Archive for October, 2010
I said yesterday I’d get back to the SIGTARP report on the federal bank bailout and the HAMP program, and the section on “Dick and Jane” is really the best illustration I’ve seen of what can happen to families who try for a loan modification and put their lives in the hands of the servicers. The report creates Dick and Jane as a pair of subprime borrowers from Tampa, Florida, with a combined annual salary of $75,000 a year.
The biggest danger to the U.S. capitalist system doesn't come from communists or community activists or left-wing academics. It comes from some of the nation's biggest financial institutions. These companies, which helped create the financial meltdown that touched off the Great Recession, have now found yet another way to undermine the public's faith in capitalism and markets: the foreclosure fiasco.
Even before the foreclosure problem appeared, the level of public distrust of our financial and political systems was approaching the pathological. It's going to get even worse when the true lesson of this episode sinks in. To wit: If you screw up big-time when you deal with a giant bank, you're toast. If the giant bank screws up when it deals with you, it gets a do-over.
Sure, many — probably most — of the people whose mortgages are being foreclosed got in trouble because they overreached or lost their jobs, not because anyone cheated them. But if we're going to have rules, they ought to be binding on everyone. If I'm supposed to obey the law and pay my bills, the people I'm paying ought to have to obey the law too.
Mortgage fraud risk remained "essentially unchanged" in the third quarter of 2010 compared to the second and down from a year ago, according to Interthinx's Quarterly Mortgage Fraud Risk Index.
However, the data analytics firm said emerging trends suggest a shift from fraud for profit to fraud for homeownership.
Interthinx reported the risk index for 3Q at 144, down 0.9% from last quarter and 1.4% from the same time last year.
The index is calculated based on the frequency that indicators of fraudulent activity, such as property mis-valuation, employment misrepresentation or concurrent closing schemes, are detected in mortgage applications processed by Interthinx. A value of 100 on any given index represents the normal level of fraud risk.
Nevada and Arizona have the highest mortgage fraud risk at indices of 254 and 214, respectively. California came in at 190.
The states with the lowest mortgage fraud risk indices are, in descending order, Wyoming, Maine, West Virginia, Mississippi and Kansas. The five lowest ranking states have an index less than half the national average. (Click on chart to expand.)
Interthinx tracks four type-specific fraud risk indices. The identity fraud and employment/income fraud risk indices both spiked in 3Q compared to a year ago, up 24% and 23%, respectively. This, Interthinx said, suggests an increase in "fraud for property," a fraud niche that has long been considered less dangerous than other types.
Fraud for property is essentially fraud to attain homeownership and is measured against "fraud for profit."
The identity fraud increased to 189 in 3Q, up 5% from 2Q and up 24% from 3Q09. The Cleveland metropolitan statistical area topped out the index at 395, a 7.7% increase from last quarter and a 47.5% increase from last year. Miami-Fort Lauderdale-Pompano Beach; Honolulu; Akron, Ohio; and Naples-Marco Island, Fla. rounded out the five MSAs with the most identity fraud.
The employment/income fraud risk index increased substantially to 94, up 11.2% from 2Q and up 23.1% from 3Q09. The Burlington-South Burlington, Vt. metro area came in first on the index at 155. That number is up 64.7% from the previous quarter and up 43.4% from the same period last year.
"Since frauds for property sparked the mortgage meltdown as unqualified borrowers began to default in large numbers, it is clear that frauds for property must be identified and addressed going forward with the same urgency as frauds for profit," the report said.
Write to Christine Ricciardi.
Kathy D. Patrick is a Houston lawyer who spends her Sundays teaching children about God. The rest of the week, according to one attorney who knows her, she can be “as frightening as a pit bull on steroids.”
That’s bad news for issuers of mortgage-backed securities like Bank of America Corp. Patrick represents bond investors including the Federal Reserve Bank of New York and BlackRock Inc. who are seeking to force the bank to buy back bad home loans, claiming the debt failed to match contractual promises about its quality.
Her law firm, Gibbs & Bruns LLP, is a 30-lawyer outfit that says it specializes in “bet the company” litigation. This month, it reached a settlement with JPMorgan Chase & Co. and Bank of Montreal stemming from an alleged fraud at a Canadian gold company. Earlier this year, Goldman Sachs Group Inc. and UBS AG settled with the firm over the sale of $550 million in mortgage-backed securities. Patrick reached that settlement on behalf of her clients just two months after filing suit.
U.S. house prices increased 0.4% in August, almost regaining the 0.7% revised decrease in July, but fell more than 2% from a year ago, according to the Federal Housing Finance Agency monthly House Price Index.
Prices fell 2.4% in August from the year before and remain 13.6% below the peak in April 2007. In August, prices reached roughly the same point in the FHFA index measured in October 2004, heading up to the peak.
The FHFA calculates is monthly index using purchase prices of houses backing mortgages sold to Fannie Mae and Freddie Mac. The FHFA has held those two companies in conservatorship since 2008.
The analytics firm Clear Capital warned of possible new lows in prices heading into 2011 after sharp drops in October.
The Standard & Poor's/ Case-Shiller 20-city index for August showed a 1.7% increase from a year ago and a 0.2% drop from July.
For the nine Census divisions measured by the FHFA index, prices ranged from a 0.6% decline in the Mountain Division to a 1.5% increase in the West South Central Division.
Write to Jon Prior.
