housing counseling at Acorn Housing, a nonprofit housing group. He said his group has intervened to prevent about 500 foreclosure sales in cases where borrowers wanted to be considered for the Obama plan.

A housing counselor told 36-year-old Veronica Cassella she should qualify for a loan modification, but Green Tree Servicing LLC claims she does not. Cassella, who works at a hair and nails salon in Visalia, Calif., has seen her income shrink with the economy from $35,000 to $25,000.

Her husband still works, but their income is not enough to cover the $213,000 mortgage on their home, which has lost roughly half its value.

"My life has been a standstill with these people for at least half the year," Cassella said. Green Tree, which modified 4 percent of eligible loans, did not return calls for comment.

There are 38 companies participating in the government program, and some noticeable holdouts that control 15 percent of outstanding mortgages.

HomEq Servicing, owned by Barclays PLC, and Litton Loan Servicing, owned by Goldman Sachs, have yet to join. Spokesmen for both companies said they plan to do so soon.

Government partly to blame
So far, banks have extended only 400,000 offers among 2.7 million eligible borrowers who are more than two months behind on their payments. More than 235,000 of those borrowers have enrolled in three-month trials.

But the government is partly to blame for the languid start. The administration rolled out the guidelines gradually this year. Much of the program was not finished until mid-May, and the guidelines were updated again in early July.

The White House maintains it is on track to meet its goal of helping up to 4 million homeowners by 2012. Last week, the administration extracted a verbal promise from the mortgage industry to reach 500,000 borrowers by Nov. 1.

American Home Mortgage Servicing and PNC Financial Services Group Inc. were among the companies that had a zero next to their names on Tuesday's report.

In a statement, American Home Mortgage Servicing explained that it did not join the program until July 22 but had modified nearly 37,000 loans in the first six months of 2009.

David M. Friedman, president and CEO, said executives expect to help 60,000 customers, or about 40 percent of the company's eligible delinquent borrowers.

PNC, which owns National City Bank, began the process in early July.

The best results among the large loan services came from Saxon Mortgage Servicers Inc. One in four of Saxon's eligible borrowers has a trial loan modification with a lower monthly payment to help the homeowner avoid foreclosure. Aurora Loan Services LLC, GMAC Mortgage Inc. and JPMorgan Chase all had one in five qualified borrowers in a trial loan.

"We've got feet on streets in neighborhoods where borrowers need help," said David Lowman, chief executive of the JPMorgan Chase's home lending division.

For each homeowner who makes regular payments for three months, the loan servicer collects $1,000 from the government. The company is paid thousand of dollars more if the borrower stays current for three years.

Housing advocates cite numerous cases in which companies have not followed the program's rules. And when borrowers are denied, they often are not told why. In response to such complaints, the Treasury Department says Freddie Mac will be doing random audits to see if borrowers are being improperly rejected.

Housing plan offered help to 15 pct of borrowers by Alan Zibel 20090804

2009-08-04T07:27:00.001-07:00

http://finance.yahoo.com/news/Housing-plan-offered-help-to-apf-1327402806.html/print?x=0

Housing plan offered help to 15 pct of borrowers

Report says lenders in Obama housing plan offered help to 15 percent of delinquent borrowers

By Alan Zibel, AP Real Estate Writer
On Tuesday August 4, 2009, 9:19 am EDT

WASHINGTON (AP) -- Only 15 percent of homeowners eligible for the Obama administration's $50 billion loan modification program have been offered help so far.

In its first monthly progress report on the plan launched in March, the government on Tuesday detailed big disparities among the 38 companies that have signed up. Several loan servicing companies -- including American Home Mortgage Servicing and PNC Financial Services Group Inc. -- have yet to modify a single loan.

So far, more than 400,000 offers have been extended to 2.7 million borrowers who are more than two months behind on their payments. More than 235,000 of those borrowers have enrolled in three-month trials.

Saxon Mortgage Services Inc. had the best results among the large loan servicers. One in four of its eligible borrowers has a trial loan modification with a lower monthly payment to help the homeowner avoid foreclosure. Aurora Loan Services LLC, GMAC Mortgage Inc. and JPMorgan Chase all had one in five qualified borrowers in a trial loan.

For each homeowner who makes regular payments for three months, the loan servicer collects $1,000 from the government. If the borrower stays current for three years, the servicer gets a maximum of $4,500.

When the plan was launched in four months ago, the government said it hoped to help up to 4 million financially distressed homeowners modify their mortgages. The administration says it is still on track to meet that goal, and last week extracted a verbal promise from the mortgage industry to reach 500,000 borrowers by Nov. 1.

But despite these efforts, foreclosures continue to rise. About 1.5 million households received at least one foreclosure-related notice in the first half of this year, according to RealtyTrac Inc.

Housing advocates say the plan has been a big disappointment so far. They cite numerous cases in which companies haven't followed the program's rules. And when borrowers are denied, they often aren't told why. In response to such complaints, the Treasury Department says Freddie Mac will be doing random audits to see if borrowers are being improperly rejected.

The lending industry is asking for patience, saying the industry needed time to implement the program. The administration rolled out the guidelines gradually this year. Much of the program was not finished until mid-May, and the guidelines were updated again in early July.

American Home Mortgage Servicing, for example, just started the program on July 22, the company said.

Copyright © 2009 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten, or redistributed without the prior written authority of The Associated Press.

Foreclosures Are Often In Lenders' Best Interest 20090728

2009-07-28T08:55:00.000-07:00

Foreclosures Are Often In Lenders' Best Interest-WashPost

http://www.washingtonpost.com/wp-dyn...l?hpid=topnews

Foreclosures Are Often In Lenders' Best Interest
Numbers Work Against Government Efforts To Help Homeowners

By Renae Merle
Washington Post Staff Writer
Tuesday, July 28, 2009

Government initiatives to stem the country's mounting foreclosures are hampered because banks and other lenders in many cases have more financial incentive to let borrowers lose their homes than to work out settlements, some economists have concluded.

Policymakers often say it's a good deal for lenders to cut borrowers a break on mortgage payments to keep them in their homes. But, according to researchers and industry experts, foreclosing can be more profitable.

The problem is that modifying mortgages is profitable to banks for only one set of distressed borrowers, while lenders are actually dealing with three very different types. Modification makes economic sense for a bank or other lender only if the borrower can't sustain payments without it yet will be able to keep up with new, more modest terms.

A second set are those who are likely to fall behind on their payments again even after receiving a modified loan and are likely to lose their homes one way or another. Lenders don't want to help these borrowers because waiting to foreclose can be costly.

Finally, there are those delinquent borrowers who can somehow, even at great sacrifice, catch up without a modification. Lenders have little financial incentive to help them.

These financial calculations on the part of lenders pose a difficult challenge for President Obama's ambitious efforts to address the mortgage crisis, which remains at the heart of the country's economic troubles and continues to upend millions of lives. Senior officials at the Treasury Department and the Department of Housing and Urban Development have summoned industry executives to a meeting Tuesday to discuss how to step up the pace of loan relief. The administration is seeking to influence lenders' calculus in part by offering them billions of dollars in incentives to modify home loans.

Still, foreclosed homes continue to flood the market, forcing down home prices. That contributed to the unexpectedly large jump in new-home sales in June, reported yesterday by the Commerce Department.

"There has been this policy push to use modifications as the tool of choice," said Michael Fratantoni, vice president of single-family-home research at the Mortgage Bankers Association. But "there is going to be this narrow slice of borrowers for which modifications is the right answer." The size of that slice is tough to discern, he said. "The industry and policymakers have been grappling with that."

The effort to understand the dynamics of the mortgage business comes as the administration is prodding lenders to do more to help borrowers under its Making Home Affordable plan, which gives lenders subsidies to lower the payments for distressed borrowers. About 200,000 homeowners have received modified loans since the program launched in March, while more than 1.5 million borrowers were subject during the first half of the year to some form of foreclosure filings, from default notices to completed foreclosure sales, according to RealtyTrac.

No doubt part of the explanation is that lenders are overwhelmed by the volume of borrowers seeking to modify their mortgages. Rising unemployment and falling home prices have added to the problem.

But a study released last month by the Federal Reserve Bank of Boston was downbeat on the prospects for widespread modifications. The analysis, which looked at the performance of loans in 2007 and 2008, found that lenders lowered the monthly payments of only 3 percent of delinquent borrowers, those who had missed at least two payments. Lenders tried to avoid modifying the loans of borrowers who could "self-cure," or catch up on their payments without help, and those who would fall behind again even after receiving help, the study found.

"If the presence of self-cure risk and redefault risk do make renegotiation less appealing to investors, the number of easily 'preventable' foreclosures may be far smaller than many commentators believe," the report said.

Nearly a third of the borrowers who miss two payments are able to self-cure without help from their lender, according to the Boston Fed study. Separately, Moody's Economy.com, a research firm, estimated that about a fifth of those who miss three payments will self-cure.

When Adrian Jones fell behind on the mortgage payments for her Dallas home earlier this year, her lender asked her to cut other expenses. Jones said she eliminated movies and coffee breaks. She turned to family members for loans. When that failed to raise enough, she sold her second car.

"It hurt, but it also made sense. The debt was my responsibility," Jones said.

But six months later, after catching up on the mortgage, Jones is again feeling pinched after her hours as an office assistant at an architecture firm were cut. This time, she's not sure she can fix the problem herself.

"I am going to try, obviously," she said. "But it is getting harder and harder."

Like Jones, those who are most determined to meet their obligations are often unlikely candidates for loan modifications.

"These are the people who will get a second job, borrow from their family to keep up," explained Paul S. Willen, a senior economist at the Federal Reserve Bank of Boston and an author of its report. ". . . From a cold-blooded profit-maximizing standpoint, these are the people the banks will help the least."

Lenders also worry that borrowers may re-default even after receiving a loan modification. This only delays foreclosure, which can be costly to the lender because housing prices are falling throughout the country and the home's condition may deteriorate if the owner isn't maintaining it. In some cases, lenders lose twice as much foreclosing on a home as they did two years ago, said Laurie Goodman, senior managing director at Amherst Securities.

American Home Mortgage Services, based in Texas, was willing to modify Edward Partain's mortgage on his Tennessee home last April after business at his beauty salon slowed and a divorce stretched his budget. But after months of negotiating with his lender, Partain said he was surprised to learn that it would only lower his payments by $90 a month, instead of the $250 decrease he expected.

"At $250, I would have had a chance, but after they added in late fees and payments, I couldn't do it," he said.

Partain soon fell behind on his payments again and went back to American Home Mortgage Services seeking a more affordable payment. Partain said he was told that he was ineligible for another modification because it had been less than a year since his last. A foreclosure sale was scheduled for late July.

After American Home Mortgage Services was contacted by The Washington Post about the case, the company said Partain would be considered for the federal foreclosure-prevention program and it delayed the sale by three months. Partain is relieved but anxious about the details.

"You want to wait and see what figures they come up with," he said.

Administration officials have not said publicly how many borrowers they expect to re-default under Obama's program.

But the experience of a separate program run by the Federal Deposit Insurance Corp. could be instructive. After taking over the failed bank IndyMac last year, the FDIC began modifying troubled mortgages held or serviced by the company. Richard Brown, the FDIC's chief economist, said the agency expects up to 40 percent of those borrowers to re-default.

Even at that rate, he said, the modification program is more profitable than doing nothing. "The idea that 30 to 40 percent re-default is a failure to a program is false," Brown said.

The administration has estimated that its foreclosure-prevention program would help 3 million to 4 million borrowers by 2012. But lenders' reluctance could limit the impact to less than half that, said Mark Zandi, chief economist for Moody's Economy.com. Coupled with re-defaults, this would mean that the number of people losing their homes to foreclosure could reach nearly 5 million by 2011, he said.

Mark A. Calabria, director of financial-regulation studies at the Cato Institute, warned that political rhetoric is driving the policy discussion. "What we really need to do is have an honest debate about what are the magnitudes of people we really can help," he said. But administration officials defended their program's progress, reporting that it has surpassed an initial goal of offering 20,000 modifications a week. These officials said they have taken into account the re-default risk and possibility for self-cure in designing the effort.

Michael S. Barr, assistant Treasury secretary for financial institutions, noted that the report by the Boston Fed does not cover the period since the administration launched its initiative. "We will continue to refine the program as new data becomes available," he said. "We are committed to studying the effectiveness and efficiency of the program, and we welcome outside analysis."

Willen, of the Boston Fed, said the government program could boost several-fold the number of seriously delinquent borrowers receiving modifications. But so few people had been getting their loans modified that even a dramatic increase in the percentage would still touch only a small fraction of troubled borrowers, he said.

"We're still not talking about a program that will stop a large number of foreclosures," he said. "We're talking about a program that, at the margins, will assist more people. It is unlikely we will see a sea change."

Dispute over parked car may lead to the streets for a mother of eight by Andre Coleman Pasadena Weekly 20090723

2009-07-28T01:00:00.001-07:00

http://pasadenaweekly.com/cms/story/detail/mom_s_mustang_melee/7519/

Mom's Mustang melee

Dispute over parked car may lead to the streets for a mother of eight

By André Coleman 07/23/2009

Where does a family of 10 go after it's been kicked out of its home of 20 years?

"If I get evicted," said Margarita Holloman, an unemployed mother of eight kids ranging in age from 1 to 20, of her four-bedroom, two-story, federally subsidized apartment on Mayflower Avenue in Monrovia, "we would have to go from couches to cars and sleep wherever we can. That's all I can do. I don't have any place to go."

In May, Holloman was due in court to face an unlawful detainer — the last of several such eviction notices served on her over the past few years by managers of the Mayflower Apartments — for allegedly being a nuisance. But the 39-year-old, who was pregnant at the time, suffered a miscarriage that forced her to stay in the hospital for five days and miss that hearing before a judge, who ultimately ruled against her.

The only thing now keeping a roof over the heads of Holloman, her children and her boyfriend is action by Pasadena attorney Philip Koebel, who was denied a rehearing on Holloman's behalf, then helped Holloman file for bankruptcy protection, which brought a temporary halt to the eviction proceedings. A federal judge will decide on Aug. 3 if Holloman and her family can stay in the apartment or must leave.

"They have been trying for a long time to get her out," said Koebel. "Yet, she defeated all the unlawful detainers. What has astonished me is they haven't offered an alternative to her. We have offered to settle the case in many different ways."

Holloman insists that she has always paid her portion of rent — the $125 not covered by the US Department of Housing and Urban Development — on time. She also says there have been no complaints filed against her by other tenants. But landlord Samuel Yen, Holloman said, has unfairly deemed her a nuisance.

Yen referred all comment to his supervisor, Evan Escobar, who called Holloman's allegations "very untrue" before referring questions to attorney Richard Daggenhurst, who also refused to comment.

"She was in the hospital and still they are trying to put us out," said Holloman's boyfriend, Quaran Lauderdale, who also lives in the apartment and is the father of three of Holloman's children. "It's like these people don't have a heart."

If the bankruptcy judge rules against her, it's unclear what might happen to Holloman's kids. Her two oldest boys — Kenneth, 20, and Kendall, 19, who were both formerly standout athletes at Monrovia High School — may be forced to skip college in order to help their mother. Holloman also has children ages 1, 3, 5, 9, 7 and 11 years old.

Holloman's latest problems began after her son Kenneth parked his beat-up 2000 Ford Mustang in his mother's parking space before heading off to Utah Valley College, where he is majoring in criminal justice. The car had bald tires, no bumpers and looked like it had been abandoned.

Holloman said she spent the next several weeks moving the vehicle to several different parking spaces in order to demonstrate that the vehicle ran and could be moved. Unfortunately, that didn't help. Police were called and the vehicle was towed. This enraged Holloman, who confronted Yen and called him several derogatory terms, including "fat' and a "pervert."

"It was an ugly car, but it was registered and it ran, but he had it towed anyway," Holloman said of Yen. "I called him some names, but I never threatened him."

Several days later, Holloman received a notice evicting her for breach of her lease, alleging she was a nuisance. Koebel requested a mediation hearing by phone, but the two sides were unable to come to an agreement. At the end of that call, Koebel requested formal mediation, but Daggenhurst declined.

Koebel said he had expected the opposing attorney to serve him with any papers pertaining to Holloman, but that never happened. Instead, Daggenhurst had Holloman served with an eviction notice at her home. Several days later, Holloman suffered a miscarriage. She did not speak to Koebel about the unlawful detainer and missed the deadline to file a motion to stop the eviction.

Under California law, a landlord can serve a tenant notice to vacate within 30 days. "The landlord does not have to provide any reason for the eviction, unless a rent control ordinance requires just cause," Koebel explained. "If the tenant does not leave within 30 days of the notice, the landlord can file a suit for the eviction."

According to Holloman, she never had a problem at the apartments until Yen took over as landlord in 2000. After Lauderdale moved in four years later, Yen allegedly tried to have Holloman evicted for having an unauthorized occupant, but a judge ruled against him.
A short time later, Yen allegedly began taking pictures of family members when they were in the courtyard. The police were also called on Holloman's sons Kenneth and Kendall, who were searched by police several times, but never arrested.

Kendall is scheduled to leave for Weaver State in Pennsylvania next year, where he plans to major in criminal justice. But now, Kendall said, "I'm not sure if I should go anymore. We need a different place to stay so we can have some peace."

"That makes me mad," Holloman said. "I want them to focus on their education. I want them to go and make something out of themselves and this is distracting them. It is hurting my family."

Defending Against “Foreclosure Defense” Lawsuits

2009-07-22T22:42:00.001-07:00

http://www.californiamortgageassociation.com/quarterly.php?a=view&id=146

Spring 2009
Defending Against "Foreclosure Defense" Lawsuits
by Julia M. Wei, Esq, The Law Office of Peter N. Brewer

As foreclosure rates rise and the legislative bodies nationwide rush to address this, plaintiffs lawyers are also cashing in with "Foreclosure Defense" lawsuits.

Borrowers pay a fee to the "Foreclosure Defense" attorney to provide a so-called forensic audit of their loan documents. The attorney will often send a demand letter (Qualified Written Request under the Real Estate Settlement Procedures Act, codified as Title 12 section 2605(e) of the United States Code / Truth In Lending Act 15 U.S.C. section 1601) to obtain the loan documents and then file a cookie-cutter complaint shortly thereafter.

The foreclosure defense lawsuits come in three flavors:
(1) TILA rescission;
(2) Lost Promissory Note; and
(3) Everything But the Kitchen Sink (TILA, RESPA, HOEPA, FCRA, RICO, etc.)

The Truth-in-Lending-Act does indeed provide for rescission of the loan in certain circumstances, but of all the claims above, it is the least beneficial for borrowers as rescission actually requires the borrowers to pay back the loan proceeds. (However, there is some caselaw out there that indicating the Act does not actually specify that the borrower must pay the loan back before the Lender rescinds the loan and reconveys the deed of trust.)

The "Lost Promissory Note" lawsuit is reaching high levels of popularity, especially in the present backlash against mortgage-backed securities. The Foreclosure Defense gurus reason that the original note is long gone as it has been sold, or assigned or securitized in a stream of transactions. They further reason that without the original Note, the deed of trust is a "nullity" and there is no proof the borrower ever incurred the debt.

Under the Uniform Commercial Code, adopted in California as Commercial Code Section 3-309, the lender can still enforce the lost instrument if three prerequisites are satisfied:
(1) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred;
(2) the loss of possession was not the result of a transfer by the person or a lawful seizure; and
(3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person who cannot be found or is not amenable to service of process

The most recent case discussing this code section actually addresses lost checks, and in that circumstance, the Court found it could allow the recipient of the lost check to enforce it so long as the payor (or bank) was adequately protected against a 2nd party who finds the check also seeking to cash it. [Crystaplex Plastics, Ltd. v. Redevelopment Agency, (2000) 77 Cal. App. 4th 990.]

The case of Huckell v. Matranga is illustrative in a circumstance where the beneficiary has lost the original promissory note. In that case, the Court found that Bank of America as Trustee was entitled to request a surety bond before issuing the reconveyance of the Deed of Trust. [Huckell v. Matranga (1979) 99 Cal.App.3d 471.]

Accordingly, there is no requirement that the original promissory note is required in order to conduct a trustee's sale, as the beneficiary can bond around the missing note. That said, a lawsuit on the lost promissory note can certainly slow things down and may be fairly effective in stalling institutional lenders. Private money lenders are less likely to have hypothecated the loans to such a degree as to cause confusion over the location of the note.

The "Everything but the Kitchen Sink" type of Complaint is freely available for download on the web from various bloggers. A wave of these complaints has swept California in both state and federal courts. In the state courts, these complaints are usually filed in conjunction with defending against an unlawful detainer action and then consolidated to stop the eviction. The case is then removed to federal court due to the "federal question" of the alleged violations.

Lenders, mortgage brokers, loan servicers, Realtors and appraisers are often named in these lawsuits. Many times, not all the defendants can even be served as they are either defunct, or in bankruptcy. Of course, as these complaints are filed merely in an effort to slow down the lender, the plaintiff's counsel rarely expends much effort to even get the complaints properly served on the defendants. The borrowers are not paying their mortgages and they may pay their attorney a one-time flat fee simply to file the lawsuit.

Accordingly, a vigorous and early defense is the best method to deal with these opportunistic lawsuits. In federal court, a 12(b)(6) motion to dismiss should be brought to test the sufficiency of the complaint. Alternatively, a Rule 11 motion for sanctions against the attorney may be the best approach. In that circumstance, the plaintiff and plaintiff's counsel has a "safe harbor" period in which to dismiss the lawsuit. There is also a state court equivalent, known as a C.C.P. Section 128.7 motion for sanctions.

Beyond that, once the parties engage in discovery, there will be close scrutiny on the loan documents. Can your documents withstand it?

Julia is an attorney with The Law Office of Peter N. Brewer. The firm serves the legal needs of homeowners, real estate and mortgage brokers and agents, property managers, loan servicers, title companies, developers, investors, other real estate professionals and their clients. You can contact the firm at: 350 Cambridge Avenue, Palo Alto, CA 94306, Ph: 650/327-2900, Fax: 650/327-5959, or on the Web at: www.brewerfirm.com.

Oh no you didn't ...

2009-07-22T16:23:00.000-07:00

Oh no you didn't arrest Skip Gates on his own doorstep... Talk about the dumbest cop in America.

The 58-year-old professor had returned from a trip to China last Thursday afternoon and found the front door of his Cambridge, Mass., home stuck shut. Gates entered the back door, forced open the front door with help from a car service driver, and was on the phone with the Harvard leasing company when a white police sergeant arrived.

http://www.msnbc.msn.com/id/32077998/ns/us_news-race_and_ethnicity/?GT1=43001

Analysis: Scholar's arrest is racial signpost - Race & ethnicity

Analysis: Scholar's arrest is racial signpost

Case signals there's 'nothing post-racial' about U.S., colleague of Gates says

ANALYSIS

By JESSE WASHINGTON

AP National Writer

The Associated Press

updated 3:18 a.m. PT, Wed., July 22, 2009

It took less than a day for the arrest of Henry Louis Gates to become racial lore. When one of America's most prominent black intellectuals winds up in handcuffs, it's not just another episode of profiling — it's a signpost on the nation's bumpy road to equality.

The news was parsed and Tweeted, rued and debated. This was, after all Henry "Skip" Gates: Summa cum laude and Phi Beta Kappa graduate of Yale. MacArthur "genius grant" recipient. Acclaimed historian, Harvard professor and PBS documentarian. One of Time magazine's "25 Most Influential Americans" in 1997. Holder of 50 honorary degrees.

If this man can be taken away by police officers from the porch of his own home, what does it say about the treatment that average blacks can expect in 2009?

Earl Graves Jr., CEO of the company that publishes Black Enterprise magazine, was once stopped by police during his train commute to work, dressed in a suit and tie.

"My case took place back in 1995, and here we are 14 years later dealing with the same madness," he said Tuesday. "Barack Obama being the president has meant absolutely nothing to white law enforcement officers. Zero. So I have zero confidence that (Gates' case) will lead to any change whatsoever."

The 58-year-old professor had returned from a trip to China last Thursday afternoon and found the front door of his Cambridge, Mass., home stuck shut. Gates entered the back door, forced open the front door with help from a car service driver, and was on the phone with the Harvard leasing company when a white police sergeant arrived.

Racial profiling?
Gates and the sergeant gave differing accounts of what happened next. But for many people, that doesn't matter.

They don't care that Gates was charged not with breaking and entering, but with disorderly conduct after repeatedly demanding the sergeant's name and badge number. It doesn't matter whether Gates was yelling, or accused Sgt. James Crowley of being racist, or that all charges were dropped Tuesday.

All they see is pure, naked racial profiling.

"Under any account ... all of it is totally uncalled for," said Graves.

"It never would have happened — imagine a white professor, a distinguished white professor at Harvard, walking around with a cane, going into his own house, being harassed or stopped by the police. It would never happen."

Racial profiling became a national issue in the 1990s, when highway police on major drug delivery routes were accused of stopping drivers simply for being black. Lawsuits were filed, studies were commissioned, data was analyzed. "It is wrong, and we will end it in America," President George W. Bush said in 2001.

Yet for every study that concluded police disproportionately stop, search and arrest minorities, another expert came to a different conclusion. "That's always going to be the case," Greg Ridgeway, who has a Ph.D in statistics and studies racial profiling for the RAND research group, said on Monday. "You're never going to be able to (statistically) prove racial profiling. ... There's always a plausible explanation."

Federal legislation to ban racial profiling has languished since being introduced in 2007 by a dozen Democratic senators, including then-Sen. Barack Obama.

U.S. Rep. Danny Davis, D-Ill., said that was partly because "when you look at statistics, and you're trying to prove the extent, the information comes back that there's not nearly as much (profiling) as we continue to experience."

But Davis has no doubt that profiling is real: He says he was stopped while driving in Chicago in 2007 for no reason other than the fact he is black. Police gave him a ticket for swerving over the center line; a judge said the ticket didn't make sense and dismissed it.

"Trying to reach this balance of equity, equal treatment, equal protection under the law, equal understanding, equal opportunity, is something that we will always be confronted with. We may as well be prepared for it," he said.

'Tumultuous' behavior
Amid the indignation over Gates' case, a few people pointed out that he may have violated the cardinal rule of avoiding arrest: Do not antagonize the cops.

The police report said that Gates yelled at the officer, refused to calm down and behaved in a "tumultuous" manner. Gates said he simply asked for the officer's identification, followed him into his porch when the information was not forthcoming, and was arrested for no reason. But something about being asked to prove that you live in your own home clearly struck a nerve — both for Gates and his defenders.

"You feel violated, embarrassed, not sure what is taking place, especially when you haven't done anything," said Graves of his own experience, when police made him face the wall and frisked him in Grand Central Station in New York City. "You feel shocked, then you realize what's happening, and then you feel it's a violation of everything you stand for."

And that this should happen to "Skip" Gates — the unblemished embodiment of President Obama's recent admonition to black America not to search for handouts or favors, but to "seize our own future, each and every day" — shook many people to the core.

Wrote Lawrence Bobo, Gates' Harvard colleague, who picked his friend up from jail: "Ain't nothing post-racial about the United States of America."

Jesse Washington covers race and ethnicity for The Associated Press.

URL: http://www.msnbc.msn.com/id/32077998/ns/us_news-race_and_ethnicity/?GT1=43001

MSN Privacy . Legal

Hoffman v. Lloyd (9th Cir. 2009) California’s Home Equity Sales Contract Act 20090720

2009-07-21T08:54:00.000-07:00

-Bankruptcy-
Debtor's right under California's Home Equity Sales Contract Act to rescind the sale of his foreclosed home never expired where the sale did not comply with HESCA provision regarding notification of revocation right, debtor's agreement with purchaser did not expressly release HESCA rights, and buyer did not come forward with any evidence suggesting debtor actually knew of his HESCA rights at the time of signing the agreement.
Hoffman v. Lloyd - filed July 20, 2009
Cite as 08-15814
Full text http://www.metnews.com/sos.cgi?0709%2F08-15814

President Obama Signs the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act 20090520

2009-07-20T18:04:00.001-07:00

http://www.whitehouse.gov/the_press_office/reforms-for-american-homeowners-and-consumers-president-obama-signs-the-helping-families-save-their-homes-act-and-the-fraud-enforcement-and-recovery-act/

THE WHITE HOUSE

Office of the Press Secretary
_________________________________________________________
FOR IMMEDIATE RELEASE May 20, 2009

REFORMS FOR AMERICAN HOMEOWNERS AND CONSUMERS
President Obama Signs the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act

WASHINGTON – Today, President Obama will sign the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act into law.

"These landmark pieces of legislation will protect hardworking Americans, crack down on those who seek to take advantage of them, and ensure that the problems that led us into this crisis never happen again," said President Obama.

The Helping Families Save Their Homes Act is an important step towards stabilizing and reforming our nation's financial and housing markets – helping American homeowners and increasing the flow of credit during these difficult economic times. This legislation will strengthen our nation's housing sector and facilitate the goals of the Administration's Making Home Affordable Program by helping millions of American homeowners stay in their homes.

The Fraud Enforcement and Recovery Act will protect the American people by giving the federal government new tools and resources to prevent fraud. This reform bill will help the federal government keep markets free and fair, so that American consumers can thrive.

Fact sheets on both pieces of legislation are below.

The Helping Families Save Their Homes Act

Expanding Reach of Making Home Affordable to Help More Homeowners
The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country. Since January, the Administration has made significant progress in developing and implementing a comprehensive plan for stabilizing our housing market, the centerpiece of which is the Making Home Affordable Program (MHA). By reducing foreclosures around the country, the average homeowner could see their house price bolstered by as much as $6,000 as a result of this plan, and as many as 9 million homeowners may increase the affordability of their mortgages and avoid preventable foreclosures.

Our progress in implementing MHA to date has been substantial. We have introduced detailed guidelines for loan modifications which will establish a new standard practice for affordable modifications in the industry. Servicers covering more than 75 percent of loans in the country have now begun modifications and refinancings under the Administration's MHA Program. We have also launched MakingHomeAffordable.gov, a consumer website for the program, which has had more than 17 million page views in less than 2 months, announced details of our Second Lien Program, Home Price Decline Protection Incentives and Foreclosure Alternatives Program, strengthened Hope for Homeowners as a part of the MHA program, and expanded the efforts of the federal government to combat mortgage rescue fraud.

Improvements to Hope for Homeowners The legislative improvements to Hope for Homeowners included in S.896 should significantly improve the ability of borrowers to benefit from the opportunities provided by Hope for Homeowners in the context of the Administration's housing plan. On April 28th we announced new details describing how Hope for Homeowners will be strengthened as a part of the Administration's Making Home Affordable Program. Incentive payments will be available for successful Hope for Homeowners refinances and servicers will be required to evaluate all applicants for eligibility for Hope for Homeowners as well as the Home Affordable Modification Program.

Hope for Homeowners targets help to underwater borrowers, who often face heightened risks of foreclosure, by requiring principal writedowns to help homeowners increase the equity they own in their homes. The legislative modifications to the Hope for Homeowners program included in S.896 will ease restrictions on eligibility and enable refinancing of underwater mortgages for a greater number of borrowers.
Modifications to FHA and federally guaranteed farm loans Legislative changes to FHA and federally guaranteed farm loans will facilitate cost-neutral loan modifications for federally guaranteed rural housing loans and FHA loans. These changes will improve the Administration's ability to provide assistance to responsible borrowers with federally guaranteed rural housing loans and FHA loans as part of the Making Home Affordable Program.

Increasing Flow of Credit by Expanding FDIC and NCUA Capabilities
The Helping Families Save Their Homes Act of 2009 contains provisions that will help to restore and support the flow of credit in the US economy. The act authorizes new important tools to assist in stabilizing the financial system during the current economic downturn. Together these provisions, described below, should provide additional support for increasing the flow of credit in the US economy.

Extension of temporary increase in deposit insurance Extending the temporary increase in deposit insurance will provide added confidence to depositors. This will provide depository institutions with a more stable source of funding and enhanced ability to continue making credit available across our economy.
Increase in borrowing authority of the FDIC
Increasing the borrowing authority for the Federal Deposit Insurance Corporation (FDIC) to $100 billion will allow the FDIC to spread out premium increases over time. This will reduce near-term costs for banks and thrifts, which will enhance their ability to continue making credit available. As a further tool to protect the financial system, the legislation also includes a process to allow the FDIC to borrow additional amounts through December 31, 2010.
Increase in NCUA borrowing authority and creation of a stabilization fund The legislation will increase the borrowing authority for the National Credit Union Administration (NCUA) to $6 billion and create a Stabilization Fund to address problems in the corporate credit union sector. This will reduce near-term costs for credit unions, which will enhance their ability to continue making credit available. As a further tool to protect the financial system, the legislation also includes a process to allow the NCUA to borrow additional amounts through December 31, 2010.

Increasing Consumer Protections Related to Housing

Establishes protections for renters living in foreclosed homes One of the often overlooked problems in the foreclosure crisis has been the eviction of renters in good standing, through no fault of their own, from properties in foreclosure. To address the problem of these tenants being forced out of their homes with little or no notice, this legislation will require that in the event of foreclosure, existing leases for renters are honored, except in the case of month-to-month leases or owner occupants foreclosing in which cases a minimum of 90 days notice will be required. Parallel protections are put in place for Section 8 tenants.
Establishes right of a homeowner to know who owns their mortgage
Often mortgage loans are sold and transferred a number of times. Borrowers often have difficulty determining who owns their loan, and who to contact with questions, problems or complaints about their loan. This legislation requires that borrowers be informed whenever their loan is sold or transferred, so that they will always know who owns their loan.

Provides Comprehensive New Resources for Homeless Americans
This legislation significantly increases aid to homeless Americans, appropriating $2.2 billion dollars to help solve the crisis of homelessness, and address the enormous costs homelessness can impose on individuals, families, neighborhoods and communities. In addition, the legislation consolidates homelessness programs to improve effectiveness and streamline administration, and targets assistance to families with children – the fastest growing segment of the homeless population.

The Fraud Enforcement and Recovery Act

Strengthening the Capacity to Fight, Prevent, and Deter Fraud
The legislation strengthens the capacity of federal prosecutors and regulators to hold accountable those who have committed fraud. The amendments expand the Department of Justice's authority to prosecute crimes involving mortgage fraud, commodities fraud, and fraud involving U.S. government assistance provided during the recent economic crisis.

Covering private mortgage brokers and other companies Over 50% of sub-prime mortgages issued as recently as 2005 involved private mortgage institutions and similar entities not currently covered under federal bank fraud criminal statutes. FERA amends the definition of a "financial institution" in the criminal code (18 U.S.C. § 20). This will extend Federal laws to private mortgage brokers and companies that are not directly regulated or insured by the Federal Government.
- This law will expand the Department of Justice's authority to prosecute mortgage fraud involving private mortgage institutions under a variety of statutes, including 18 U.S.C. § 215 (financial institution bribery); 18 U.S.C. § 225 (continuing financial crimes enterprise); 18 U.S.C. § 1005 (false statement/entry/record for financial institution); and 18 U.S.C. § 1344 (bank/financial institution fraud).
- The bill changes the definition of "financial institution" to include private mortgage brokers and other non-bank lenders will enhance our ability to prosecute criminals under the bank fraud statute who commit fraud involving loans from those companies.
Prohibiting manipulation of the mortgage lending business
The new law changes the mortgage applications statute (18 U.S.C. § 1014) to make it a crime to make a materially false statement or to willfully overvalue a property in order to influence any action by a mortgage lending business. Currently, the offense only applies to federally-regulated institutions.
Protecting the Integrity of TARP and the Recovery Act
The legislation amends the major fraud statute (18 U.S.C. § 1031) to protect funds expended under TARP and the Recovery Act.
Covering commodity futures and options in anti-fraud statutes
This law amends the Federal securities statute (18 U.S.C. § 1348) to cover fraud schemes involving commodity futures and options. Currently, the statute does not reach frauds involving options or futures, which include some of the derivatives and other financial products that were part of the financial collapse.
Broadening the False Claims Act
FERA modifies the False Claims Act (FCA) to eliminate the requirement that a false claim be presented to a federal official, or that it directly involve federal funds. It also amends the FCA reverse false claims provision to ensure that the knowing retention of an overpayment is a violation.

Providing the Resources to Keep Markets Free and Fair
There is no shortcut to effective fraud enforcement and prevention. FERA will also provide needed resources to help the Department investigate and prosecute those who engage in fraudulent schemes.

Investing in fraud prevention and enforcement
The legislation authorizes up to $165 million in new resources for FY 2010 and 2011 to hire fraud prosecutors and investigators.
Strengthening the federal government's full regulatory and enforcement capacity
The legislation authorizes $140 million for the FBI, $50 million for U.S. Attorney's Offices; $20 million for the Criminal Division, $15 million for the Civil Division, $5 million for the Tax Division, $30 million for the US Postal Inspection Service, $30 million for the Inspector General at the Department of Housing and Urban Development, $20 million for the Secret Service, and $21 million for the Securities and Exchange Commission.

Addressing the Causes and Consequences of the Crisis
This legislation creates a bipartisan Financial Crisis Inquiry Commission to investigate the financial practices that brought us to this point, so that we make sure it never happens again.
-- ...............

JPMorgan Chase & Company 20090421

2009-07-12T18:03:00.001-07:00

http://topics.nytimes.com/top/news/business/companies/morgan_j_p_chase_and_company/index.html?inline=nyt-org&

JPMorgan Chase & Company

JPM: NYSE; Financials/Financial Services - Diversified

Updated: April 21, 2009

As it name suggests, JPMorgan Chase is the product of many combinations involving some of the most storied names in American banking. In a 10-year stretch beginning in 1991, four of the biggest and oldest New York financial institutions -- Chase Manhattan Bank (founded by Aaron Burr), Chemical Bank and Manufacturer Hanover Bank were joined with J.P. Morgan and Company, the venerable investment bank. Then in 2004, the combined company merged with Bank One Corp., in a $58 billion deal that remains the largest of its kind.

That deal brought JPMorgan within a whisker of catching Citigroup as the world's largest financial institution, and combined Bank One's vast branch retail network with JPMorgan's investment banking franchise. It also brought James Dimon, a former rising star at Citigroup who became chief executive of Bank One after being forced out by Citigroup's chairman, Sanford I. Weill, his former mentor. Mr. Dimon became chief executive of the combined company, and its chairman in 2006.

While the company was formed by acquisitions, Mr. Dimon proved to be notably cautious about further big deals. And while losses from mortgage-related securities drove profits down at the end of 2007, JPMorgan in early 2008 appeared to have avoided the worst of the battering damaging its competitors. The company was in a good position to move quickly when Bear Stearns came face to face with bankruptcy in March 2008. Known as a tough negotiator, Mr. Dimon struck a bargain that had Wall Street gasping when it was announced on March 16, buying Bear Stearns for a mere $2 a share -- a tenth of its closing price -- together with a Federal Reserve loan for $30 billion secured by Bear Stearns's shaky portfolio.

With the advent of the credit crisis in September, Washington Mutual, a giant savings and loan that had been hobbled by bad mortgages, teetered on the brink of collapse. Federal regulators called a familiar number: James Dimon's. The head of the Federal Deposit Insurance Corporation told him the F.D.I.C. was about to seize WaMu — and then sell it to JPMorgan. JPMorgan paid $1.9 billion to the F.D.I.C. to acquire all of WaMu's assets, branches and deposits. With WaMu, JPMorgan has $905 billion in deposits and 5,400 branches nationwide, rivaling Bank of America in size and reach. But the bank was also responsible for absorbing $31 billion in losses tied to WaMu's troubled loans. WaMu shareholders and certain bondholders were wiped out, but a taxpayer funded WaMu bailout was avoided.

JPMorgan Chase reported a $2.1 billion profit in the first quarter of 2009, besting analysts' average forecasts. Revenue increased to $25 billion, up 45 percent from $16.9 billion in the period last year. Still, the results reflected continued turmoil in sectors like credit card services and private equity, businesses that reported losses or steep drops in revenue, reflecting the lingering effects of the recession on consumer spending and the credit markets.

Mr. Dimon is adamant that his company will pay back $25 billion in government bailout funds as soon as regulators allow. "Folks, it has become a scarlet letter," said Mr. Dimon, referring to the taxpayer infusion the bank received in October 2008. "We could pay it back tomorrow," he said. "We have the money."

And JPMorgan Chase did just that on June 17 when it became one of 10 banks to repay about $68 billion in bailout funds. JPMorgan's share was $25 billion; the bank allowed to do repay the money after it had passed a stress test given by government regulators.

Looking for the Lenders’ Little Helpers by Gretchen Morgenson NY Times 20090711

2009-07-12T17:20:00.001-07:00

The following quote is from the article by Gretchen Morgenson linked below...

"One example is a suit filed in Federal District Court in Atlanta, on behalf of the borrowers, Patricia and Ricardo Jordan. The Jordans are fighting a foreclosure on their home of 25 years that they say was a result of an abusive and predatory loan made by NovaStar Mortgage Inc. A lender that had been cited by the Department of Housing and Urban Development for improprieties, like widely hiring outside contractors as loan officers, NovaStar ran out of cash in 2007 and is no longer making loans.

Also named as a defendant in the case is the initial trustee of the securitization that contained the Jordans' loan: JPMorgan Chase. In 2006, the bank transferred its trustee business to Bank of New York Mellon, which is also a defendant in the case. The Jordans are asking that all three defendants pay punitive damages.

"We contend that the trustee has direct liability on the theory that even though they were not sitting at the loan closing table, they were involved in the securitization and profited from it," said Sarah E. Bolling, a lawyer in the Home Defense Program at the Atlanta Legal Aid Society who represents the Jordans. "The prospectus had been written before the loan was closed. If this loan was not going to be assigned to a trust, it would not have been made.""

http://www.nytimes.com/2009/07/12/business/12gret.html

Fair Game

Looking for the Lenders' Little Helpers

By GRETCHEN MORGENSON

Published: July 11, 2009

IT is hard not to be dismayed by the fact that two years into our economic crisis so few perpetrators of financial misdeeds have been held accountable for their actions. That so many failed mortgage lenders do not appear to face any legal liability for the role they played in almost blowing up the economy really rankles. They have simply moved on to the next "opportunity."

And what of the giant institutions that helped finance these monumentally toxic loans, or arranged the securitizations that bundled the loans and sold them to investors? So far, they have argued, fairly successfully, that they operated independently of the original lenders. Therefore, they are not responsible for any questionable loans that were made.

But this argument is growing tougher to defend. Some legal experts point to a number of cases in which plaintiffs contend that firms involved in the securitization process, like trustees hired to oversee the pools of loans backing securities, worked so closely with the lenders that they should face liability as members of a joint venture. And these experts see a rising receptiveness to this argument by some courts.

"As we are unpeeling what was happening on Wall Street, we may see that Wall Street didn't find the safety from litigation risk that it hoped to find in securitization," said Kathleen Engel, a professor at Cleveland-Marshall College of Law at Cleveland State University. "I think there is potential for liability if borrowers can engage in discovery to see exactly how much the sponsors were shaping the practices of the lenders."

One example is a suit filed in Federal District Court in Atlanta, on behalf of the borrowers, Patricia and Ricardo Jordan. The Jordans are fighting a foreclosure on their home of 25 years that they say was a result of an abusive and predatory loan made by NovaStar Mortgage Inc. A lender that had been cited by the Department of Housing and Urban Development for improprieties, like widely hiring outside contractors as loan officers, NovaStar ran out of cash in 2007 and is no longer making loans.

IN their legal briefs, the trustees have made the traditional argument that their relationship with NovaStar was not a joint venture and that they are not responsible for any problems with the Jordans' loan.

A JPMorgan spokesman declined to comment on the case but said that because the bank was no longer the trustee, it was not directly involved in the litigation. A spokesman for Bank of New York Mellon also declined to comment.

A lawyer for NovaStar did not return calls seeking comment.

The facts surrounding the Jordans' case are depressingly familiar. In 2004, interested in refinancing their adjustable-rate mortgage as a fixed-rate loan, they said they were promised by NovaStar that they would receive one. In actuality, their lawsuit says, they received a $124,000 loan with an initial interest rate of 10.45 percent that could rise as high as 17.45 percent over the life of the loan.

Mrs. Jordan, 66, said that she and her husband, who is disabled, provided NovaStar with full documentation of their pension, annuity and Social Security statements showing that their net monthly income was $2,697. That meant that the initial mortgage payment on the new loan — $1,215 — amounted to 45 percent of the Jordans' monthly net income.

The Jordans were charged $5,934 when they took on the mortgage, almost 5 percent of the loan amount. The loan proceeds paid off the previous mortgage, $11,000 in debts and provided them with $9,616 in cash.

Neither of the Jordans knew the loan was adjustable until two years after the closing, according to the lawsuit. That was when they began getting notices of an interest-rate increase from Nova- Star. The monthly payment is now $1,385.

"I got duped," Mrs. Jordan said. "They knew how much money we got each month. Next thing I know I couldn't buy anything to eat and I couldn't pay my other bills."

All the defendants in the case have asked the judge to dismiss it. The Jordans are awaiting his ruling.

Perhaps the most famous case that linked a brokerage firm with a predatory lender was the one involving First Alliance, an aggressive lender that declared bankruptcy in 2000, and Lehman Brothers, its main financier.

More than 7,500 borrowers had successfully sued First Alliance for fraud, and in 2003 a jury found that Lehman, which had lent First Alliance roughly $500 million over the years to finance its lending, "substantially assisted" it in its fraudulent activities. Lehman was ordered to pay $5.1 million, or 10 percent of damages in the case, for its role.

Another case, from 2004, took up the issue of liability for abusive lending that went beyond a loan's originator. That case, which involved Wells Fargo and a borrower named Michael L. Short, was settled after the court denied two motions to dismiss it.

That matter turned on the language in the securitization's pooling and servicing agreement, which provides details not only on the types of loans in a pool but also on the relationships of various parties involved in it.

Diane Thompson, a lawyer with the National Consumer Law Center, said that the meaning of the agreement was that "the trustee was a joint venture with the originator and was therefore responsible for everything that happened in that joint venture."

Many such agreements, she said, create a joint venture by force of law. "Everybody I know that has tried this argument has had pretty good success. Absolutely we are going to see more of these cases."

And let us not forget that late in the mortgage mania, Wall Street was no longer content simply to package these loans and sell them to investors. Eager for the profits generated by originating these loans, big firms bought subprime lenders to keep their securitization machinery humming. This could expose the firms to liability.

"I think something that hasn't been explored much is the extent to which the financial services industry has exposure to litigation risk in securitizations," Professor Engel said. "As the industry got faster and looser, Wall Street just stopped paying attention. And when you stop paying attention, you get in trouble."