Angelo Mozilo

The Office of Mortgage Settlement Oversight released some interesting data on the first-lien and second-lien portfolios of the five services sanctioned in the foreclosure fraud settlement. Calculated Risk reproduces the data here. Despite the heavy investment in a narrative of the foreclosure crisis being over and the housing recovery underway, these loan portfolios show substantial weakness at the big banks, particularly Bank of America and JPMorgan Chase. Even at Wells Fargo, the bank with the best data here, nearly 1 in 11 first-lien mortgages in their portfolio are in some stage of delinquency.

That number widens with BofA, which only has 84.4% of its loans current, and 4.81% in foreclosure, well above traditional averages. JPMorgan Chase’s foreclosure rate is 5.06%.

These just aren’t good numbers, and they suggest continuing softness in the sector. Worse, home seizures have begun to rise for the first time in two years.

Home seizures in the U.S. rose 5.4 percent last month, the first annual gain in two years, as lenders seek to manage the flow of distressed properties without disrupting the housing recovery, according to RealtyTrac.

Banks repossessed 59,134 homes, up from 56,124 from November 2011, the Irvine, California-based data firm said today in a report. The increase was the first since October 2010, when foreclosures slowed after allegations that lenders were using faulty practices to take property from delinquent homeowners. Seizures climbed 11 percent from the previous month.

“Lenders have figured out how to play the foreclosure game in this new world where they’re getting a lot more scrutiny,” Daren Blomquist, RealtyTrac vice president, said in a telephone interview. “Everybody involved in the foreclosure industry has finally got a good handle on how to manage these properties to create a more managed and stable flow.”

As Thomas Cox indicated, just because lenders “have figured out how to play the foreclosure game” doesn’t mean they are playing it legally. They’ve determined that they can navigate the system by wearing out resource-starved foreclosure victims. And the fact that the governments at the state and federal level have basically tapped out as far as foreclosure defense and due process is concerned gives them a much freer hand.

Some defenses still go on, of course, and they often yield fascinating results. There is a knowledge on the ground that banks have had to engage in systematic fraud all over the country in order to “play the foreclosure game.” Judges have been slow to catch up to this. And even when the defense teams get a win, they do not have the numbers to replicate that everywhere.

Moreover, when you have people like this running around, not behind bars, the notion of a deterrent for this kind of behavior goes by the wayside:

Countrywide Financial Corp. co- founder Angelo Mozilo said under oath last year that he had “no regrets” about how he ran the mortgage firm and that he only agreed to a record $67.5 million regulatory settlement in 2010 to protect his children […]

Mozilo was responding to questions from an MBIA attorney who asked if he regretted how Countrywide was run after “all the foreclosures and ruined lives and lawsuits.” Mozilo called the lawyer’s question “nonsensical and insulting.”

“I have no regrets about how Countrywide was run,” Mozilo said. “We were a world-class company in every respect.”

If Mozilo is unbowed, it’s not like the banks still operating have any remorse for their actions.

David Dayen

David Dayen