Fannie Mae's $21 Million Foreclosure Fiasco: Cincinnati Judge Told Bad Loan Financed 1,400 Apartments; Reality Is Half That

723 Non-Existent Cincinnati Apartments 

CINCINNATI (TDB) -- Fannie Mae's $21.2 million loan went south in about three years.  It covered 20 government-subsidized low-income housing complexes -- 19 scattered around Cincinnati, the other near Dayton.  When the foreclosure case began moving through the courts earlier this year, Magistrate Michael Bachman was told it involved 1,400 separate apartment units, and that subsidy payments from HUD "are the largest source of value for these 20 properties."  But there aren't 1,400 units in the buildings.  There are just 677 units.   Somehow, the total was over-inflated by 723 non-existent apartments in legal filings at the Hamilton County Courthouse.  Lawyers are now trying to set the record straight.  A document filed recently at the courthouse says there was a mistake, a rather large mistake:

"It is hereby stipulated by and between the parties through their respective counsel of record that the number of project-based housing units involved in the above foreclosure proceedings in 677 and not 1,400 as previously believed and noted in legal memoranda by both counsels."

What is not yet clear is how the error was made.  Did Fannie Mae have incorrect numbers?  Was there sloppy record keeping?  Or poor arithmetic?  Because of the error, Magistrate Bachman issued "Findings of Fact" that said the case involved 1,400 rent subsidized apartment units:

"The Magistrate finds that the Tenants are residents of three separate properties in foreclosure, that they entered into a lease with NY Group OH1 LLC ("NY Group") before the filing of this action, and that each lease is subsidized by the Secretary of Housing and Urban Development ("HUD"), and that each lease is unrecorded.  The magistrate finds that 20 separate properties are involved in this foreclosure, totaling 1,400 individual residential units.  The size and location of each property is different, but all of the units have subsidized leased with HUD.  The subsidies are in full force and effect as of the date of this decision."

On the surface, the Cincinnati foreclosure seems to be the latest example of a legal system struggling to handle the flood of foreclosures pouring into the courts because of the real estate collapse.   Across the U.S. there are robo-filings and questionable securitized loan documents.  And now a Fannie Mae foreclosure that cited the existence of 723 Cincinnati-area apartments that don't exist.  Fannie Mae is Congressionally chartered corporation that is financially insolvent.   Along with its sister, Freddie Mac, Fannie Mae guaranteed or owned about half the nation's $12 trillion mortgage market.  Fannie Mae is currently in conservatorship under the Federal Home Finance Agency, which was created in 2008 as a bail out program.  In Cincinnati, Bachman has appointed a receiver to manage the apartment buildings while the foreclosure proceeds.  There are allegations that the buildings were deteriorating after the owner defaulted on the $21.2 million loan.

Hillary Goes REALLY Negative: On Foreclosures, Calls Obama To The 'Right' Of Bush

CINCINNATI (TDB) -- Barack Obama as a right winger? The Clinton campaign now contends the Illinois senator's plan to deal with the foreclosure crisis is worse than the White House effort:

"Sen. Obama is positioning himself to the right of President Bush. The Bush administration recently reached an agreeement with the mortgage industry to implement a limited foreclosure moratorium and a loan modification program that could result in rate freezes for at-risk borrowers. In December, the administration announced another plan that also called for a rate freeze for qualified at-risk borrowers. While this plan is not sufficient, it goes farther than Sen. Obama."

Ohioan's Deed Not Transferred After Foreclosure: Now She Faces Building Code Prosecution

CINCINNATI (TDB) -- Demetria Scriber-Hinkston is facing criminal prosecution for building code violations because the deed on a house she lost in foreclosure proceedings has never been transferred. Her lawyer contends a Florida mortgage company "failed and refused to record the deed to 6129 Cary, in part to avoid responsibility to maintain the property."

Greg Korte has the story in today's Cincinnati Enquirer. Scriber-Hinkston's difficulties highlight an extremely disturbing side issue of the foreclosure crisis. Mortgage companies, banks and other financial institutions reportedly are sitting on deeds rather than promptly filing them at the courthouse. They seem to be holding back the legal paperwork in order to avoid paying property taxes and maintaining foreclosed properties. Meanwhile, Ohioans who lost their home to foreclosure continue to show up on the records as still responsible for the property.

Will Ohio's Cities Catch The Wave? Investors Now Snapping Up Homes In Detroit

CINCINNATI (TDB) -- Hamilton County officials are projecting that 6,200 foreclosure cases -- with large numbers of the volume in Cincinnati -- will be filed this year. It's a gloomy statistic that is mirrored across Ohio . But there could be some bright days coming after the storm. The foreclosure crisis has created a red hot real estate market in Detroit, where existing home sales are sizzling.

Residential sales are up 4% percent over November 2006 in the Motor City, and Crain's Detroit Business reports "November's numbers continued the hot streak for the city, which saw residential sales increase month-over-month for eight months in 2007." In the wealthy suburbs like Oakland County, sales are down by as much as 15%.

Detroit? It was supposed to be dead, worse off than Cleveland and Cincinnati, or any of its other Midwestern manufacturing sisters like Toledo and Akron. But there are people who see opportunity, value and deals in the market.

"The increase is attributable to a combination of demand from young, urban pioneers and out-of-town investors, said Darralyn Bowers, president of Southfield-based ERA Bowers and Associates, which does a majority of its sales in Detroit. She said data indicates a high level of cash buyers, meaning a lot of the sales are by people investing in residential real estate. 'We may not appreciate what an opportunity Detroit property is right now, but some people are. When this passes, we'll see tremendous fortunes made.'

OH-02 Dem Vic Wulsin: Foreclosure Wave Hits Jean Schmidt's Home Town

CINCINNATI (TDB) -- Democratic Congressional candidate Vic Wulsin says the foreclosure crisis is so serious that 75 homes are on the market over defaults in Loveland, an affluent Cincinnati suburb. Republican U.S. Rep. Jean Schmidt, who now holds the OH-02 seat, lives in that community.

Wulsin says Schmidt is out of touch and voted against the Mortgage Reform and Anti-Predatory Lending Act that passed the House by a 291-127 margin last week. There were 64 Republicans who supported the bill, which establishes lending standards.

Overall, according to Wulsin, there are 2,103 foreclosures pending in Cincinnati. Ohio has the third highest foreclosure rate in the nation. Wulsin says she would have supported the bill, HR 2915. The Wulsin campaign pointed to this Yahoo link as its source about foreclosure activity in Loveland. Wulsin contends Schmidt has had support from builders and bankers over the years, and favors real estate lenders over borrowers now struggling to hang onto their homes.

"I support this bipartisan, common sense effort to rein in an industry that has spun out of control, and would have voted for it. I believe we must protect all Americans from unfair and predatory lending practices.

"We need to stand up for our hard working families, not the Wall Street insiders who made billions when times were good and are now looking for a government bailout. Maybe she's listening to the developers who have supported her political career. . . I have one question for Jean Schmidt: Isn't it Congress' job to protect families who save up and buy a home in good faith, and then lose it because the system was rigged from the start against them."

12 Ohio Mayors Demand Fed Action On Foreclosures: Warn 2 Million U.S. Families Face 'Dire' Future

COLUMBUS (TDB) -- The mayors of Akron, Columbus, Dayton and Toledo are among 66 from across the U.S. -- including 8 others from Ohio -- now pushing the Federal Reserve to "expeditiously" beef up regulations against abusive lending practices. In a letter to the Fed demanding action, the mayors say regulators must quickly protect homeowners and warned "it is estimated that close to two million families face dire financial circumstances and/or foreclosure" by 2008.

The problem: Interest rates on adjustable rate mortgages will reset and climb to higher rates. Many people just won't have the money to make their monthly payments. Ohio already has a mortgage foreclosure rate that ranks near the nation's highest -- by some accounts it is the worst. Gov. Ted Strickland in March said the foreclosure crisis is worsening and will deepen over the next two years.

Mayors said the Fed needs to crackdown on unfair and deceptive lending immediately and sent a letter outlining suggested action including limits on prepayment penalties, mandatory escrow accounts for taxes, and a ban on unaffordable loans by imposing income guidelines.

"A core plague of predatory lending is lending beyond borrower payment ability. The federal agencies have correctly identified that abusive lenders are underwriting ARM loans at initial and low rates, leaving borrowers vulnerable to rapid rate increases . . .

"Finally, there should be a presumption that a loan is unaffordable if the borrower's debt-to-income ratio exceeds 50%."

Ohio mayors who signed the letter include Akron's Don Plusquellic, Michael Coleman of Columbus, Solon's Kevin Patton, Westlake's Dennis M. Clough, Toledo's Carly Finkbeiner, Warren's Michael O'Brien, Georgine Welo of South Euclid, Tom Longo of Garfield Heights, Youngtown's Jay Williams, Dayton's Rhine McLin, University Height's Beryl Rothschild and Judith Rawson of Shaker Heights.

Trenton, N.J. Mayor Douglas H. Palmer heads the U.S. Conference of Mayors and said up to $1.4 trillion in adjustable rate mortgages are going to climb higher while too many Americans are locked into home mortgages they should not have obtained in the first place.

"The mayors of America understand the negative impact that these practices have had on everyday citizens. We cannot wait to the next wave of bad news to intervene on behalf of working people. The abusive lending has to stop."