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IPFS News Link • Housing

Foreclosure-Gate: State Ag's Come Up With Pink Ponies and Balloon... Payments

The 27-page fluff-piece is now out where we can see it.... Let's be blunt: There's no "there" there. The entire document is a rehash of what servicers had a legal mandate to do right up front. Accurately apply payments. Respond to inquiries. Operate in good faith. Use a NPV test for HAMP (was in the HAMP program originally.) Document the assignment chain before foreclosing. There's exactly one substantive change, in that HAMP did not prohibit "dual-track" (that is, foreclosure while attempting modification.) Essentially every other item in this 27 pages is something that Servicers already had a legal duty to do, either as a fiduciary to the investor or just through the ordinary covenant of operating in good faith (You know, the original standards that all businesses are held to that aren't actually racketeering outfits and gangsters? Yes, that.) There's no prosecution for all the bad affidavits, despite them being acts of perjury. Balloons eh? Remember how I've been talking about Balloon modifications in the context of HAMP? Well, guess what - they're still there. These are the very loans that blew up in the 1930s and cost huge numbers of Americans their homes. Balloon notes are a complete and total screw-job. The entire purpose of a modification that has a balloon associated with it is to allow the BANK to claim that the loan is "performing" even though it is outrageously underwater or otherwise could not be paid, right up until the inevitable default at the end when the entire loss will wind up occurring. The only way these notes will not detonate is if we have another housing bubble. That's not going to happen.