Christian Bohyn

You would think that the top executives at Countrywide, once the nation's largest mortgage lender couldn't qualify to ever do business in the Financial Industry ever again… think again. They're back on stage and they're positioning themselves to make a ton of money off the housing meltdown. Crazy isn’t it? But sadly it is the truth.

Only in America can this be done, this truly is the land of opportunity…

After stealing hundreds of millions of dollars in bright daylight, the Countrywide boys are at it again! They've launched a company that will buy distressed mortgages from the banks and the government at a discount, of course and they will then offer to modify the loans so that the borrowers can afford them and then, as a natural by product of their generous efforts, pocket the profits from reselling these new mortgages.

Machiavelli?

The company's name is PennyMac Mortgage Investment Trust.
Yes, you’re reading it right, another Mac. After FreddyMAC we now have PennyMAC, this made me think would the word MAC have some meaning that we don’t know of? So I looked it up on Wikipedia and the only reason for the use of MAC in the trade name of these companies seems to be that Mac is short for “Machiavelli". According to Wikipedia a Machiavelli is a person of acute and scheming intelligence and Machiavellianism is the use of cunning and deceit in politics or generally. That Explains! Right?

PennyMac filed papers end of May for a $750 million initial public offering on Wall Street. The company's founder and CEO is Stanford Kurland, a 27-year veteran of Countrywide. Kurland was Countrywide's Chief Operating Officer, President, and the heir-apparent to CEO Angelo Mozilo who was recently indicted by the Securities and Exchange Commission ('"SEC") on charges of insider trading, among other things. Kurland left Countrywide in 2006, just a few days after cashing in $130 million worth of Countrywide stock.
As a matter of fact, eleven of PennyMac's 14 officers are all ex- Countrywide. Logic, because there couldn’t be too many Captains on the Pirate Ship, as Countrywide sold itself in January of 2008 to Bank of America (another Machiavellic Financial Institution, known for its client abuse),

What it come down to is that, the architects of the sub-prime lending that caused the greatest financial crisis in the history of mankind, are now going to profit from the crisis they caused by buying and selling the very sub-prime loans they couldn't sell before, using money raised from selling shares of stock to the general public.

According to their brochure, PennyMac's business model is based on keeping people in their homes. The Times reported that "most banks and investors who own mortgages still seem to find foreclosure preferable to so-called workout solutions, and homeowners continue to report that their pleas for loan modifications fall on deaf ears." So, PennyMac's approach will actually benefit struggling homeowners. See, it's a good thing. Thank God for those boys (read cowboys) from Countrywide.

PennyMac will buy the toxic mortgages from the banks at just pennies on the dollar, because apparently the banks will sell the toxic assets to them at pennies on the dollar. Paulson, however, had to pay full price, if you recall. And by the way, as you recall, Machiavelli is a person of acute and scheming intelligence, so PennyMac is not stupid, they will only buy whole entire mortgages, not mortgages that have been sliced and diced into multiple pieces and then made into securities to be sold to multiple investors.

So, PennyMac now becomes now, one of the "good guys", as all they're trying to do is to help make mortgages affordable. Isn’t that nice? The banks haven't been able to do it, nor have two former administrations.

Mr. Paul Leonard, director of the California office in Oakland for the Center for Responsible Lending said: “PennyMac's "model suggests the great promise of an aggressive modification strategy; creating win-win opportunities for borrowers and investors."
He also added: "It's hard to overlook the fact that these are Countrywide veterans who no doubt contributed to some of the sophisticated schemes to sell bad loans to borrowers and make great profits, who are now finding profitable ways of fixing those loans."

Note that PennyMac has received mega-bucks from BlackRock, the investment manager who, in "no bid" contracts, has been paid some $71 million to help the government and banks dispose of toxic assets…such as… the mortgages PennyMac will pick up on the cheap

Ryan Taylor, a principal at San Francisco's Cirios Real Estate, is quoted saying:

"They capitalized on the way up, left at the right time, and now are going to capitalize on the way down," Taylor said. "From the business person's perspective, you have to say, that's pretty smart. From a moral, integrity, ethics perspective, it can be questionable."

How politically correct…In my opinion this is “Pure Machiavellianism”, definitely the use of cunning and deceit,

Now here's perhaps the best part of PennyMac's business plan. PennyMac is a REIT ("real estate investment trust"), which means it doesn't have to pay federal taxes, because it will pay out its profits to its investors. Woo-hoo! All that and no taxes too? Isn’t this The Land Of Opportunity? How’s that for the American dream? Could it be any better?

According to PennyMac's Wall Street filing, the new company will be a subsidiary of a company by the name of Private National Mortgage Acceptance Corp., which is owned by Kurland who founded the company a year ago. To start that company Kurland raised $584 million as of March 31, 2009, and has already spent $226 million of that bounty.

In PennyMac's Wall Street filing we also read the following:

"We believe that there are unique, current market opportunities to acquire distressed mortgage loans and mortgage-related assets at significant discounts to their unpaid principal balances," the company wrote. "We believe that more than $1 trillion of (residential mortgage) loans are troubled or at significant risk of default in their present state."

To start this new venture, PennyMac has already a mammoth deal under its belt. It negotiated to pay the FDIC $43.2 million for $560 million in distressed home loans from the failed First National Bank of Nevada. PennyMac keeps 20-40 percent of every dollar it collects and Uncle Sam gets the rest. Not bad for a start? Good thing that they won’t be paying taxes on that profit, no?

PennyMac's prospectus does mention that the company's Countrywide heritage could have a couple of drawbacks, such as:

"There are several lawsuits pending against Countrywide and certain of its former officers," the prospectus says, adding that there was a possibility of civil charges against Mozilo.

A possibility???? More than a possibility! I would say

Reading further in PennyMac's prospectus:
"Certain of the officers of PennyMac who are former employees of Countrywide, including Stanford L. Kurland, our chairman and chief executive officer, who was chief operating officer of Countrywide until September 2006, have been named as defendants in lawsuits in which Countrywide and other employees and former employees of Countrywide are defendants. … We cannot assure you that existing or future, if any, investigations or litigation will not generate publicity or media attention or adversely impact the company's ability to conduct business."

Really? This is stuff for another Godfather movie because with today’s technology I wouldn’t be surprised that, even if Kurland ends up in jail, he'll probably still be able to run things from his laptop, inside the jail, I

I suggest that you all call your stockbroker and tell him that you want to be in on the IPO right now. Except, you might have lost your status as an accredited buyer because of all the money you’ve lost in your Florida and California Real Estate

So, listen up… here's another idea for a Boston Tea party or even better… create you own personal bailout package…
Stop making your mortgage payments.
Then just negotiate a short sale with your lender, so that you obtain, not only debt forgiveness, but also no deficiency judgment.
Stay in your house for free as long as possible so that your mortgage becomes as toxic an asset as possible.
Sit back, relax and wait for it to be bought by PennyMac for pennies on the dollar.
Then they'll modify your mortgage so you can keep your home, and sell your mortgage back to the investors of whom they bought it from and of course PennyMac will make a huge profit from the transaction…
But you, who have bought stock of PennyMac with the money that you’ve saved by not paying your mortgage, will then be able to reap your part of the profit as a shareholder in PennyMac!

How’s that for a Machiavellic Plan?

The bank won't mind because the Treasury will make them whole on whatever money they lose on your mortgage, and they won't have to screw around with those annoying loan modifications they hate doing and actually hardly ever acomplish. They save on the costs to foreclose on your home. And as long as you keep your income under $250k a year, your taxes won't even go up as a result!

I am so thankful for this great Nation! The land of the Cowboys! (read Countrywide boys). This Really Is, The Land of Opportunity!

God Bless America! Land of The Free…

If you have invested in a property and have tenants, and your rentals are in foreclosure, or if you regularly purchase properties at foreclosure sale, or if you are a lender who forecloses on residential dwellings, there is a new federal law that will have a direct impact on your business.

On May 20, President Obama has signed the "Protecting Tenants at Foreclosure Act." Under the new law, if a federally-related mortgage loan (as defined in 12 U.S.C. 2602) is foreclosed or if the property being foreclosed is a dwelling or residential property, then the purchaser at the foreclosure sale takes the property subject to the pre-existing tenancy of a bona fide tenant. A "bona fide tenant" is one who is not related by blood or marriage to the foreclosed borrower and is a tenant under a lease negotiated in an arms-length transaction and the rent is not "substantially less than fair market value."

If the bona fide tenant is there, then the purchaser at the foreclosure sale must provide at least 90 days' notice to vacate to the tenant, and (if the tenant's lease pre-dates the notice of lis pendens) the tenant is permitted to remain in the property for the remaining term of the lease or for 90 days, whichever is later.

The tenant does not get the balance of the term of the lease (i.e. tenant only gets 90 days) if the purchaser at the foreclosure sale sells the property to someone who intends to live in the property as their primary residence. In that event, the lease terminates immediately upon closing to the new buyer (so long as the tenant has received 90 days' notice to vacate).

This should comfort tenants that are living in houses that are being foreclosed on. Hopefully it will help to convince them to keep paying rent while the investor-owner is trying to work things out with the bank. So far when tenants got served with the lis pendis, they decided to leave or worse, not to pay the owner. In doing so the tenant brought the homeowner/investor even more into trouble.

This new law "sunsets" and is no longer effective after December 31, 2012.

Below is a questionnaire that gives you a better view to interpret the new law:

Is this a foreclosure of a federally-related mortgage?
If yes, law applies;
If no, then:
Is this a foreclosure of a residential property or dwelling unit?
If no, then law does not apply;
If yes, then:
Is there a tenant in the property?
If no, then law does not apply.
If yes, then:
Is this a "bona fide" tenant (non-related to borrower, arm-length, fair market rent)?
If no, then law does not apply.
If yes, then:
Is this a month-to-month rental?
If yes, then provide 90-day notice to vacate.
If no, then:
Was the current lease dated effective prior to the date of the lis pendens?
If no, then provide 90-day notice to vacate.
If yes, then:
Does the lease expire in less than 90 days?
If yes, then provide 90-day notice to vacate
If no, then wait out term of lease and provide notice of non-renewal/termination at least 90 days prior to lease expiration date (if desired).
If lease expires in over 90 days:
Has the property been sold to a new purchaser who will occupy it as a primary residence?
If yes, then lease terminates at sale, but still must give 90-day notice to vacate;
If no, then new owner takes subject to current lease and must give 90 day notice prior to lease expiration date.


I hope this helps those who will face this scenario. I would not be surprised if the larger lenders and servicers attempt to attack the new law on constitutional grounds, but the arguments likely would not be heard by the U.S. Supreme Court until after the law sunsets anyway.

That's it, for the time being, we will have to learn our investors to work within these boundaries.

www.monkeysold.com

More and more it becomes obvious that the lenders are playing 'Panic Football'. They have no strategy in place to cope with this crisis and certainly don't have the team, let go the coach to handle the actual crisis.

If you have ever worked in a corporate environment and have some common sense left, then you certainly learn to appreciate the 'Dilbert' comics. Because it is sad but true, corporations are all about politics, laziness and ego.
Nobody cares, it's everyone for him- or herself everyone is good at 'shuffling paper around' and most of them don't have a clue what they are doing.

Take the new approach to loan modifications as an example. Certainly some bright Harvard boy has been named Head of the Loan Modification Department, with the mission to save as much "Loans" from foreclosure as possible. Note the emphasis on "Loans" not "Homeowners".

So what does this bright manager do? Where is his department going to find people to offer Loan Modifications? Or how can they get into the picture of upper management showing statistical improvement?
Well, someone just got a bright idea! This smart executive instructed his team to call all short sale files and offer a loan modification to these distressed homeowners.

Great Idea isn't it?

The answer is: NO

Think about it. These people, who are going for a short sale solution, have already months of outstanding payments. They have a genuine hardship, they either lost their job, have medical issues, are in divorce or in the military and most of all they are desperate. They don't have the income anymore. They have exhausted their savings. All because they did what the Lender's collections department told them to do: The lender suggested to these poor people to tap into monies from friends, family, 401K and pension fund in order to get paid for these silly mortgages.

So now, that these homeowners finally have come to the conclusion, that the only decent thing for them to do is to try and get their home sold in a short sale, to negotiate debt forgiveness and to walk away with no deficiency judgment. Now the Lender offers the homeowner a loan modification. Imagine getting a call from your lender, after being 6 months late in payments and uncertainty, offering you a loan modification. Would you be happy? I bet you would. So, what does the homeowner do? He jumps on it!

The Almighty Lender has now given Hope, and the homeowner thinks that all will be fine from now on.

Well it won't!

In reality the lender is now going to take 2 months or more to find out that the homeowner does not qualify. Why does he not qualify? Because he does not make enough money and has too much debt... Dummy. As a result of 2 months waste of time and energy, both at the lender and the homeowners side, a nice letter is send to the homeowner telling him that he cannot get a loan modification and that's the end of it.

Meanwhile, during this loan modification process, the house has been taken off the market for two months and precious marketing time has been lost and foreclosure is inevitable.

Very few homeowners qualify for a loan modification, but most of them qualify for a Short Sale.

So I suggest that the lenders offer loan modifications to the people who ask for them, namely the homeowners who are still current but recognize upcoming financial hardship and leave alone those people that are trying to save what they can. Namely, their good name and credit, by avoiding deficiency judgment as a result of a foreclosure.

By Christian Bohyn, MonkeySold

According to a recent post on Forbes.com By Daniel Indiviglio, Obama wants to Use The TARP to absorb some of the individual homeowners losses.

With few other options, the White House may adapt an FDIC plan to help stall foreclosures. The Obama administration is considering spending up to $100 billion of the Treasury Department's $700 billion Troubled Asset Relief Program to ease the crisis. Under the FDIC's plan, banks would modify mortgage loans, while Uncle Sam would use TARP dollars to absorb some of these losses.
And it's got promise because a version of it is already being used with some success to handle troubled mortgages originated by IndyMac. The IndyMac program allows the bank to lower borrowers' monthly mortgage payments. In return, the government pays a portion of the bank's expenses and takes on up to 50% of any losses should the mortgage default.
Why not just reduce the principal balance on a mortgage loan? Many balances can't be altered because the mortgages themselves have been securitized.

The Federal Housing Administration's HOPE for Homeowners program, which took effect last October, for instance, was intended to help more than 400,000 struggling homeowners. The bank saved close to $50,000 per loan by changing the terms rather than foreclosing. The FDIC estimates it could do the same for 2.2 million other mortgages if it's able to tap TARP funding and bring the modification program to the general public. Estimated cost: $24 billion to $25 billion--far less than the $40 billion to $100 billion members of Congress and the Obama administration are considering to keep people in their homes.

The program allows interest rates to be drastically reduced temporarily before increasing to a fixed market rate. One suggestion, which may or may not involve TARP money, would allow bankruptcy judges to rewrite mortgage terms. The Mortgage Bankers Association argues that this so-called "cram-down" approach would make it more difficult for consumers to buy a home by leading to higher interest rates and tighter lending standards.

Obama has supported allowing bankruptcy judges to modify mortgage terms, and cram-down legislation is currently being considered in Congress. But this option leaves many open questions: Would the banks or the government absorb the loss? Would there be an automated process to rewrite the mortgages, or would it be done on a case-by-case basis? Would the new mortgage amount be based on market value or the borrower's ability to pay?

The Treasury Department has had discussions with the FDIC about using TARP money to expand its IndyMac program, and the administration is considering this option. The central bank approved a foreclosure prevention plan Tuesday. It has many similarities to the FDIC plan, but it would only be used to modify mortgages held by Federal Reserve banks.

These are historical times we are living in and a lot of these proposals make humanly sense. But on the other hand we should ask ourselves: what about the basics of Capitalism? Is this the start of America’s journey towards Socialism?

By Christian Bohyn A/K/A MonkeySold.com

Just wanted to give you an update on the latest lawsuit that is Countrywide facing this time.

Countrywide and Landsafe Sued over Appraisals From Business Week, a Seattle lawfirm is suing Countrywide and Landsafe claiming they illegally rigged the appraisal process. The suit, which seeks class-action status, claims that Countrywide Home Loans and its in-house appraisal arm, LandSafe, inflated home valuations during the boom so Countrywide could make more loans and sell them on Wall Street.

The lawsuit claims that when the Clarks refinanced their Seattle home for $350,000 in February 2007, they were required to use the Countrywide affiliate for the appraisal. The suit further claims that outside appraisers who didn't come up with high home values were denied future work from the lender.

Asked for a response, Bank of America spokeswoman Shirley Norton said, "We have not been served yet, but based on what we have heard about this suit we believe it is without merit." A lot of appraisers aren't happy about the looming changes. In a poll conducted on Jan. 16 by the American Appraisal Institute trade group, 60% of appraisers said the code was unlikely to change the quality of appraisals. However, the lawsuit touches on a couple other issues facing appraisers, such as low appraisal fees and interference from AMC's.

Oh, and by the way, here's some more Countrywide news!

We are working on a short sale with Greenpoint Mortgage and after 3 months into the process, Greenpoint notifies us that they have sold the defaulted loan to... Countrywide. Can you imagine buying a defaulted loan? Aren't they in enough trouble already?

by Christian Bohyn

Monkeysold.com