Oct 10

Mental Exercise: Data, Mortgages, Derivatives, and Foreclosure

I’m heartened to see that 40 of the Attorneys General of the states here in the US are going to examine mortgage foreclosure fraud.

I’m certain more than a few of them will take the easy way out and blame the victims  (afterall, this is an election year, and the Teabaggers will demand scalps), but there can be little doubt that fraud was occurring on a massive scale and likely was the cause of the collapse of the US housing market.  A 2005 FBI report estimated that 80% of fraud losses came collusion and collaboration from industry insiders (via this MeFi thread).  All of the major lenders are at the very least scrutinizing their processes and at most ordering foreclosure moratoriums.

How could data mining and visualization aid in surfacing potential fraud?

As a mental exercise, consider the multitude of data that certainly exists and the challenge of combing the haystack and creation of a comprehensible narrative.

These flowcharts posted by Barry Ritholtz (sourced from  Foreclosure Fraud for Dummies Part 1,  Part TwoPart Three, and Part Four) show the process as it should occur.  The news has been full of stories about foreclosure mills rushing foreclosures through and in some cases ‘recreating’ original documents, pushing through foreclosures.

Government agencies – both local, state, and Federal – have access to terabytes of data from the VA, HUD, Freddie Mae and Freddie Mac, with more to be discovered via subpoena, from proprietary lender systems to MLS and MERS to credit bureau data, as well as email and other correspondence between borrower, lender, and broker, as well as the other invested parties.   From Patriot Act disclosures to county deed filings and lien notices to the eviction notice sent to the sheriff, each of those transactions lives as a datapoint, somewhere…

Then there’s the question of “should we go down this road”? While I personally think the answer is “Hell Yes, Round up the Banksters!”, I’m certain that ‘following the money’ will open the door to more investigations.  Fraud may end in the foreclosure process, but it certainly didn’t start there.    The trail will certainly lead us past questionable practices regarding the mortgage backed securities, collateralized derivatives, credit default swaps, mortgage servicers, mortgage originators, home appraisers, builders, realtors, mortgage brokers, and yes, homeowners (there’s a variety of infographics here).

The fallout will likely include homeowners, stock markets, the entire domestic financial system, and the entire global economy.  Will renewed scrutiny and the likely fallout lengthen the Great Recession, or worse yet precipitate a Great Depression 2.0?

Jun 09

Daily Links for June 20th through June 21st

  • Financial Responsibility in the United States – A credit infographic from BillShrink.
  • Historical Home Prices – A dynamic chart/infographic of the US economy and home prices.
  • Flip Flop Fly Ball – Essentially, this site is what I'd have been doing when I was 12 years old had the Internet and Photoshop been available to me in the eighties. As well as the infographics there are a few other bits and bobs; like small pixiliated portraits of some baseball players. They are filleted from a bigger collection of Minipops (that's what I call them) which is one of the biggest parts of my main web site, Flip Flop Flyin' (thus the name of this site). There's also some photos from some of the stadiums I've visited, and a few drawings.
  • The HBR List 2009 – Our annual HBR Breakthrough Ideas List spans from Africa to the economy, from Western Union to state capitalism, and from biomimicry to something called the IKEA Effect…

Mar 09

Daily Links for March 26th

  • Pew Research Center: Unusually Wide Gap in ‘Satisfaction,’ ‘Right Direction’ Measures – Historically, a significant gap in this direction is far less common than the reverse. In the second half of 1991, as the economy deteroriated, the percentage saying they were satisfied with national conditions significantly outpaced the percentage saying the country was headed in the right direction. In the final years of the Clinton administration (March 1998 through January 2001), a period marked by particularly high levels of satisfaction overall, public beliefs that the country was headed in the right direction consistently lagged behind overall satisfaction. This gap was most pronounced in January 1999 in the midst of Clinton's impeachment trial: At that time, 70% said they were satisfied with the way things were going in the country (among the highest percentages in the 19-year period), while 49% said they felt the country was headed in the right direction.
  • Gen Y Says: "I Want My Social TV!" – ReadWriteWeb – New research from Park Associates found that many Gen Y TV viewers are ready for a change when it comes to their television-watching experience. According to a recent report, over one-fourth of users ages 18-24 are interested in having more social media features integrated into their TV. This data should come as good news to companies like Verizon and Yahoo!, both of whom have been pushing their new social networking widgets. But it also has broader implications that go beyond kids just wanting Facebook on their TV. The study found that there's a desire to use social networking as a platform to actually enhance the TV-watching experience through interactive chats with other viewers and the ability to recommend shows to friends.
  • Pew Research Center: The Phantom Recovery – A new Pew Research Center report finds that for the typical American household, the Great Recession that began more than a year ago came on the heels of a less dramatic but equally unusual economic phenomenon: a Phantom Recovery.
  • GOOD » Our “Dead Pledge” Crisis» – “Mort” comes from the Latin for “dead” and “gage” from the Latin for “pledge.” So a mortgage is a “dead pledge.” It’s dead in two ways: the property is “dead” to the creditor once the debtor paid off the loan, and, if the loan is not paid off, the property was “dead” to the creditor.
  • South of the Border—By Scott Horton (Harper’s Magazine) – If you track the same story from the Mexican side (reading La Reforma from time to time can provide that perspective), you get a far more realistic take. The problem, in their view, is us. Criminal syndicates based in Mexico have come to control the drug traffic inside the United States. They have gorged themselves on American cash and armed themselves with lethal assault weapons procured on the largely unrestricted American gun market. Mexican law enforcement is no match for them. And these problems would not exist but for the United States.
  • Internet Slang Dictionary – If you are not sure what it means, try searching here.

Nov 08

Daily Links for November 12th

  • Ironic Sans: At 1600 Pennsylvania Avenue – Other 1600 Pennsylvania Avenues throughout the United States.
  • Where Homes Are Worth Less Than the Mortgage – Interactive Graphic – NYTimes.com – In 43 states, First American CoreLogic was able to analyze data for all homes with mortgages. Using estimates of current property values, the analysis shows that many homeowners owe more on their mortgages than the homes are now worth, a condition known as having negative equity. Move the cursor over a state to see the percentage of mortgaged homes with negative equity. Also shown is a statewide estimate for the total value of mortgaged homes compared to the total mortgage debt on those homes; the higher that number, the more indebted a state's homeowners are in relation to the value of their property.