Owners seek short sales as banks push foreclosure

   The mighty American foreclosure machine is about to start cranking again in style and thousands of Americans are going to be kicked out of their homes. The banks are foreclosing on these homes because said Americans haven't paid their mortgages but a New York Times article this morning asks, "Why not short sales instead of foreclosures?" From the piece:

http://finance.yahoo.com/news/Owners-Seek-Short-Sales-as-nytimes-3208549596.html?x=0&sec=topStories&pos=7&asset=&ccode=
   Concerns about fraud are one of the reasons lenders are so careful about short sales. Sometimes well-off homeowners want to portray their finances as dire and cut their losses on a property. In other instances, distressed homeowners try to make a short sale to a relative, who would then sell it back to them (a practice that is illegal). A recent industry report estimates that short sale fraud occurs in at least 2 percent of sales and costs banks about $300 million annually. Short sales are also hindered when homeowners fail to forward the proper papers, have tax liens or cannot find a buyer.

   Banks are swamped with delinguent mortgages and the attendant foreclosures. When swamped in such a manner, large organizations such as BAC have to wade through the morass and attempt to move forward as efficiently as possible. The current firebomb attack method to push through foreclosures is the only way that banks can proceed and this is how it'll be henceforth. It's ugly but that's business. Nothing personal.

Bank of America starts thaw in foreclosure freeze

   Remember the foreclosure moratorium that was mentioned last week? Remember how some people thought it was seriously going to be considered by the banks? Well, there won't be a moratorium and BAC is already restarting their foreclosure machine after halting it in 23 states. From an AP article published today:

"Bank of America said Monday that it plans to resume seizing more than 100,000 homes in 23 states next week. It said it has a legal right to foreclose despite accusations that documents used in the process were flawed.

Other major lenders have yet to say whether they will follow suit and resume foreclosures in the 23 states that require a judge's approval. But analysts said they expect the move by the nation's biggest bank will mean other lenders will proceed with a wave of foreclosures that have depressed the housing market.

Banking analyst Nancy Bush of NAB Research said other lenders are likely to follow because foreclosure practices were similar from bank to bank."

   On the back of that news,  bank shares rebounded today. Am I buying the banks now? Nah, not yet. If I'm late to the banking party, so be it but as mentioned last week, I buy on strength. If the banks are going up, they're going up by a lot more than what they've shown in the past year and there's always time to take a bite out of the impending move once it's in motion.

A House in Maine kicks off Foreclosure Freeze

   A woman named Nicolle Bradbury lives in the house in Maine that set off the current furor over the foreclosure mess that the banks find themselves mired in. The NY Times captures her case like so:

http://www.nytimes.com/2010/10/15/business/15maine.html
"Nicolle Bradbury bought this house seven years ago for $75,000, a major step up from the trailer she had been living in with her family. But she lost her job and the $474 monthly mortgage payment became difficult, then impossible.

It should have been a routine foreclosure, with Mrs. Bradbury joining the anonymous millions quietly dispossessed since the recession began. But she was savvy enough to contact a nonprofit group, Pine Tree Legal Assistance, where for once in her 38 years, she caught a break." 

   That break came in the form of a retired lawyer named Thomas A. Cox who was volunteering at Tree Legal. Cox exposed the shoddy paperwork that GMAC was using to evict Ms Bradbury and eventually showed that all of the banks were using the same shoddy paperwork and questionable tactics to foreclose on borrowers.

   This type of laxity on the part of the banks shows me that there's no leadership at the top. The troops look to the leadership for guidance and structure but what happens when there's no leadership to begin with? Well, just look at the sorry state of banks like Citi, BAC, and GMAC for the first clue. Are we really in 2010? Is this still America? Feels more like the old times I've seen in movies where banks did whatever they wanted and kicked widows and orphans to the curb with all the might of a grizzly old sea captain. Shit's depressing.

Bank shares drop on foreclosure woes

   Banks can't get out of their own way but I like it. Earlier this morning, shares of JPM were down 3.2%, BAC down 5.5%, C down 5.4%, and Wells Fargo was dropping 5%. Will they go lower? Yes, I think so. Although it is unlikely that a moratorium on foreclosures will be instituted, the fear of such a stoppage is going to weigh on shares in the short term. I've mentioned before that a moratorium won't happen but not everyone knows that. These weak hands flee on any sign of trouble and their selling presents opportunity.

    This doesn't mean that traders should blindly buy when trouble rears its head however. I've mentioned before that I prefer to buy shares on strength instead of weakness. With the bank shares sliding, I'd take a wait and see approach before starting any positions but I like the banks for trading. I'd never hold them long term however because they blow up every now and then and destroy capital like nothing else.

How Banks Can Fix the Foreclosure Crisis

   Daniel Gross has written an article for Yahoo Finance which states that banks can "Fix the Foreclosure Crisis" by doing the following:

"Jamie Dimon of J.P. Morgan Chase, Brian Moynihan of Bank of America, and other banking CEOs willing to show their face in public should call a press conference today and announce their intention to hired 50,000 people to deal with all aspects of the foreclosure crisis. They should hire processors who will actually read the legal documents, but also professionals to work on debtor counseling and modification, landscapers to mow loans of real estate they own, and security guards who will ensure that repossessed homes aren't stripped or occupied by squatters."

   Does Daniel Gross live in a fantasy land where 50,000 people can be hired and marshalled into a foreclosure force capable of efficiently going through the muddle that is the American real estate crisis? How long will it take for the banks to train those 50,000 people and ensure that the foreclosure process is performed in admirable fashion? My estimate would be at least 3-5 years and banks aren't going to invest the capital and time for that. In the eyes of the banks, hacking and slashing people out of their homes should be quick and painful. Daniel goes on in the article to state the following:

"Doing so would help put a small chunk of the underemployed workforce back on the job.  It would be a bold, public gesture that might spur other companies to hire. It would demonstrate to courts and politicians that the banks are finally getting serious about getting on top of the problem. Perhaps some of the newly employed will use their wages to stay current on their mortgages, and the banks can certainly afford it. Fifty thousand people at $50,000 per year comes to $2.5 billion. J.P. Morgan Chase earned $4.8 billion in the second quarter. In other words, it would cost the industry about what one of its leading members makes in seven weeks."   

   Since when was altriusm part of any banks' business model or vernacular? I found this sentence particularly laughable" "It would be a bold, public gesture that might spur other companies to hire." HAHAHA. Daniel, you do live in fantasy land. Can I join you and look at the unicorns and rainbows? Daniel insinuates that just because banks hire people, other businesses like Dunkin' Donuts, Saks Fifth Avenue, and British Petroleum are going to start hiring people too. Damn, that's the kind of logic that writers for Yahoo are capable of? He even works out the equation for hiring 50,000 people and then multiplies everyone's $50,000 in annual wages to come up with $2.5 billion in total wages. This guy is a simpleton of the highest order and he can't be taken seriously. I'm done with this guy and his future articles will be shitcanned immediately.