RealtyTrac has just reported that even though the volume of foreclosed homes plunged by 25% from Q2 to Q3 and 31% from Q2 of 2009, the discount on foreclosed homes has hit a five year high, as interest in even ultra bargain properties has collapsed following the expiration of the homebuyer tax credit, and confirming yesterday's bad Case Shiller (remember that one?) number. Per RealtyTrac: "foreclosure homes accounted for 25 percent of all U.S. residential sales in the third quarter of 2010 and that the average sales price of properties that sold while in some stage of foreclosure was more than 32 percent below the average sales price of properties not in the foreclosure process — up from a 26 percent discount in the previous quarter and a 29 percent discount in the third quarter of 2009." Yet despite the major price drop, buying interest has evaporated as nobody there is no longer any purchasing power left in the lower and middle sections of the housing market: "a total of 188,748 U.S. properties in some stage of foreclosure — default, scheduled for auction or bank-owned (REO) — sold to third parties in the third quarter, a decrease of 25 percent from the previous quarter and a decrease of nearly 31 percent from the third quarter of 2009. The average sales price of properties in some stage of foreclosure was $169,523, down 2.46 percent from the previous quarter and down 0.44 percent from the third quarter of 2009." And while the average price of non-foreclosed homes posted a slight uptick in Q3, the volume drop was even worse: "The average sales price of properties not in foreclosure was $249,721, up 6.42 percent from the previous quarter and up 4.36 percent from the third quarter of 2009. Sales volume of non-foreclosure properties decreased 29 percent from the previous quarter and nearly 31 percent from the third quarter of 2009."
More from RealtyTrac's Jim Saccacio:
I’ve taken a particular interest in GMAC because in the one consumer foreclosure case I
‘ve attended, back in May, I had the dubious pleasure of seeing a GMAC employee and an attorney for the local foreclosure mill, who was also put on the stand, perjure themselves. And this isn’t my interpretation; documentary evidence was presented later in the trial that showed core elements of each of their testimony to be false. The GMAC staffer, who had made confident statements about the case and provided plenty of bromides about the integrity of GMAC’s processes, was suddenly reluctant to say anything more definitive than “I don’t know.”A Birmingham, Alabama law firm, Bradley Arant Boult Cummings, has been GMAC’s national counsel on real estate servicing matters for some time (see here for examples of some of the matters it has handled).
Curiously, Bradley Arant is one of the firms that GMAC engaged to conduct an “independent review” after its use of robo signing became public:
GMAC Mortgage is initiating an independent review of foreclosures in all 50 states and examining foreclosure sales nationwide to ensure procedures and documentation are accurate….
The firms hired to conduct the review are Sullivan & Cromwell LLP, Bradley Arant Boult Cummings LLP, Morrison & Foerster LLP and PricewaterhouseCoopers LLP, said a person familiar with the matter.
Given Bradley Arant’s long-standing and extensive involvement in GMAC’s mortgage business, how can it legitimately be part of the team conducting the review? It’s incentives will be to minimize any problems, for a host of reasons, the most important being so as not to ruffle a big meal ticket and to avoid the exposure of any issues that might create liability for the firm.
But if that isn’t bad enough, get a load of this, courtesy Bloomberg:
Fannie Mae, the largest provider of mortgage financing in the U.S., said it halted referrals to a Florida foreclosure-processing law firm that’s being investigated by the state attorney general.
The Law Offices of David J. Stern PA have drawn scrutiny in Attorney General Bill McCollum’s investigation into the foreclosure of homes based on possibly fraudulent or improperly prepared documents….Fannie Mae, which has a $3.3 trillion book of business, has hired law firm Bradley Arant Boult Cummings LLP to review Stern’s processes and operations.
Why is this problematic? The profile of a typical foreclosure mill is a very high staff to partner ratio, as many as 90 to 100 paralegals for every partner. Their processes are routinized. Foreclosure mills are evaluated according to parameters set by Fannie and Freddie, in case of GSE securtizations. Most of this coordination and assessment does not take place directly, but via a firm called Lender Processing Services, which serves as a defacto outsourced manager on behalf of the GSEs and servicers.
It is hardly news that foreclosure mills in the LPS/Fannie/Freddie network were engaging in questionable conduct. Consider this June 2009 statement:
Attorney General Richard Blumenthal, as part of an investigation into the foreclosure business in Connecticut, has requested information from mortgage giants Lender Processing Services, Inc., Freddie Mac and Fannie Mae concerning their process for selecting law firms in foreclosure proceedings.
Blumenthal is investigating reports that a majority of Connecticut foreclosures are assigned to only a few select law firms, and complaints by consumers who said they did not receive proper foreclosure notices from marshals.
In letters to Lender Processing Services, Inc., the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae), Blumenthal said he understands that these organizations maintain a network of law firms that perform legal services relating to foreclosure actions…
“Dominance over foreclosure service by a few select law firms and marshals has spurred complaints about improper or illegal practices — wrongfully allocating work to non-marshals, forging papers, failing to serve papers, and making kickbacks,” Blumenthal said. “Concentrating this work in a few hands can be severely problematic — causing unconscionable costs and failed notice delivery. These companies — mortgage lending giants — have a public trust.’
Now how does this relate to GMAC and Bradley Arant? LPS and the mills they hire work in an integrated fashion. Moreover, Freddie, Fannie, and the servicers have chosen to work with firms that operate in a high-volume, highly standardized manner. Blumenthal clearly was of the view that Fannie and Freddie would bear some, perhaps a great deal, of responsibility for any improprieties, since the law firm was operating less independently than would normally be the case.
GMAC also used the David Stern law firm. Thus both due to its desire to deepen its relationship with Fannie and to keep itself and GMAC out of trouble, Bradley Arant is certain to frame its examination as narrowly as possible and not consider potentially troublesome but germane questions such as who at the contracting organizations (LPS, Fannie, other servicers) might also be culpable.
A broader look is key to understand who really bears responsibility. Foreclosures of securitized loans increasingly look to be what Bill Black would call a criminogenic environment, in which the major perps are deeply entwined and work together. And if caught, it is clearly in their best interest to cut loose the weakest, most dispensable actor in their tidy group, the foreclosure mill.
So in many ways, the selection of Bradley Arant makes perfect sense. It is familiar with the terrain, so it will be able to issue a plausible-sounding report. It is also so deeply part of this questionable backwater that it is highly unlikely to make a bottoms up investigation and potentially rock the boat.
As former central banker Willem Buiter remarked, “Regulation is to self regulation as regard is to self regard.” The only way for an investigation of this sordid business to succeed is for it to be truly independent, and that means requisitioned and executed by parties that have their hands clean. If any of these companies had a new CEO or a particularly tough compliance/internal audit function, they might fill that bill. However, the very choice of Bradley Arant strongly suggests that these examinations are exercises in form over substance.
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Here's an interesting tidbit we can thank jailed WikiLeaks founder Julian Assange for: according to cables included in the recent WikiLeaks document drop, informants have told diplomats at the U.S. Embassy in Saudi Arabia that American ...
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Three years later, KQED.org has more than 15 active WordPress sites, collaborates with other regional public media outlets on WordPress plugin development, and sees a future where WordPress helps them quickly deliver the news their ...
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Fox News Washington managing editor Bill Sammon is under fire today for instructing his newsroom - during the height of the health care debate - not to use the term “public option.
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Fox News Washington managing editor Bill Sammon is under fire today for instructing his newsroom - during the height of the health care debate - not to use the term “public option.
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Here's an interesting tidbit we can thank jailed WikiLeaks founder Julian Assange for: according to cables included in the recent WikiLeaks document drop, informants have told diplomats at the U.S. Embassy in Saudi Arabia that American ...
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Fox News Washington managing editor Bill Sammon is under fire today for instructing his newsroom - during the height of the health care debate - not to use the term “public option.
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Here's an interesting tidbit we can thank jailed WikiLeaks founder Julian Assange for: according to cables included in the recent WikiLeaks document drop, informants have told diplomats at the U.S. Embassy in Saudi Arabia that American ...
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Three years later, KQED.org has more than 15 active WordPress sites, collaborates with other regional public media outlets on WordPress plugin development, and sees a future where WordPress helps them quickly deliver the news their ...
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Fox News Washington managing editor Bill Sammon is under fire today for instructing his newsroom - during the height of the health care debate - not to use the term “public option.
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Here's an interesting tidbit we can thank jailed WikiLeaks founder Julian Assange for: according to cables included in the recent WikiLeaks document drop, informants have told diplomats at the U.S. Embassy in Saudi Arabia that American ...
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Fox News Washington managing editor Bill Sammon is under fire today for instructing his newsroom - during the height of the health care debate - not to use the term “public option.
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Here's an interesting tidbit we can thank jailed WikiLeaks founder Julian Assange for: according to cables included in the recent WikiLeaks document drop, informants have told diplomats at the U.S. Embassy in Saudi Arabia that American ...
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