Posted on 07/03/2012 8:42:24 AM PDT by whitedog57
According to the Los Angeles Times, California lawmakers have passed legislation that would provide homeowners with some of the nation’s strongest protections from foreclosure. The cornerstone of the legislation mirrored provisions of the national settlement earlier this year between federal regulators and the five largest servicers, including Ally Financial (ALLY), Bank of America (BAC), Citigroup (NYSE: C), JPMorgan Chase (JPM) and Wells Fargo (WFC).
The legislation, SB 900 and AB 278, also would simplify dealings between homeowners and their banks or loan servicers by requiring that clients be given a single representative to work with, helping to prevent bureaucratic runarounds.
Populism Versus Economic Reality
The new California foreclosure law is just another piece of populist legislation by lawmakers that ignores economic reality. People voluntarily agreed to a loan that spelled out the terms of the loan and the loan covenants that allow the note holder to foreclosure on the underlying property if the borrower defaults.
I admit, dual-tracking is frustrating for a borrower. But bear in mind that the note holder is losing money as the process lingers on. The borrower is no longer making loan payments and is living in the house rent free. At some point, the note holder makes the economic decision to end the process. But California law makers have now taken away the lender’s rights to cure loan defaults.
Robo-signing is a victimless event. Once again, the borrower is living rent free and costing the note holder 1) the loan payment that is no longer being received and 2) the opportunity costs of the rents that could be received. Once again, the borrower defaulted on their loan. It was the borrower that harmed the note holder and continues to harm the note holder by failing to leave the premises.
But both dual-tracking and rob0-signing are populist battle cries that fail to understand the note holder’s rights and incentives and side only with the borrower (who has defaulted on their mortgage).
Future of Lending
The California foreclosure laws are misguided and damaging. Essentially, would you lend money to someone in California if you knew that it is more difficult to enforce a foreclosure if the borrower defaults? Or if you knew that lawmakers will make feel-good and non-economic laws handcuffing lenders and note holders?
Of course, lenders will still make loans in California. But between the Dodd-Frank banking legislation, the San Bernardino County consideration of using eminent domain to seize mortgage loans from note holders, the new anti-lender/investor legislature, and the new Consumer Financial Protection Bureau, the result will be fewer mortgages originated and fewer “risky” mortgages to householders with less than perfect credit and down payments less than 20% (or even 30%).
The more the Federal and State governments regulate mortgage lending, the less loans will be originated and only to the wealthiest households, like Brad Pitt, Stephen Spielberg and George Clooney. Furthermore, it acts to have the opposite effect of “affordable lending” goals of the Federal and State governments. Lenders will avoid households with a greater probability of default simply to avoid foreclosure. Thus the people that are most harmed are the ones that are standing outside with signs asking not to be foreclosed upon. How soon they forget – THEY defaulted on their loan in the first place.
Rules for Borrowing
What is missing from the Attorneys General Settlement and the new California foreclosure legislation is any language protecting the lender and note holders. For example, “If you don’t understand the loan terms, don’t sign the loan papers.” I was testifying in Congress recently when one of the panelist said “My sister in California read me her loan terms and even I couldn’t understand it.” My response was: “Then why did she sign it if she didn’t understand the terms?” But that is already in the mortgage loan documents!
This is the fundamental problem that plagues government intervention into lending. It is the borrower’s responsibility to read and understand the loan documents. And if you don’t understand it, don’t sign it. But government continues to assume the lender/note holder is the villain and therefore constantly makes bad economic decisions.
But we have descended rapidly into the European Nanny State mentality where government is now making our decisions for us and blaming the lenders for daring to loan us money (and trying to recoup losses from default).
The note holder companies were made whole by the bailouts and trillions of tax dollars taken from the tax-payers.
Lenders would be stupid to make loans in California and investors would be stupid to partake in that commie ball of wax. When money dries up and poverty goes up, California will change.
California’s large bloc of voters, third world transplants, know nothing about American wealth and freedom. They are re-creating what they know - oppression, poverty and corruption of home, sweet home at the behest of American socialists.
Everything about lending in California is nuts.
Four time we have tried to refinance our second home in the last two years.
Four times we started the process only to have “something” come up that ended it.
Last one, one week before signing the bank said “oh yea, we have decided to make the loan to ratio 70& instead of 80% so you no longer qualify, unless you want to bring money to the table”.
We are done. I am at the point to just walk away, oh we wont of course but ahhhhhhh!!!!!!!
All the changes come from stupid idiotic California meddling and constant rule chnages.
“Robo-signing is a victimless event.”
No, it is not. Robo-signing has resulted in numerous false and wrongful foreclosure seizures of homes that were not in default and in some cases, like in Naples FL, the home was owned free and clear. Robo-signing also violates the Notary laws of several states that require such papers to be notarized to prove the identity of the person signing the documents, and how do you do that when the signer is a machine?
While I generally do not care for liberal legislation the banks had this coming to them. After trillions of dollars in bailouts and debt forgiveness from the taxpayers they turn around and persecute the people who owe them money?
If the bankers had acted like Christians and treated people the same way THEY wanted to be treated then this would not have happened.
Matthew 18:21-35
New International Version (NIV)
The Parable of the Unmerciful Servant
21 Then Peter came to Jesus and asked, “Lord, how many times shall I forgive my brother or sister who sins against me? Up to seven times?”
22 Jesus answered, “I tell you, not seven times, but seventy-seven times.[a]
23 “Therefore, the kingdom of heaven is like a king who wanted to settle accounts with his servants. 24 As he began the settlement, a man who owed him ten thousand bags of gold[b] was brought to him. 25 Since he was not able to pay, the master ordered that he and his wife and his children and all that he had be sold to repay the debt.
26 “At this the servant fell on his knees before him. ‘Be patient with me,’ he begged, ‘and I will pay back everything.’ 27 The servant’s master took pity on him, canceled the debt and let him go.
28 “But when that servant went out, he found one of his fellow servants who owed him a hundred silver coins.[c] He grabbed him and began to choke him. ‘Pay back what you owe me!’ he demanded.
29 “His fellow servant fell to his knees and begged him, ‘Be patient with me, and I will pay it back.’
30 “But he refused. Instead, he went off and had the man thrown into prison until he could pay the debt. 31 When the other servants saw what had happened, they were outraged and went and told their master everything that had happened.
32 “Then the master called the servant in. ‘You wicked servant,’ he said, ‘I canceled all that debt of yours because you begged me to. 33 Shouldn’t you have had mercy on your fellow servant just as I had on you?’ 34 In anger his master handed him over to the jailers to be tortured, until he should pay back all he owed.
35 “This is how my heavenly Father will treat each of you unless you forgive your brother or sister from your heart.”
I continue to scratch by head in bewilderment wondering why any business (or bank) would want to do business in Mexifornia.
the author completly botches the article. The author does include the fradulent valuations in the discussion.
Banks were hyper inflating the values to have substance to their promissory not sales. Bundlers knew so many loans were destined for default. Buyers were represented that the collateral would cover any default.
where are the bankers under arrest? perp walks?
Again, the banks brought this on themselves. Don’t forget that the banks that took trillions in bailouts handed out $300 million of that money as bonuses to their executives. And then these same people turn around and run that ‘dual tracking’ scam where they foreclose on people they’re supposed to be helping.
no robo signing is a fraud perpetrated on the court. A contract can not be enforced via fraud.
The promissory notes are destroyed. (these are not checks ala ucc)
The mortgage is now tainted.
As a matter of law the bank has no lien on the property.
Yes, but that's not really the point, is it?
Again, that's not really the point.
One way to "solve" these problems would be to outlaw mortgages entirely -- is that a solution you would support? "Solutions" like this one are just about as bad as that and heading in the direction of destruction of the lending industry.
That's the point.
I would not support banning mortgages, but I would most definitely support getting the Federal Reserve and the Federal lending agencies like Fannie Mae and Freddie Mac out of the lending business. Let the banks go back to lending out only the money they have on hand instead of lending out money that the government just creates out of thin air. That would help.
As to my feelings for the banking industry? Just because they may be doing something that is legal does not mean that they are doing what is right.
If they were doing the right things I’d not be worried about them and we’d not be having this conversation.
If the government allowed them to do what's right in the first place, I'm sure that's just what they'd do. When banks are not allowed to decide who to give their money to, they will do some pretty odd things just to survive. Would you invest your money in a mortgage bank under these conditions?
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