Ineptocracy (in-ept-o-cra-cy) - a system of government where the least capable to lead are elected by the least capable of producing, and where the members of society least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of a diminishing number of producers.

This "word" magically sprang up after the Congressional super committee failed at its task, with Congress now rumored to be figuring out ways to stop the budget cuts that are set to automatically happen. No downgrades took place, or were expected, but Fitch will wrap up its present review this week and intimated it could lower the US outlook to negative (not an outright downgrade). And yesterday we all learned that Rep. Barney Frank, D-Mass, will not seek re-election in 2012. Before the financial industry became too excited about the news, however, word circulated that Maxine Waters is in line to take over from Frank on Financial Services: "Waters is in line for Frank's spot and could become chairwoman of the panel if Democrats retake the House. The California liberal is seen as to the left of Frank." One quote read, "Waters at times is very hostile to the banks so this is a situation worth watching."

Returning to the super committee, as the law stands, $1.2 trillion worth of spending cuts will hit starting in 2013 as a result of the super committee failure, a safety mechanism designed to keep the rating agencies at bay assuming no deal was reached. About $500 billion of it should come from the Pentagon, but the chairman of the House Armed Services Committee came out and announced that he would introduce legislation sparing the Pentagon from $500B of automatic cuts.  This article discusses how defense hawks are looking to kill the $500B (

The U.S. government could always impose more fees, right? CNBC reported that last week House Committee on Oversight and Government Reform Ranking Member Elijah Cummings (D-MD) issued a press release detailing a letter he sent to the conservator of Fannie Mae and Freddie Mac, FHFA Acting Director Ed DeMarco. The letter requested information on $150 million in penalties that the two mortgage giants levied on mortgage servicers for "failing to conduct foreclosures fast enough." "I am concerned that these penalties, at least some of which were ordered by the Federal Housing Finance Agency (FHFA), may have contributed to widespread abuses by mortgage servicing companies and law firms attempting to meet arbitrary deadlines to expedite foreclosures," Cummings wrote, according to the release. The letter also cites an FHFA Inspector General report that found, "servicers, attorneys, and other supporting personnel were overloaded with the volume of foreclosures." The letter goes on to allege that, "the size and timing of these penalties raise serious questions about whether FHFA may be more interested in expediting foreclosures to clear its books than protecting the rights of homeowners."

Later, in front of the same committee, FHFA Acting Director Ed DeMarco complained that foreclosures are still taking too long. "We are foreclosing on properties that have had no payments for two, three years or more. It's damaging the taxpayer because we have to maintain these properties for so long and it's damaging to our communities," he told the committee. Perhaps the federal government will suggest that judges stop delaying foreclosures, because it's judicial states where the biggest lag times are.

Analysts just won't let HUD and the FHA off the hook on the amount of capital reserve on their books, and whether or not it will be enough:

Just when you think an argument is settled ("Ok, I'll clean out the litter box this time"), it turns out to not be the case. In this instance a settlement agreement reached last month between Citigroup and the SEC over a 2007 mortgage derivatives deal has been thrown out by a federal court judge who has ordered the case be sent to trial. Citicorp had agreed to pay $285 million to settle a civil suit arising out of the sale of $1 billion in mortgage-linked collateralized debt obligations. Investors lost $700 million while Citigroup is alleged to have handpicked the securities and simultaneously wagered that some of the mortgages would fail while profiting by $160 million from the deal. The judge said yesterday that the settlement was "neither reasonable, nor fair, nor adequate, nor in the public interest" because permitting a company to neither admit nor deny the charges against it does not satisfy the law.

The Massachusetts Supreme Judicial Court ("SJC") has ruled that Massachusetts property owners may lack standing to establish title to their property where there is a void foreclosure sale in the chain of title.  The Massachusetts "try title" statute permits a holder of "record title" in possession of property to file a petition to force adverse claimants to defend their purported interest in the property. K&L Gates reports that in "Bevilacqua v. Rodriguez, the SJC held that a third-party purchaser of foreclosed property did not hold record title where no assignment of mortgage to the foreclosing entity had occurred at the time of foreclosure.  Absent such an assignment, the foreclosure sale was invalid, and the foreclosing entity had nothing to convey to the third-party purchaser. Taking nothing from the foreclosing entity, the third-party purchaser lacked standing to maintain a try title action against the original mortgagor. Nonetheless, the scope of the ruling is likely limited to Massachusetts and jurisdictions where a mortgagee or its assigns must initiate foreclosure and where the party bringing the foreclosure action did not obtain an assignment of the mortgage until after the commencement of the foreclosure process. Moreover, because the Bevilacqua decision simply applies the law as already articulated by the SJC in its January 2011 U.S. Bank, N.A. v. Ibanez opinion, its impact on current and ongoing foreclosure practices appears limited. Massachusetts foreclosure attorneys are likely to have already altered their assignment practices in light of Ibanez." Thank you K&L!

Turning to company news, HousingWire reports that "Guggenheim Partners, an affiliate of Pillar Multifamily LLC, forged a deal with Tremont Realty Capital this week to create a correspondent lending channel in which Tremont will source Fannie Mae-eligible multifamily loans for Pillar through its  network." Tremont is based in in Boston, and is a real estate investment and advisory company while Guggenheim Commercial Real Estate is a lender that sources, underwrites, funds and services commercial mortgages. On may recall Pillar Multifamily joined forces with First California Mortgage last month to partner in the commercial mortgage-backed securities market.

Wells Fargo Funding sent correspondent clients a Newsflash yesterday detailing some changes worth note. "Amended Reminder: RESPA Violations - Tolerance Cure and Technical Corrections (30 days or else!), Uniform Loan Delivery Dataset (ULDD) Update: Potential Impacts for Site Condos, reminder: Revised Homebuyer Education Completion Certification (Form 11) Required for all "Affordable" Loans starting next month, Guaranteed Rural Housing (GRH) Loans Eligible for Purchase with Conditional Commitments "Subject to the
availability of commitment authority" (Under the Appropriations Bill passed by Congress and signed by the president, funding for purchase transactions is now available from the USDA RD GRH Program. The allocation process for refinance transactions may take a few weeks. During that time, Rural Development will issue Conditional Commitments "subject to the availability of commitment authority" (i.e., contingent Conditional Commitments). Because the bill has been passed, Wells Fargo will purchase eligible GRH Loans with contingent Conditional Commitments if all other conditions have been satisfied.), update to HomePath documentation requirements, and a reminder that the Change of Servicer Notice should not be sent until after a loan purchase by Wells Fargo.

Citibank sent out a reminder that its clients had better be ready for the Uniform Collateral Data Portal (UCDP)! The first step is to establish UCDP Profile. "Each Lender must establish a UCDP account profile for both GSEs regardless of whether you are a Seller/Servicer or Non-Seller/Servicer. Fannie Mae and Freddie Mac have separate multi-step registration processes for users of the UCDP. In order to establish this UCDP account profile, you must designate one individual to serve as primary Lender administrator. This administrator must be the same individual for both GSEs. For more information on Lender Administrators, visit the reference/training series provided jointly by Fannie Mae and Freddie Mac (" Remember that, "Conventional conforming loan applications dated on or after December 1, 2011 will require successful submission of their appraisal reports to the UCDP prior to loan purchase. This is applicable to all conventional loans that require certain appraisal reports" for Citi. Citi goes on to list much more of the procedures, and, as always, it is best to read the actual bulletin for full details. (Citi does not require UCDP usage for FHA or VA loans at this time.)

Looking at the markets, yesterday bonds rallied: the 10-yr T-Note, which began the day at 2.07% ended 1.96%, and DOW was up nearly 300 points. The only U.S. news was the report that new homes sales in October rose 1.3% to a seasonally adjusted annual rate of 307,000. Sales surged in the Midwest, up 22% month-over-month and 37% from one year earlier, and the West did well also (+15% m-o-m and +54% y-o-y). Given the pace of sales, we have about 6 months available versus 8 months a year ago. But agency MBS prices did well, as did our overall markets, on vague news of EU advances via debt purchase plans, as well as more intensified rumblings of possible QE3 MBS agency purchase directives.

The only news out today comes at 9AM EST with the S&P/Case Shiller home price index for September and 10AM EST with some FHFA housing data & Consumer Confidence. Ahead of that, rates are close to unchanged with the 10-yr at 1.98% and MBS prices quiet.

A turtle was walking down an alley in New York when he was mugged by a gang of snails.

A police detective came to investigate and asked the turtle if he could explain what happened.

The turtle looked at the detective with a confused look on his face and replied "I don't know - it all happened so fast."

If you're interested, visit my twice-a-month blog at the STRATMOR Group web site located at The current blog reminds everyone about how government intervention in the housing market is nothing new. If we forget history, we are doomed to repeat it, and it is important to know the last 15 years of the history of the agencies. If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what's going on out there from the other readers.