March Hathaway Duke Archives

Monday Market Commentary: Mortgage Rates Unchanged Last Week

Last Week: Mortgage bonds endured yet another week of choppy action driven by a decidedly mixed bag: Bear Stearns do over, from $2 to 10 per share, Continued weak housing data, with some (early) bottoming signs. Ebbing consumer confidence, Weekly unemployment claims better than expected, Friday’s PCE report showed inflation remains anchored and a fading consumer. Add it all up, mix in a little generalized anxiety, and mortgage rates closed out the week unchanged from where they started. This Week: As for the economic calendar: Monday’s Chicago Purchasing Managers Survey, Tuesday’s ISM Manufacturing index, Wednesday’s Factory orders report will give us a look at the manufacturing and wholesale components of the economy. Friday’s Employment Report will garner the most attention from the markets. Negativity in any of these reports, but especially the employment report, should help mortgage rates. Fed Chairman Bernanke testifies before the congressional joint economic committee on Wednesday, which also brings the ADP payroll report. Information hungry traders trying to gauge the Fed and front-run Friday’s employment report may spark some volatility if there are any surprises here. For up to the minute news and views on interest rates and the factors that drive them, tune in to our twitter feed, BTM RateWatch.

10 Indicted In Colorado Fraud Scheme

Colorado Attorney General John W. Suthers will announce the criminal indictment of ten individuals (a real estate broker, a mortgage broker, a secretary/assistant, a buyer and income property investors) operating as a group to unlawfully take equity ca…

Star-Tribune on Centennial Mortgage & Funding

Jim Buchta provides some additional color to the story we broke right here yesterday: Bill Walsh said that such orders, issued in this case for what he calls “substantial financial problems,” are unusual for a company this size…in 2006, the latest year for which data was available, Centennial closed 1,828 mortgages. We’d like to re-iterate the call for any borrowers, employees, who’ve been impacted by this shutdown, or have direct knowledge of the goings on to contact us via email, or in the comments below.

Breaking News: Lender with 9 Local Branches Can’t Fund Loans, Ordered to Cease and Desist

We’ve only got a single source on this for now (working on more) so we’ll leave the name of this outfit blind until we can get some confirmation. ——– The word is a south-metro headquarted Mortgage lender (of the correspondent/broker ilk) with 9 local branches, and two in Wisconsin, has had their warehouse lines pulled, and cannot fund loans. Allegedly the company CFO was using one warehouse line to fund another (this is bad, see below.) 40 some odd loans scheduled to close today cannot fund, leaving the borrowers, some of whom were set to close on purchase transactions, in the lurch. For the civilians and non-mortgage people: A warehouse line, or warehouse line-of-credit is the mechanism that most larger brokers (or correspondent lenders) use to fund loans before they are sold off to the investor (such as a Countrywide, Chase, Wells Fargo, etc.) who will ultimately own and/or service the loan. Warehouse lines are used because the typical broker does not have the cash to fund each loan themselves, so they need short term borrowing capacity to fund production. A warehouse line is essentially a giant revolving line of credit, and their use is the standard business model for non-bank lenders. Normally, and by design, closed loans are “on” a warehouse line for very short periods of time - a matter of days or weeks - until the loan is shipped off to the investor. For this reason, there is not normally a lot of risk for the providers of these types of facilities. But occasionally, the investor the loan was destined for will reject the loan and push it back to the originator/broker. There are many reasons this can happen. Maybe the loan was underwritten incorrectly, maybe it was flagged for fraud, maybe it was an early payment default, or some other violation of the representations and warranties the lender and originator agree to. So if nobody will buy the loan, it sits on the warehouse line. Once enough loans (or just one of the wrong kind- warehouse lenders are VERY conservative these days) get put back on the warehouse line, the warehouse lender says something like: “Hey, this is supposed to be a short term deal here, we didn’t sign up to take the long term credit risk for you on a loan, so you need to pay this loan off yourself if you can’t sell it on the secondary market.” This is known as a margin call. And if the broker/originator does not have the cash to pay up, they might just look to other sources to raise cash. If desperate, they might just use one warehouse line to meet the margin call of another. But back to our story: If this is what happened here, they are up a creek. And the solution is not likely to be just about throwing the CFO under the bus, offering a mea-culpa to the warehouse lender, and re-instating the line. It may not be that easy. That’s because, presumably, the broker faced a cash call it could not meet, and tried to use another warehouse line to come up with the dough. Point being: The original obligation that caused this may remain unmet, and unless they’ve got another way to quickly raise capital, or a VERY cozy relationship with another warehouse lender, it could spell the end. Again, this is speculation and theory to a large degree at this point, and we will work on confirming the brokers identity. Anyone with any personal knowledge, especially borrowers caught in this, feel free to jump in the comments.

Missouri Basketball Coach Sentenced

Floyd Irons was sentenced to one year in prison for his role in a mortgage fraud scheme, according to media reports. As previously reported by Mortgage Fraud Blog, Irons and John Mineo, Jr., a Missouri restaurant operator, pled guilty to wire and mai…

Jury Convicts In Rebate Coupon Scheme

Terry Hugh Mahon, 69, Broken Arrow, Oklahoma, was convicted by a federal jury in connection with a fraudulent investment scheme involving rebate coupons and home mortgages.  His co-defendant, Grover Harold Phillips, 70, Stillwater, Oklahoma, pled …

Cash For Keys: Banks Paying Delinquent Borrowers So They Don’t Trash The House

Article and video from the WSJ, Buyers Revenge: Trash the House After Foreclosure. These days, bankers and mortgage companies often find that by the time they get the keys back, embittered homeowners have stripped out appliances, punched holes in walls, dumped paint on carpets and, as a parting gift, locked their pets inside to wreak further havoc. This can obviously cost thousands of dollars to fix before re-sale. The solution? Payola. The most practical way to ensure the houses are returned in decent shape, lenders and their agents say, is to pay homeowners hundreds or even thousands of dollars to put their anger in escrow and leave quietly. The moral: Never underestimate the goodwill engendered by a fat stack of cash.

Idaho Bans Florida Foreclosure Rescue

Mortgage Assistance Solutions, LLC, a Florida foreclosure rescue company that sent advertisements to consumers claiming their homes were in foreclosure, can no longer do business in Idaho. Mortgage Assistance Solutions entered into a settlement agreeme…

LA FBI Comments On The Latest Scam

What do you get when you combine two popular rackets these days—identity theft and mortgage fraud? A totally new kind of crime: house stealing. Here’s how it generally works: … The con artists start by picking out a house to steal—say, YOURS….

Five Year Statute of Limitations Applies to Unrecorded Rules of Homeowners Association

Pacific Hills Homeowners Association v. Prun (Mar. 20, 2008, G038244) __ Cal.App.4th __

By S. Keith Garner

The California Court of Appeal for the Fourth District recently held that the five-year statute of limitations in the Code of Civil Procedure (CCP) section 336 for challenges to restrictions on the use of real property applies to a homeowners association’s unrecorded rules or guidelines.  The case involved a dispute over the location and height of a fence and gate across a homeowner’s driveway.  The homeowners association’s CC&Rs, which were recorded, required homeowners to obtain written approval of plans for any improvements, such as fences, from the association’s architectural committee before starting construction.  The association’s architectural committee also adopted guidelines that imposed setback and height requirements on fences, which were not recorded.  In this case, the homeowner erected the fence and fate in November, 2000, without receiving the architectural committee’s approval and in violation of the setback and height restrictions in the unrecorded guidelines.  The association immediately notified the homeowner of the violation, and, over the course of next few years, sporadically attempted to resolve the matter administratively with the homeowner.  After its requests for mediation were rebuffed, the association filed suit against the homeowner more than four years but less than five years after the installation of the gate and fence.  The homeowner argued in part that the action was barred by the four-year statute of limitations in CCP section 337.  The superior court found that the action was timely under CCP section 336(b) and issued an injunction requiring the gate and fence to be lowered or moved outside the setback.

The homeowner renewed its statute of limitations argument on appeal, contending that CCP section 336(b) applies only to recorded documents, and not to the association’s unrecorded rules and guidelines, which contained the setback and height restrictions.  CCP section 336(b) provides a five-year statute of limitations for "[a]n action for violation of a restriction, as defined in Section 784 of the Civil Code."  Civil Code section 784, in turn, defines "restriction" as "a limitation on, or provision affecting, the use of real property in a deed, declaration, or other instrument, whether in the form of a covenant, equitable servitude, condition subsequent, negative easement, or other form of restriction."  The appellate court held that the catchall description "other form of restriction" in Civil Code section 784 was not limited to recorded instruments even though the specific enumerated documents are generally recorded:  "Had that been the intent of the Legislature, it could have easily used the language any ‘other form of recorded restriction’" (emphasis added).  The court then noted that the Legislature could easily amend the statutory language if the result in this case is contrary to its intent.

For more information please contact Keith Garner.  Keith Garner, AICP, is an associate in the Real Estate, Land Use and Environmental Practice Group in the firm’s San Francisco office.