The acting director of the Federal Housing Finance Agency and overseer of Fannie Mae and Freddie Mac, Mr. DeMarco is a soft-spoken, career public servant — and under fire. In the thankless job of conservator for the loss-ridden mortgage finance giants, he has a duty to ensure that the companies operate in the best interests of the taxpayers who own them. That means working to keep a lid on the companies’ losses, which now total $183 billion.
But in recent weeks, Mr. DeMarco has come under increasing pressure to chuck his obligation to taxpayers and make Fannie and Freddie write down principal on mortgages held by troubled borrowers. He says, with reason, that such a program would run counter to his legal obligation to pursue only those activities that pose the least cost to taxpayers.
Edward J. DeMarco Acting Director Federal Housing Finance Agency
Before the U.S. Senate Committee on Banking, Housing, and Urban Affairs On the State of the U.S. Housing Market: Removing Barriers to Economic Recovery
Washington, DC – Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco today sent to Congress a strategic plan for the next phase of the conservatorships of Fannie Mae and Freddie Mac (the Enterprises). The plan builds on the Acting Director’s February 2010 letter to Congress on the conservatorships and sets forth objectives and steps FHFA is taking or will take to meet FHFA’s obligations as conservator. Fannie Mae and Freddie Mac were placed into conservatorships Sept. 6, 2008 and have since received more than $180 billion in taxpayer support.
FHFA identifies three strategic goals for the next phase of the conservatorships:
Build. Build a new infrastructure for the secondary mortgage market;
Contract. Gradually contract the Enterprises’ dominant presence in the marketplacewhile simplifying and shrinking their operations; and
Maintain. Maintain foreclosure prevention activities and credit availability for newand refinanced mortgages.
“With the conservatorships operating for more than three years and no near-term resolution insight, it is time to update and extend the goals and directions of the conservatorships,” DeMarco wrote. “FHFA is contemplating next steps to build an infrastructure for thesecondary mortgage market that is consistent with existing policy proposals and will supportany outcome of the leading legislative proposals. FHFA looks forward to working withCongress and the Administration on a resolution of the conservatorships and a comprehensivereview of the nation’s housing finance system,” said DeMarco.
If you want to be reelected–in those 41 states where voters get to have their say on how well you’re doing your job–you’d better get busy and indict some document fraudsters, or at least sue the big banks for their deceptive and deeply damaging practices. That’s because voters are catching on to just how above the law bankers believe they are. And if you don’t make a real effort to hold the banks accountable–NO, the “50 state” settlement Santa’s supposedly giving to the banks doesn’t count, as I’ll get to–if you don’t make a real effort to hold the banks to account, you’ll get voted out for any candidate that credibly promises accountability.
My mother always said “Don’t have nothing good to say, Don’t say anything at all”
FOX BUSINESS-
The impasse over the nationwide mortgage foreclosure settlement continues, but could a meeting Tuesday provide the much needed breakthrough that brings the California Attorney General into the settlement and paves the way for a deal?
Some people close the negotiations say yes. That is because California Attorney General Kamala Harris will be attending a meeting with Iowa’s Attorney General, Tom Miller, who is leading the negotiations with the banks over faulty mortgage foreclosures and who is likely to press Harris to join the broader group.
Absolutely no respect for the AG’s who are doing their jobs. Absolutely no consideration for the valid reasons why they simply will not settle to the greatest heist in American History.
WSJ-
Bank representatives and government officials are working on a broad settlement of most state and federal foreclosure-practices investigations that could move forward without the participation of California, long considered a key to any deal, people familiar with the negotiations said.
The terms of the deal remain fluid. Banks have proposed a deal excluding California that would carry a value of $18.5 billion, though the final outcome remains uncertain, people familiar with the discussion said.
Negotiators are continuing to make a push to persuade California to join a settlement valued at $25 billion among federal officials, state attorneys general and the …
A recent editorial in the LA Times, “California Should Make that Mortgage Deal,” admonishes California Attorney General Kamala Harris for her insistence on ensuring that the big banks that caused the foreclosure crisis in our state pay their fair share to our homeowners. The editors urge Attorney General Harris to take the deal that’s currently on the table, even though she knows–and California’s homeowners know–that the deal isn’t good enough.
During 2009-2010, Fannie Mae & Freddie Mac lost $121.6 Billion and took $94 Billion from US taxpayers, who paid the top six executives as the government-owned mortgage giants more than $35 Million.
Mr. Edward DeMarco Acting Director Federal Housing Finance Agency 1700 G Street NW Washington, D.C. 20551
Dear Acting Director DeMarco:
I am writing to request additional information about $150 million in fees that Fannie Maeand Freddie Mac charged mortgage servicing companies in 2010 for failing to conductforeclosures quickly enough to meet federally imposed timelines. I am concerned that thesepenalties, 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 firmsattempting to meet arbitrary deadlines to expedite foreclosures.
Evidence of Abuses Prior to 2010
On February 25, 2011,1 launched a major investigation into abuses and illegal activities by mortgage servicing companies, including wrongful foreclosures, deficient recordkeeping, inflated fees, and fraud in lending. As part of this investigation, I wrote to the FHFA Inspector General requesting an investigation into “widespread allegations of abuse by private attorneys and law firms hired to process foreclosures as part of the ‘Retained Attorney Network’ established by Fannie Mae.”1
On September 30, 2011, the Inspector General issued a report in response to my request concluding that “there were multiple indicators of foreclosure abuse risk prior to 2010 that could have led FHFA to identify and act earlier on the issue.” According to the Inspector General, these warnings included “consumer complaints alleging improper foreclosures; contemporaneous media reports about foreclosure abuses by Fannie Mae’s law firms; and public court filings in Florida and elsewhere highlighting such abuses.”2
In one instance, a review commissioned by Fannie Mae found that “foreclosure attorneys in Florida are routinely filing false pleadings and affidavits.” Similarly, in June 2010, officials from FHFA’s Office of Conservatorship Operations performed a two-day field visit to Florida, after which they noted:
[Servicers, attorneys, and other supporting personnel were overloaded with the volume of foreclosures, the average timeline for foreclosures had increased from 150 to 400 days, documentation problems were evident, and law firms (referred to as “foreclosure mills”) were not devoting the time necessary to their cases due to Fannie Mae’s flat fee structure and volume-based processing model.3
Despite evidence of widespread problems among foreclosure law firms retained by Fannie Mae and Freddie Mac, the Inspector General’s report concluded that FHFA “did not begin to act on foreclosure abuse issues involving Fannie Mae’s RAN until mid-2010.” The Inspector General recommended that FHFA review why it failed to heed these warnings sooner, implement comprehensive procedures to prevent these abuses in the future, and address “poor performance” by law firms that have contractual relationships with Fannie Mae and Freddie Mac. FHFA agreed with all of these recommendations.4
Penalties for Slow Foreclosures
In addition to finding that there were multiple indicators of foreclosure abuse prior to 2010, the Inspector General reported that during this same timeframe in 2010, FHFA “directed Fannie Mae to impose compensatory fees against the servicers for violating foreclosure timeline limits.”5
In fact, FHFA General Counsel Alfred M. Pollard disclosed in a letter to me on November 1, 2011, that Fannie Mae and Freddie Mac assessed penalties totaling approximately $150 million in 2010. He wrote:
To date, the top ten servicers account for the bulk of the fees due; the total amount for all servicers, after approving appeals and corrections, is approximately $150 million dollars for 2010.6
Mr. Pollard also described the methodology for calculating these penalties. He explained:
Fees are assessed based on each Enterprise’s specific allowable foreclosure timelines for individual states as published in their Seller/Servicer Guides. Each Enterprise assesses the servicers a per day fee—approximately $30 a day—for each day that the servicer exceeds the established timeline.7
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.
Request for Information
On October 3, 2011,1 wrote to you to inquire about the extent of penalties imposed against mortgage servicers that failed to meet federally imposed timelines to conduct foreclosures. Specifically, I requested that you “provide a list of all servicers that have been assessed compensatory fees, identify the total amount of fees assessed against each servicer, identify the reasons these fees were assessed, and identify whether the fees have been paid in f u l l . ” 8
Although the letter from Mr. Pollard disclosed that the total amount of these penalties for 2010 was $150 million, it did not provide the specific information I requested, including the amount of fees charged to each mortgage servicing company. For these reasons, I request that you provide the following information:
(1) a list of all servicers that have been assessed compensatory fees; (2) the total amount of fees assessed against each servicer; (3) the reasons these fees were assessed against each servicer; (4) whether each servicer assessed compensatory fees has paid the assessed fees in full; and (5) if a servicer has not yet paid the assessed fees in full, the expected date by which the fees will be paid in full.
I request that you provide this information by November 30, 2011. I also request that you provide the information requested above regarding compensatory fees assessed against mortgage servicers in 2011 when that information becomes available. Thank you for your consideration of this request.
Sincerely,
Elihah E. Cummings
Ranking Member
cc: The Honorable Darrell E. Issa, Chairman Committee on Oversight and Government Reform
Let me start by saying, that no one was even qualified to run them making millions. It was at all times fraud and the cover up they have cost tax payers is insane. Lets not forget they got together with the “elites” to form MERS, knowing where it would find itself today with all missing papers.
Sadly, I bet you could only find an honest person $200,000 a year to run them!
HW-
Efforts to find a solution to the government-sponsored enterprises continue to spin in circles. This is especially frustrating for Federal Housing Finance Agency Acting Director Ed DeMarco and the CEOs of Fannie Mae and Freddie Mac.
To date, the only meaningful change is the move to abolish bonuses for the chief executives.
Sadly, this will only make things worse, as there is no one willing to do the job necessary to run the nation’s housing for $200,000 a year.
The Times editorial describes why Eric Schneiderman, Beau Biden and Kamala D. Harris, Attorney General of California, have refused to join the 47 other attorneys general who have agreed to the settlement. The Times editorial stated,
The proposed settlement reportedly would prevent the states from pursuing claims against banks relating to fraud or abuse in the origination of loans during the bubble. (In some states, the statute of limitations has expired for bringing challenges for faulty originations but not on all loans in all states.) It would also prevent states from pursuing claims for foreclosure abuses, like improper denial of loan modifications. And it would prevent them from pursuing banks’ misconduct in their dealings with the Mortgage Electronic Registration Systems database, or MERS, a land registry system implicated in bubble-era violations of tax, trust and property law. The proposal would not preclude the states from pursuing the banks for wrongdoing in the repackaging and marketing of loans as mortgage-backed securities. But, as a practical matter, the ability to fully press such claims — and to achieve significant redress — could be impeded or blocked by the other constraints. Once one avenue of inquiry is closed off, it can be difficult to ascertain what happened along other points in the mortgage chain. In effect, the legal waivers being contemplated would let the banks pay up to sweep wrongdoing under the rug.
she shares them with President Obama, who endorsed her late in 2010 for the AG office. Her brother-in-law, Tony West, was key fundraiser for Obama in California, having helped raise $65 million for Obama in the state, and he is considered a rising star in the Democratic Party. He now works at the DOJ and has expanded the Civil Rights department to take on some elements of mortgage fraud. The DOJ has an internal directive to make mortgage fraud a top priority, but what mortgage fraud means to the DOJ are mortgage modification scams and penny ante borrowers ripping off fly-by-night lenders. West, while not the direct actor in the DOJ’s settlement talks, is in all likelihood involved in pressure on state AGs to sign on to a settlement. And it’s simply inconceivable he hasn’t dealt with his sister-in-law and political ally on the matter. Harris and West are part of a coherent political network, and much of the strength of that network has to do with reinforcing the traditional bank-friendly policies of the Democratic elite and then using that to create political support.
The first indication that as California AG Harris was more sympathetic to the Obama side of the ledger on banking is that one of her first decisions as AG was to let off Angelo Mozilo without admitting to wrong-doing or personally paying a fine (the small money that went to restitution came from Bank of America shareholders). I suspect the issue is actually more personal to her than legal, not because she particularly cares about finance or foreclosures, but because her friends and allies are very concerned about ensuring that the banks get a release. In their view, this will cause the housing market to clear, the economy to recover, and then help reelection chances.
The political problem for Harris is that she was elected by liberal votes, and she’s getting enormous public pressure to resist signing on to a settlement that is perceived as favorable to the banks. While she backed out of an immediate settlement a few weeks ago, she refused to join the joint investigation by Eric Schneiderman and Beau Biden of the foreclosure fraud crisis. She has sat on the sidelines, trying to figure out what to do.
Appeal-Democrat has a different view-
There is no three-strikes law for crooked bankers, not even a law for a fifth strike, as The New York Times reported in the case of Citigroup, cited last month in a $1 billion fraud case. Unlike the California third-striker I once wrote about whom a district attorney wanted banished forever to state prison for stealing a piece of pizza from the plate of a person dining outdoors, Citigroup executives get off with a fine and by offering a promise not to do it again, and again and again.
As the Times reported when Citigroup agreed to settle SEC charges last month: “Citigroup’s main brokerage subsidiary, its predecessors or its parent company agreed to not violate the very same antifraud statue in July 2010. And in May 2006. Also as far back as March 2005 and April 2000.”
The banks want California, and the Obama administration hopes they can get it.
NYT-
In September, the attorney general of California, Kamala Harris, withdrew from settlement talks between the banks and federal and state officials over mortgage abuses. Ms. Harris said California was being asked to excuse bank conduct that has not been adequately investigated and to grant the banks an unacceptably broad release from legal liability for the mortgage mess.
We undertook such an inquiry, building on the work of many others. And we know time is of the essence. Homeowners and investors are suffering every day, and patterns of abuse and misconduct are continuing. We’re working hard to complete the first — and most critical — phase of our investigation before the end of 2011.
POLITICO –
America’s free markets work only when there is one set of rules for everyone — and everyone plays by those rules.
It is now clear, however, that many in the mortgage finance industry ignored the rules over the past decade. This led to a breakdown in our housing market and in the market for mortgage-backed securities.
I clearly see this as one thing, FHFA’s Ed DeMarco is keeping CA AG Harris from moving forward on the Foreclosure Fraud Settlement. Hmm this is getting interesting.
HuffPO-
California Attorney General Kamala Harris has called on the head of the agency that houses Fannie Mae and Freddie Mac to “step aside” if he continues to refuse to reduce mortgage loans for underwater homeowners.
“It has become clear to me that the only way to keep distressed California homeowners in their homes is through meaningful principal reduction,” Harris said in a statement Thursday.
The lack of meaningful principal reduction is what drove Harris in late September to exit the multistate settlement talks with major banks that are led by Iowa Attorney General Tom Miller with the support of the Obama administration. The attorneys general of Massachusetts, New York, Kentucky, Minnesota, Delaware and Nevada have also bridled at the settlement efforts, finding the banks’ expected $25 billion write-down to be inadequate to protect their states’ homeowners from losing their property.
Thank you for investigating Fannie Mae’s purchase of mortgage servicing rights from Bank of America. As I detail below much more thoroughly than I did in my Fortune.com piece that you cited in your letter, the $500 million purchase is a backdoor bailout until proven otherwise.
DeMarco said Fannie Mae will not service the loans itself, instead transferring the loans to an undisclosed third party.
Kansas City-
Bank of America Corp.’s sale of mortgage servicing rights to Fannie Mae, a transaction that spurred a congressional inquiry last week, “made sense for both companies,” the regulator of the government-controlled mortgage giant told reporters Monday.
“We are certainly concerned about ensuring that these higher-risk mortgages are adequately and appropriately serviced, and this was an arrangement that helped to realize that goal,” Edward DeMarco, acting director of the Federal Housing Finance Agency, said after remarks at a mortgage conference sponsored by the N.C. Bankers Association.
Is Fannie Mae’s Purchase of Troubled B of A Portfolio a Back-Door Bailout?
Oversight Chairman Issa Asks FHFA to Address Questions Raised about Purchase of Risky Portfolio with Deteriorating Value
(WASHINGTON) – Fannie Mae, the government sponsored enterprise bailed out with billions in taxpayer dollars has agreed to buy a portfolio of high risk, deteriorating value loans from Bank of America (B of A). House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) has opened an investigation into this purchase and requested that Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco provide to the Committee documents and a full explanation of the agency’s decision-making process in this purchase.
In a letter sent to DeMarco today, Issa said Fannie Mae’s purchase of mortgage servicing rights from Bank of America is worrisome because as a government-backed enterprise Fannie Mae does not traditionally service mortgages. He also pointed out that the transaction likely shifted to Fannie Mae a significant amount of risk previously held by B of A.
Issa cited an August Wall Street Journal report that Fannie Mae had agreed to purchase from B of A “rights to process and collect payments on a pool of 400,000 loans with an unpaid principal balance of $73 billion.” Fannie Mae paid B of A $500 million for this portfolio. The story also pointed out that, “the bank decided to sell the portfolio at a loss because its value is expected to deteriorate further.” The loans purchased by Fannie Mae are reported to have a delinquency rate of more than 13% (twice the national average) with more than half of the loans on properties in troubled local markets.
To date, the Treasury Department has provided Fannie Mae (and its sibling government sponsored enterprise Freddie Mac) with over $150 billion since they entered conservatorship in September 2009. In addition, the Federal Reserve Board has committed to purchase $1.25 trillion of mortgage-backed securities owned by the enterprises. In August Fannie Mae announced that it would seek an additional $5.1 billion from the Treasury Department.
“Some commentators have labeled this transaction as a back-door bailout of B of A by permitting the bank to shift part of its risky portfolio to American taxpayers. Under these circumstances, I am unclear why the FHFA allowed Fannie to proceed with the transaction,” Issa wrote.
“Congress and the American people deserve a full explanation for what appears to be yet another bailout paid for by taxpayers benefitting businesses that made bad business decisions,” he said.
Issa’s letter to DeMarco included a dozen detailed questions about FHFA’s oversight and Fannie Mae’s process of evaluating the portfolio, assessing risk, and preventing further losses that could jeopardize the enterprise and require additional taxpayer support. A copy of the letter is here.
Members ramp up pressure on FHFA to implement President’s plan to boost economy by helping responsible homeowners refinance at historically low rates.
(Washington, DC) – Congressman Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, and Congressman Dennis Cardoza, Co-Chair of the Housing Stabilization Task Force, today were joined by 27 Members of Congress in sending a letter to Edward DeMarco , Acting Director of the Federal Housing Finance Agency (FHFA), renewing their request for a meeting to begin discussing a plan to allow more American families to refinance their mortgages at historically low interest rates.
Cummings and Cardoza originally made the request in a previous letter last Friday , but FHFA officials declined the request, asserting that it would be premature to give Congress a “briefing” on their response to the President’s proposal.
“Contrary to the assertion made by your Office of Congressional Affairs, the letter from Representatives Cummings and Cardoza did not request a ‘briefing,’” the Members wrote. “It requested a meeting that would enable us to begin a detailed dialogue about the process by which agency officials will ‘review, evaluate, and implement the President’s proposal.’”
“Contrary to another assertion made by the Office of Congressional Affairs, this meeting would not be premature—if anything, it is overdue,” the letter stated. “On Friday, you issued a public statement in response to the President’s address indicating that your office has been ‘analyzing these issues’ and discussing them with ‘a range of stakeholders.’ As Members of Congress who have been tirelessly seeking to support renewed economic growth by stabilizing the housing market, we certainly deserve the same courtesy and consideration as other stakeholders in this process.”
Today’s letter significantly increases the pressure on FHFA to act quickly on the President’s proposal, which is similar to bipartisan legislation introduced in the House and Senate that garnered widespread support from industry, investors, and consumer groups.
According to Bill Gross, the Managing Director and co-CIO of the world’s largest bond fund, PIMCO, removing barriers to refinancing under this type of proposal could provide an economic stimulus of up to $50 or $60 billion.
There are currently more than 8 million homeowners whose mortgages are guaranteed by Fannie Mae and Freddie Mac and that carry an interest rate at or above 6%, even though current 30-year mortgage rates are hovering at about 4.12%.
The Honorable Timothy F. Geithner .The Honorable Sheila Bair
Secretary . Chairman
Department of the Treasury . Federal Deposit Insurance Corporation
1500 Pennsylvania Avenue, . NW 550 17th Street, NW
Washington, DC 20220 . Washington, DC 20429
The Honorable Ben S. Bernanke . The Honorable Mary Schapiro
Chairman . Chairman
Board of Governors of the Federal Reserve System .Securities and Exchange Commission
20th Street and Constitution Ave, .NW 100 F Street, NE
Washington, DC 20551 Washington, DC 20549
The Honorable John G. Walsh .The Honorable Gary Gensler
Acting Comptroller of the Currency .Chairman
Office of the Comptroller of the Currency Commodity Futures Trading Commission
250 E St. SW . 1155 21st St. NW
Washington, DC 20219 .Washington, DC 20581
The Honorable Ed DeMarco .The Honorable Debbie Matz
Acting Director .Chairman
Federal Housing Finance Agency .National Credit Union Administration
1700 G Street, .NW 1775 Duke Street,
Washington, DC 20552 .Alexandria, VA 22314-3428
Dear Secretary Geithner and members of the Financial Stability Oversight Council (FSOC),
The FSOC is tasked with ensuring the financial stability of the United States, which includes identifying and addressing possible systemic risks. There is a well-documented wave of foreclosure fraud sweeping the country that presents such a risk. Bank of America and JP Morgan Chase have both suspended foreclosures in 23 states where that fraud could be uncovered and stopped by the courts. Connecticut has suspended foreclosures.
I write to encourage the FSOC to appoint an emergency task force on foreclosure fraud as a potential systemic risk. I am also writing to ask the members of the FSOC to use their regulatory authority to impose a foreclosure moratorium on all mortgages originated and securitized between 2005-2008, until this task force is able to understand and mitigate the systemic risk posed by the foreclosure fraud crisis.
So far, banks are claiming that the many forged documents uncovered by courts and attorneys represent a simple ‘technical problem’ with foreclosure processes. This is not true. What is happening is fraud to cover up fraud.
The mortgage lending boom saw the proliferation of predatory lending and mortgage fraud, what the FBI called at the time ‘an epidemic of mortgage fraud.’ Much of this was lender-induced.
When lenders – many of whom are now out of business – originally lent money to borrowers, they often did so knowing that the terms of the loans could not possibly be honored. They sought fees, not repayment. These lenders put people in predatory loans, they induced massive amounts of fraud, and Wall Street banks misrepresented these loans to investors when they moved through the securitization chain. They were stealing money from investors, and from homeowners.
Obviously these originators and servicers didn’t keep good records of who owed what to whom because the point was never about getting paid back, it was about moving as much loan volume as possible as quickly and as cheaply as possible. The banks didn’t keep good records, and there is good reason to believe in many if not virtually all cases during this period, failed to transfer the notes, which is the borrower IOUs in accordance with the requirements of their own pooling and servicing agreements. As a result, the notes may be put out of eligibility for the trust under New York law, which governs these securitizations. Potential cures for the note may, according to certain legal experts, be contrary to IRS rules governing REMICs. As a result, loan servicers and trusts simply lack standing to foreclose. The remedy has been foreclosure fraud, including the widespread fabrication of documents.
There are now trillions of dollars of securitizations of these loans in the hands of investors. The trusts holding these loans are in a legal gray area, as the mortgage titles were never officially transferred to the trusts. The result of this is foreclosure fraud on a massive scale, including foreclosures on people without mortgages or who are on time with their payments.
The liability here for the major banks is potentially enormous, and can lead to a systemic risk. Fortunately, the Dodd-Frank financial reform legislation includes a resolution process for these banks. More importantly, these foreclosures are devastating neighborhoods, families, and cities all over the country. Each foreclosure costs tens of thousands of dollars to a municipality, lowers property values, and makes bank failures more likely.
I appreciate your willingness to assess possible systemic risks to the country, and would again encourage you to suspend foreclosures until this problem is understood and its ramifications dealt with.
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