KeNo's Housing and Economic Portal: Saturday November 6 Housing and Economic stories

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Homeowners Facing Foreclosure Demand Recourse - (www.nytimes.com) Ricky Rought paid cash to the Deutsche Bank National Trust Company for a four-room cabin in Michigan with the intention of fixing it up for his daughter. Instead, the bank tried to foreclose on the property and the locks were changed, court records show. Sonya Robison is facing a foreclosure suit in Colorado after the company handling her mortgage encouraged her to skip a payment, she says, to square up for mistakenly changing the locks on her home, too. Thomas and Charlotte Sexton, of Kentucky, were successfully foreclosed upon by a mortgage trust that, according to court records, does not exist. As lenders have reviewed tens of thousands of mortgages for errors in recent weeks, more and more homeowners are stepping forward to say that they were victims of bank mistakes — and in many cases, demanding legal recourse. Some homeowners say the banks tried to foreclose on a house that did not even have a mortgage. Others say they believed they were negotiating with the bank in good faith. Still others say that even though they are delinquent on their mortgage payments, they deserve the right to due process before being evicted.

Reduction in debt subsidies could be in houseowners' futures - (www.contracostatimes.com) Could the forthcoming report of a bipartisan presidential deficit-reduction commission -- due Dec. 1 -- lead to fundamental changes in the way homeownership is treated by the federal tax system? Are you kidding? For decades the political rule on Capitol Hill has been that nobody messes with homeowners' tax benefits -- mortgage interest deductions, capital gains exclusions, property tax write-offs -- even if they cost the government hundreds of billions of dollars in tax revenues a year and increase the federal deficit. But now the sheer size of the country's fiscal problems -- a $1.3 trillion deficit for 2010 and a fast-mounting $13.6 trillion debt overall -- could be slowly altering the equation. Not only are some Republicans and Democrats joining in support of plans to lower the deficit through across-the-board cuts in military spending, social programs and tax subsidies, but even leaders in the real estate industry are speaking up. At an opening session Oct. 14 of the annual fall meeting of the Urban Land Institute here, all five panelists -- Democrats and Republicans -- agreed that while continuing tax system support for housing is important, the current mix of tax incentives is costly and imbalanced -- favoring homeownership disproportionately over rental housing alternatives. At a private meeting following that session, one of the panelists, Henry Cisneros, secretary of housing and urban development during President Clinton's first term, said serious leaders on both sides of the political aisle increasingly believe that the weight of public debt -- plus the hundreds of billions of dollars per year required to make interest payments to creditors -- could wreck the economy within the decade.

Tax Shortfalls Spur New Fear on Europe’s Recovery Bid - (www.nytimes.com) The mathematics of austerity are getting harder. With economic conditions weaker than expected, tax revenue is coming up short of projections in parts of Europe. As a result, countries struggling with high deficits are now confronting the prospect that they will miss the budget deficit targets forced upon them this year by impatient bond investors. Greece, for one, looks as if it will run a budget deficit for 2010 greater than the 8.1 percent of gross domestic product it agreed to as part of a rescue package from the International Monetary Fund and the European Union that amounted to more than $150 billion, according to a person briefed on the matter but not authorized to speak about it. The adjustment, at worst, would result in a deficit of 8.9 percent of Greece’s output, this person said. Normally, such a small difference would not be cause for alarm. But after the latest upward revision in Greece’s 2009 deficit — to about 15.5 percent from 13.5 percent of output — the miss has spurred investor fears that the Greek government will be unable to close the gap and that Greece may ultimately be forced to restructure its mountain of debt with foreign investors.

Unmentioned Elephant In Foreclosure Fraud Room: Second Liens - (blogs.alternet.org) There’s been plenty of recent media attention to the prospect of investor lawsuits over fraudulent mortgages and mortgage securities. But investor lawsuits against mortgage servicers could be even more damaging than these other lines of legal inquiry. The four largest banks hold nearly half a trillion dollars worth of second-lien mortgages on their books—loans that could be decimated if investors successfully target improper mortgage servicing operations. The result would be major trouble for the financial system. The result would be major trouble for too-big-to-fail behemoths. Mortgage servicers are the banking industry’s debt collectors. They accept payments and forward them along to investors who own mortgage securities– servicers themselves don’t actually own the mortgages they handle. This is a recipe for trouble for a variety of reasons, but one of the biggest problems is the fact that the nation’s four largest banks also operate the four largest mortgage servicers. Bank of America, Wells Fargo, JPMorgan Chase and Citigroup service about half of all mortgages in the United States. They also have multi-trillion-dollar businesses whose interests often conflict with those of mortgage security investors.

Foreclosure crisis is about who gets stuck with $1.1 trillion in losses - (www.businessweek.com) The foreclosure crisis isn't just about lost documents. It's about trust—and a clash over who gets stuck with $1.1 trillion in losses. In 2002, a Boca Raton (Fla.) accountant named Joseph Lents was accused of securities law violations by the Securities and Exchange Commission. Lents, who was chief executive officer of a now-defunct voice-recognition software company, had sold shares in the publicly traded company without filing the proper forms. Facing a little over $100,000 in fines and fees, and with his assets frozen by the SEC, Lents stopped making payments on his $1.5 million mortgage. The loan servicer, Washington Mutual, tried to foreclose on his home in 2003 but was never able to produce Lents' promissory note, so the state circuit court for Palm Beach County dismissed the case. Next, the buyer of the loan, DLJ Mortgage Capital, stepped in with another foreclosure proceeding. DLJ claimed to have lost the promissory note in interoffice mail. Lents was dubious: "When you say you lose a $1.5 million negotiable instrument—that doesn't happen." DLJ claimed that its word was as good as paper. But at least in Palm Beach County, paper still rules. If his mortgage holder couldn't prove it held his mortgage, it couldn't foreclose. Eight years after defaulting, Lents still hasn't made a payment or been forced out of his house. DLJ, whose parent, Credit Suisse, declined to comment for this story, still hasn't proved its ownership to the satisfaction of the court. Lents' debt has grown to about $2.5 million, including unpaid taxes, interest, and penalties. As the stalemate grinds on, Lents has the comfort of knowing he's no longer alone. When he began demanding to see the I.O.U., he says, "I was looked upon like I had leprosy. Now, I have probably 20 to 30 people a month come to me" asking for advice. Lents is irked when people accuse him of exploiting a loophole. "It's not a loophole," he says. "It's the law."