LPS Applied Analytics released their October Mortgage Performance data today. According to LPS:
• The average number of days delinquent for loans in foreclosure is a record 492 days
• Over 4.3 million loans are 90 days or more delinquent or in foreclosure
• Foreclosure sales plummeted by 35% in October (as a result of the widespread moratoria)
• Nearly 20% of loans that have been delinquent more than two years are still not in foreclosure
Click on graph for larger image in new window.
This graph provided by LPS Applied Analytics shows the percent delinquent, percent in foreclosure, and total non-current mortgages.
The percent in the foreclosure process is trending up because of the foreclosure moratoriums.
According to LPS, 9.29 percent of mortgages are delinquent, and another 3.92 are in the foreclosure process for a total of 13.20 percent. It breaks down as:
• 2.72 million loans less than 90 days delinquent.
• 2.24 million loans 90+ days delinquent.
• 2.09 million loans in foreclosure process.
For a total of 7.04 million loans delinquent or in foreclosure.
This is similar to the quarterly data from the Mortgage Bankers Association.
Note: I've seen some people include these 7+ million delinquent loans as "shadow inventory". This is not correct because 1) some of these loans will cure, and 2) some of these homes are already listed for sale (so they are included in the visible inventory).
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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LPS Applied Analytics released their October Mortgage Performance data today. According to LPS:
• The average number of days delinquent for loans in foreclosure is a record 492 days
• Over 4.3 million loans are 90 days or more delinquent or in foreclosure
• Foreclosure sales plummeted by 35% in October (as a result of the widespread moratoria)
• Nearly 20% of loans that have been delinquent more than two years are still not in foreclosure
Click on graph for larger image in new window.
This graph provided by LPS Applied Analytics shows the percent delinquent, percent in foreclosure, and total non-current mortgages.
The percent in the foreclosure process is trending up because of the foreclosure moratoriums.
According to LPS, 9.29 percent of mortgages are delinquent, and another 3.92 are in the foreclosure process for a total of 13.20 percent. It breaks down as:
• 2.72 million loans less than 90 days delinquent.
• 2.24 million loans 90+ days delinquent.
• 2.09 million loans in foreclosure process.
For a total of 7.04 million loans delinquent or in foreclosure.
This is similar to the quarterly data from the Mortgage Bankers Association.
Note: I've seen some people include these 7+ million delinquent loans as "shadow inventory". This is not correct because 1) some of these loans will cure, and 2) some of these homes are already listed for sale (so they are included in the visible inventory).
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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