WHO BENEFITS FROM AUSTERITY? WALL STREET!

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Editor’s Comment:

You might wonder why people, mostly republicans, are all about “spending cuts.” just for clarification here, spending cuts are what Europe calls “austerity measures.” every policy possibility has been played here and the worst one is clearly austerity or “spending cuts.” everyone calling for austerity is controlled by the banks. Everyone who is not controlled by the banks thinks it isn’t a bad idea to continue government safety nets and sponsor more commerce. Once upon a time Wall Street made its money riding the crest of successful economies, collecting brokerage fees for more and more deals. Not anymore. The Banks are intent on taking the capital — all of it. What then?

People think it makes sense to spend less money to have more. But when the government does that it has less, not more money, thus cutting off vital services. So you might want to think about who benefits as all the major industrialised nations go down the tubes. We know government loses, we know the people lose their services and pay more taxes, so who is it that benefits from the austerity spin?

WALL STREET is the answer. With the level of commerce declining, plummeting they can bet on a sure thing — that interest rates are going to go through the roof, which means that the prices of bonds already issued are going to fall like stones. Only on Wall street can you make bets on interest rates and bets on bonds or groups of bonds or banks or groups of banks. They are pushing the austerity engine and taking us all into a ditch while Wall Street rakes in whatever money is left in our limping economy.

Wall Street has not only turned the lending models on their heads they have succeeded at turning the policy models on their head. The results are unthinkable— Wall Street has created an incentive to kill commerce. And now they are so deep into those bets that the only game in town is putting every economy into crisis. Someone needs to pull the rug out from under these banksters and put them jail where they belong. As society gave them the license to create and grow liquidity for the engine of economic growth so too can society take it away when the banks bite the hands that fed them.

Paul Krugman Debunks Mitt Romney’s Economic Nonsense

By: Jason Easley

On CNN, Paul Krugman called out Mitt Romney today for spouting nonsense about the economy and explained why Romney’s plan to do what Greece did won’t bring prosperity to America.

Here are Krugman’s thoughts on Obama and Romney via CNN:

ZAKARIA: All this said and done, are you enthusiastic about President Obama? You were not for him in the Democratic primary four years ago.

KRUGMAN: Right. I mean, we’re a long way past where I think enthusiasm is the appropriate emotion for anything here.

But he’s learned a lot. And, you know, his heart’s always been in the right place, and I believe his head is now in the right place. And you certainly — of course, I can’t do endorsements, right? It’s a Times rule. So you have no idea who I prefer in this election.

(LAUGHTER)

But he certainly is talking sense about the economy, and Mitt Romney is talking utter nonsense. And you really do worry. In effect…

ZAKARIA: What is the single biggest piece of nonsense that Mitt Romney…

KRUGMAN: Mitt Romney is saying basically that spending cuts are how we’re going to get to prosperity. Mitt Romney is saying, see what’s happening in Greece and in Portugal and in Spain and in Ireland; let’s do that here.

Boy — you know, we’ve just had a massive test, human experimentation on a massive scale, in effect, alternative doctrines of economic management. We’ve just seen which doctrines are disastrous. And the Republican platform is, let’s put that doctrine that has just caused collapse in Europe — let’s put that doctrine into effect right here in America.

Krugman was right on the money. Republicans have been trying to play what they think is a clever game of pretending that what they have proposed isn’t austerity, while at the same time threatening to implement austerity if they don’t get what they want, which is austerity. History shows that economies suffocate under austerity, but Republicans like Mitt Romney and Paul Ryan keep pushing the insane idea is that we can do the same thing that Europe did, but expect a different result.

Republicans are using austerity as an economic justification for their policy of feeding the rich while starving everyone else. The Romney and Ryan plans by design don’t force any austerity measures on the wealthy. The austerity is designed for everyone else. The rich would benefit while America’s devolution into a society of haves and have nots would accelerate. The reality is that Spending cuts never bring prosperity, and many of the rank and file Republicans who are championing the cuts fail to understand that those cuts will be coming out of their hides. All of the Republicans over 65 years of age who support Romney haven’t put the pieces together that a vote for Mitt is a vote to slash their Medicare.

Mitt Romney is spewing contradictory economic nonsense, because the Republican platform is becoming little more than historically discredited feel good dreams of trickledown worship and gibberish.

Paul Krugman is right. A majority of his fellow economists know he is right. The American people know he is right, and history proves him correct, but the Republican Party is trapped in a suicidal fantasy economy of their own creation. It is this fantasy that Romney has to pander to in order to keep his base, and it is the same fantasy that Paul Krugman absolutely destroyed.

Nancy Drewe: Preapproved Loans Without Borrowers

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Editor’s Comment:

From Nancy Drewe:

Consider ‘Wells Fargo Home Mortgage, Inc.’ was approved May 2003 to be merged out of existence into ‘Wells Fargo Home Mortgage Insurance’ and RELS LLC, Rels Title Settlement Services, Des Moines IA, RELS Title dba ATI Title – American Title Insurance – partnership 50/50 with First American Real Estate Solutions dba CORELOGIC in 1997 … allowed for sale of notes to Wall St. in Iowa as INVESTOR who holds ‘REO’ title so in event of default RELS – Wells Fargo Home Mortgage Insurance transfers new real estate loan to be created with more suitable borrower – execute transfer of debt settlement using a new real estate loan …Interesting ‘novel’ method ‘patent’ for nationwide telesales preapproved offers ‘mortgage’ real estate receivables recorded just before Wells Fargo Home Mortgage, Inc. was a general purpose business entity, oversight FFIEC ‘Domestic Entity Other’ none of the purported transactions – consider this – are created in accordance with each states insurance regulations!NOVEL METHOD WELLS FARGO HOME MORTGAGE BRIAN J. LAURENZO DORESEY & WHITNEY LLP 801 GRAND AVE DES MOINES IA 50309MARK C. OMAN WEST DES MOINES IA MICHAEL J. HEID URBANDALE IA PRE-APPROVAL MARKETING OFFERS 04/01/2004 PUB NO: US 2004/0064402 A1 REVEALS HOW NATIONWIDE TELESALES BYPASS BROKERAGES AND GOES DIRECT TO INDEPENDENT TITLE ABSTRACTORS WHO TRADE AND EXCHANGE IN SECONDARY MARKET PROMISSORY NOTES http: // http://www.scribd.com/doc/76730044/WFHM-PATENT-NovelMethodFundingMortgageLoanpat20040064402

Arizona Supreme Court Hogan Case Holds that Note is Not required to Start Foreclosure

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“the trustee owes the trustor a fiduciary duty, and may be held liable for conducting a trustee’s sale when the trustor is not in default. See Patton v. First Fed. Sav. & Loan Ass’n of Phoenix, 118 Ariz. 473, 476, 578 P.2d 152, 155 (1978).” Hogan Court

Editor’s Comment: Here is another example of lawyers arguing out of a lack of understanding of the securitization process and trying to compress an elephant into a rabbit hole. They lost, unsurprisingly.

If you loaned money to someone, you want the money repaid. You DON’T want to be told that because you don’t have the note you can never enforce the loan repayment. You CAN start enforcement and you must prove why you don’t have the note in a credible way so that the court has footprints leading right up to the point that you don’t have the note. But the point is that you can start without the note. 

The Supreme Court apparently understood this very well and they didn’t address the real issue because nobody brought it up. The issue before them was whether someone without the note could initiate the foreclosure process. Nobody mentioned whether the same party could submit a credit bid at the auction which is what I have been pounding upon for months on end now.

Apparently, right or wrong, the feeling of the courts is that there is a very light burden on the right to initiate a foreclosure whether it is judicial or non-judicial. It is very close to the burden of the party moving to lift stay in a bankruptcy procedure. Practically any colorable right gives the party enough to get the stay — because the theory goes — whether it is a lift stay or starting the ball rolling on a foreclosure there is plenty the borrower can do to  oppose the enforcement procedure. I don’t agree with either standard or burden of proof in the case of securitized mortgages but it is about time we got real about what gets traction in the courtroom and what doesn’t.

In the Hogan case the Court makes a pretty big deal out of the fact that Hogan didn’t allege that WAMU and Deutsch were not entitled to enforce the note. From the court’s perspective, they were saying to the AG and the borrowers, “look, you are admitting the debt and admitting this is the creditor, what do you want from us, a free pass?”

This is why you need real people with real knowledge and real reports that back up and give credibility to deny the debt, deny the default, deny that WAMU and/or Deutsch are creditors, plead payment and force WAMU and Deutsch to come forward with pleadings and proof. Instead WAMU and Deutsch skated by AGAIN because nobody followed the money. They followed the document trail which led them down that rabbit hole I was referencing above.

In order to deny everything without be frivolous, you need to have concrete reasons why you think the debt does not exist, the debt does not exist between the borrower and these pretender lenders, the debt was paid in full, and deny that the loan was NOT secured (i.e. that the mortgage lien was NOT perfected when filed).

For anyone to do that without feeling foolish you must UNDERSTAND how the securitization model AS PRACTICED turned the entire lending model on its head. Then everything makes sense, which is why I wrote the second volume which you can get by pressing the appropriate links shown above. But it isn’t just the book that will get you there. You need to give rise to material, relevant issues of fact that are in dispute. For that you need a credible report from a credible expert with real credentials and real experience and training.

I follow the money. In fact the new book has a section called “Show Me the Money”. To “believe” is taken from an ancient  language that means “to be willing”. I want you to believe that the debt that the “enforcers” doesn’t exist and never did. I want you to believe that the declarations contained in the note, mortgage (deed of trust), substitution of trustee etc. are all lies. But you can’t believe that unless you are willing to consider the the idea it might be true. That I might be right.

At every “Securitized” closing table there were two deals taking place — one perfectly real and the other perfectly unreal, fake and totally obfuscated. The deal everyone is litigating is the second one,  starting with the documents at closing and moving up the chain of securitization. Do you really think that some court is going to declare that everyone gets a free house because some i wasn’t dotted or t crossed on the back of the wrong piece of paper when you admit the debt, the default and the amount due?

It is the first deal that is real because THAT is the one with the money exchanging hands. The declarations contained in the note, mortgage and other documents all refer to money exchanging hands between the named payee and secured party on one side and the borrower on the other. The deal in those documents never happened. The REAL DEAL was that money from investor lenders was poured down a pipe through which the loans were funded. The parties at the closing table with the borrower had nothing to do with funding; acquiring, transferring the receivable, the obligation, note or the mortgage or deed of trust.

Every time you chase them down the rabbit hole of the document trail you miss the point. The REAL DEAL had no documents and couldn’t possibly be secured. And if you read the wording from the Hogan decision below you can see how even they would have considered the matter differently if the simple allegation been made that the borrower denied that WAMU and Deutsch had any right to enforce the note either as principals or as agents. They were not the creditor. But Hogan and its ilk are not over — yet.

There is still a matter to be determined as to whether the party who initiated the foreclosure is in fact a creditor under the statute and can therefore submit a credit bid in lieu of cash. THAT is where the rubber meets the road — where the cash is supposed to exchange hands. And THAT is where nearly all the foreclosures across the country fail. The failure of consideration means the sale did not take place. If the borrower was there or someone for him was there and bid a token amount of money it could be argued in many states that the other bid being ineligible as a credit bid, the only winning bidder is the one who offered cash.

————————————————————

Hogan argues that a deed of trust, like a mortgage, “may be enforced only by, or in behalf of, a person who is entitled to enforce the obligation the mortgage secures.” Restatement (Third) of Prop.: Mortgages § 5.4(c) (1997); see Hill v. Favour, 52 Ariz. 561, 568-69, 84 P.2d 575, 578 (1938).

-6-
We agree. (e.s.) But Hogan has not alleged that WaMu and Deutsche Bank are not entitled to enforce the underlying note; rather, he alleges that they have the burden of demonstrating their rights before a non-judicial foreclosure may proceed. Nothing in the non-judicial foreclosure statutes, however, imposes such an obligation. See Mansour v. Cal-Western Reconveyance Corp., 618 F. Supp. 2d 1178, 1181 (D. Ariz. 2009) (citing A.R.S. § 33-807 and observing that “Arizona’s [non-]judicial foreclosure statutes . . . do not require presentation of the original note before commencing foreclosure proceedings”); In re Weisband, 427 B.R. 13, 22 (Bankr. D. Ariz. 2010) (stating that non-judicial foreclosures may be conducted under Arizona’s deed of trust statutes without presentation of the original note).

———————AND SPEAKING OF  DEUTSCH BANK: READ THIS AS GRIST FOR THE ABOVE ANALYSIS——-

Disavowal by-DEUTSCHE-BANK-NATIONAL-TRUST-COMPANY-AS-TRUSTEE-NOTICE-TO-CERTIFICATE-HOLDERSForeclosure-Practice-Notice-10-25[1]

Pandemic Lying Admission: Deutsch Bank Up and Down the Fake Securitization Chain

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Editor’s Comment:

One problem with securitization in practice even under the academic model is the effect on potential enforcement of the obligation, even assuming that the “lender” is properly identified in the closing documents with the buyer of the loan product and the closing papers of the buyer of the mortgage bonds (and we’ll assume that the mortgage bonds are real and valid, as well as having been issued by a fully funded REMIC in which loans were properly assigned and transferred —- an assumption, as we have seen that is not true in the real world). Take this quote from the glossary at the back of this book and which in turn was taken from established authoritative sources used by bankers, securities firms and accountants:

cross guarantees and credit default swaps, synthetic collateralized asset obligations and other exotic equity and debt instruments, each of which promises the holder an incomplete interest in the original security instrument and the revenue flow starting with the alleged borrower and ending with various parties who receive said revenue, including but not limited to parties who are obligated to make payments for shortfalls of revenues.

Real Property Lawyers spot the problem immediately.

First question is when do these cross guarantees, CDS, Insurance, and other exotic instruments arise. If they are in existence at the time of the closing with the borrower homeowner then the note and mortgage are not properly drafted as to terms of repayment nor identity of the lender/creditor. This renders the note either unenforceable or requiring the admission of parole evidence in any action to either enforce against the borrower or enforce the cross obligations of the new cross creditors who supposedly are receiving not just rights to the receivable but to the actual note and the actual mortgage.

Hence even a truthful statement that the “Trustee” beings this foreclosure on behalf of the “trust” as creditor (assuming a Trust existed by law and that the Trustee, and beneficiaries and terms were clear) would be insufficient if any of these “credit enhancements” and other synthetic or exotic vehicles were in place. The Trustee on the Deed of Sale would be required to get an accounting from each of the entities that are parties or counterparties whose interest is effected by the foreclosure and who would be entitled to part of the receivable generated either by the foreclosure itself or the payment by counterparties who “bet wrong” on the mortgage pool.

The second question is whether some or any or all of these instruments came into existence or were actualized by a required transaction AFTER the closing with the homeowner borrower. It would seem that while the original note and mortgage (or Deed of Trust) might not be affected directly by these instruments, the enforcement mechanism would still be subject to the same issues as raised above when they were fully actualized and in existence at the time of the closing with the homeowner borrower.

Deutsch Bank was a central player in most of the securitized mortgages in a variety of ways including the exotic instruments referred to above. If there was any doubt about whether there existed pandemic lying and cheating, it was removed when the U.S. Attorney Civil Frauds Unit obtained admissions and a judgment for Deutsch to pay over $200 million resulting from intentional misrepresentations contained in various documents used with numerous entities and people up and down the fictitious securitization chain. Similar claims are brought against Citi (which settled so far for $215 million in February, 2012) Flagstar Bank FSB (which settled so far for $133 million in February 2012, and Allied Home Mortgage Corp, which is still pending. Even the most casual reader can see that the entire securitization model was distorted by fraud from one end (the investor lender) to the other (the homeowner borrower) and back again (the parties and counterparties in insurance, bailouts, credit default swaps, cross guarantees that violated the terms of every promissory note etc.

Manhattan U.S. Attorney Recovers $202.3 Million From Deutsche Bank And Mortgageit In Civil Fraud Case Alleging Reckless Mortgage Lending Practices And False Certifications To HUD

FOR IMMEDIATE RELEASE                  Thursday May 10, 2012

Preet Bharara, the United States Attorney for the Southern District of New York, Stuart F. Delery, the Acting Assistant Attorney General for the Civil Division of the U.S. Department of Justice, Helen Kanovsky, General Counsel of the U.S. Department of Housing and Urban Development (“HUD”), and David A. Montoya, Inspector General of HUD, announced today that the United States has settled a civil fraud lawsuit against DEUTSCHE BANK AG, DB STRUCTURED PRODUCTS, INC., DEUTSCHE BANK SECURITIES, INC. (collectively “DEUTSCHE BANK” or the “DEUTSCHE BANK defendants”) and MORTGAGEIT, INC. (“MORTGAGEIT”). The Government’s lawsuit, filed May 3, 2011, sought damages and civil penalties under the False Claims Act for repeated false certifications to HUD in connection with the residential mortgage origination practices of MORTGAGEIT, a wholly-owned subsidiary of DEUTSCHE BANK AG since 2007. The suit alleges approximately a decade of misconduct in connection with MORTGAGEIT’s participation in the Federal Housing Administration’s (“FHA’s”) Direct Endorsement Lender Program (“DEL program”), which delegates authority to participating private lenders to endorse mortgages for FHA insurance. Among other things, the suit accused the defendants of having submitted false certifications to HUD, including false certifications that MORTGAGEIT was originating mortgages in compliance with HUD rules when in fact it was not. In the settlement announced today, MORTGAGEIT and DEUTSCHE BANK admitted, acknowledged, and accepted responsibility for certain conduct alleged in the Complaint, including that, contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations. MORTGAGEIT also admitted that it submitted certifications to HUD stating that certain loans were eligible for FHA mortgage insurance when in fact they were not; that FHA insured certain loans endorsed by MORTGAGEIT that were not eligible for FHA mortgage insurance; and that HUD consequently incurred losses when some of those MORTGAGEIT loans defaulted. The defendants also agreed to pay $202.3 million to the United States to resolve the Government’s claims for damages and penalties under the False Claims Act. The settlement was approved today by United States District Judge Lewis Kaplan.

Manhattan U.S. Attorney Preet Bharara stated: “MORTGAGEIT and DEUTSCHE BANK treated FHA insurance as free Government money to backstop lending practices that did not follow the rules. Participation in the Direct Endorsement Lender program comes with requirements that are not mere technicalities to be circumvented through subterfuge as these defendants did repeatedly over the course of a decade. Their failure to meet these requirements caused substantial losses to the Government – losses that could have and should have been avoided. In addition to their admissions of responsibility, Deutsche Bank and MortgageIT have agreed to pay damages in an amount that will significantly compensate HUD for the losses it incurred as a result of the defendants’ actions.”

Acting Assistant Attorney General Stuart F. Delery stated: “This is an important settlement for the United States, both in terms of obtaining substantial reimbursement for the FHA insurance fund for wrongfully incurred claims, and in obtaining the defendants’ acceptance of their role in the losses they caused to the taxpayers.”

Giving Back to the Community through a variety of venues & initatives.

Making sure that victims of federal crimes are treated with compassion, fairness and respect.

www.justice.gov/usao/nys/pressreleases/may12/deutschebankmortgageitsettlement.html                  1/45/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

HUD General Counsel Helen Kanovsky stated: “This case demonstrates that HUD has the ability to identify fraud patterns and work with our partners at the Department of Justice and U.S. Attorney’s Offices to pursue appropriate remedies. HUD would like to commend the work of the United States Attorney for the Southern District of New York in achieving this settlement, which is a substantial recovery for the FHA mortgage insurance fund. We look forward to continuing our joint efforts with the Department of Justice and the SDNY to combat mortgage fraud. The mortgage industry should take notice that we will not sit silently by if we detect abuses in our programs.”

HUD Inspector General David A. Montoya stated: “We expect every Direct Endorsement Lender to adhere to the highest level of integrity and accountability. When the combined efforts and attention of the Department of Justice, HUD, and HUD OIG are focused upon those who fail to exercise such integrity in connection with HUD programs, the end result will be both unpleasant and costly to the offending party.”

The following allegations are based on the Complaint and Amended Complaint (the “Complaint”) filed in Manhattan federal court by the Government in this case:

Between 1999 and 2009, MORTGAGEIT was a participant in the DEL program, a federal program administered by the FHA. As a Direct Endorsement Lender, MORTGAGEIT had the authority to originate, underwrite, and endorse mortgages for FHA insurance. If a Direct Endorsement Lender approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD for the costs associated with the defaulted loan, which HUD must then pay. Under the DEL program, neither the FHA nor HUD reviews a loan before it is endorsed for FHA insurance. Direct Endorsement Lenders are therefore required to follow program rules designed to ensure that they are properly underwriting and endorsing mortgages for FHA insurance and maintaining a quality control program that can prevent and correct any deficiencies in their underwriting. These requirements include maintaining a quality control program, pursuant to which the lender must fully review all loans that go into default within the first six payments, known as “early payment defaults.” Early payment defaults may be signs of problems in the underwriting process, and by reviewing early payment defaults, Direct Endorsement Lenders are able to monitor those problems, correct them, and report them to HUD. MORTGAGEIT failed to comply with these basic requirements.

As the Complaint further alleges, MORTGAGEIT was also required to execute certifications for every mortgage loan that it endorsed for FHA insurance. Since 1999, MORTGAGEIT has endorsed more than 39,000 mortgages for FHA insurance, and FHA paid insurance claims on more than 3,200 mortgages, totaling more than $368 million, for mortgages endorsed for FHA insurance by MORTGAGEIT, including more than $58 million resulting from loans that defaulted after DEUTSCHE BANK AG acquired MORTGAGEIT in 2007.

As alleged in the Complaint, a portion of those losses was caused by the false statements that the defendants made to HUD to obtain FHA insurance on individual loans. Although MORTGAGEIT had certified that each of these loans was eligible for FHA insurance, it repeatedly submitted certifications that were knowingly or recklessly false. MORTGAGEIT failed to perform basic due diligence and repeatedly endorsed mortgage loans that were not eligible for FHA insurance.

The Complaint also alleges that MORTGAGEIT separately certified to HUD, on an annual basis, that it was in compliance with the rules governing its eligibility in the DEL program, including that it conduct a full review of all early payment defaults, as early payment defaults are indicators of mortgage fraud. Contrary to its certifications to HUD, MORTGAGEIT failed to implement a compliant quality control program, and failed to review all early payment defaults as required. In addition, the Complaint alleges that, after DEUTSCHE BANK acquired MORTGAGEIT in January 2007, DEUTSCHE BANK managed the quality control functions of the Direct Endorsement Lender business, and had its employees sign and submit MORTGAGEIT’s Direct Endorsement Lender annual certifications to HUD. Furthermore, by the end of 2007, MORTGAGEIT was not reviewing any early payment defaults on closed FHA-insured loans. Between 1999 and 2009, the FHA paid more than $92 million in FHA insurance claims for loans that defaulted within the first six payments.

***

Pursuant to the settlement, MORTGAGEIT and the DEUTSCHE BANK defendants will pay the United States $202.3 million within 30 days of the settlement.

As part of the settlement, the defendants admitted, acknowledged, and accepted responsibility for certain misconduct. Specifically,

MORTGAGEIT admitted, acknowledged, and accepted responsibility for the following:

www.justice.gov/usao/nys/pressreleases/may12/deutschebankmortgageitsettlement.html                  2/4

5/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

MORTGAGEIT failed to conform fully to HUD-FHA rules requiring Direct Endorsement Lenders to maintain a compliant quality control program;

MORTGAGEIT failed to conduct a full review of all early payment defaults on loans endorsed for FHA insurance;

Contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations;

MORTGAGEIT endorsed for FHA mortgage insurance certain loans that did not meet all underwriting requirements contained in HUD’s handbooks and mortgagee letters, and therefore were not eligible for FHA mortgage insurance under the DEL program; and;

MORTGAGEIT submitted to HUD-FHA certifications stating that certain loans were eligible for FHA mortgage insurance when in fact they were not; FHA insured certain loans endorsed by MORTGAGEIT that were not eligible for FHA mortgage insurance; and HUD consequently incurred losses when some of those MORTGAGEIT loans defaulted.

The DEUTSCHE BANK defendants admitted, acknowledged, and accepted responsibility for the fact that after MORTGAGEIT became a wholly-owned, indirect subsidiary of DB Structured Products, Inc and Deutsche Bank AG in January 2007:

The DEUTSCHE BANK defendants were in a position to know that the operations of MORTGAGEIT did not conform fully to all of HUD-FHA’s regulations, policies, and handbooks;

One or more of the annual certifications was signed by an individual who was also an officer of certain of the DEUTSCHE BANK defendants; and;

Contrary to the representations in MORTGAGEIT’s annual certifications, MORTGAGEIT did not conform to all applicable HUD-FHA regulations.

***

The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating financial fraud, including mortgage fraud.

To date, the Office’s Civil Frauds Unit has brought four civil fraud lawsuits against major lenders under the False Claims Act alleging reckless residential mortgage lending.

Three of the four cases have settled, and today’s settlement represents the third, and largest, settlement. On February 15, 2012, the Government settled its civil fraud lawsuit against CITIMORTGAGE, INC. for $158.3 million. On February 24, 2012, the Government settled its civil fraud suit against FLAGSTAR BANK, F.S.B. for $132.8 million. The Government’s lawsuit against ALLIED HOME MORTGAGE CORP. and two of its officers remains pending. With today’s settlement, the Government has achieved settlements totaling $493.4 million in the last three months. In each settlement, the defendants have admitted and accepted responsibility for certain conduct alleged in the Government’s Complaint.

The Office’s Civil Frauds Unit is handling all three cases as part of its continuing investigation of reckless lending practices.

The Civil Frauds Unit works in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Mr. Bharara thanked HUD and HUD-OIG for their extraordinary assistance in this case. He also expressed his appreciation for the support of the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C.

www.justice.gov/usao/nys/pressreleases/may12/deutschebankmortgageitsettlement.html                  3/4

5/16/12                  USDOJ: US Attorney’s Office – Southern District of New York

Assistant U.S. Attorneys Lara K. Eshkenazi, Pierre G. Armand, and Christopher B. Harwood are in charge of the case.

Acknowledgement to Max Gardner and his work

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Editor’s Comment:

The name of Max Gardner has become a trademark for effective confrontation and dissemination of information about the greatest economic crime in human history.  His work includes “Boot Camps” which are composed of small groups of lawyers in training for the purpose of saving the homes and lives of millions of homeowners who were deceived into purchasing corrupt loan products.  Those Boot Camps are about to come to an end although Max will continue to teach in larger forums.  I suggest that any lawyer who was considering attendance at one of Max’s events decide in favor of it and to sign up immediately.  

Max has been quite open about his health conditions and while they are different from my own, I find a number of areas of commonality between us even as we approach the Wall Street monster from different angles.  I know how he feels when he has heard from the physicians that there is, “one more thing” with which he must deal.  Like Max, I am also reconsidering my role as I get older.  

Max has made it clear that he’s not going anywhere just yet but that he considers time with family and his effort in battling the banks and servicers to be his remaining priorities.  I support him in his endeavors and so should we all.

Max Gardner Personal Message to

Bankruptcy Boot Camp Graduates

The following message was sent from Max to his Boot Camp graduates on May 9, 2012.

Dear Boot Campers,

I have always been candid with you about my health issues and I will continue to be candid throughout this very personal process.  I last updated you on my health shortly before the San Antonio NACBA conference when I was suffering from symptoms consistent with previous malignant tumor growth in my lungs and bladder.  Testing did, in fact, confirm a new tumor growth but this time it was in a new organ, my liver.  My medical team has confirmed that it is the same type of tumor in the bladder and lungs, known as a Typical Carcinoid—a relatively non-aggressive cancer. After running more tests, my doctors laid out the different options for me, all with their own advantages and disadvantages.  After much thought and discussing it with Vickie, I have decided that I will not undergo any type of surgical intervention with respect to the liver tumor. Rather than surgery, we will only take the necessary medical steps to deal with the negative symptoms related to this type of cancer.  The doctors can cite national statistics for survival rates with and without the liver surgery, but because the progression of my cancer has been so unusual, they simply have nothing to compare it to and the statistics are meaningless.

I want you to know that despite the above news, I remain very optimistic. And, quite frankly, I feel very good about the decision we have made.  Life is certainly important but the quality of the life we have left may be more important.  I also want you all to know that this is not the end of the road for me.  I have a job to do and I plan on finishing what I started with your help.  Part of my purpose for fully disclosing my health situation to you at this time is to let you know the reasoning behind two decisions I’ve made.

First, I don’t plan on traveling outside of North Carolina to conduct future seminars.  Getting on a plane to travel can only increase my chances of getting sick so I plan on traveling only when necessary.  Second, beginning this fall, I will discontinue holding boot camps at the farm and hold only larger sessions where I can teach more people at a time and also take some burden off of me and Vickie.  The five-day seminars at the Farm are both physically and mentally draining for both of us.  The June 7-11 Boot Camp will go on as planned and then I will hold either one or two more  Boot Camps at the Farm this summer, which can include another re-boot if there is enough interest.  Right now the other possible boot camp dates for Lizmere Farm are July 5-9 and August 2-6.

I’ve made my decisions based on what I believe makes the most sense for me, my family and the goals I want to accomplish and I’d like you to accept these decisions without second guessing or offering advice, no matter how well intentioned.  I received hundreds of emails and calls when my health situation required me to cancel my April appearance in San Antonio and you will never know how much each one of those emails and calls meant to me and to Vickie.  We consider all of you to be a part of our extended family.

Many of you know that the late Marvin R. Wooten was my all-time favorite Judge and person and friend.  Judge Wooten had so many historic quotes that it is hard to know where to start or end with any of them.  However, when he could not grant you the relief you requested, he would always say “I’m sorry but you have come to the Goat Man for Wool.”  Well, I really and truly have goats at the Farm so in fact and in truth I may now qualify as Judge Wooten’s proverbial Goat Man but I want all of you to know that this Goat Man still has a rather large supply of wool and he intends to give it all out before the goats finally go home.

Thank you for all your support and kind words over all of these many years.

BAILOUT TO STATE BUDGETS: AZ Uses Housing Settlement Money for Prisons

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Editor’s Comment:

The general consensus is that the homeowner borrowers are simply at the bottom of the food chain, not worthy of dignity, respect or any assistance to recover from the harm caused by Wall Street. Now small as it is, the banks have partially settled the matter by an agreement that bars the states from pursuing certain types of claims conditioned on several terms, one of which was the payment of money from the banks that presumably would be used to fund programs for the beleaguered homeowners without whose purchasing power, the economy is simply not going to revive. Not only are many states taking the money and simply putting it into general funds, but Arizona, over the objection of its own Attorney General is taking the money and applying to pay for prison expenses.

Here is the sad punch line for Arizona. The prison system in that state and others is largely “privatized” which is to say that the state “hired” new private companies created for the sole purpose of earning a profit off the imprisonment of the state’s citizens. Rumors abound that the current governor has a financial interest in the largest private prison company.

The prison lobby has been hard at work ever since privatizing prisons became the new way to get rich using taxpayers dollars. Not only are we paying more to house more prisoners because the laws a restructured to make more behavior crimes, but now our part of the housing settlement is also going to the prisons. Another bailout that was never needed or wanted. Meanwhile the budget of  Arizona continues to rise from incarcerating its citizens and the profiteers (not entrepreneurs by any stretch of the imagination) are getting a gift of more money from the state out of the multistate settlement.

Needy States Use Housing Aid Cash to Plug Budgets

By SHAILA DEWAN

Only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group. So far about 15 states have said they will use all or most of the money for other purposes.

In Texas, $125 million went straight to the general fund. Missouri will use its $40 million to soften cuts to higher education. Indiana is spending more than half its allotment to pay energy bills for low-income families, while Virginia will use most of its $67 million to help revenue-starved local governments.

Like California, some other states with outsize problems from the housing bust are spending the money for something other than homeowner relief. Georgia, where home prices are still falling, will use its $99 million to lure companies to the state.

“The governor has decided to use the discretionary money for economic development,” said a spokesman for Nathan Deal, Georgia’s governor, a Republican. “He believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”

Andy Schneggenburger, the executive director of the Atlanta Housing Association of Neighborhood-Based Developers, said the decision showed “a real lack of comprehension of the depths of the foreclosure problem.”

The $2.5 billion was intended to be under the control of the state attorneys general, who negotiated the settlement with the five banks — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally. But there is enough wiggle room in the agreement, as well as in separate terms agreed to by each state, to give legislatures and governors wide latitude. The money can, for example, be counted as a “civil penalty” won by the state, and some leaders have argued that states are entitled to the money because the housing crash decimated tax collections.

Shaun Donovan, the federal housing secretary, has been privately urging state officials to spend the money as intended. “Other uses fail to capitalize on the opportunities presented by the settlement to bring real, concerted relief to homeowners and the communities in which they live,” he said Tuesday.

Some attorneys general have complied quietly with requests to repurpose the money, while others have protested. Lisa Madigan, the Democratic attorney general of Illinois, said she would oppose any effort to divert the funds. Tom Horne, the Republican attorney general of Arizona, said he disagreed with the state’s move to take about half its $97 million, which officials initially said was needed for prisons.

But Mr. Horne said he would not oppose the shift because the governor and the Legislature had authority over budgetary matters. The Arizona Center for Law in the Public Interest has said it will sue to stop Mr. Horne from transferring the money.

Az Statute on Mortgage Fraud Not Enforced (except against homeowners)

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Editor’s Comment:

With a statute like this on the books in Arizona and elsewhere, it is difficult to see why the Chief Law Enforcement of each state, the Attorney General, has not brought claims and prosecutions against all those entities and people up and down the fraudulent securitization chain that brought us the mortgage meltdown, foreclosures of more than 5 million people, suicides, evictions and claims of profits based upon the fact that the free house went to the pretender lender.

Practically every act described in this statute was committed by the investment banks and all their affiliates and partners from the seller of the bogus mortgage bond (sold forward, which means that the loans did not yet exist) all the way down to the people at the closing table with the homeowner borrower.

I’d like to see a script from attorneys who confront the free house concept head on. The San Francisco study and other studies clearly show that many if not most foreclosures resulted in a “sale” of property without any cash offered by the buyer who submitted a credit bid when they had not established themselves as creditors nor had they established the amount due. And we now know that they failed to establish themselves as creditors because they neither loaned the money nor purchased the loan in any transaction in which they parted with money. So the consideration for the sale was not present or if you want to put it in legalese that would effect those states that allow review of the adequacy of consideration at the auction.

I’d like to see a lawyer go to court and say “Judge, you already know it would be wrong for my client to get a free house. I am here to agree with you and state further that whether you rule for the borrower or this pretender lender here, you are going to give a free house to somebody.

“Because this party initiated a foreclosure proceeding without being the creditor, without spending a dime on the loan or purchase of the loan, and without any right to represent the multitude of people and entities that should be paid on this loan. This pretender, this stranger to this transaction stands in the way of a mediated settlement or HAMP modification in which the borrower is more than happy to do a traditional workout based upon the economic realities.

“And they they maintain themselves as obstacles to mediation or modification because they have too much to hide about the origination of this loan.

“All I seek is that you recognize that we deny the loan on which this party is pursuing its claims, we deny the default and we deny the balance. That puts the matter at issue in which there are relevant and material facts that are in dispute.

“I say to you that as a Judge you are here to call balls and strikes and that your ruling can only be that with issues in dispute, the case must proceed.”

“The pretender should be required to state its claim with a complaint, attach the relevant documents and the homeowner should be able to respond to the complaint and confront the witnesses and documents being used. And that means the pretender here must be subject to the requirements of the rules of civil procedure that include discovery.

“Experience shows that there have been no trials on the evidence in all the foreclosures ever brought during this period and that the moment a judge rules on discovery in favor of the borrower, the pretender offers settlement. Why do you think that is?”

“If they had a good reason to foreclose and they had the authority to allege the required the elements of foreclosure and they had the proof to back it up they would and should be more than willing to put a stop to all these motions and petitions from borrowers. But they don’t allow any case to go to trial. They are winning on procedure because of the assumption that the legitimate debt is unpaid and that the borrower owes it to the party making the claim even if there never was transaction with the pretender in which the borrower was a party, directly or indirectly.”

“Neither the non-judicial powers of sale statutes nor the rules of civil procedure based upon constitutional requirements of due process can be used to thwart a claim that has merit or raises issues that have merit. You should not allow the statute and rules to be applied in a manner in which a stranger to the transaction who could not even plead a case in good faith would win a foreclosed house at auction without court review and a hearing on the merits.”

Residential mortgage fraud; classification; definitions in Arizona

Section 1. Title 13, chapter 23, Arizona Revised Statutes, is amended by adding section 13-2320, to read:
13-2320.

A. A PERSON COMMITS RESIDENTIAL MORTGAGE FRAUD IF, WITH THE INTENT TO DEFRAUD, THE PERSON DOES ANY OF THE FOLLOWING:

1. KNOWINGLY MAKES ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
2. KNOWINGLY USES OR FACILITATES THE USE OF ANY DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION DURING THE MORTGAGE LENDING PROCESS THAT IS RELIED ON BY A MORTGAGE LENDER, BORROWER OR OTHER PARTY TO THE MORTGAGE LENDING PROCESS.
3. RECEIVES ANY PROCEEDS OR OTHER MONIES IN CONNECTION WITH A RESIDENTIAL MORTGAGE LOAN THAT THE PERSON KNOWS RESULTED FROM A VIOLATION OF PARAGRAPH 1 OR 2 OF THIS SUBSECTION.
4. FILES OR CAUSES TO BE FILED WITH THE OFFICE OF THE COUNTY RECORDER OF ANY COUNTY OF THIS STATE ANY RESIDENTIAL MORTGAGE LOAN DOCUMENT THAT THE PERSON KNOWS TO CONTAIN A DELIBERATE MISSTATEMENT, MISREPRESENTATION OR MATERIAL OMISSION.

Those convicted of one count of mortgage fraud face punishment in accordance with a Class 4 felony.  Anyone convicted of engaging in a pattern of mortgage fraud could be convicted of a Class 2 felony

Short Sale No Protection Against Bank

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Editor’s Comment:

As if on queue this story appears. I have been warning buyers of short sales that they face strong headwinds in maintaining ownership of the house, keeping possession, and the general fact that buying a short sale probably is buying into litigation now or later.

This guy is a true innocent buyer without any real notice of the problems he was buying into. His realtor obviously didn’t tell him because the realtor’s compensation is based upon the sale closing. The title agent didn’t tell him for the same reason. And the bank selected as the ” designated hitter” to receive money and execute papers showing the old mortgage was satisfied and the foreclosure was over probably didn’t even know who to call or why because, like the originator at the original closing on the loan, was just a fee for service “satisfied” instead of a fee for service originator.

So the designated forecloser keeps proceeding — and in this case apparently foreclosed on the house without the new short sale buyer knowing a thing about it, evicted the tenants, which now included the shortsale buyer, and then broke in, removed all the personal belongings leaving this guy with a lawsuit for trespass and the loss of his furniture and personal belongings.

This will continue until we accept and act upon the fact that the foreclosures and the would-be originators of foreclosures have no right to even be at the table — same as when the old old loan was created.

KC Man Sues Bank Over Foreclosure Error

Claim: JPMorgan Chase Changed Locks, Seized New Owner’s Property

KANSAS CITY, Mo. – A Kansas City man is taking on banking giant JPMorgan Chase, accusing the company of something that he said would have landed anyone else in handcuffs.

Allan Danforth bought a house in a short sale in fall 2010. JPMorgan Chase held the previous owner’s mortgage. Danforth said two months later, without notice, the bank changed the locks and hauled away $25,000 worth of furniture, appliances and family heirlooms.

“I had to bust in through the basement window here,” Danforth said, pointing to the house that he was forced to break into more than 18 months ago.

He said JPMorgan Chase’s contractor, Safeguard Properties, ignored “No Trespassing” signs on the garage, changed the locks on his home and cleaned it out two months after he paid cash for the property.

“It was basically stuff that was 150 years of family history,” Danforth said. “I feel violated and I felt like the house wasn’t even safe to go into for a while.”

Danforth said Safeguard Properties could find his family heirlooms. He said JPMorgan Chase just gave him a runaround.

“They’re the big bank and they don’t care,” he said.

“It’s a wrong built upon wrongs,” said attorney Tony Stein.

He said it’s a wrongful foreclosure.

“We fully intend to go into court and have a Jackson County jury try to decide the eventual outcome of this case in the only language JPMorgan Chase understands,” Stein said. “The language of money.”

In his lawsuit, Stein accuses JPMorgan Chase of theft, trespassing and reckless indifference.

Jackson County court records show that on Sept. 9, the previous homeowners transferred the house to Danforth. The bank signed off 12 days later.

“For the very company to release their deed of trust and thereby release all their rights against this property, and then two months later, send in a company to clean this thing out? You’ll have to ask them why they’d do something like that,” Stein said. “It defies logic.”

Danforth and his attorney said the bank has ignored their letters. When KMBC investigated the case, a spokeswoman for JPMorgan Chase had a response.

“We made a paperwork mistake when the property was sold, which resulted in our service partner changing the locks and winterizing the property to ensure its security,” the statement said.

The company did not comment how it plans to settle the dispute.

“I’m not the first one. I will not be the last, unfortunately,” Danforth said.

He said he has installed a security system in case of another “paperwork mistake.”

“If it were you or I doing it, we’d be sitting in jail right now,” Danforth said. “Why isn’t JPMorgan in jail?”

Safeguard Properties deferred comment to the bank.

Danforth’s lawsuit is before the Jackson County Court and claims actual damages in excess of $25,000. Under law, Stein said members of Danforth’s family could be entitled to recover as much as $1.5 million in punitive damages.

Danforth’s copies of important documents were inside the house and were taken by Safeguard Properties. Experts said in case of a fire or burglary, it’s a good idea to have copies of important documents in a digital form or a safety deposit box.

Another Ruse: Realtors Gleeful over Equator Short Sale Platform

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Editor’s Comment:

Banks have adopted a technology platform to process short sale applications. It is called Equator, presumably to imply that it equates one thing with another, and produces a result that either gives a pass or fail to the application. In theory it is a good thing for those people who want to save their homes, save their credit (up to a point) and move on. In practice it essentially licenses the real estate broker to take control over the negotiations and police the transactions so that the new “network” rules are not violated. This reminds me of VISA and MasterCard who control the payment processing business with the illusion of being a quasi governmental agency. Nothing could be further from the truth, but bankers react to net work threats as though the IRS was after them.

Equator is meant as another layer of illusion to the title problem that realtors and title companies are trying to cover up. The short sale is getting be the most popular form of real estate sale because it is a form of principal reduction where there is some face-saving by the banks and the borrowers. The problem is that while short sales are a legitimate form of workout,  they leave the elephant in the living room undisturbed — short sales approved by banks and servicers who have neither the authority nor the interest in the loan to even be involved except as an agent of Equator but NOT as an agent of the lenders,  if they even exist anymore.

So using the shortsale they get the signature of the borrower as seller which gives them a layer of protection if they are the bank or servicer approving the short-sale. But it fails to cure the title defect, especially in millions of transactions in which Nominees (like MERS and dummy originators) are in the chain of title. 

The true owner of the obligation is a group of investor lenders who appear to have only one thing in common— they all gave money to an investment bank or an affiliate of an investment bank, where it was divided up and put into various accounts, some of which were used to fund mortgages and others were used to pay fees and profits to the investment bank on the closing of the “deal” with the investor lenders. As far as the county recorder is concerned, those deposits and splits are nonexistent. 

The investor lenders were then told that their money was pooled in a “Trust” when no such entity ever existed or was registered to do business and no attempt was made to fund the trust. An unfunded trust is not a trust. This, the investor lenders were told was a REMIC entity.  While a REMIC could have been established it never happened  in the the real world because the only communications between participants in the securitization chain consisted of a spreadsheet describing “closed loans.” Such communications did not include transfer, assignment or even transmittal or delivery of the closing papers with the borrower. Thus as far as the county recorder’s office is concerned, they still knew nothing. Now in the shortsales, they want a stranger the transaction to take the money and run — with no requirement that they establish themselves as creditors and no credible documentation that they are the owner of the loan.

This is another end run around the requirements of basic law in property transactions. They are doing it because our government officials are letting them do it, thus implicitly ratifying the right to foreclose and submit a credit bid without any requirement of proof or even offer of proof.

It gets worse. So we have BOA agreeing to accept dollars in satisfaction of a loan that they have no record of owning. The shortsale seller might still be liable to someone if the banks and servicers continue to have their way with creating false chains of ownership. But the real tragedy is that the shortsale seller is probably getting the shaft on a false premise — I.e, that the mortgage or deed of trust had any validity to begin with. 

The shortsale Buyer is most probably buying a lawsuit along with the house. At some point, the huge gaps in the chain of title are going to cause lawyers in increasing numbers to object to title and demand that it be fixed or that the client be adequately covered by insurance arising from securitizatioin claims. Thus when the shortsale Buyer becomes a seller, that is when the problems will first start to surface.

Realtors understand this analysis whereas buyers from Canada and other places do not understand it. But realtors see shortsales as the salvation to their diminished incomes. Thus most realtors are incentivized to misrepresent the risk factors and the title issues in favor of controlling the buyer and the seller into accepting pre-established criteria published by the members of Equator. It is securitization all over again, it is MERS all over again, it is a further corruption of our title system and it is avoiding the main issue — making the victims of this fraud whole even if it takes every penny the banks have. Realtors who ignore this can expect that they and their insurance carriers will be part of the gang of targeted deep pockets when lawyers smell the blood on the floor and go after the perpetrators.

Latest Changes to The Bank of America Short Sale Process

by Melissa Zavala

When processing short sales, it’s important to know about how each of the lending institutions handles loss mitigation and paperwork processing. If you have done a few short sales in Equator with different lenders, you may see what while your same Equator account is used for all your short sales at all the lending institutions, each of the servicers uses the platforms in a different manner.

Using the Equator system

When processing short sales, it’s important to know about how each of the lending institutions handles loss mitigation and paperwork processing. Many folks already know that Equator is the online platform used by 5 major lenders (Bank of America, Wells Fargo, Nationstar, GMAC, and Service One). If you have done a few short sales in Equator with different lenders, you may see what while your same Equator account is used for all your short sales at all the lending institutions, each of the servicers uses the platforms in a different manner.

And, my hat goes off to Bank of America for really raising the bar when it comes to short sale processing online. And, believe me, after processing short sales with Bank of America in 2007, this change is much appreciated.

New Bank of America Short Sale Process

Effective April 13, 2012, Bank of America made a few major changes that may make our short sale processing times more efficient.  The goal of these changes is to make short sale processing through Equator (the Internet-based platform) at Bank of America so efficient that short sale approval can be received in less than one month.

First off, Bank of America now requires their new third party authorization for all short sales being processed through the Equator system. Additionally, the folks at Bank of America will be working to improve task flow for short sales in Equator by making some minor changes to the process.

According to the Bank of America website,

Now you are required to upload five documents (which you can obtain at www.bankofamerica.com/realestateagent) for short sales initiated with an offer:

• Purchase Contract including Buyer’s Acknowledgment and Disclosure
• HUD-1
• IRS Form 4506-T
• Bank of America Short Sale Addendum
• Bank of America Third-Party Authorization Form

And, now, you will have only 5 days to submit a backup offer if your buyer has flown the coop.

The last change is a curious one, especially for short sale listing agents, since it often takes awhile to find a new buyer after you learn that the current buyer has changed his or her mind.

Short sale listings agents should be familiar with these changes in order to assure that they are providing their client with the most efficient short sale experience possible.

Continuing The Worship of Money

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Editor’s Comment:

The high priests of money located at the NY Federal Reserve and in Wall Street banks serve as the people nearest to the god of money and therefore are far more persuasive than the rest of us. We are all believers. And in that lies the undermining of the spiritual foundation of our society, our country and our future.

The trickle down theory artfully presented by one of Romney’s partners at Bain Capital makes a brilliant case filled with logic and faith in the system. The fact that there are parts of a theory that work, is hardly a reason to accept the whole theory. Romney’s partner is successfully arguing for capitalism, with which I agree — up to a point (firefighters, police, ambulance etc). Where the argument breaks down to simply absurd is that income inequality is somehow good for us and that we should be thankful for it.

If income inequality were a good thing then U.S. Prosperity, employment and economic power would be at an all time high. Instead they are at a serious low point and without further stimulus will move into recession mode which is where Europe is now, with mmost people agreeing that austerity was a bad idea.

But we listen to this nonsense because of our worship and submission to money and those that have it. And so we stagnate despite the white elephant in the living room. For the past 35 years the financial sector has been sucking money out of the system instead of putting it into the economy — which is the ONLY rational for even having a financial sector (banks, in particular). Having an economy grow where the richest 1% received 93% of the benefit is crazy.  Treating those people with extra tax incentives to do more of the same is insane.

We are a society of people serving we hope higher causes, ideals and spiritual hopes and dreams. We exist as a society not for the sake of money but for the sake of peace, prosperity, the general welfare and fairness (read our constitution — if you don’t like what it says, then you must amend it because it states the foundation and basis of our society).

Instead we let the high priests of money direct our society, our government, our thoughts and even our faith. That they stole a gargantuan amount of money from the citizens directly and indirectly as taxpayers is now known widely and yet we continue to believe.

We need more stimulus. But so far all stimulus proposals stop at the door finance instead of examining the underpinnings of our society, our government and our high priests. The largest chunk taken out of the economy amounting to trillions of dollars should simply be put back in — practicing fairness and pursuit of happiness and the general welfare of the citizens. And the way to put it back in is to stop (not slow) the foreclosures, reverse the 5 million foreclosures that were illegally obtained and work out a fair settlement on the money where everyone shares in the burden if rebuilding our society.

That stimulus will hurt nobody and cost nothing except to the banks that stole the money and homes. That stimulus of merely returning collective wealth from where it was stolen will result in spending and investing as any healthy society would have us do. And it would result, without tax increases, in fully funded social security, Medicare, Medicaid, police, fire and rebuilding our road, power, water and other infrastructures that are an embarrassment to all Americans.

Above all we must return to our faith in our ideals and view money, power and wealth as merely necessary evils that represent the cost of maintaining a society — a cost, I said, not a goal.

Foreclosure Strategists: Phx. Meet tonight: Make the record in your case

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Editor’s Comment:

Contact: Darrell Blomberg  Darrell@ForeclosureStrategists.com  602-686-7355

Meeting: Tuesday, May 15th, 2012, 7pm to 9pm

Make the Record

It appears the most rulings against homeowners are predicated on some arcane and minute failure of the homeowner to make the record.  We’ll be discussing how to make sure you cover all of those points by Making the Record as your case moves along.  We’ll also look at how the process of Making the Record starts long before you even think of going to court

We meet every week!

Every Tuesday: 7:00pm to 9:00pm. Come early for dinner and socialization. (Food service is also available during meeting.)
Macayo’s Restaurant, 602-264-6141, 4001 N Central Ave, Phoenix, AZ 85012. (east side of Central Ave just south of Indian School Rd.)
COST: $10… and whatever you want to spend on yourself for dinner, helpings are generous so bring an appetite.
Please Bring a Guest!
(NOTE: There is a $2.49 charge for the Happy Hour Buffet unless you at least order a soft drink.)

FACEBOOK PAGE FOR “FORECLOSURE STRATEGIST”

I have set up a Facebook page. (I can’t believe it but it is necessary.) The page can be viewed at www.Facebook.com, look for and “friend” “Foreclosure Strategist.”

I’ll do my best to keep it updated with all of our events.

Please get the word out and send your friends and other homeowners the link.

MEETUP PAGE FOR FORECLOSURE STRATEGISTS:

I have set up a MeetUp page. The page can be viewed at www.MeetUp.com/ForeclosureStrategists. Please get the word out and send your friends and other homeowners the link.

May your opportunities be bountiful and your possibilities unlimited.

“Emissary of Observation”

Darrell Blomberg

602-686-7355

Darrell@ForeclosureStrategists.com

Everything Built on Myth Eventually Fails

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Editor’s Comment:

The good news is that the myth of Jamie Dimon’s infallaibility is at least called into question. Perhaps better news is that, as pointed out by Simon Johnson’s article below, the mega banks are not only Too Big to Fail, they are Too Big to Manage, which leads to the question, of why it has taken this long for Congress and the Obama administration to conclude that these Banks are Too Big to Regulate. So the answer, now introduced by Senator Brown, is to make the banks smaller and  put caps on them as to what they can and cannot do with their risk management.

But the real question that will come to fore is whether lawmakers in Dimon’s pocket will start feeling a bit squeamish about doing whatever Dimon asks. He is now becoming a political and financial liability. The $2.3 billion loss (and still counting) that has been reported seems to be traced to the improper trading in credit default swaps, an old enemy of ours from the mortgage battle that continues to rage throughout the land.  The problem is that the JPM people came to believe in their own myth which is sometimes referred to as sucking on your own exhaust. They obviously felt that their “risk management” was impregnable because in the end Jamie would save the day.

This time, Jamie can’t turn to investors to dump the loss on, thus drying up liquidity all over the world. This time he can’t go to government for a bailout, and this time the traction to bring the mega banks under control is getting larger. The last vote received only 33 votes from the Senate floor, indicating that Dimon and the wall Street lobby had control of 2/3 of the senate. So let ius bask in the possibility that this is the the beginning of the end for the mega banks, whose balance sheets, business practices and public announcements have all been based upon lies and half truths.

This time the regulators are being forced by public opinion to actually peak under the hood and see what is going on there. And what they will find is that the assets booked on the balance sheet of Dimon’s monolith are largely fictitious. This time the regulators must look at what assets were presented to the Federal Reserve window in exchange for interest free loans. The narrative is shifting from the “free house” myth to the reality of free money. And that will lead to the question of who is the creditor in each of the transactions in which a mortgage loan is said to exist.

Those mortgage loans are thought to exist because of a number of incorrect presumptions. One of them is that the obligation remains unpaid and is secured. Neither is true. Some loans might still have a balance due but even they have had their balances reduced by the receipt of insurance proceeds and the payoff from credit default swaps and other credit enhancements, not to speak of the taxpayer bailout.

This money was diverted from investor lenders who were entitled to that money because their contracts and the representations inducing them to purchase bogus mortgage bonds, stated that the investment was investment grade (Triple A) and because they thought they were insured several times over. It is true that the insurance was several layers thick and it is equally true that the insurance payoff covered most if not all the balances of all the mortgages that were funded between 1996 and the present. The investor lenders should have received at least enough of that money to make them whole — i.e., all principal and interest as promissed.

Instead the Banks did the unthinkable and that is what is about to come to light. They kept the money for themselves and then claimed the loss of investors on the toxic loans and tranches that were created in pools of money and mortgages — pools that in fact never came into existence, leaving the investors with a loose partnership with other investors, no manager, and no accounting. Every creditor is entitled to payment in full — ONCE, not multiple times unless they have separate contracts (bets) with parties other than the borrower. In this case, with the money received by the investment banks diverted from the investors, the creditors thought they had a loss when in fact they had a claim against deep pocket mega banks to receive their share of the proceeds of insurance, CDS payoffs and taxpayer bailouts.

What the banks were banking on was the stupidity of government regulators and the stupidity of the American public. But it wasn’t stupidity. it was ignorance of the intentional flipping of mortgage lending onto its head, resulting in loan portfolios whose main characteristic was that they would fail. And fail they did because the investment banks “declared” through the Master servicer that they had failed regardless of whether people were making payments on their mortgage loans or not. But the only parties with an actual receivable wherein they were expecting to be paid in real money were the investor lenders.

Had the investor lenders received the money that was taken by their agents, they would have been required to reduce the balances due from borrowers. Any other position would negate their claim to status as a REMIC. But the banks and servicers take the position that there exists an entitlement to get paid in full on the loan AND to take the house because the payment didn’t come from the borrower.

This reduction in the balance owed from borrowers would in and of itself have resulted in the equivalent of “principal reduction” which in many cases was to zero and quite possibly resulting in a claim against the participants in the securitization chain for all of the ill-gotten gains. remember that the Truth In Lending Law states unequivocally that the undisclosed profits and compensation of ANYONE involved in the origination of the loan must be paid, with interest to the borrower. Crazy you say? Is it any crazier than the banks getting $15 million for a $300,000 loan. Somebody needs to win here and I see no reason why it should be the megabanks who created, incited, encouraged and covered up outright fraud on investor lenders and homeowner borrowers.

Making Banks Small Enough And Simple Enough To Fail

By Simon Johnson

Almost exactly two years ago, at the height of the Senate debate on financial reform, a serious attempt was made to impose a binding size constraint on our largest banks. That effort – sometimes referred to as the Brown-Kaufman amendment – received the support of 33 senators and failed on the floor of the Senate. (Here is some of my Economix coverage from the time.)

On Wednesday, Senator Sherrod Brown, Democrat of Ohio, introduced the Safe, Accountable, Fair and Efficient Banking Act, or SAFE, which would force the largest four banks in the country to shrink. (Details of this proposal, similar in name to the original Brown-Kaufman plan, are in this briefing memo for a Senate banking subcommittee hearing on Wednesday, available through Politico; see also these press release materials).

His proposal, while not likely to immediately become law, is garnering support from across the political spectrum – and more support than essentially the same ideas received two years ago.  This week’s debacle at JP Morgan only strengthens the case for this kind of legislative action in the near future.

The proposition is simple: Too-big-to-fail banks should be made smaller, and preferably small enough to fail without causing global panic. This idea had been gathering momentum since the fall of 2008 and, while the Brown-Kaufman amendment originated on the Democratic side, support was beginning to appear across the aisle. But big banks and the Treasury Department both opposed it, parliamentary maneuvers ensured there was little real debate. (For a compelling account of how the financial lobby works, both in general and in this instance, look for an upcoming book by Jeff Connaughton, former chief of staff to former Senator Ted Kaufman of Delaware.)

The issue has not gone away. And while the financial sector has pushed back with some success against various components of the Dodd-Frank reform legislation, the idea of breaking up very large banks has gained momentum.

In particular, informed sentiment has shifted against continuing to allow very large banks to operate in their current highly leveraged form, with a great deal of debt and very little equity.  There is increasing recognition of the massive and unfair costs that these structures impose on the rest of the economy.  The implicit subsidies provided to “too big to fail” companies allow them to boost compensation over the cycle by hundreds of millions of dollars.  But the costs imposed on the rest of us are in the trillions of dollars.  This is a monstrously unfair and inefficient system – and sensible public figures are increasingly pointing this out (including Jamie Dimon, however inadvertently).

American Banker, a leading trade publication, recently posted a slide show, “Who Wants to Break Up the Big Banks?” Its gallery included people from across the political spectrum, with a great deal of financial sector and public policy experience, along with quotations that appear to support either Senator Brown’s approach or a similar shift in philosophy with regard to big banks in the United States. (The slide show is available only to subscribers.)

According to American Banker, we now have in the “break up the banks” corner (in order of appearance in that feature): Richard Fisher, president of the Federal Reserve Bank of Dallas; Sheila Bair, former chairman of the Federal Deposit Insurance Corporation; Tom Hoenig, a board member of the Federal Deposit Insurance Corporation and former president of the Federal Reserve Bank of Kansas City; Jon Huntsman, former Republican presidential candidate and former governor of Utah; Senator Brown; Mervyn King, governor of the Bank of England; Senator Bernie Sanders of Vermont; and Camden Fine, president of the Independent Community Bankers of America. (I am also on the American Banker list).

Anat Admati of Stanford and her colleagues have led the push for much higher capital requirements – emphasizing the particular dangers around allowing our largest banks to operate in their current highly leveraged fashion. This position has also been gaining support in the policy and media mainstream, most recently in the form of a powerful Bloomberg View editorial.

(You can follow her work and related discussion on this Web site; on twitter she is @anatadmati.)

Senator Brown’s legislation reflects also the idea that banks should fund themselves more with equity and less with debt. Professor Admati and I submitted a letter of support, together with 11 colleagues whose expertise spans almost all dimensions of how the financial sector really operates.

We particularly stress the appeal of having a binding “leverage ratio” for the largest banks. This would require them to have at least 10 percent equity relative to their total assets, using a simple measure of assets not adjusted for any of the complicated “risk weights” that banks can game.

We also agree with the SAFE Banking Act that to limit the risk and potential cost to taxpayers, caps on the size of an individual bank’s liabilities relative to the economy can also serve a useful role (and the same kind of rule should apply to non-bank financial institutions).

Under the proposed law, no bank-holding company could have more than $1.3 trillion in total liabilities (i.e., that would be the maximum size). This would affect our largest banks, which are $2 trillion or more in total size, but in no way undermine their global competitiveness. This is a moderate and entirely reasonable proposal.

No one is suggesting that making JPMorgan Chase, Bank of America, Citigroup and Wells Fargo smaller would be sufficient to ensure financial stability.

But this idea continues to gain traction, as a measure complementary to further strengthening and simplifying capital requirements and generally in support of other efforts to make it easier to handle the failure of financial institutions.

Watch for the SAFE Banking Act to gain further support over time.

Objections and Preserving Your Rights on Appeal: From, Whose Lien Is It Anyway? by Neil F Garfield

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Editor’s Comment:

Foreclosure cases are won or lost on procedure more than on the merits of the case offered by either side. Lawyer and especially pro se litigants tend to use the right of appeal, as though it was a vehicle for entertaining evidence, objections or motions that should have been made. These make up a large percentage of the 85% of cases that are affirmed on appeal.[1]

The appellate court rarely has even the power to consider affidavits or other evidence that was not proffered and which does not show up on the record on appeal sent by the clerk of the court on the “trial” level. The appellate court is limited to what DID happen and not what SHOULD have happened. If the matter was properly raised in the lower court, then the matter may be considered by the appellate court. If not, then they must simply state that the grounds for appeal were not properly preserved for appeal and affirm the decision of the lower court Judge.

In foreclosure cases, most of the objections that should be made are known in advance and quite probably should be brought or offered as a motion in limine before the actual hearing, so that the complete focus of the court is on the issue that  would be presented by opposing counsel  and the objections raised by the borrower homeowner. In those cases, where the objections are known in advance, you should not only state that you have an objection, but the state the reasons for your objection and include a memorandum of law on the point, complete with copies of the most relevant cases.

Most of the errors that I see on the trial court level amounts to denial of due process in that the Court refuses to hear the merits or to allow the parties to conduct discovery. If that is the case in your case, you should mention it even though it is “fundamental error” that the appellate court could hear even without raising the objection contemporaneously with the subject of your objection.

This assures (along with the transcription from a court reporter) that everything about that objection was stated, presented and denied, if such is the case. It might also alert the Judge that you are ready to make such an appeal. If the objection is procedural relating to whether a proper foundation has been laid for the introduction of evidence, or whether the Court is accepting the proffer of counsel without any evidence in the record to support it, then you must make that point clearly and with support from citations in your own state. If the court refuses to hear the objections in limine then you still have the matters raised as part of the court record but you must raise the objection in the hearing or you might well have waived them unless your main point (ill advised) is that the court abused its discretion in denying the motion in limine without hearing it on the merits.

In every case I have seen reversed on appeal, there was something in the record that contradicted or nothing in the record that supported the position taken on appeal.

There are no magic words or bullets on objections. What is necessary is that you state it, without rambling on tangent subjects, with sufficient specificity so that the appellate court will understand in a flash what your objection related to, and what grounds and what law upon which you were relying. Do not combine objections. If you have more than one then state that you have 2 or more objections and proceed with the first.

The mistake I see in appeals and trial proceedings is that the attorney for the homeowner borrower remains silent while opposing counsel states facts that are not in the record (because there has not been an adversary proceeding and that you deny those facts, as they are in issue between the two sides). In many cases the Judge takes silence as a concession that the facts are true as stated and that your defense relates to something other than contesting the facts being proffered by opposing counsel.

The appellate court might agree, particularly if you are not clear in immediately identifying the fact that there was a real transaction in which money exchanged hands and then another event which involved the signing of papers but in which there was no actual transaction. The fact that the borrower believed the papers to be true while everyone else knew they were not, cannot now be used to further the fraud upon your client.

____________________

[1] It has been pointed out by some bankruptcy court judges that out of the three possibilities for appeal of a bankruptcy court ruling, petitioners and their counsel usually bypass the appeal laterally to the sitting District Court Judge charged with hearing civil cases with Federal jurisdiction and with hearing appeals from decisions made in the bankruptcy court. Sources tell us that the percentage of reversals and remand is possibly as high as 50% when brought to the District Judge rather than the BAP or Circuit Court of Appeals.

The Rain in Spain May Start Falling Here

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Editor’s Comment:

It is typical politics. You know the problem and the cause but you do nothing about the cause. You don’t fix it because you view your job in government as justifying the perks you get from private companies rather than reason the government even exists — to provide for the protection and welfare of the citizens of that society. It seems that the government of each country has become an entity itself with an allegiance but to itself leaving the people with no government at all.

And the average man in the streets of Boston or Barcelona cannot be fooled or confused any longer. Hollande in France was elected precisely because the people wanted a change that would align the government with the people, by the people and for the people. The point is not whether the people are right or wrong. The point is that we would rather make our own mistakes than let politicians make them for us in order to line their own pockets with gold.

Understating foreclosures and evictions, over stating recovery of the housing Market, lying about economic prospects is simply not covering it any more. The fact is that housing prices have dropped to all time lows and are continuing to drop. The fact is that we would rather kick people out of their homes on fraudulent pretenses and pay for homeless sheltering than keep people in their homes. We have a government that is more concerned with the profits of banks than the feeding and housing of its population. 

When will it end? Maybe never. But if it changes it will be the result of an outraged populace and like so many times before in history, the new aristocracy will have learned nothing from history. The cycle repeats.

Spain Underplaying Bank Losses Faces Ireland Fate

By Yalman Onaran

Spain is underestimating potential losses by its banks, ignoring the cost of souring residential mortgages, as it seeks to avoid an international rescue like the one Ireland needed to shore up its financial system.

The government has asked lenders to increase provisions for bad debt by 54 billion euros ($70 billion) to 166 billion euros. That’s enough to cover losses of about 50 percent on loans to property developers and construction firms, according to the Bank of Spain. There wouldn’t be anything left for defaults on more than 1.4 trillion euros of home loans and corporate debt. Taking those into account, banks would need to increase provisions by as much as five times what the government says, or 270 billion euros, according to estimates by the Centre for European Policy Studies, a Brussels-based research group. Plugging that hole would increase Spain’s public debt by almost 50 percent or force it to seek a bailout, following in the footsteps of Ireland, Greece and Portugal.

“How can you only talk about one type of real estate lending when more and more loans are going bad everywhere in the economy?” said Patrick Lee, a London-based analyst covering Spanish banks for Royal Bank of Canada. “Ireland managed to turn its situation around after recognizing losses much more aggressively and thus needed a bailout. I don’t see how Spain can do it without outside support.”

Double-Dip Recession

Spain, which yesterday took over Bankia SA, the nation’s third-largest lender, is mired in a double-dip recession that has driven unemployment above 24 percent and government borrowing costs to the highest level since the country adopted the euro. Investors are concerned that the Mediterranean nation, Europe’s fifth-largest economy with a banking system six times bigger than Ireland’s, may be too big to save.

In both countries, loans to real estate developers proved most toxic. Ireland funded a so-called bad bank to take much of that debt off lenders’ books, forcing writedowns of 58 percent. The government also required banks to raise capital to cover what was left behind, assuming expected losses of 7 percent for residential mortgages, 15 percent on the debt of small companies and 4 percent on that of larger corporations.

Spain’s banks face bigger risks than the government has acknowledged, even with lower default rates than Ireland experienced. If losses reach 5 percent of mortgages held by Spanish lenders, 8 percent of loans to small companies, 1.5 percent of those to larger firms and half the debt to developers, the cost will be about 250 billion euros. That’s three times the 86 billion euros Irish domestic banks bailed out by their government have lost as real estate prices tumbled.

Bankia Loans

Moody’s Investors Service, a credit-ratings firm, said it expects Spanish bank losses of as much as 306 billion euros. The Centre for European Policy Studies said the figure could be as high as 380 billion euros.

At the Bankia group, the lender formed in 2010 from a merger of seven savings banks, about half the 38 billion euros of real estate development loans held at the end of last year were classified as “doubtful” or at risk of becoming so, according to the company’s annual report. Bad loans across the Valencia-based group, which has the biggest Spanish asset base, reached 8.7 percent in December, and the firm renegotiated almost 10 billion euros of assets in 2011, about 5 percent of its loan book, to prevent them from defaulting.

The government, which came to power in December, announced yesterday that it will take control of Bankia with a 45 percent stake by converting 4.5 billion euros of preferred shares into ordinary stock. The central bank said the lender needs to present a stronger cleanup plan and “consider the contribution of public funds” to help with that.

Rajoy Measures

The Bank of Spain has lost its prestige for failing to supervise banks sufficiently, said Josep Duran i Lleida, leader of Catalan party Convergencia i Unio, which often backs Prime Minister Mariano Rajoy’s government. Governor Miguel Angel Fernandez Ordonez doesn’t need to resign at this point because his term expires in July, Duran said.

Rajoy has shied away from using public funds to shore up the banks, after his predecessor injected 15 billion euros into the financial system. He softened his position earlier this week following a report by the International Monetary Fund that said the country needs to clean up the balance sheets of “weak institutions quickly and adequately” and may need to use government funds to do so.

“The last thing I want to do is lend public money, as has been done in the past, but if it were necessary to get the credit to save the Spanish banking system, I wouldn’t renounce that,” Rajoy told radio station Onda Cero on May 7.

Santander, BBVA

Rajoy said he would announce new measures to bolster confidence in the banking system tomorrow, without giving details. He might ask banks to boost provisions by 30 billion euros, said a person with knowledge of the situation who asked not to be identified because the decision hadn’t been announced.

Spain’s two largest lenders, Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), earn most of their income outside the country and have assets in Latin America they can sell to raise cash if they need to bolster capital. In addition to Bankia, there are more than a dozen regional banks that are almost exclusively domestic and have few assets outside the country to sell to help plug losses.

In investor presentations, the Bank of Spain has said provisions for bad debt would cover losses of between 53 percent and 80 percent on loans for land, housing under construction and finished developments. An additional 30 billion euros would increase coverage to 56 percent of such loans, leaving nothing to absorb losses on 650 billion euros of home mortgages held by Spanish banks or 800 billion euros of company loans.

Housing Bubble

“Spain is constantly playing catch-up, so it’s always several steps behind,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy, a consulting firm in London specializing in sovereign-credit risk. “They should have gone down the Irish route, bit the bullet and taken on the losses. Every time they announce a small new measure, the goal posts have already moved because of deterioration in the economy.”

Without aggressive writedowns, Spanish banks can’t access market funding and the government can’t convince investors its lenders can survive a contracting economy, said Benjamin Hesse, who manages five financial-stock funds at Fidelity Investments in Boston, which has $1.6 trillion under management.

Spanish banks have “a 1.7 trillion-euro loan book, one of the world’s largest, and they haven’t even started marking it,” Hesse said. “The housing bubble was twice the size of the U.S. in terms of peak prices versus 1990 prices. It’s huge. And there’s no way out for Spain.”

Irish Losses

House prices in Spain more than doubled in a decade and have dropped 30 percent since the first quarter of 2008. U.S. homes, which also doubled in value, have lost 35 percent. Ireland’s have fallen 49 percent after quadrupling.

Ireland injected 63 billion euros into its banks to recapitalize them after shifting property-development loans to the National Asset Management Agency, or NAMA, and requiring other writedowns. That forced the country to seek 68 billion euros in financial aid from the European Union and the IMF.

The losses of bailed-out domestic banks in Ireland have reached 21 percent of their total loans. Spanish banks have reserved for 6 percent of their lending books.

“The upfront loss recognition Ireland forced on the banks helped build confidence,” said Edward Parker, London-based head of European sovereign-credit analysis at Fitch Ratings. “In contrast, Spain has had a constant trickle of bad news about its banks, which doesn’t instill confidence.”

Mortgage Defaults

Spain’s home-loan defaults were 2.7 percent in December, according to the Spanish mortgage association. Home prices are propped up and default rates underreported because banks don’t want to recognize losses, according to Borja Mateo, author of “The Truth About the Spanish Real Estate Market.” Developers are still building new houses around the country, even with 2 million vacant homes.

Ireland’s mortgage-default rate was about 7 percent in 2010, before the government pushed for writedowns, with an additional 5 percent being restructured, according to the Central Bank of Ireland. A year later, overdue and restructured home loans reached 18 percent. At the typical 40 percent recovery rate, Irish banks stand to lose 11 percent of their mortgage portfolios, more than the 7 percent assumed by the central bank in its stress tests. That has led to concern the government may need to inject more capital into the lenders.

‘The New Ireland’

Spain, like Ireland, can’t simply let its financial firms fail. Ireland tried to stick banks’ creditors with losses and was overruled by the EU, which said defaulting on senior debt would raise the specter of contagion and spook investors away from all European banks. Ireland did force subordinated bondholders to take about 15 billion euros of losses.

The EU was protecting German and French banks, among the biggest creditors to Irish lenders, said Marshall Auerback, global portfolio strategist for Madison Street Partners LLC, a Denver-based hedge fund.

“Spain will be the new Ireland,” Auerback said. “Germany is forcing once again the socialization of its banks’ losses in a periphery country and creating sovereign risk, just like it did with Ireland.”

Spanish government officials and bank executives have downplayed potential losses on home loans by pointing to the difference between U.S. and Spanish housing markets. In the U.S., a lender’s only option when a borrower defaults is to seize the house and settle for whatever it can get from a sale. The borrower owes nothing more in this system, called non- recourse lending.

‘More Pressure’

In Spain, a bank can go after other assets of the borrower, who remains on the hook for the debt no matter what the price of the house when sold. Still, the same extended liability didn’t stop the Irish from defaulting on home loans as the economy contracted, incomes fell and unemployment rose to 14 percent.

“As the economy deteriorates, the quality of assets is going to get worse,” said Daragh Quinn, an analyst at Nomura International in Madrid. “Corporate loans are probably going to be a bigger worry than mortgages, but losses will keep rising. Some of the larger banks, in particular BBVA and Santander, will be able to generate enough profits to absorb this deterioration, but other purely domestic ones could come under more pressure.”

Spain’s government has said it wants to find private-sector solutions. Among those being considered are plans to let lenders set up bad banks and to sell toxic assets to outside investors.

Correlation Risk

Those proposals won’t work because third-party investors would require bigger discounts on real estate assets than banks will be willing to offer, RBC’s Lee said.

Spanish banks face another risk, beyond souring loans: They have been buying government bonds in recent months. Holdings of Spanish sovereign debt by lenders based in the country jumped 32 percent to 231 billion euros in the four months ended in February, data from Spain’s treasury show.

That increases the correlation of risk between banks and the government. If Spain rescues its lenders, the public debt increases, threatening the sovereign’s solvency. When Greece restructured its debt, swapping bonds at a 50 percent discount, Greek banks lost billions of euros and had to be recapitalized by the state, which had to borrow more from the EU to do so.

In a scenario where Spain is forced to restructure its debt, even a 20 percent discount could spell almost 50 billion euros of additional losses for the country’s banks.

“Spain will have to turn to the EU for funds to solve its banking problem,” said Madison Street’s Auerback. “But there’s little money left after the other bailouts, so what will Spain get? That’s what worries everybody.”

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Read Exceprt of the Draft Introduction below: WHOSE LIEN IS IT ANYWAY? Real Property, Mortgages and Foreclosures Post-Securitization A treatise, practice manual and forms for litigation of claims relating to claims relating to securitized loans By Neil F Garfield, Esq. MBA, JD Author and Editor of livinglies.wordpress.com Published by GTC|Honors  INTRODUCTION If you want to trace the genesis of the mortgage meltdown then I suggest that you purchase a copy of my original workbook that was published before the crash. It accurately predicted the crash, the reasons, and the strategies that were employed by the banks as well as predicting those strategies that would assist people who wanted to challenge what we eventually named the “pretender Lender.” This is the first revision of the Attorneys Workbook first published in 2008, when foreclosure, mortgage, priority, securitization claims were in their infancy. Since then, hundreds of decisions have been rendered, new statutes have been passed, and revelations (many accurately predicted by the 2008 workbook) have passed into mainstream media. A certain amount of knowledge as to the nature and definition of a deed, mortgage, note, negotiable instrument is assumed here, which also differentiates this book from the previous edition. Regulatory agencies have awakened to the problem only to fail the people by limpid enforcement and required restitution. The question must be asked, after reputable reports from San Francisco and several recording offices of several states that the foreclosures show evidence that the party who bid in the property was a complete stranger and that they had no right to submit a “credit bid” why are we even discussing the resolution to an obvious problem? In the bankruptcy courts, way are we finding it necessary to state the obvious: that the party who filed the Motion to Lift the Automatic Stay must be the party to actually foreclose? And why are credit bids being accepted from non-creditors? The answers unfortunately include political factors. We are at one of many crossroads our nation has endured wherein the question must be answered “Are we a Nation of Laws” or a nation of men where power gets increasingly limited to the biggest bully on the block. While it is true that Judges, some of whom were at one time openly hostile to borrowers’ defense, are now ruling in favor of the borrower on preliminary motions, it is nevertheless true that at the time of the writing of this book, more judges are continuing to rubber stamp foreclosures than those who insist on seeing documentation that can be admitted as evidence. Some of the bad results are, as pointed out later, the result of lawyers and pro se litigants who fail to grasp the nuances and exotic nature of the securitization claims and structure presented by Wall Street. Any judge who hears from one side concessions that amount to admissions of the basic facts and elements of a foreclosure is constrained to rule in favor of the party acting as lender even if the judge suspects that the would-be forecloser is a stranger to the transaction. The purpose of this book is to provide a treatise treatment and practice manual of the subject of residential and commercial mortgages in which there is the possibility of a securitization claim being asserted with respect to past, present or future transactions. The practice pointers include issues presented in judicial and non-judicial foreclosures, state court mortgage litigation, state court eviction, federal jurisdiction (removal and remand), bankruptcy, and specific analyses of milestone issues. There are many things we now know that we could only surmise at the time of the first workbook. Want to read more? Download entire introduction for the Attorney Workbook, Treatise & Practice Manual 2012 Ed – Sample Pre-Order the new workbook today for up to a $150 savings, visit our store for more details. Act now, offer ends soon!

AP Fannie, Freddie and BOA set to Reduce Principal and Payments

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Editor’s Comment:

Partly as a result of the recent settlement with the Attorneys General and partly because they have run out of options and excuses, the banks are reducing principal and offering to reduce payments as well. What happened to the argument that we can’t reduce principal because it would be unfair to homeowners who are not in distress? Flush. It was never true. These loans were based on fake appraisals at the outset, the liens were never perfected and the banks are staring down a double barreled shotgun: demands for repurchase from investors who correctly allege and can easily prove that the loans were underwritten to fail PLUS the coming rash of decisions showing that the mortgage lien never attached to the land. The banks have nothing left. BY offering principal reductions they get new paperwork that allows them to correct the defects in documentation and they retain the claim of plausible deniability regarding origination documents that were false, predatory, deceptive and fraudulent. 

Fannie, Freddie are set to reduce mortgage balances in California

The mortgage giants sign on to Keep Your Home California, a $2-billion foreclosure prevention program, after state drops a requirement that lenders match taxpayer funds used for principal reductions.

By Alejandro Lazo

As California pushes to get more homeowners into a $2-billion foreclosure prevention program, some Fannie Mae and Freddie Mac borrowers may see their mortgages shrunk through principal reduction.

State officials are making a significant change to the Keep Your Home California program. They are dropping a requirement that banks match taxpayers funds when homeowners receive mortgage reductions through the program.

The initiative, which uses federal funds from the 2008 Wall Street bailout to help borrowers at risk of foreclosure, has faced lackluster participation and lender resistance since it was rolled out last year. By eliminating the requirement that banks provide matching funds, state officials hope to make it easier for homeowners to get principal reductions.

The participation by Fannie Mae and Freddie Mac, confirmed Monday, could provide a major boost to Keep Your Home California.

Fannie Mae and Freddie Mac own about 62% of outstanding mortgages in the Golden State, according to the state attorney general’s office. But since the program was unveiled last year, neither has elected to participate in principal reduction because of concerns about additional costs to taxpayers.

Only a small number of California homeowners — 8,500 to 9,000 — would be able to get mortgage write-downs with the current level of funds available. But given the previous opposition to these types of modifications by the two mortgage giants, housing advocates who want to make principal reduction more widespread hailed their involvement.

“Having Fannie and Freddie participate in the state Keep Your Home principal reduction program would be a really important step forward,” said Paul Leonard, California director of the Center for Responsible Lending. “Fannie and Freddie are at some level the market leaders; they represent a large share of all existing mortgages.”

The two mortgage giants were seized by the federal government in 2008 as they bordered on bankruptcy, and taxpayers have provided $188 billion to keep them afloat.

Edward J. DeMarco, head of the federal agency that oversees Fannie and Freddie, has argued that principal reduction would not be in the best interest of taxpayers and that other types of loan modifications are more effective.

But pressure has mounted on DeMarco to alter his position. In a recent letter to DeMarco, congressional Democrats cited Fannie Mae documents that they say showed a 2009 pilot program by Fannie would have cost only $1.7 million to implement but could have provided more than $410 million worth of benefits. They decried the scuttling of that program as ideological in nature.

Fannie and Freddie last year made it their policy to participate in state-run principal reduction programs such as Keep Your Home California as long as they or the mortgage companies that work for them don’t have to contribute funds.

Banks and other financial institutions have been reluctant to participate in widespread principal reductions. Lenders argue that such reductions aren’t worth the cost and would create a “moral hazard” by rewarding delinquent borrowers.

As part of a historic $25-billion mortgage settlement reached this year, the nation’s five largest banks agreed to reduce the principal on some of the loans they own.

Since then Fannie and Freddie have been a major focus of housing advocates who argue that shrinking the mortgages of underwater borrowers would boost the housing market by giving homeowners a clear incentive to keep paying off their loans. They also say that principal reduction would reduce foreclosures by lowering the monthly payments for underwater homeowners and giving them hope they would one day have more equity in their homes.

“In places that are deeply underwater, ultimately those loans where you are not reducing principal, they are going to fail anyway,” said Richard Green of USC’s Lusk Center for Real Estate. “So you are putting off the day of reckoning.”

The state will allocate the federal money, resulting in help for fewer California borrowers than the 25,135 that was originally proposed. The $2-billion program is run by the California Housing Finance Agency, with $790 million available for principal reductions.

Financial institutions will be required to make other modifications to loans such as reducing the interest rate or changing the terms of the loans.

The changes to the program will roll out in early June, officials with the California agency said. The agency will increase to $100,000 from $50,000 the amount of aid borrowers can receive.

Spokespeople for the nation’s three largest banks — Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co. — said they were evaluating the changes. BofA has been the only major servicer participating in the principal reduction component of the program.

Now It’s the Servicers Betting Against Homeowners

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Editor’s Analysis:

Start with some premises that were speculation but are now known to be true. First, banks and servicers need as many properties in foreclosure as possible. There are many reasons. The banks want it because it covers up the outright bold lies they told investors to get them to “buy” non-existent mortgage bonds most of which involved either no paper certificate at all or they were simply not worth the paper they were written on. Second, the bankers (management) could make a killing depressing Market prices and then relieving the pressure when they wanted prices to go up. Third, servicers make far more money in fees as long as they are “servicing” a loan in default because their fees are higher on loans in distress. Fourth in many cases the servicers actually get to “own” the property if the foreclosure sale occurs.

The tactic used now is that if you miss a mortgage payment or even if you don’t, the servicer can say they were required to obtain insurance on their own because you didn’t. This is forced place insurance and nearly all of it is a bold-faced lie. Now the servicer adds to your mortgage payment the cost of forced place insurance even if they paid nothing. If you are on the edge, the cost of forced placed insurance (many times 3-4 times normal rates) is the straw that breaks the camel’s back. The result? Many homes that were otherwise current in their payments end up in foreclosure.

This can be stopped. On challenge, most servicers back off of forced place insurance claims, but getting them to stop the foreclosure is more difficult — usually because by the time the homeowner challenges the forced place insurance some scheduled payments have been missed. But upon further challenge it can usually be shown that the scheduled payments were in fact made by the servicer to the creditor, meaning that the declaration of a default and notice of sale were bogus — just like everything else in this mess.

Servicers incentivized to bet against homeowners, may hurt housing

by Tara Steele

Insurance policies are not often pointed to as the problem with housing, but one news outlet says homeowners are being pushed off of the foreclosure cliff by force-place insurance.

Force-placed insurance’s impact on housing

“Force-placed” insurance, or property insurance the bank takes out for homeowners who miss an insurance payment has recently come under fire by Bloomberg News Editors¹ who say the policies cover less and cost more, and will likely end up putting homeowners into foreclosure regardless of the force-placed insurance policies.

Deeper analysis of the forced-place policies revealed that the loss ratio is much lower than expected, in other words, the percentage of premiums paid out on claims is severely low, paying out $0.20 cents on the dollar, when the average $0.55 cents on the dollar payout of most other types of policies. The implication is that the insurance companies are charging extremely high premiums, and when the policies actually pay out, they barely cover the bank’s losses.

Bloomberg reports that banks not only receive commissions on the forced-place policies, they make even more money by re-insuring them, so the bank takes out a policy to protect the property but is making a more lucrative bet that the policy will never pay out. Fannie Mae has already instructed servicers of Fannie-backed loans to reduce the cost of insurance premiums, but Bloomberg implies that these directives are weak and more can be done.

Although the Consumer Financial Protection Bureau is looking into forced-place insurance, Bloomberg urges the CFPB to require all servicers to pick up the homeowner’s lapsed policy when possible, otherwise seek bids for lower cost options, and notes that Freddie mac should demand its servicers to get competitive bids on insurance policies.

The crux of the forced issue

The CFPB should investigate the commissions made by banks on these policies, says Bloomberg, as they are a major incentive to put homeowners into policies they cannot possibly afford. “Many homeowners who experience coverage gaps have severe financial problems that lead them to stop paying their insurance bills,” notes Bloomberg. “They are already at great risk of foreclosure. Banks and insurers shouldn’t be allowed to add to the likelihood of default by artificially inflating the cost of insurance.”

The Banks, Rushing To Foreclose So They Can Sit On Vacant Homes

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Editor’s Comment:

Author: Matthew D. Weidner, Esq.

These damn judges here in Florida, they really need to wake up, start working harder and grant more foreclosures more quickly.  Hurry up already, and stop whining about budget cuts and staff positions cut, and who cares that the entire state court system is funded by less than one percent of the state budget, and shut up about case loads that have tripled to 3,000 or more cases per judge and frazzled judicial assistant.  Just grant those damn foreclosure judgments….after all, everyone knows the economy cannot recover until these damn slacking judges push through this foreclosure backlog….right?

Oh wait a minute, there’s apparently a bit of a fly in this ointment.  You see, apparently the banks are cancelling foreclosure sales just as quickly as our good judges are able to sign those damn Final Judgments of Foreclosure…yup…apparently, now wait just a dadgummed minute.

You mean to tell me our elected circuit court judges are busy throwing families out into the streets just so the banks can amass ever larger portfolios of vacant and abandoned properties that they are apparently not responsible for taking care of?

Well shut my mouth!  You don’t say?  Really!  No way?  Do you mean to tell me we can’t blame all this on our under-funded judges and this ain’t the fault of those damn ethically-challenged foreclosure defense attorneys what with all their delay tactics and pesky rules and those absurd arguments about THE LAW…blah, blah, blah.

When exactly will this nation wake up and start directing appropriate anger and rage at the real evil that’s hard at work, everyday all across this sleeping nation?

From the Tampa Times:

It’s an oft-repeated pattern.

In the last 12 months, lenders have canceled auctions on 4,204 properties in Pinellas and Hillsborough counties. Sales have been canceled two, three, even nine times on some homes.

In many cases, banks delay seizures to avoid having to pay maintenance bills or homeowner association fees. Meanwhile, neighbors fend off vandals and thieves and worry about property values falling because of the deteriorating houses.

The repeated cancellations burden the court system.

“These never seem to go away,” said Thomas McGrady, chief judge of the Pinellas-Pasco County Circuit. “It’s a nuisance.”

Banks Pushing Homeowners Over Foreclosure Cliff

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Editor’s Comment:

Whether it is force-placed insurance or any other device available, banks and servicers are pushing homeowners, luring homeowners and tricking homeowners into foreclosures. It is the only way they can put distance between them and the collosal corruption of title, the fact that strangers are foreclosing on homes, and claims of predatory, deceptive and fraudulent lending practices.

Most of those five million homes belong back in the hands of the people who lost them in fake foreclosures. And that day is coming.

Foreclosures are good but short- sales are better as those in the real estate Market will tell you. Either way it has someone other than the bank or servicer signing the deed to the ” buyer” and eventually it will all come tumbling down. But what Banks and servicers are betting is that the more chaotic and confused the situation the less likely the blame will fall on them.

Watch out Mr. Banker, you haven’t seen our plan to hold you accountable. You might think you have control of the narrative but that is going to change because the real power is held by the people. Go read the constitution — especially the 9th Amendment.

Look Who’s Pushing Homeowners Off the Foreclosure Cliff

By the Editors

One of the more confounding aspects of the U.S. housing crisis has been the reluctance of lenders to do more to assist troubled borrowers. After all, when homes go into foreclosure, banks lose money.

Now it turns out some lenders haven’t merely been unhelpful; their actions have pushed some borrowers over the foreclosure cliff. Lenders have been imposing exorbitant insurance policies on homeowners whose regular coverage lapses or is deemed insufficient. The policies, standard homeowner’s insurance or extra coverage for wind damage, say, for Florida residents, typically cost five to 10 times what owners were previously paying, tipping many into foreclosure.

The situation has caught the attention of state regulators and the Consumer Financial Protection Bureau, which is considering rules to help homeowners avoid unwarranted “force- placed insurance.” The U.S. ought to go further and limit commissions, fine any company that knowingly overcharges a homeowner and require banks to seek competitive bids for force- placed insurance policies. Because insurance is not regulated at the federal level, states also need to play a stronger role in bringing down rates.

All mortgages require homeowners to maintain insurance on their property. Most mortgages also allow the lender to purchase insurance for the home and “force-place” it if a policy lapses or is deemed insufficient. These standard provisions are meant to protect the lender’s collateral — the property — if a calamity occurs.

High-Priced Policies

Here’s how it generally works: Banks and their mortgage servicers strike arrangements — often exclusive — with insurance companies in which the banks agree to buy high-priced policies on behalf of homeowners whose coverage has lapsed. The bank advances the premium to the insurer, and the insurer pays the bank a commission, which is priced into the premium. (Insurers say the commissions compensate banks for expenses like “advancing premiums, billing and collections.”) The homeowner is then billed for the premium, commissions and all.

It’s a lucrative business. Premiums on force-placed insurance exceeded $5.5 billion in 2010, according to the Center for Economic Justice, a group that advocates on behalf of low- income consumers. An investigation by Benjamin Lawsky, who heads New York State’s Department of Financial Services, has found nearly 15 percent of the premiums flow back to the banks.

It doesn’t end there. Lenders often get an additional cut of the profits by reinsuring the force-placed policy through the bank’s insurance subsidiary. That puts the lender in the conflicted position of requiring insurance to protect its collateral but with a financial incentive to never pay out a claim.

Both New York and California regulators have found the loss ratio on these policies — the percentage of premiums paid on claims — to be significantly lower than what insurers told the state they expected to pay out, suggesting that premiums are too high. For instance, most insurers estimate a loss ratio of 55 percent, meaning they’ll have to pay out about 55 cents on the dollar. But actual loss ratios have averaged about 20 percent over the last six years.

It’s worth noting that force-placed policies often provide less protection than cheaper policies available on the open market, a fact often not clearly disclosed. The policies generally protect the lender’s financial interest, not the homeowner’s. If a fire wipes out a house, most force-placed policies would pay only to repair the structure and nothing else.

Lack of Clarity

Homeowners can obviously avoid force-placed insurance by keeping their coverage current. Banks are required to remove the insurance as soon as a homeowner offers proof of other coverage. But the system, as the New York state investigation and countless lawsuits have demonstrated, is defined by a woeful lack of clarity, so much so that Fannie Mae has issued a directive to loan servicers to lower insurance costs and speed up removal times. And it said it would no longer reimburse commissions. The recent settlement with five financial firms over foreclosure abuses also requires banks to limit excessive coverage and ensure policies are purchased “for a commercially reasonable price.”

That’s not enough. Tougher standards should be applied uniformly, regardless of the loan source. Freddie Mac should follow Fannie Mae’s lead and require competitive pricing on the loans it backs. The consumer bureau should require mortgage servicers to reinstate a homeowner’s previous policy whenever possible, or to obtain competitive bids when not.

The bureau should also prevent loan servicers from accepting commissions or, at the very least, prohibit commissions from inflating the premium. It should require servicers to better communicate to borrowers that their policy has lapsed, explain clearly what force-placed insurance will cost and extend a grace period to secure new coverage. Finally, states should follow the example of California, which recently told force-placed insurers to submit lower rates that reflect actual loss ratios.

Many homeowners who experience coverage gaps have severe financial problems that lead them to stop paying their insurance bills. They are already at great risk of foreclosure. Banks and insurers shouldn’t be allowed to add to the likelihood of default by artificially inflating the cost of insurance.

White Paper: Many Causes of Foreclosure Crisis

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Editor’s Comment:

I attended Darrell Blomberg’s Foreclosure Strategists’ meeting last night where Arizona Attorney General Tom Horne defended the relatively small size of the foreclosure settlement compared with the tobacco settlement. To be fair, it should be noted that the multi-state settlement relates only to issues brought by the attorneys general. True they did very little investigation but the settlement sets the guidelines for settling with individual homeowners without waiving anything except that the AG won’t bring the lawsuits to court. Anyone else can and will. It wasn’t a real settlement. But the effect was what the Banks wanted. They want you to think the game is over and move on. The game is far from over, it isn’t a game and I won’t stop until I get those homes back that were ripped from the arms of homeowners who never knew what hit them.

So this is the first full business day after AG Horne promised me he would get back to me on the question of whether the AG would bring criminal actions for racketeering and corruption against the banks and servicers for conducting sham auctions in which “credit bids” were used instead of cash to allow the banks to acquire title. These credit bids came from non-creditors and were used as the basis for issuing deeds on foreclosure, each of which carry a presumption of authenticity.  But the deeds based on credit bids from non-creditors represent outright theft and a ratification of a corrupt title system that was doing just fine before the banks started claiming the loans were securitized.

Those credit bids and the deeds issued upon foreclosure were sham transactions — just as the transactions originated with borrowers were based upon the lies and false pretenses of the acting lenders who were paid for their acting services. By pretending that the loan came from these thinly capitalised sham companies (all closed with no forwarding address), the banks and servicers started the lie that the loan was sold up the tree of securitization. Each transaction we are told was a sale of the loan, but none of them actually involved any money exchanging hands. So much for, “value received.”

The purpose of these loans was to create a process that would cover up the theft of the investor money that the investment bank received in exchange for “mortgage bonds” based upon non-existent transactions and the title equivalent of wild deeds.

So the answer to the question is that borrowers did not make bad decisions. They were tricked into these loans. Had there been full disclosure as required by TILA, the borrowers would never have closed on the papers presented to them. Had there been full disclosure to the investors, they never would have parted with a nickel. No money, no lender, no borrower no transactions. And practically barring lawyers from being hired by borrowers was the first clue that these deals were upside down and bogus. No, they didn’t make bad decisions. There was an asymmetry of information that the banks used to leverage against the borrowers who knew nothing and who understood nothing.  

“Just sign everywhere we marked for your signature” was the closing agent’s way of saying, “You are now totally screwed.” If you ask the wrong question you get the wrong answer. “Moral hazard” in this context is not a term anyone knowledgeable uses in connection with the borrowers. It is a term used to express the context in which unscrupulous Bankers acted without conscience and with reckless disregard to the public, violating every applicable law, rule and regulation in the process.

Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis

Public Policy Discussion Paper No. 12-2


by Christopher L. Foote, Kristopher S. Gerardi, and Paul S. Willen

This paper presents 12 facts about the mortgage market. The authors argue that the facts refute the popular story that the crisis resulted from financial industry insiders deceiving uninformed mortgage borrowers and investors. Instead, they argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. The authors then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago. Economists should acknowledge the limits of our understanding of asset price bubbles and design policies accordingly.

To ready the entire paper please go to this link: www.bostonfed.org/economic/ppdp/2012/ppdp1202.htm