Will you protect this house?

A group of vocal protestors was bunched in tightly together within the confines of a narrow sliver of sidewalk that JP Morgan security had provided for them yesterday morning. By design, the space kept the group safely off the spacious outdoor plaza in front of the company's headquarters at 270 Park Avenue, placing their backs against the wide, waist high concrete bollards that delineate private property from the city sidewalk.

The protestors' uncomfortable position simultaneously allowed a constant flow of pedestrian traffic to move past them on the sidewalk and to obstruct the view of onlookers, which consisted almost entirely of curiously observant JP Morgan employees leaving the building for lunch. The rest were the various City Council employees that were on hand to staff the three members who took turns at the makeshift lecturn shoved snuggly into the center of the chanting crowd.

Unfortunately for the protestors, their chaotic, ad hoc physical placement and the clear lack of an interested public seemed to echo the rather jumbled message that they brought to the headquarters of the corporation that they insulted, accused and then, bizarrely, invited out for a walk around Brooklyn, where they believe Chase is wreaking havoc on low-income homeonwers.“The government bailed out this company and then their CEOs received thousands of dollars in bonuses,” said Minister Patricia Malcolm of Brooklyn's “Churches United to Save and Heal,” before going on to accuse the bank of refusing to re-negotiate the mortgages of many poorer city residents that are facing foreclosure in the face of rising unemployment and ongoing financial crisis.

The minister then engaged in a repetitive ‘call and response’ with the supporters crowded in closely behind her by calling out “Can’t take it no more!” to which the crowd responded en masse, “Fired up!”

Minister Malcolm's crowd did indeed seem "fired up" by its anger toward what it perceived as Chase's predatory lending practices even after the bank received "bailout money" from the Federal Government. Those acrimonious feelings were heightened by the elected officials that took the podium after Minister Malcolm.

“Tax money has built up this institution,” said Councilwoman Letitia James while gesturing up at 270 Park Avenue, the black steel and glass high rise that rose up behind her, giving the event perhaps its only successful moment of theatrics. “Chase has the second lowest conversion rate in New York City, and they control thousands of mortgages.”

And it was Ms. James who made the biggest statement of the event by by giving a broad strokes description of legislation that she intends to propose before the council. It would prevent JP Morgan, currently the largest issuers of New York City bonds by a wide margin, from dealing in any more bond issues with the city.

Judging from Ms. James' statements yesterday, the measure would be intended as a clear punitive message to Chase, and one that, judging from at least two other members of The Council present at yesterday's protest, has at least a modicum of political support.

City Council Members Ruben Wills and Jumaane Williams followed Ms. James to the podium and both were quite pointed and discourteous in their remarks. Mr. Wills made a veiled accusation of Chase’s targeting of “black homeowners” through a concerted ad campaign. Mr. Williams was less subtle, going as far as to say that Chase lenders are “ravenous predators who dangle gold in front of poor people.”

The strong language seemed odd for more than a few reasons, not the least of which were the fact it was being broadcast out into mostly passing car and pedestrian traffic, or for the incongruous invitation that immediately followed it.

In what was perhaps meant to be the climactic event of the press conference, a middle-aged man who was not clearly identified took the podium to describe the urban decay caused by high foreclosure rates in his Brooklyn neighborhood. After further accusing Chase of being a major, active force behind this social blight, the man the invited Jamie Dimon, JP Morgan Chase's CEO, to come tour those neighborhoods hardest hit by homeowners unable to pay their mortgages.

The protest signs put it plainly: “Jamie Dimon, Come See What Chase Has Done to NYC."

When she returned to the mic, Councilwoman James made the same plea. “Come down and talk Jamie Dimon,” she said, “We will show you what you have done.”

As the crowd took full throat to chant after Mr. Dimon’s whereabouts, Ms. James answered a question posed by The Observer about the efficacy of her plan to cut Chase out of further city business; in this current climate, with interest rates at zero, banks failing every day and widespread panic around lending, what institution is capable of replacing Chase to issue New York City bonds?

“I don’t really know,” replied Ms. James, “I’m not really in a position put forth any names yet.”

Perhaps Mr. Dimon might offer some during his walking tour.

Fixer-upper-in-chief? (Reuters)

Good news! Foreclosures are at their lowest levels in four years!

Wait, no, that's horrible news. There are so many delinquent homes out there, the banks don't want to repossess them, and even when they want to, the bottleneck caused by the robo-signing scandal is still holding up the whole party. The Obama administration has a simple solution: Just rent it.

The White House is working on a plan to turn a vast inventory of foreclosed homes into rentals, either privately managed or sold in bulk, according to The Times.

The goal, the administration said, is to stabilize neighborhoods where large supplies of empty, foreclosed properties have hurt property values. In addition, the plan is an effort to clear the nation’s balance sheet of real estate holdings that, because they have been difficult to sell individually, have hung over the housing market and stunted sales of existing homes and new construction.

The Federal Housing Finance Agency, the Department of Housing and Urban Development and the Treasury Department are jointly requesting ideas for sales, partnership ventures or other strategies that would help to unload approximately 250,000 properties owned by Fannie Mae, Freddie Mac and the Federal Housing Administration. Those properties account for about half of all properties that have been foreclosed upon and are still awaiting resale nationwide.

[...]

Greater flexibility in disposing of the houses will have other benefits as well, Timothy F. Geithner, the Treasury secretary, said. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets and support neighborhood and home price stability,” he said in a statement announcing the new program.

Plus, it helps diminish the ranks of home owners, should the administration indeed put an end to the mortgage interest tax deduction.

mchaban [at] observer.com | @MC_NYC

Despite months of moratoriums and the drop in foreclosures that came with them, 2010 still saw more foreclosures than ever, CNN reports, and more than 1 million homes were repossed and 2.9 million foreclosure filings made.

Yet as The Observer has been saying for months, things are bound to get worse before they get better. The Associated Press spells this out in a dour report on the coming year's foreclosure troubles:

The bleakest year in foreclosure crisis has only just begun.

Lenders are poised to take back more homes this year than any other since the U.S. housing meltdown began in 2006. About 5 million borrowers are at least two months behind on their mortgages and more will miss payments as they struggle with job losses and loans worth more than their home's value, industry analysts forecast.

"2011 is going to be the peak," said Rick Sharga, a senior vice president at foreclosure tracker RealtyTrac Inc. The firm predicts 1.2 million homes will be repossessed this year by lenders.

mchaban@observer.com

“What we’re looking at is five separate agreements with the five largest servicers,” Miller said. “We’re still a ways away” from reaching agreements, he said. “We’re working very hard to figure out what should be in the settlement.”

Mr. Miller has also told Bloomberg that the investigation into practices by Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally are not criminal. The attorneys general are primarily interested in providing remedies to the foreclosure debacle. They're exploring possibilities that include banning foreclosures when homeowners are undergoing loan modifications and shoring up the modification system.

mtaylor [at] observer.com | @mbrookstaylor

A premium of $1.28 billion was paid to Freddie Mac to resolve $1 billion in claims currently outstanding. But the kicker is that the deal also covers potential future claims on $127 billion in loans sold by Countrywide through 2008. That amounts to 1 cent on the dollar to Freddie Mac.

Imagine if you had a $500,000 mortgage, and you got to settle it for $5,000 — that is the deal B of A appears to have gottem from Freddie Mac.

Ritholtz says these sweetheart terms support the notion that government ownership of Fannie Mae and Freddie Mac has enabled a "back door bailout of the banks." Could the government really get itself so deeply intertwined with a bank that's been hamstrung by its own mortgage mistakes? It's certainly possible.

mtaylor [at] observer.com | @mbrookstaylor

BofA said that it intends to take a fourth-quarter provision of about $3 billion as part of the agreement, and with that, the company believes it has "addressed its remaining exposure to repurchase obligations for residential mortgage loans sold directly to the GSEs." The company expects to take a non-cash goodwill impairment charge of $2 billion as a result of these actions.

Compared with the worst-case scenario, BofA got off pretty light. The company had pegged its exposure to the GSE putback claims somewhere around $6.5 billion in October. Sure, this settlement isn't the hand-to-hand brawl the bank had previously promised to investors, but the firm had already backed away from that hardline stance. And before we get carried away, there are still some problem areas remaining for BofA even in the wake of this announcement, per Bloomberg:

The agreements don’t cover loan servicing obligations, other contractual obligations or loans contained in private label securitizations.

The private-label segment of Bank of America's putback exposure is a hazy risk area, even by the bank's own reckoning. The putback apocalypse hasn't entirely faded with the passing of 2010, but Bank of America appears to at least be getting proactive about the situation in the new year.

The subpoenas focus on the earliest stage of the mortgage securitization process, said the sources, who requested anonymity because the probe is not public.

The sources said the SEC is asking for information about the role of so-called "master servicers" -- specialized firms that oversee the selection and maintenance of the large pool of home loans that go into every mortgage-backed bond.

Regulators are also taking a new approach to the banks. Whereas in the past they focused on the poorly executed paperwork banks were using to evict people from their homes, now they're also examining whether banks properly handled mortgages when turning them into bonds. This investigation is distinct from the one about banks misrepresenting the value of their mortgage-related assets to investors that yielded a big settlement from former Countrywide exec Angelo Mozilo. Readers can be forgiven for getting confused; when it comes to alleged misconduct by bankers in the housing market, there's a lot to keep track of.

Look at horror stories from the foreclosure apocalypse.>>

mtaylor [at] observer.com | @mbrookstaylor

The bank instructed its foreclosure attorneys this week to prepare new affidavits in 7,800 cases where court approval is required to foreclose on a home, out of a total of 102,000 frozen by the bank amid documentation concerns. In states where no court approval is required, attorneys were asked to lift the hold on 8,000 delayed foreclosure sales out of 30,000.

Readers can be forgiven for thinking that Bank of America had already done this, since in mid-October the bank said it had a good handle on its foreclosure situation and would begin refiling affidavits. But it's been fits and starts for BofA:

Bank of America officials previously said they would resubmit affidavits on pending foreclosures starting Oct. 25, with foreclosure sales resuming in November. But those efforts hit several snags, including the hiring of new law firms to handle new foreclosure paperwork, as the bank refiled just a "handful" of cases as part of an initial pilot test of the process. "We are taking a deliberate and phased approach," said bank spokesman Dan Frahm.

As insurance against additional blowback on these 16,000 foreclosure proceedings, BofA is going after the low-hanging fruit: empty and rented houses. That's probably smart, considering the bank's track record with occupied homes.

mtaylor [at] observer.com | @mbrookstaylor

To Goldman, Litton Loan may be a shade worse than merely extraneous. In early November, Goldman joined other major banks like JPMorgan Chase, Bank of America and Ally's GMAC in suspending foreclosures amid revelations that lenders were illegally rubber-stamping repossession documents. The investment bank paid a historic $550 million in a fraud settlement with the Securities and Exchange Commission in June, and its name has occasionally popped up in the latest FBI insider-trading probe. Taking heat from many directions, Goldman may have decided Litton Loan isn't worth the additional regulatory scrutiny.

mtaylor [at] observer.com | @mbrookstaylor

Citing research from Compass Point Research and Trading, Barron's estimates Bank of America's potential losses at $35.2 billion. JPMorgan faces a $23.9 billion price tag, Deutsche Bank could take a $14.1 billion blow and Goldman might hit an $11.2 billion pothole.

Of course, it's hard to quantify the eventual legal risk to the banks, but Barron's isn't overly optimistic:

How much of a loss the big banks will suffer as a result of investors' putbacks is anyone's guess. The law in this area is largely untested. The banks figure to put up an epic battle because the stakes are so large and no federal bailout of big banks seems likely in this political climate. They are on their own.

A gloomy picture indeed, unless of course that there is some kind of subtle, backdoor route for Congress to take in coming to the banks' aid. Not that we've seen anything like that before.

mtaylor [at] observer.com | @mbrookstaylor