Subprime | FORECLOSURE FRAUD | by DinSFLA

Tag Archive | "subprime"

Insight: Falling home prices drag new buyers under water

Insight: Falling home prices drag new buyers under water


This is a NO SHIT SHERLOCK moment. As this site has said it time after time, it’s a crime to lend money today very well knowing the housing values are depreciating!

FHA caters to first time buyers and this includes no ownership in a principal residence during a 3year period. This also caters mainly to those who don’t have any money… sounds a lot like the subprime market, now doesn’t it?

This is deliberate F R A U D and another bailout coming your way.

REUTERS-

More than 1 million Americans who have taken out mortgages in the past two years now owe more on their loans than their homes are worth, and Federal Housing Administration loans that require only a tiny down payment are partly to blame.

That figure, provided to Reuters by tracking firm CoreLogic, represents about one out of 10 home loans made during that period.

It is a sobering indication the U.S. housing market remains deeply troubled, with home values still falling in many parts of the country, and raises the question of whether low-down payment loans backed by the FHA are putting another generation of buyers at risk.

As of December 2011, the latest figures available, 31 percent of the U.S. home loans that were in negative equity – in which the outstanding loan balance exceeds the value of the home – were FHA-insured mortgages, according to CoreLogic.

[REUTERS]

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Israeli Bank Hapoalim sues Bank of America, Merrill Lynch and Countrywide for $720M

Israeli Bank Hapoalim sues Bank of America, Merrill Lynch and Countrywide for $720M


Haaretz-

Bank Hapoalim has filed a massive $720 million suit against Bank of America, Merrill Lynch and Countrywide over its losses in the U.S. subprime crisis, alleging that the U.S. institutions misled and defrauded it.

Among Israel’s financial institutions, Hapoalim suffered the worst losses in the subprime crisis due to its investments in mortgage-backed securities.

Between 2005 and 2007, the bank, led by Shlomo Nehama and Zvi Ziv, snapped up mortgage-backed securities in an attempt to meet its goal of a 15% return on equity by 2007.

[HAARETZ]

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Servicers Behaving Badly: An Insider’s Perspective on the Root Cause of this Recurring Problem

Servicers Behaving Badly: An Insider’s Perspective on the Root Cause of this Recurring Problem


The Subprime Shakeout-

The Principal – Agent Problem: Part I – RMBS Data Integrity

Back near the dawn of time when I was in business school, and the faculty was hard-pressed to find topics to fill up the curriculum, they introduced the Principal – Agent Problem.  As future corporate managers and agents of the stockholders, I suppose they wanted to explain to us that our economic interests were not identical to those of the owners.  This wasn’t exactly the most shocking news we had ever received, but that was all that was said about the issue, back then.

Of course, there is considerably more to this multi-faceted problem. According to Wikipedia, “The principal–agent problem arises when a principal compensates an agent for performing certain acts that are useful to the principal and costly to the agent, and where there are elements of the performance that are costly to observe,” primarily due to asymmetric information, uncertainty and risk.

Let’s look at the relationship between the RMBS bondholder

[THE SUBPRIME SHAKEOUT]

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Goldman, Wells Fargo May Face SEC Mortgage-Securities Claims

Goldman, Wells Fargo May Face SEC Mortgage-Securities Claims


Bloomberg-

Goldman Sachs Group Inc. and Wells Fargo & Co. were warned by federal regulators that they may face civil claims tied to sales of mortgage-backed securities.

Goldman Sachs received a so-called Wells notice Feb. 24 from the Securities and Exchange Commission relating to disclosures for a late-2006 offering of $1.3 billion in subprime residential mortgage-backed securities, the firm said today in an annual financial report. Wells Fargo said it also got an SEC notice as the government examines whether it properly described facts and risks in offering documents.

[BLOOMBERG]

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Housing in the New Millennium: A Home Without Equity is Just a Rental with Debt – JOSHUA ROSNER

Housing in the New Millennium: A Home Without Equity is Just a Rental with Debt – JOSHUA ROSNER


Housing in the New Millennium: A Home Without Equity is Just a Rental with Debt

Joshua Rosner
Graham Fisher & Co.

June 29, 2001

Abstract:     
This report assesses the prospects of the U.S. housing/mortgage sector over the next several years. Based on our analysis, we believe there are elements in place for the housing sector to continue to experience growth well above GDP. However, we believe there are risks that can materially distort the growth prospects of the sector. Specifically, it appears that a large portion of the housing sector’s growth in the 1990’s came from the easing of the credit underwriting process. Such easing includes:

* The drastic reduction of minimum down payment levels from 20% to 0%
* A focused effort to target the “low income” borrower
* The reduction in private mortgage insurance requirements on high loan to value mortgages
* The increasing use of software to streamline the origination process and modify/recast delinquent loans in order to keep them classified as “current”
* Changes in the appraisal process which has led to widespread overappraisal/over-valuation problems

If these trends remain in place, it is likely that the home purchase boom of the past decade will continue unabated. Despite the increasingly more difficult economic environment, it may be possible for lenders to further ease credit standards and more fully exploit less penetrated markets. Recently targeted populations that have historically been denied homeownership opportunities have offered the mortgage industry novel hurdles to overcome. Industry participants in combination with eased regulatory standards and the support of the GSEs (Government Sponsored Enterprises) have overcome many of them.

If there is an economic disruption that causes a marked rise in unemployment, the negative impact on the housing market could be quite large. These impacts come in several forms. They include a reduction in the demand for homeownership, a decline in real estate prices and increased foreclosure expenses.

These impacts would be exacerbated by the increasing debt burden of the U.S. consumer and the reduction of home equity available in the home. Although we have yet to see any materially negative consequences of the relaxation of credit standards, we believe the risk of credit relaxation and leverage can’t be ignored. Importantly, a relatively new method of loan forgiveness can temporarily alter the perception of credit health in the housing sector. In an effort to keep homeowners in the home and reduce foreclosure expenses, holders of mortgage assets are currently recasting or modifying troubled loans. Such policy initiatives may for a time distort the relevancy of delinquency and foreclosure statistics. However, a protracted housing slowdown could eventually cause modifications to become uneconomic and, thus, credit quality statistics would likely become relevant once again. The virtuous circle of increasing homeownership due to greater leverage has the potential to become a vicious cycle of lower home prices due to an accelerating rate of foreclosures.

Presented: 2002 Mid-Year Meeting American Real Estate and Urban Economics Association National Association of Home Builders Washington, DC May 28-29, 2002.

[ipaper docId=77849340 access_key=key-a7jp2xnwsvk0bxa0r7r height=600 width=600 /]

 

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Re-Wind | Judges to weigh mortgage document destruction

Re-Wind | Judges to weigh mortgage document destruction


Any follow up to this story from back in January 2011?

By Scot J. Paltrow

WASHINGTON | Sun Jan 23, 2011 2:50pm EST

WASHINGTON (Reuters) – Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes or original loan documents.

The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost.

A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose.

In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records “threatens to impair federal law enforcement efforts.”

The former subprime lender shut down in February 2007. In a January 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain Inc.

Luria stated that destruction is necessary to eliminate $16,000 per month in storage costs as he disposes of the last assets of the bankrupt company.

In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company’s former headquarters in Melville, Long Island.

[REUTERS]

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Red Flags on NovaStar’s Mortgages Were Unheeded

Red Flags on NovaStar’s Mortgages Were Unheeded


It Teetered, It Tottered, It Was Bound to Fall Down

This article was adapted from “Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon,” by Gretchen Morgenson, a business reporter and columnist for The New York Times, and Joshua Rosner, a managing director at the independent research consultant Graham Fisher. The book is to be published on Tuesday by Times Books.

MARC COHODES had heard the stories.

Heard how these guys would give a mortgage to anyone — even to a corpse, the joke went. How the place was run like a frat house.

You wouldn’t believe the things that go on there, his brother-in-law had told him.

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Bank Foreclosures Create Dangerous Situations, Make Banks into Slumlord Millionaires

Bank Foreclosures Create Dangerous Situations, Make Banks into Slumlord Millionaires


NBC

A fire that killed three people in the Bronx revealed the dangers of illegally subdivided apartments, but what is less widely known is the building’s cloudy ownership status.

At dispute is a question over who was actually responsible for maintaining the property.

Click image below to go to video and article…


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MERSCORP Names Former CitiMortgage Chief Bill Beckmann, President and CEO

MERSCORP Names Former CitiMortgage Chief Bill Beckmann, President and CEO


MERSCORP Names Bill Beckmann New President & CEO, he will also lead the Reston-based company’s subsidiary Mortgage Electronic Registration Systems Inc.

During his tenure at CitiMortgage, the company had four million residential mortgage customers, representing over $800 billion in serviced assets. Beckmann had responsibility for strategy, sales, operations, capital markets, and regulation/compliance. Prior to this, he was president of Citigroup’s real estate servicing and technology group, providing customer service, technology and default management services to customers of CitiMortgage, CitiFinancial and Citi’s Auto business.

From 1997 to 2003 Beckmann was the chairman and CEO of The Student Loan Corporation. He has also worked in IBM’s Corporate Strategy and Internet Marketing divisions, Citigroup’s Card Products group, and European American Bank’s strategy department in various marketing, strategy, finance and treasury roles.

Beckmann is on the Boards of Junior Achievement of Mississippi Valley, Enterprise Community Partners and Enterprise Community Investments. He holds an M.S. in Management from the Stanford Sloan Program and a B.A. in Mathematical Economics from Brown University.

source: MERSINC.org

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The Mortgage Was Like a Shell Game; So Is Responsibility in 3 Deaths

The Mortgage Was Like a Shell Game; So Is Responsibility in 3 Deaths


New York Times-

The promise made by a mortgage company in San Diego could not have been more blunt. “Accredited Home Lenders offers an unusually broad line of subprime mortgage products for wholesale mortgage brokers,” the company’s Web site boasted in its heyday.

“Send us your toughest loans, and let us earn your business.”

Those were the days: from 2005 to 2007, Accredited made $29 billion in subprime loans.

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THE CASE AGAINST ALLOWING MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS) TO INITIATE FORECLOSURE PROCEEDINGS

THE CASE AGAINST ALLOWING MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS) TO INITIATE FORECLOSURE PROCEEDINGS


The Case Against Allowing Mortgage Electronic Registration Systems, Inc. (MERS) to Initiate Foreclosure Proceedings

~

Nolan Robinson
Benjamin N. Cardozo School of Law

March 21, 2011

Cardozo Law Review, Vol. 32, No. 4, p. 101, 2011

Abstract:
Few American homeowners know much about the small, Virginia-based company that has revolutionized the mortgage industry over the past fifteen years. Yet, Mortgage Electronic Registration Systems, Inc. (MERS) is the named mortgagee on nearly two-thirds of all newly originated residential mortgages in the United States. Industry leaders – including Freddy Mac, Ginnie Mae, and a host of private lenders – created MERS in the mid-1990s to help facilitate a burgeoning market in mortgage-backed securities.

At the time MERS was created, a robust and lightly regulated secondary market for mortgage-backed securities seemed like a good idea. The recent subprime mortgage crisis, which has impacted millions of American homeowners and played a key role in a global recession, has done much to challenge that presumption. One unfortunate byproduct of the subprime mortgage crisis has been a dramatic increase in the number of American homeowners facing foreclosure. For many of these homeowners, the MERS system may compound their hardships by effectively masking the identity of the owner of their loans. One of the benefits of MERS membership, according to MERS, is the legal right to foreclose on a defaulting homeowner in MERS’s name rather than in the name of the entity who actually owns the mortgage. This can mean that homeowners have no way of ascertaining the identity of the party with whom they can negotiate their loans.

Several state courts have considered challenges to MERS’s right to initiate foreclosure actions in its own name. MERS claims to have the legal authority to initiate foreclosure proceedings throughout the United States, but not every court has agreed. Some jurisdictions have expressly upheld MERS’s right to foreclose, while some have questioned or limited MERS’s foreclosure rights. Still other courts have reserved judgment, expressing frustration and confusion regarding MERS’s role in an increasing number of foreclosure and bankruptcy proceedings, and the ostensible connection between MERS and the subprime mortgage crisis.

MERS is currently a plaintiff in as many as forty percent of pending foreclosure actions in some locales. This Note argues that foreclosure actions brought in MERS’s name, without joining the real party in interest, are unlawful. Furthermore, this Note reveals how granting standing to MERS in foreclosure actions threatens to undermine the protections for homeowners that foreclosure law has traditionally provided, and violates important property law doctrines that ensure the proper functioning of the recording system and minimize clouds on title.

[ipaper docId=52761486 access_key=key-qwfrgu8jq9r5bqew71p height=600 width=600 /]

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BLOOMBERG | SEC Fannie Mae Probe Said to Examine CEO’s Testimony to Congress

BLOOMBERG | SEC Fannie Mae Probe Said to Examine CEO’s Testimony to Congress


As the housing market deteriorated in April 2007, Fannie Mae Chief Executive Officer Daniel Mudd reported to Congress on his company’s health. The firm’s exposure to subprime loans, he told lawmakers, “remains minimal, less than 2.5 percent of our book.”

Within 18 months, U.S. regulators seized the government- sponsored mortgage firm and its smaller sibling, Freddie Mac, after losses on soured loans pushed them to the brink of insolvency. The two firms have drawn more than $150 billion in life support from the Treasury since then.

?

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NYT | Eyes Open, WaMu Still Failed

NYT | Eyes Open, WaMu Still Failed


In the crazy days of 2005 and 2006, when home prices were soaring and mortgage underwriting standards were crumbling, it took foresight and judgment to see that it was all a bubble.

As it happens, there was a bank chief executive whose internal forecasts now seem prescient. “I have never seen such a high-risk housing market,” he wrote to the bank’s chief risk officer in 2005. A year later he forecast the housing market would be “weak for quite some time as we unwind the speculative bubble.”

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WaPO | SEC moves to charge Fannie, Freddie execs

WaPO | SEC moves to charge Fannie, Freddie execs


The Securities and Exchange Commission is moving toward charging former and current Fannie Mae and Freddie Mac executives with violations related to the financial crisis, setting up a clash with the housing regulator that oversees the companies, according to sources familiar with the matter.

The SEC, responsible for enforcing securities laws, is alleging that at least four senior executives failed to provide necessary information to investors about the companies’ mortgage holdings as the U.S. housing market collapsed.

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Fannie Mae Ex-CEO Mudd May Face SEC Claims in Subprime Probe

Fannie Mae Ex-CEO Mudd May Face SEC Claims in Subprime Probe


Fortress Investment Group LLC (FIG) Chief Executive Officer Daniel Mudd received notice from U.S. regulators that he may face claims for misleading investors about Fannie Mae’s exposure to subprime loans when he ran the mortgage firm during the financial crisis.

Mudd, who was ousted when Fannie Mae and Freddie Mac were seized by regulators in September 2008, confirmed in a statement to Bloomberg News that he received the so-called Wells notice from the Securities and Exchange Commission today.

Continue reading… BLOOMBERG

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US judge temporarily delays loan document shredding

US judge temporarily delays loan document shredding


Mon Jan 24, 2011 1:57pm EST

* Two defunct lenders seeking to destroy boxes of records

* One judge temporarily blocks document destruction

* In separate hearing, destruction partially allowed

* Rulings come amid wide concerns of missing loan docs

By Scot J. Paltrow

WILMINGTON, Del., Jan 24 (Reuters) – A U.S. bankruptcy judge temporarily blocked bankrupt subprime lender Mortgage Lenders Network USA from destroying 18,000 boxes of original loan files after federal prosecutors said documents in them may be needed as evidence in more than 50 criminal investigations.

In a hearing Monday before U.S. Bankruptcy Judge Peter J. Walsh, a representative from the Delaware U.S. Attorneys’ Office said she did not know details of any of the investigations.

But she said prosecutors and FBI offices around the country had requested time to access to the boxes and assess whether the contents contain needed evidence before the judge permits any destruction.

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Judges to weigh mortgage document destruction

Judges to weigh mortgage document destruction


By Scot J. Paltrow

WASHINGTON | Sun Jan 23, 2011 2:50pm EST

WASHINGTON (Reuters) – Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes or original loan documents.

The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost.

A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose.

In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records “threatens to impair federal law enforcement efforts.”

The former subprime lender shut down in February 2007. In a January 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain Inc.

Luria stated that destruction is necessary to eliminate $16,000 per month in storage costs as he disposes of the last assets of the bankrupt company.

In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company’s former headquarters in Melville, Long Island.


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Treasury Makes Shocking Admission: Program for Struggling Homeowners Just a Ploy to Enrich Big Banks

Treasury Makes Shocking Admission: Program for Struggling Homeowners Just a Ploy to Enrich Big Banks


The Treasury Dept.’s mortgage relief program isn’t just failing, it’s actively funneling money from homeowners to bankers, and Treasury likes it that way.

August 25, 2010 |AlterNet / By Zach Carter

The Treasury Department’s plan to help struggling homeowners has been failing miserably for months. The program is poorly designed, has been poorly implemented and only a tiny percentage of borrowers eligible for help have actually received any meaningful assistance. The initiative lowers monthly payments for borrowers, but fails to reduce their overall debt burden, often increasing that burden, funneling money to banks that borrowers could have saved by simply renting a different home. But according to recent startling admissions from top Treasury officials, the mortgage plan was actually not really about helping borrowers at all. Instead, it was simply one element of a broader effort to pump money into big banks and shield them from losses on bad loans. That’s right: Treasury openly admitted that its only serious program purporting to help ordinary citizens was actually a cynical move to help Wall Street megabanks.

Treasury Secretary Timothy Geithner has long made it clear his financial repair plan was based on allowing large banks to “earn” their way back to health. By creating conditions where banks could make easy profits, Getithner and top officials at the Federal Reserve hoped to limit the amount of money taxpayers would have to directly inject into the banks. This was never the best strategy for fixing the financial sector, but it wasn’t outright predation, either. But now the Treasury Department is making explicit that it was—and remains—willing to let those so-called “earnings” come directly at the expense of people hit hardest by the recession: struggling borrowers trying to stay in their homes.

This account comes secondhand from a cadre of bloggers who were invited to speak on “deep background” with a handful of Treasury officials—meaning that bloggers would get to speak frankly with top-level folks, but not quote them directly, or attribute views to specific people. But the accounts are all generally distressing, particularly this one from economics whiz Steve Waldman:

The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system,” “the economy,” and “ordinary Americans.”

Mike Konczal confirms Waldman’s observation, and Felix Salmon also says the program has done little more than delay foreclosures, as does Shahien Nasiripour.

Here’s how Geithner’s Home Affordability Modification Program (HAMP) works, or rather, doesn’t work. Troubled borrowers can apply to their banks for relief on monthly mortgage payments. Banks who agree to participate in HAMP also agree to do a bunch of things to reduce the monthly payments for borrowers, from lowering interest rates to extending the term of the loan. This is good for the bank, because they get to keep accepting payments from borrowers without taking a big loss on the loan.

But the deal is not so good for homeowners. Banks don’t actually have to reduce how much borrowers actually owe them—only how much they have to pay out every month. For borrowers who owe tens of thousands of dollars more than their home is worth, the deal just means that they’ll be pissing away their money to the bank more slowly than they were before. If a homeowner spends $3,000 a month on her mortgage, HAMP might help her get that payment down to $2,500. But if she still owes $50,000 more than her house is worth, the plan hasn’t actually helped her. Even if the borrower gets through HAMP’s three-month trial period, the plan has done nothing but convince her to funnel another $7,500 to a bank that doesn’t deserve it.

Most borrowers go into the program expecting real relief. After the trial period, most realize that it doesn’t actually help them, and end up walking away from the mortgage anyway. These borrowers would have been much better off simply finding a new place to rent without going through the HAMP rigamarole. This example is a good case, one where the bank doesn’t jack up the borrower’s long-term debt burden in exchange for lowering monthly payments

But the benefit to banks goes much deeper. On any given mortgage, it’s almost always in a bank’s best interest to cut a deal with borrowers. Losses from foreclosure are very high, and if a bank agrees to reduce a borrower’s debt burden, it will take an upfront hit, but one much lower than what it would ultimately take from foreclosure.

That logic changes dramatically when millions of loans are defaulting at once. Under those circumstances, bank balance sheets are so fragile they literally cannot afford to absorb lots of losses all at once. But if those foreclosures unravel slowly, over time, the bank can still stay afloat, even if it has to bear greater costs further down the line. As former Deutsche Bank executive Raj Date told me all the way back in July 2009:

If management is only seeking to maximize value for their existing shareholders, it’s possible that maybe they’re doing the right thing. If you’re able to let things bleed out slowly over time but still generate some earnings, if it bleeds slow enough, it doesn’t matter how long it takes, because you never have to issue more stock and dilute your shareholders. You could make an argument from the point of view of any bank management team that not taking a day-one hit is actually a smart idea.

Date, it should be emphasized, does not condone this strategy. He now heads the Cambridge Winter Center for Financial Institutions Policy, and is a staunch advocate of financial reform.

If, say, Wells Fargo had taken a $20 billion hit on its mortgage book in February 2009, it very well could have failed. But losing a few billion dollars here and there over the course of three or four years means that Wells Fargo can stay in business and keep paying out bonuses, even if it ultimately sees losses of $25 or $30 billion on its bad loans.

So HAMP is doing a great job if all you care about is the solvency of Wall Street banks. But if borrowers know from the get-go they’re not going to get a decent deal, they have no incentive to keep paying their mortgage. Instead of tapping out their savings and hitting up relatives for help with monthly payments, borrowers could have saved their money, walked away from the mortgage and found more sensible rental housing. The administration’s plan has effectively helped funnel more money to Wall Street at the expense of homeowners. And now the Treasury Department is going around and telling bloggers this is actually a positive feature of the program, since it meant that big banks didn’t go out of business.

There were always other options for dealing with the banks and preventing foreclosures. Putting big, faltering banks into receivership—also known as “nationalization”—has been a powerful policy tool used by every administration from Franklin Delano Roosevelt to Ronald Reagan. When the government takes over a bank, it forces it to take those big losses upfront, wiping out shareholders in the process. Investors lose a lot of money (and they should, since they made a lousy investment), but the bank is cleaned up quickly and can start lending again. No silly games with borrowers, and no funky accounting gimmicks.

Most of the blame for the refusal to nationalize failing Wall Street titans lies with the Bush administration, although Obama had the opportunity to make a move early in his tenure, and Obama’s Treasury Secretary, Geithner, was a major bailout decision-maker on the Bush team as president of the New York Fed.

But Bush cannot be blamed for the HAMP nightmare, and plenty of other options were available for coping with foreclosure when Obama took office. One of the best solutions was just endorsed by the Cleveland Federal Reserve, in the face of prolonged and fervent opposition from the bank lobby. Unlike every other form of consumer debt, mortgages are immune from renegotiation in bankruptcy. If you file for bankruptcy, a judge literally cannot reduce how much you owe on your mortgage. The only way out of the debt is foreclosure, giving banks tremendous power in negotiations with borrowers.

This exemption is arbitrary and unfair, but the bank lobby contends it keeps mortgage rates lower. It’s just not true, as a new paper by Cleveland Fed economists Thomas J. Fitzpatrick IV and James B. Thomson makes clear. Family farms were exempted from bankruptcy until 1986, and bankers bloviated about the same imminent risk of unaffordable farm loans when Congress considered ending that status to prevent farm foreclosures.

When Congress did repeal the exemption, farm loans didn’t get any more expensive, and bankruptcy filings didn’t even increase very much. Instead, a flood of farmers entered into negotiations with banks to have their debt burden reduced. Banks took losses, but foreclosures were avoided. Society was better off, even if bank investors had to take a hit.

But instead, Treasury is actively encouraging troubled homeowners to subsidize giant banks. What’s worse, as Mike Konczal notes, they’re hoping to expand the program significantly.

There is a flip-side to the current HAMP nightmare, one that borrowers faced with mortgage problems should attend to closely and discuss with financial planners. In many cases, banks don’t actually want to foreclose quickly, because doing so entails taking losses right away, and most of them would rather drag those losses out over time. The accounting rules are so loose that banks can actually book phantom “income” on monthly payments that borrowers do not actually make. Some borrowers have been able to benefit from this situation by simply refusing to pay their mortgages. Since banks often want to delay repossessing the house in order to benefit from tricky accounting, borrowers can live rent-free in their homes for a year or more before the bank finally has to lower the hatchet. Of course, you won’t hear Treasury encouraging people to stop paying their mortgages. If too many people just stop paying, then banks are out a lot of money fast, sparking big, quick losses for banks — the exact situation HAMP is trying to avoid.

Borrowers who choose not to pay their mortgages don’t even have to feel guilty about it. Refusing to pay is actually modestly good for the economy, since instead of wasting their money on bank payments, borrowers have more cash to spend at other businesses, creating demand and encouraging job growth. By contrast, top-level Treasury officials who have enriched bankers on the backs of troubled borrowers should be looking for other lines of work.

Zach Carter is AlterNet’s economics editor. He is a fellow at Campaign for America’s Future, writes a weekly blog on the economy for the Media Consortium and is a frequent contributor to The Nation magazine.

Source: AlterNet

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Posted in coercion, concealment, conflict of interest, conspiracy, CONTROL FRAUD, corruption, federal reserve board, foreclosure, foreclosure fraud, foreclosures, geithner, hamp, insider, investigation, trade secretsComments (0)

WALL STREET FINES: “LARGE PONZI SCHEME”

WALL STREET FINES: “LARGE PONZI SCHEME”


CONGRESS IS COVERING UP! SHAM…SCANDAL!

Janet Tavakoli of Tavakoli Structured Finance tells what she thinks of recent fines the SEC has imposed on Wall Street giants and where she would like future investigations take place.

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Posted in bogus, CitiGroup, concealment, conspiracy, CONTROL FRAUD, corruption, foreclosure, foreclosure fraud, foreclosures, goldman sachs, mbs, originator, Real Estate, S.E.C., scam, securitization, servicers, settlement, sub-primeComments (1)

Citi to pay $73 million for misleading investors

Citi to pay $73 million for misleading investors


By David Ellis, staff writer July 29, 2010: 3:57 PM ET

NEW YORK (CNNMoney.com) — Citigroup said Thursday it would pay $73 million to settle charges by the Securities and Exchange Commission that the bank, as well as two of its executives, misled investors about the company’s exposure to the subprime mortgage market.

Wall Street’s top regulator said Citigroup repeatedly made misleading statements in investor presentations and in public filings about the actual size of assets it controlled that were backed by subprime mortgages.

Between July and mid-October 2007, the company maintained its holdings of what have now been dubbed “toxic assets”, stood at $13 billion, when in fact the number was closer to $50 billion, according to the SEC.

“The rules of financial disclosure are simple — if you choose to speak, speak in full and not in half-truths,” Robert Khuzami, director of the SEC’s Division of Enforcement, said in a statement.

Continue reading….CNN

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Posted in citi, CitiGroup, concealment, settlement, sub-primeComments (1)

MERS “Common Thread” to hundreds of Mortgage Fraud lawsuits planned in MI

MERS “Common Thread” to hundreds of Mortgage Fraud lawsuits planned in MI


Hundreds of mortgage fraud lawsuits planned

Published: Saturday, July 24, 2010

By Jameson Cook, Macomb Daily Staff Writer

Macomb, Oakland cases in federal court but may return to state

Officials at an organization representing homeowners battling their mortgage lenders say hundreds more people in the tri-county area will join additional lawsuits.

Officials at Michigan Loan Compliance Advisory Group Inc. in Troy said they plan to file lawsuits including up to another 1,000 plaintiffs against financial institutions for deceptive lending, excessive fees and other wrongdoing in granting subprime mortgages.

That’s on top of the 88 plaintiffs representing 78 mortgages in Macomb and Oakland counties who through Michigan Loan Compliance sued more than two dozen banks for awarding inflated mortgages to borrowers.

“We’re not stopping,” said May Brikho, senior consultant at Michigan Loan Compliance.

“We’re trying to convince judges there is fraud, there is a scam. The banks are not the victims. They never lost anything.

“We are getting a lot of new plaintiffs who are out of a job and they do not qualify for loan modification. People are telling other people and they are contacting us.”

The pending cases in Macomb, Oakland and a third in Wayne County were filed in state circuit court, but have since been moved to U.S. District Court in Detroit.

However, Loan Compliance attorney Ziyad Kased has asked federal Judge Arthur Tarnow to return the Oakland case to Judge Colleen O’Brien in the Oakland court in Pontiac and said he believes federal Judge Nancy Edmunds on her own may return the Macomb case back to circuit Judge John Foster in Mount Clemens.

Kased said the Oakland case should remain in state court because all of the defendants and plaintiffs do not have different state residences, which is a requirement to get the case moved.

He said that Ocwen and Saxon must gain “concurrence” of the other defendants to warrant permanent transfer and that all of the defendants must be located outside the state.

Attorney Chantelle Neumann, representing Ocwen Loan Servicing LLC, named in the Macomb case, and Saxon Mortgage Co., named in the Oakland case, gained “removal” to federal court for the time being. Neumann said the defendants did not have to gain concurrence from other defendants because the plaintiffs improperly got together.

“Plaintiffs have aggregated their grievances into one mass action in an effort to evade federal jurisdiction,” said Neumann, a Rochester Hills-based lawyer also representing Saxon, in a legal brief.

Kased says the plaintiffs have similar claims.

“There were all victims of the same predatory lending practices listed in the complaint (inflated income, understated debt, manufactured debt to income ratios etc.),” Kased says in a court document.

He contends that the case should remain since three of the defendants are “domestic Michigan corporations.”

He also said that all but three mortgages in the Oakland case are affiliated with co-defendant Mortgage Electronic Registration Systems Inc., so there is a “common thread” among them.

Continue reading….MacombDaily

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Posted in conflict of interest, conspiracy, lawsuit, MERS, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., mortgage modification, sub-primeComments (5)

SEC’s internal watchdog investigates timing of Goldman subprime fraud case settlement

SEC’s internal watchdog investigates timing of Goldman subprime fraud case settlement


The US financial regulator’s own internal watchdog has widened his investigation of the civil fraud lawsuit brought against Goldman Sachs to include a focus on the timing of last week’s $550m (£356m) settlement.

By James Quinn
Published: 6:00AM BST 24 Jul 2010

David Kotz, inspector general of the Securities and Exchange Commission, has said he is looking into the timing of Goldman’s settlement with the regulator, coming as it did on the same day that the US passed its wide-ranging financial reform bill.

Mr Kotz’s investigation to date has focused on whether politics played a part in the SEC bringing the case against Goldman in the first place.

Continue here…Telegraph

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Posted in conspiracy, goldman sachs, S.E.C., securitization, settlement, Wall StreetComments (1)

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