Daily Archives: October 8, 2010

The mortgage notes weren’t fraudulent

I’m fifteen years removed from real estate transactions, but I doubt much has changed since I quit the law. I’m sure that there were crooked lawyers back there in the day, but the vast majority of us – 99.9%, I’d guess – weren’t going to risk losing our freedom and law licenses to participate in fraud. Borrowers did get funding to buy a house, and spent that money on the property, period. No fraud.. The current trouble stems from the mortgage mills that couldn’t be bothered to nail down the documentation. So, in theory, this whole kerfuffle should be resolved in a few months and foreclosures will resume. It ain’t gonna happen.

The banks won’t be able to come up with the documents to prove their claim. We lawyers oversaw the signing, but, after recording documents on the land records, we were instructed to return  the document to the originator, who then lost them. Most of these mortgage mills have collapsed ,and they never forwarded the originals to their principals. Who didn’t care, then.

So: the recorded documents are true and accurate copies: where are the originals? Who knows? Five years ago, the response would have been, “who cares?” Different now.


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I 84 shut down in both directions


No go


A state trooper stopped a stolen car, was shot at by the driver and shot back, killing him. Highway traffic is going nowhere at last sighting. I’ve always admired the courage of single cops approaching stopped vehicles – they have no idea what they’re facing. In fact, I doubt I have their bravery (Okay, I don’t). But it’s a good idea to keep your hands visible if you’re stopped, and don’t make sudden movements.


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Well, it turns out I’m not the only one to see foreclosure disaster

Zero Hedge has been predicting the same thing. I have a link to their site, but I haven’t been reading it lately. I should have been, because those guys know more than I do, by far. They’re calling  for impending doom – well no they aren’t, but I am. The worst part? We need to clear the inventory of failed home purchases, and this will delay that process for years. Unless of course, everyone walks out of court with no debt, in which case they can reset their prices to the current market. But if that happens, the banks will fail, so who will be around to make loans? The U.S. taxpayer, I suppose. May you live in interesting times.

Ezra Klein: What’s happening here? Why are we suddenly faced with a crisis that wasn’t apparent two weeks ago?

Janet Tavakoli: This is the biggest fraud in the history of the capital markets. And it’s not something that happened last week. It happened when these loans were originated, in some cases years ago. Loans have representations and warranties that have to be met. In the past, you had a certain period of time, 60 to 90 days, where you sort through these loans and, if they’re bad, you kick them back. If the documentation wasn’t correct, you’d kick it back. If you found the incomes of the buyers had been overstated, or the houses had been appraised at twice their worth, you’d kick it back. But that didn’t happen here. And it turned out there were loan files that were missing required documentation. Part of putting the deal together is that the securitization professional, and in this case that’s banks like Goldman Sachs and JP Morgan, has to watch for this stuff. It’s called perfecting the security interest, and it’s not optional.

EK: And how much danger are the banks themselves in?

JT: When we had the financial crisis, the first thing the banks did was run to Congress and ask for accounting relief. They asked to be able to avoid pricing this stuff at the price where people would buy them. So no one can tell you the size of the hole in these balance sheets. We’ve thrown a lot of money at it. TARP was just the tip of the iceberg. We’ve given them guarantees on debts, low-cost funding from the Fed. But a lot of these mortgages just cannot be saved. Had we acknowledged this problem in 2005, we could’ve cleaned it up for a few hundred billion dollars. But we didn’t. Banks were lying and committing fraud, and our regulators were covering them and so a bad problem has become a hellacious one.

EK: My understanding is that this now pits the banks against the investors they sold these products too. The investors are going to court to argue that the products were flawed and the banks need to take them back.

JT: Many investors now are waking up to the fact that they were defrauded. Even sophisticated investors. If you did your due diligence but material information was withheld, you can recover. It’ll be a case-by-by-case basis.



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Cop strips his foreclosed home, is arrested

Don’t be stupid. Faced with foreclosure, a veteran cop and a former Marine (12 years) ripped out appliances and fixtures, poured ink on carpets, etc.. He might have gotten away with just a civil suit for damages but as a cop , …. Whether you’re a policeman or not, I’d advise you to curb your anger if faced with a situation like this. Does no good and can cause you great difficulties, as this guy is about to discover.

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Aren’t they all?

Whitman upset at being called a” “whore” for selling out to police union. Well, it takes one to know one, and Jerry Brown should know. How about we just don’t elect anyone and let government shut down for a year or two?

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Bank of America joins mortgage foreclosure moratorium

This, as predicted (by me, anyway), will sweep the nation by next week. And here’s the fun part: if record keeping on foreclosures is so universally bad, do you think it was any better in the actual loan process itself? I think not, and so if judges start peeling the cover off these packaged loans, I believe they’ll discover millions of bad loans; loans without sufficient documentation to prove the debt. In which case, a lot of borrowers are going to walk out of court with a free house. That, in turn, will bring down the banks, which will be interesting.

Keep an eye on this – it may well be time for a strategic default on your mortgage. Take a hundred point hit on your credit rating, get a house. What was that old ad in the Dodger’s Ebbets Field stadium? “Hit sign, win suit”. You may be able to do substantially better than that.

UPDATE: Thanks to a reader, here’s a link to an article explaining all this.


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Feds: no cellphones, hand-held or not, while driving

And since LaHood opposes any distraction, presumably no radios or talking. You’d think Michael Bloomberg had taken over the government.


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Bush and Obama in a tie

Poll asks who was the better president and the voters are knotted. Given the hatred for Bush that existed just two years ago, this is probably not good news for Obama. Regardless of the exact numbers, this sounds like good advice:

“Democrats may want to think twice about bringing up former President George W. Bush’s name while campaigning this year,” says CNN Polling Director Keating Holland.


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Belle Haven, take two

41 Bush Avenue

This beautiful old (1900) Belle Haven home couldn’t fetch $12.750 from ’09 until this summer, but it’s back with a new broker and a new price: $9.995. Maybe. It’s assessed for just $4.3 but that’s nuts – I believe the owners paid $5 million for it in 2000 and then dumped a ton of money into restoration. 1.18 acres and pool, great location, it should sell at some significant price, if not its current asking. Not a house for bottom feeding, I shouldn’t think.


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I guess someone’s not reading the papers

14 Tomney

This house on Tomney (lower Stanwich) sold for $1.325 in January of this year. It’s back on the market today for $1.595. Listing says the owner has added a new front door and “fabric window treatments”. Okay.

26 Richmond Hill Road, a building site, is also back on the market. Its owner sought $3.3 million in 2006, dropped that to $3 and let it expire in 2007. Today he’ll take $1.7. That still seems steep to me for Richmond but the assessment is $2.1, so maybe the price is right; I really don’t remember the place. Some lots on Richmond are hills, rocks and swamp while others are meadow. I’d bet this is meadow. Hope so, anyway.


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1,738 days later, a contract!

404 Round Hill Road

When your child was starting kindergarten in 2005 this house was put up for sale at a price of $8.5 million. Well Biff is in fifth grade now, ready to move on to Brunswick and the house, reduced ever so painfully to $5.950, has found a buyer. For how much? We’ll have to wait and see. Assessment is $3.360.

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Land for sale, (not) dirt cheap

500 Round Hill Road

This twenty-acre parcel sits above and across the street from the Helmsley’s and came on the market today asking $29 million. Hmm. It sold in 2002 for $13.5 million and again in 2005 for $11 million. Somewhere during that period the beautiful old mansion that graced its acres was disappeared, so you’ve got a full twenty acres to play with and, if you wish, spit watermelon seeds down on the Helmsley place.

$29 million? I don’t know. The one thing we aren’t producing is more land, and this is some of the finest we have. Still, it seems steep.


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Steal this house

546 North Street

546 North Street (just south of Taconic) came on the market in early 2008 for $7.995 million. It’s marked down today to $3.895. Yes, it’s an old house in need of renovation and yes, it’s on a shared driveway (which means it’s far removed from the noise of the street) but it also has 5.5 acres in the RA-2 zone and it’s assessed at $5.389 million. That’s a really good deal, and the house itself is well worth updating – in fact, it’s quite beautiful. But at this price, you could afford to tear it down and build again. I wouldn’t, but you could.


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Creating Jobs

Earlier this week I stopped by my friend Lou Van Leeuwen (Greenwich Construction) ‘s new spec project on Club Road in Riverside. I hope to sell this house, which will probably go for somewhere between $6.5 and $7 million,  but if I don’t someone else surely will. Club Road’s a very desirable street and this house, on an acre, will be a beauty.

But that’s not my point. Lou is just beginning the foundation and yet I counted seventeen people working on the site, between foundation men, surveyors and stone masons. During the next year, hundreds of tradesmen will get paid to work on this project, all without the assistance of  our government – in fact, despite our government. That’s something Obummer and Bluemthal fail to understand. To create a job, an entrepreneur has to risk his capital and pay people to create something that otherwise wouldn’t exist. Lou’s doing far more to solve our unemployment problem than Obummer and Blumenthal combined.


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NRFS: Not really for sale?

531 Riversville

This house way up Riversville near John Street sits on 7 1/2 acres and has fantastic views. But it shows its age (1928) and when it came on back in 2009 at $6.290 it was hard to recommend it to anyone. It slowly dropped its price, down to as low as $4.950, but that was still too high (assessment is $3.6) and today it was withdrawn from the market.

I suspect a large percentage of our inventory is like that: the owners will sell if they get their price, but not otherwise. It’s a free country, but I sure wouldn’t want my life disrupted for 2 1/2 years with a house on the market if I really wasn’t interested in selling it.

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Price cuts

No significant activity this week (aside from Leona’s place moving) but we are seeing lots of price reductions.

48 Brookridge

This house near the high school sold new for $4.865 in 2003. The buyers put in a pool and tried reselling it this year for $6.295. Today it’s marked down to $5.895. Assessment is $5 million.

38 Grahampton

38 Grahampton sold for $4.385 in 2006, is assessed for $2.323 and is asking $3.995.

20 Dingletown

I feel bad about this one on Dingletown because I know the owners/builders and they did a decent job. But their timing (and initial pricing) were terrible, and they weren’t able to get $5.150 in 2006. It’s down today to $3.650 which I suspect is what they owe on the place but, alas, I think it’s still got further to go. Assessment, $2.6ish.

50 Sumner Rd

We do have one contract, this one on Sumner Road, way up on Round Hill. It says “pending”, so perhaps it’s a short sale – I don’t know. Assessed at $2.3 million, it was only asking $1.74 and presumably is going for less than that.


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The country’s going to hell

Pre-teen wax jobs?


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The NYT and tax illiteracy

I saw this article yesterday and sighed, but I’m glad Powerline took it up. The New York Times hires economic illiterates, which is fine, but not when they lard their articles with that ignorance.

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This can’t be good news

General James Jones to resign as National Security Advisor, to be replaced by a Jimmy Carter political operative.

Mr. Donilon began as a young political operative for President Jimmy Carterand later was chief of staff for Secretary of State Warren Christopher in the Clinton administration. He has long operated in the area between politics and national security. He coached Mr. Obama on foreign policy for his debates in the 2008 presidential campaign.

As deputy national security adviser, Mr. Donilon has urged what he calls a “rebalancing” of American foreign policy to rapidly disengage American forces in Iraq and to focus more on China, Iran and other emerging challenges. In the Afghanistan-Pakistan review, he argued that the United States could not engage in what he termed “endless war,” and has strongly defended Mr. Obama’s decision to withdraw American troops from Afghanistan next summer.



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