Nevada has now surpassed Florida with number of Foreclosure filings

South Florida Business Journal reports today foreclosure activity in Florida fell by nearly 10 percent in November, but it was still high enough to hold the No. 2 spot in the nation, according to a report released Thursday by RealtyTrac.

Three Florida cities were in the top ten list of cities.  Cape Coral-Ft. Myers claimed the No. 1 spot in foreclosure activity among the top 100 metropolitan areas. Fort Lauderdale was seventh and Port Lucie-Fort Pierce was eighth in foreclosure activity.

Despite a decrease of 9.45 percent in foreclosure activity from October, it was 68 percent higher than November 2007 activity.

Only Nevada which recorded 49,190 foreclosure filings beat out Florida, according to RealtyTrac, an Irvine, Calif.-based online marketplace that tracks foreclosure activity. Following Florida was Arizona, California, Michigan, Georgia, Ohio, Colorado, Utah and Idaho.

Florida Lending Groups Agree To Halt Foreclosures for 45 Days!

Two groups of Florida lenders announced today they will voluntarily agree not to file new foreclosure petitions on primary homes for the next 45 days.

The Florida Bankers Association and the Florida Credit Union League made the announcement Monday in a press conference with Gov. Charlie Crist in Tallahassee. They also volunteered not to schedule foreclosure sales during that period.

Nothing Up His Sleeve…

My good friend, Paul Chandler wrote this editorial in his Mortgage Matters newsletter. I wrote a similar article but since Paul is a little more diplomatic than I am, I decided to post his instead.   I called for Hank Paulson to be tarred and feathered like a British Tax Man in colonial Boston. -Steve

Nothing Up His Sleeve…

Back in late September, Treasury Secretary Hank Paulson, was beseeching Congress to pass a bailout bill and to pass it right away. Nicknamed the TARP [for Troubled Asset Repurchase Program], this legislation would save us from impending financial doom.  It would allow the Federal Government to purchase bad mortgage loans at a discount and hopefully sell them at an increased value when things started to recover.  But, a funny thing happened.  The House of Representatives, listening to their constituents, said ”No.” 

The Secretary wanted to be entrusted with $700,000,000,000 with the latitude he thought he needed to use it however he saw fit.  After all of the arm twisting, groveling and earmarking was done, the House agreed with the Senate provided there was oversight and that the whole amount did not get released at once.  Relief for homeowners facing foreclosure was to be part of the package as well.  At least there would be some control.

You may recall watching episodes of the Rocky & Bullwinkle Show.  One of the staples of the show would show Bullwinkle as a magician on stage with a small table and a top hat.  Bullwinkle would ask Rocky, “Hey! Do you wanna see me pull a rabbit out of my hat?”  “Sure!” Rocky would reply.  And on with the show, Bullwinkle exclaimed, “Nothing up my sleeve! [while yanking off the sleeve of his tux and shirt] PRESTO!”  Only instead of pulling out a rabbit, our hero had a hold on the head of a roaring lion.  Never at a loss for words, Bullwinkle would say, “No doubt about it, I gotta get another hat!”

The TARP money has NOT been used for the purpose intended.  Banks have used funds to acquire other banks, AIG—a large insurance firm—has received two chunks of cash, and has spent lavishly on a corporate function since then, and now the car companies are standing in line with municipalities and others with their hands out.  Meanwhile, Mr. Paulson has stated that the problem was greater than imagined and that the intended purpose was not the best use for the money even though that was the pressure point applied in order to get the legislation passed.  And now he wanted the rest of the money.

“Not so fast.”  In so many words, Dennis Kucinich, a sub-committee chairman from Ohio, an area hard hit by foreclosures, presided over a hearing on Friday last which essentially said that maybe the balance of the funds should NOT be entrusted to Treasury.  If the problem was too difficult to manage, then maybe the problem was the manager.  [Obviously, I believe there are better ways to solve the problem than the ones selected by Mr. Paulson and his colleague, Ben Bernanke, Chairman of the Federal Reserve.  I just hope Congress sticks to its guns on this one.]  Perhaps, Rep. Kucinich suggested, it would be better to have HUD administer the funds for the purpose intended.

The whole point of the Bullwinkle story, is that Secretary Paulson promised a rabbit, delivered a lion, and now wants another hat.  There were a lot of poor investing decisions, lending decisions, purchasing decisions and other decisions to go around.    It almost seems that applying a sum of the earmarked $350,000,000,000 that remains to mortgage debtors’ loan balances would be a wiser use of the funds.  It might get people into situations where the loan to values would be in line and would surely help the remaining assets perform well for the lenders and investors.  But that might be too simple.

 Paul Chandler, Certified Mortgage Professional, is the Newport Branch Manager for Universal Mortgage Corporation.  He graduated from the University of Maine’s business school in 1979 and has been in the financial services industry ever since.  Since 1991, he has exclusively been involved in mortgage lending, moving to the Newport area in 1993. He also authors a blog at http://www.misterva.typepad.com. He also has been a contributor to Mortgage Originator Magazine. If you have a mortgage related question, please call 802-334-1999.

Have the FBI and the American Homeowner Been Bushwhacked?

What would you do if one night after a long day at work you came home to find your house ransacked and that you had been robbed? Now, what would happen if you called the police and no one came to investigate or were told to call someone else?  You would be shocked and dismayed.   Don’t think this could happen? It already is happening and it’s not just you, it’s happening to your neighbors and friends as well.  The thieves are getting away with millions of dollars and the Bush Administration is allowing it to happen. 

The New York Times ran a story buried deep in their business section on October 19^th about how the FBI is understaffed and overwhelmed because of the economic crisis the US is in right now.  They simply cannot handle the flow of white collar crime cases coming in.  The problem with this is not the fact the bureau is understaffed but that the alarm bells went off over four years ago and the Department of Justice and the Bush Administration did nothing about it. 

After the September 11^th attacks, because of the criticism the FBI received for it’s failing to detect the events of that day, the bureau slashed its criminal investigative workforce by 1,800 agents and transferred them to terrorism and counterintelligence duties.  Former and current officials say this has left the bureau seriously exposed in areas like white collar crime.    The pressure on the FBI increased in the past several months due to the disclosure of criminal activity by executives at some of the largest firms in the financial collapse, including Fannie Mae and Freddie Mac.   

Because of the depletion of the bureau’s white collar investigators, business executives have been having difficulty attracting the FBI’s attention in cases involving potential multimillion dollar fraud cases.  Even Sam Antar, who helped mastermind one of largest securities frauds in the 1980s wrote on his blog, “As the heartless cold blooded criminal CFO of Crazy Eddie, the FBI was respected adversary that filled my stomach with butterflies and caused me many a sleepless nights as I feared their tenacity to successfully investigate my crimes.  Unfortunately, the white collar criminals of today have less to fear from the FBI.”

Another problem the bureau is having is top-notch, experienced FBI agents are leaving the agency for higher paying jobs in the private sector as soon as they qualify for retirement causing a brain drain within the bureau.  Since 2001, internal documents from the FBI indicate that staffing for white collar crime has dropped 36% or 625 agents.   The number of total criminal cases that the bureau has brought to Department of Justice for prosecution has dropped 26% since 2001.  While prosecutions for fraud against lenders and banks has dropped 48% from 2000 to 2007.

According to the NYT article:

“In addition to the investigations into Fannie Mae and Freddie Mac, the FBI is carrying out investigations of AIG and Lehman Brothers as well as 1,500 other mortgage related investigations.  Some FBI officials worry privately that the trillion dollar federal bailout of the financial industry may itself become a problem because it contains inadequate controls to deter fraud.”

The FBI is planning on reassigning about 400 agents but some people inside and outside the Department of Justice have questioned out loud where these agents would come from and if they would be enough to handle the avalanche of cases being handled.  Even if the FBI increases the number of agents handling white collar crimes, it doesn’t necessarily solve the problem of effectively investigating these cases.   White collar crime cases are becoming increasingly more complex and require enormous resources, time and experienced agents.  Too often, these types of complicated cases fall apart because agents lack the patience, knowledge and experience to manage a successful criminal investigation.

These problems are not entirely the fault of the policies at the bureau.  FBI officials realized of the growing danger posed by financial fraud in the housing sector back in 2003 but were rebuffed by then Attorney General John Ashcroft and the Congressional Budget Office when the bureau attempted to acquire more resources.  From 2001 to 2007, the FBI sought an increase in funding to hire over 1,000 agents for criminal investigations not connected with national security.  According to the New York Times, the bureau instead suffered a decrease of 132 agents while asking the Justice Department and Congress for an increase of $800 million but only received $50 million.

In 2004, the FBI warned publically that a flood of fraudulent mortgage deals had the potential to become an epidemic.  Yet, the following year the FBI only had 15 full time agents devoted to mortgage fraud out of an estimated 13,000 agents in the bureau. 

The FBI has increased the number of agents who handle white collar crime including mortgage fraud to 177 agents who have opened 1,522 new cases.  It is still well below the staffing levels the bureau had during the S&L crisis in the late 1980s. 

In their white-collar crime division, the bureau claims it has only given up lower level cases of marginal significance like cases from consumers and homeowners that might have never been prosecuted any way.   They would then pass these cases on to other agencies that they have increasingly become dependent on such as state and local authorities.  The bureau has created joint task forces with these agencies and local law enforcement.  This however, creates a serious dilemma.  Many of these state enforcement agencies are in the same position as the bureau, they are understaffed, overwhelmed and most don’t have the experience to investigate detailed white collar crime. 

Individuals and companies victimized by fraud are increasingly turning to private investigators, forensic mortgage auditing firms and accountants because they are unable to attract the attention of the FBI.  The situation has gotten so bad that private investigative and accounting firms are now collecting evidence, conducting Forensic Audits, taking statements from witnesses and even testifying before grand juries.  Thus preparing courtroom ready prosecutions they can take to prosecutors. 

The New York Times article quoted Alton Sizemore a former FBI agent and fraud examiner for Forensic Strategic Solutions, “Anytime you bring to the FBI a case that is thoroughly investigated and reduce the amount of work for investigators, the likelihood is that they will take the case and present it for prosecution.”

Daniel Karson, an executive managing director for Kroll Inc., was quoted in the New York Times as saying, “The FBI no longer has the resources to take on such lower-level cases by itself.  When you come in with a garden variety, plain vanilla crime, you have to stand in the queue.”

Sam Antar commented on his blog, “In other words, in order for the FBI to give serious consideration to many cases, they must be presented to them neatly gift wrapped on a silver platter. The criminals of today are elated by an under-resourced and relatively inexperienced FBI.  As a result, the cancer of white collar crime continues to destroy the integrity of our great capitalist economic system.”

Critics inside the federal government believe that this problem may be not just a lack of resources but an attitude by the White House that the Department of Justice and the FBI are being anti-business.  The White house feared such an anti-business attitude could affect corporate risk taking. 

Attorney General Michael Mukasey rejected congressional calls for a national task force to investigate abuses in the financial industry, especially in the lending industry.  Attorney General Mukasey dismissed these cases as “white-collar street crime” that could be handled best by the local U.S. Attorney’s offices. 

Paul McNulty who served in the Justice department during the tenure of Alberto Gonzalez was commented in the New York Times piece as saying, “There’s no question that the department has been stretched thin when it comes to resources and that has affected white-collar enforcement in a variety of areas.”

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