President Barack Obama delivers remarks on the economy at Shaker Heights High School,Shaker Heights, Ohio, Jan. 4, 2012. (Official White House Photo by Chuck Kennedy)

We really haven’t seen President Obama insert himself directly into the housing crisis, but there are rumblings that he may do just that during Tuesday’s State of The Union address.

The fact is that is what homeowners have been clamoring for. A new USA TODAY/Gallup Poll found 58% of Americans want the government to do more to help people keep homes.

According to HousingWire, Ohio senator Sherrod Brown told reporters today that there was evidence that Obama would address the robo-signing case which involves several major banks.  A North Carolina congressman even said there were rumours that Obama would announce a settlement, something HUD secretary Shaun Donovan suggested last week was ‘very close’, as we mentioned in our Week In Review on Friday.

For the record, Obama’s press secretary refused to confirm any details, saying only that the President was “focused on the issue of housing”.

Between Dononvan’s comments and the recent white paper sent out by the Federal Reserve, it seems that more and more top government officials are finally realizing how important the housing market is to our economic recovery, not to mention their own political survival.

This is not news to us here at the South Florida Law Blog.

As the large inventory of distressed homes on the market continues to push a reduction in home prices as well as an increase in rental prices, the government is thinking about renting the homes owned by Fannie and Freddie.

The proposal has two benefits:

1. Reducing the amount of distressed homes for sale
2. Clearing the surplus of homes currently unoccupied.

These benefits would be the keys to a successful housing market recovery.  Increasing the amount of rental properties available can also stabilize rent prices, which have been going up as foreclosed families wait before buying another home.

While the benefits of the proposal are obvious, it is still just a proposal. It’s too bad the Administration did not listen to Oppenheim Law back in 2009 when we advocated using the inventory of foreclosed homes to benefit communities, instead of just letting them sit unoccupied and cause suburban blight.

The Government could easily enact the proposal by ordering Fannie and Freddie to sell their foreclosed homes to investors who promise to rent them out. The investors could then hire management companies to look after the houses. If the Administration decides to follow through with the plan, the Government might actually make money on the deal and help the housing recovery at precisely the right time for it: before the next wave of foreclosures hit. That way, the market can be more resilient when the next hit comes and absorb more losses.

Is homeownership still part of today’s American Dream? A recent article in the Wall Street Journal shared some old school advice on buying a home in today’s economy, more along the lines of Depression Era thinkers versus Baby Boomer spenders.

1. Buy what you can afford without scrimping on other needs. If you need to save for retirement or college, save. Don’t think your Florida home is going to pay for them.

2. If you need to move in less that seven years, then rent, don’t buy. You will be hard pressed to break even on your Florida home unless you live in it for a long time.

3. Values could stay depressed for many years. The only way you can plan to build equity in your Florida home is to pay down the mortgage.

Whether buying or selling a Florida short sale or foreclosure or renting; make smart decisions in light of today’s economy. Today’s housing market is still unraveling.

With a foreclosure fraud financial crisis this intense and prolific, there’s certainly enough blame to go around for everyone, but we have one more culprit to add to the list!  News broke this week that the SEC is investigating and considering civil fraud charges against credit rating companies for their role as “key enablers” of our country’s financial meltdown.

Critics of the leading credit rating companies like Standard and Poor’s argue that these firms fueled the $1 trillion Wall Street mortgage-securities machine before the boom ended.

Regulators, however, should not be free from blame: there is clear evidence of incompetence and deliberate neglect by the SEC in keeping credit rating companies in line.  The fact is that credit rating companies and the SEC itself have served as co-conspirators with Wall Street banks to bury us in this seemingly insurmountable hole.

According to the Wall Street Journal, SEC officials are finally investigating whether the ratings companies committed fraud by failing to do enough research to be able to adequately rate the pools of subprime mortgages and other loans that underpinned mortgage-backed securities.

Allegations continue to swirl that the credit rating companies relied on incomplete or out-of-date information about the pools of loans in the mortgage-backed securities or ignored obvious problems among subprime loans to give unduly high ratings to slices of deals, known as collateralized debt obligations (CDOs), that were then sold to investors.

The ratings firms assigned coveted triple-A ratings to many of these CDO slices in the run-up to our real estate and national financial crisis, before doing mass downgrades when the housing market collapsed and the subprime mortgages soured, according to the Wall Street Journal.

Whether charges against the credit rating companies are ever actually filed or not, the blame game is in full swing and doesn’t appear to be stopping any time soon.

From The Trenches

Roy Oppenheim

Mortgage Rates Set Fresh 2011 Low After Jobs Report

Fixed rate home mortgage loans dropped for the eighth straight week to a new low for 2011 amid concerns of another economic slowdown this year, according to data from Freddie Mac and a report by The Wall Street Journal.

The 30-year fixed-rate mortgage averaged 4.49%, down from 4.55% last week and 2010’s  4.72% average. Rates on 15-year fixed-rate mortgages fell from 3.74% to 3.68%.  15-year fixed-rate mortgages averaged 4.17% in 2010.

Lawyers Get More Time to Finish Foreclosures

Florida foreclosure defense is translating into more time for plantiff bank attorneys to complete a foreclosure, according to an article in the Palm Beach Post.

Due to the reality of Florida’s overloaded court system and swirling questions surrounding the validity of foreclosure paperwork, Fannie Mae is now allowing bank attorneys up to 450 days (about 15 months) for lawyers to complete a foreclosure before fines are levied.  The previous time limit was 185 days, or about six months.

The increased time needed to complete a foreclosure legally and correctly against a homeowner is due in large part to Florida foreclosure defense attorneys working to protect the rights of South Florida homeowners, according to Roy Oppenheim.

Obama Blames Wells Fargo, Bank of America, Chase for Modification Failures

The three largest U.S. mortgage lenders are getting some heat from the Obama administration for the failures of the federal foreclosure-prevention program, according to The Associated Press.

The lackluster performance of Wells Fargo, Bank of America and Chase with helping homeowners lower their mortgage payments has led the Obama administration to remove financial incentives it had given these lenders.

Only about one-third of the 1.4 million people who applied for mortgage modifications through the federal program have had their payments lowered permanently.

Angry Homeowners ‘Foreclose’ on Lenders

Owners of a house in Florida have engineered a “reverse foreclosure” against a Bank of America branch in Naples, according to The New York Times.

The homeowners paid $165,000 in cash to buy their home from the bank and never borrowed against it. But last February, the bank began foreclosure proceedings against them.  The homeowners hired a Florida foreclosure defense attorney and the case against them was dropped, however they were able to recover a judgment for $2,500 in attorney’s fees against the bank.

When the bank didn’t pay, the homeowners’ lawyer showed up at the bank with sheriff deputies and a moving truck to clean out the building.

The bank eventually settled with the homeowners for more than $5,700 to cover the fees and additional costs.

When the real estate market collapsed, Miami’s downtown epitomized the worst excesses of the building boom. Glittering new towers sat mostly vacant. Today Miami’s downtown real estate is booming and bustling with life and commerce thanks to foreign investors and renters.

A report by the Miami Downtown Development Authority indicates that 85 percent of new condo units are occupied. Downtown Miami’s population now numbers about 70,000 compared to 40,000 ten years ago. In spite of Miami-Dade’s 13.2% unemployment rate, downtown bars, shops and restaurants buzz with activity at the end of the workday. Sales at the swank Icon Brickell average 47 units a month.

The bad:
Clearing the backlog of foreclosures slows again as some delinquent homeowners successfully maintain that their mortgage companies can’t prove they own the loans, therefore forfeiting their right to foreclose. After last fall’s robo-signing debacle, many homeowners are waking up and realizing their banks are guilty of sloppy practices at best and forgery at worst.  Oppenheim Law continues to see banks dismiss foreclosures.

And the ugly:
Double Dip Housing is no Ameri-cone Dream
As South Florida housing prices hit a new low, the The New York Times and Wall Street Journal chime in unison with a cherry on top: Goodbye, American Dream. It seems renting is the new ‘black’ in real estate fashion as desperate sellers watch not-so-desperate buyers sit on the sidelines waiting for the bottom to hit; while they rent in Miami luxury.

The S&P/Case-Shiller National Index, released today, indicated prices nationwide fell 4.2% in the first quarter after declining 3.6% in the fourth quarter of 2010, in spite of increases in 2009 after the home buyer tax credit and early 2011.

Today’s news is another blow to the economy as it struggles to gain its footing. Typically, a rebound relies on consumer spending, including home buying, which then triggers large durable good orders like washers, dryers and furniture. But even as the economy reluctantly begins to correct itself, homeownership has continued to decline to levels not seen since 2002. Experts point to obvious factors such as foreclosures, unemployment and underwater mortgages, but also “a change in the American psyche,” meaning even those who can afford to buy are holding off, scarred by the impact of the collapse.

Another 5 percent drop in home prices will push the number of underwater borrowers to 28 percent, says CoreLogic Inc. 23 percent of U.S. homeowners were underwater at the end of 2010. A 10% drop will leave more than one-third of all U.S. homeowners with mortgages upside down.

”Once upon a time,” said Pete Flint, chief executive of the housing Web site Trulia to The Times, “owning a home was a symbol you had made it. Now it’s O.K. not to own.”

If the survey conducted by Trulia and RealtyTrac is any indication, the masses agree. One third of respondents expect the market to recover in 2014 or later.

Economists agree that a full recovery will take years, and require faster growth, decreased unemployment and a return of consumer confidence. Today’s Wall Street Journal points out a bright spot: home affordability is returning to pre-bubble levels in several markets, including Cleveland, Atlanta, and Las Vegas. In addition, mortgage rates fell to their lowest level of the year.

Many industry experts, including our very own From The Trenches guest Pat Sessions, believe last year’s recovery was artificial and we have yet to hit bottom in the real estate crisis. Chief Executive of Radar Logic Michael Feder agrees: “The market showed a little stability that was largely stimulated by the tax credit, but that stability was very short-lived,” Feder told The Journal. “The fact is we have never really started to recover.”

Oppenheim Law will continue to bring you the latest perspective on real estate news as it happens. Join the conversation on Facebook or Twitter for updates in real time.

Glenn Greenwald of Salon.com called Barofsky “easily one of the most impressive and courageous political officials in Washington” for his willingness to stand up to some of the most powerful people, institutions, and special interest lobbies in Washington and Wall Street.

On March 29, before his departure from office, he wrote a piece for the New York Times titled “Where the Bailout Went Wrong.” The piece, so vicious in its criticisms of the TARP program and politicians in Washington,  prompted the Wall Street Journal to run excerpts from it along with their own commentary on the TARP fiasco.

Of the failed bailout Barofsky wrote:
“Two and a half years ago, Congress passed the legislation that bailed out the country’s banks. The government has declared its mission accomplished, calling the program remarkably effective ‘by any objective measure.’  On my last day as the special inspector general of the bailout program, I regret to say that I strongly disagree . . . Almost immediately [after passage], as permitted by the broad language of the act, Treasury’s plan for TARP shifted from the purchase of mortgages [that would have helped everyday homeowners] to the infusion of hundreds of billions of dollars into the nation’s largest financial institutions, a shift that came with the express promise that it would restore lending.”

Free money to banks, “free for all” (except homeowners)
The Treasury, however, provided the money to banks with no effective policy or effort to compel the extension of credit. There were no strings attached: no requirement or even incentive to increase lending to home buyers, and against our strong recommendation, not even a request that banks report how they used TARP funds.

Barofsky concluded with the following:
“[The] Treasury’s mismanagement of TARP and its disregard for TARP’s Main Street goals – whether born of incompetence, timidity in the face of a crisis or a mindset too closely aligned with the banks it was supposed to rein in – may have so damaged the credibility of the government as a whole that future policy makers may be politically unable to take the necessary steps to save the system the next time a crisis arises. This avoidable political reality might just be TARP’s most lasting, and unfortunate, legacy.”

Crash, burn, what next?
These failings of the Treasury have also resulted in larger banks that control a larger portion of our economy. This asks the question, why should the banks do anything different the next time around? In exchange for almost crashing the entire world economy, they come out larger, richer, and virtually guaranteed of future bailouts if governments want to avoid economic depression. Indeed, according to Barofsky, credit rating agencies are now taking into account the likelihood of future bailouts when determining the financial health of a company.

We salute Neil Barofsky and wish a great public servant the very best.

From The Trenches
Roy Oppenheim

PS: I’m flattered to be nominated in three categories for the South Florida Sun-Sentinel’s Best of Blog Awards this year! If you like the South Florida Law blog or our Twitter feed @OpLaw, please take a minute and vote! You can vote for each category once per day. Thanks!

While South Florida is #1 for mortgage fraud and foreclosure settlement talks between banks and the Obama administration appear futile at best, this week’s new was not all doom and gloom.

Check out Oppenheim Law’s and Weston Title’s picks in the week’s winners and losers for Florida foreclosure, real estate and the economy.

Winners

Pending home sales up 18% in Miami-Dade
Pending home sales rose 18 percent in Miami-Dade County over the course of the past month, according to new data released today by the Miami Association of Realtors.

Pending home sales, which include single-family home and condominium unit sales, were also up 3.24 percent month-over-month in March, the figures show.

“Increased pending sales reflect the existence of pent-up demand and should result in strengthening home values as distressed housing inventory continues to be absorbed,” said Jack Levine, chairman of the board of Miami Realtors.

Hiring Shows Growing Strength
The American job market is starting to show some muscle, according to The Wall Street Journal.

The jobless rate, our most politically salient measure of economic health, edged down to 8.8% in the fourth consecutive monthly decline despite the fact that more Americans entered the job market.
“It’s a very solid report that shows the labor market gaining momentum,” said David Greenlaw, an economist with Morgan Stanley in New York.

The public sector remained a weak point, as local governments shed 15,000 jobs last month in an effort to close budget gaps, but many other sectors showed strong growth, according to The Wall Street Journal.

Professional and business services gained 78,000 jobs. Factories added 17,000 jobs, while health care added 37,000. Over the past 12 months, health care has added an average of 24,000 jobs a month.

Losers

South Florida is #1 for Foreclosure Fraud
South Florida is first in the country for the number of mortgage fraud suspicious activity reports per capita, according to a new report from the Financial Crimes Enforcement Network and The South Florida Business Journal.

The region, which recorded 11,833 such reports last year, also leads the nation in Medicare fraud and auto insurance fraud.

Overall, mortgage fraud reports rose significantly in 2010, with 70,472 reports filed last year, up from 57,507 in 2009.

In Foreclosure Settlement Talks With Banks, Predictions of a Long Process
Little was settled in the first round of foreclosure settlement talks, according to The New York Times.

As negotiations begin over new rules for homeowners who are in default, experts all agree that progress is going to take time.

But lengthy negotiations work to the banks’ advantage, according to The Times.

“The banks’ strategy is to run the clock,” a Georgetown University law professor, Adam Levitin, said. “The chances of a settlement that meaningfully reforms mortgage servicing and makes the banks pay an appropriate price for illegal conduct are rapidly slipping away.”

Draw

Subprime Bonds Are Back

As the economy recovers, long-term investors are willing to take on more risks and subprime and other residential mortgage bonds that helped trigger the financial crisis are back in vogue, according to The Wall Street Journal.

The stock market ended its best first quarter since 1999 last week, with the Dow Jones Industrial Average closing up 6.41% on the quarter.

The willingness to take on risk is helping ordinary borrowers, too, by leading banks to make more nontraditional loans, such as jumbo mortgages, and to charge lower interest rates for them.

While it is encouraging that the markets are continuing on an upward swing, cautious optimism is needed any time subprime bonds are involved.

So, while it looks like housing values keep dropping around the country and new construction is also off, South Florida real estate may have hit rock bottom or close to it.

It seems that South Florida’s position as an international location is encouraging foreigners to swoop in and purchase homes and condos that based on an international standard are outright cheap.  Of course; a strong stock market, a dollar that is fairly weak and the prospect of huge government defecits that forshadows inflation, only helps.

That was then, this is…then or now?

Last week, The Wall Street Journal published an article about Debtors’ Prisons in 2011. Currently, several U.S. states allow borrowers who are behind on credit-card payments, auto loans and other bills to be jailed. However lawmakers, judges and regulators are beginning to crack down on this practice, which Foreclosure Defense attorney Roy Oppenheim calls “illegal, unconstitutional and un-American.” In this video, Oppenheim explains how that happens and how to make sure that that doesn’t happen to you.

So how can Florida homeowners avoid becoming a part of this debtor nation? Roy Oppenheim says, “Don’t put your head in the sand, by ignoring the situation. If you’re in foreclosure, for example, make sure that deficiency judgment isn’t entered against you. Get legal counsel and make sure you know your rights.”

As Florida’s top prosecutor continues to investigate the state’s law firms for improper foreclosure work, a report has surfaced showing Fannie Mae was warned in 2006 of abuses in the way lenders and their law firms handled foreclosures, according to the Wall Street Journal.

The fraud-closure problem that’s been snow-balling could have been minimized, if only the government paid attention to documented reports!

This internal report, produced years before regulators began investigating the mortgage industry’s practices, said Florida foreclosure attorneys “routinely made” false statements in court attempting to process foreclosures more quickly.

The report said Fannie Mae officials “believe foreclosure counsel are sacrificing accuracy for speed” but did not name any firms, the Journal said.

How ironic that the government has essentially known of the fraudulent, illegal practices of banks and the mortgage industry for five years, and is still trying to fix these catastrophic wrongs.  Essentially, this equates to fraud, perpetuated by the idea that you can privatize profits and socialize losses.

And apparently this is what you get when the fox is asked to clean up the hen house.

It is also interesting to note that after the government took complete control of Freddie and Fannie in 2008 amid soaring loan losses, Florida foreclosure filings soared to unprecedented levels.  This report proves that the government is to blame for our real estate debacle as much, if not more, than the banks who have taken the brunt of America’s scorn for years.

Fannie Mae has been under investigation since September 2008 for its role in the mortgage crisis, but more recently, federal and state officials have been looking to see if banks and foreclosure law firms have improperly seized homes by using fraudulent or incomplete paperwork.

Two red flags raised by the report, which was produced at a time when national foreclosure numbers stood at relatively low numbers, include improper legal filings by foreclosure attorneys and questionable practices surrounding the Mortgage Electronic Registration Systems, an electronic-lien registry set up by the mortgage industry to reduce paperwork and lower costs.

According the Journal, the report said, “foreclosure attorneys may be taking short cuts by misrepresenting that [original loan documents] are lost.”  Nearly a year ago, Oppenheim Law wrote about the Florida Supreme Court was working to end the abusive practice of banks filing a foreclosure based on a “lost note.”

Over and over again, homeowners have been subjected to foreclosure proceedings when banks and the government knew full well there was no ground to foreclose.  It is appalling that the government had knowledge of these practices and still allowed gross infringements of Americans’ Constitutional right to due process.

Referring to the industry in general, Elizabeth Warren, the White House adviser in charge of establishing the new Bureau of Consumer Financial Protection, said that with proper oversight, “the problems in mortgage servicing would have been exposed early and fixed while they were still small.”

A month ago, Oppenheim Law asked, “Why isn’t Wall Street in Jail?” After today, it looks like the banks should be sharing a cell with the feds.