They are AT It Again: Ocwen Securitizing Gov.-Backed Mortgages

Just in case you were wondering if anything is changing in the world of finance, the answer is no, not really. Ocwen here is announcing that they are securitizing mortgages backed by the government, and selling the pieces to investors, who really ought to know better by now.

They are doubling down on a failed strategy in the hope that it will bring the housing market out of its slump. Maybe it will work for a time, but the net result is that the fundamental dysfunction of the financial markets are being ignored. Trust is the basic component of everything that happens in the financial markets and trust is what was broken completely in the mortgage crisis.

They lied, cheated, stole and then fabricated documents out of thin air, forged with the signatures of unsophisticated office workers who were told that if they want a paycheck they need to do what they were told. That gave birth to what was eventually called robo-signing and surrogate signing, forging of signatures and invalid documentation unsupported by either authority or consideration. It looks to me that no lessons were learned on Wall Street except that if you make the crime big enough, nothing will happen to you.

This is why in the Full day seminar on August 25 in Emeryville (San Francisco) we delve into the components of discovery and pleading so that homeowners stop making or allowing records on appeal to contain matters that are in dispute appear as though they are not in dispute.

One interesting question that should be asked is that if the risk of loss is covered by BOTH securitization (diversification) and government backing, what benefits are the consumers getting in rates?

This article from Housing Wire by Jon Prior, is one of many to come as the policy of “doing what works” continues to dominate over “doing what is right.” With these policies in effect the vast majority of homeowners are being left out in the cold and the few who litigate successfully will get reasonable settlements or modifications. The bottom line is that housing as a keystone component of our economy will continue to drag the economy even as we try to spike activity in other sectors.

Ocwen to securitize FHA mortgages

A special vehicle put together by subprime mortgage servicer Ocwen Financial Corp. ($24.38 0.29%) plans to acquire government-backed loans soon and package them into bonds for investors.

Ocwen and its former asset management firm Altisource built Correspondent One last year. The vehicle will buy mortgages originated by Lenders One, which Ocwen estimates wrote 8% of all home loans in the U.S. last year. Lenders One is a national alliance of mortgage bankers, correspondent lenders and suppliers of mortgage products and services.

Correspondent One will also acquire Federal Housing Administration mortgages soon for future securitizations, Ocwen disclosed to investors in its second quarter filing. Currently, roughly 98% of FHA loans are securitized through Ginnie Mae bonds.

The company said Correspondent One acquired roughly $17 million in conventional loans from Lenders One in the first half of 2012.

“Correspondent One has seen significant, positive environmental changes in the correspondent lending market. There has been a contraction in correspondent lending,” Ocwen said, alluding to recent exits by Bank of America ($7.91 0.035%), Ally Financial and others.

In July, Ocwen also began setting up agreements to purchase servicing on newly originated loans. Under the arrangements with undisclosed firms, lenders would sell the loan to either Fannie Mae or Freddie Mac or issue a Ginnie Mae security backed by FHA loans. The servicing on those loans would automatically transfer to Ocwen.

The company serviced nearly $128 billion in mortgages as of June 30, nearly double the $70 billion portfolio it held one year prior.

The funding pipeline for Correspondent One and these special arrangements reached nearly $195 million at the end of July, Ocwen said.

Ginnie may raise its minimum net-worth requirement for issuers of its FHA-backed mortgage bonds, American Banker reported this week. Smaller lenders are becoming shut out and could turn to more creative and private deals like the one Ocwen has set up in order to fund their new loans.

jprior@housingwire.com

@JonAPrior

Wrong Bailout

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Editor’s Comment:

It isn’t in our own mainstream media but the fact is that Europe is verging on  collapse. They are bailing out banks and taking them apart (something which our regulators refuse to do). The very same banks that caused the crisis are the ones that are going to claim they too need another bailout because of international defaults. The article below seems extreme but it might be right on target.

From the start the treatment of the banks had been wrong-headed and controlled by of course the banks themselves. With Jamie Dimon sitting on the Board of Directors of the NY FED, which is the dominatrix in the Federal Reserve system, what else would you expect?

The fact is that, as Iceland and other countries have proven beyond any reasonable doubt, the bailout of the banks is dead wrong and it is equally wrong-headed to give them the continued blank check to pursue business strategies that drain rather than infuse liquidity in economies that are ailing because of intentional acts of the banks to enrich themselves rather than the countries that give them license to exist.

The bailout we proposed every year and every month and practically every day on this blog is the only one that will work: reduce household debt, return things to normalcy (before the fake securitization of mortgages and other consumer and government debt) and without spending a dime of taxpayer money.  The right people will pay for this and the victims will get some measure of relief — enough to jump start economies that are in a death spiral.

Just look at home mortgages. They were based upon layers of lies that are almost endless and that continue through the present. But the principal lie, the one that made all the difference, was that the mortgage bonds were worth something and the real property was worth more than the supposed loans. With only a few exceptions those were blatant lies that are not legal or permissible under any exemption claimed by Wall Street. Our system of laws says that if you steal from someone you pay for it with your liberty and whatever it is you stole is returned to the victim if it still exists. And what exists, is millions of falsely created invalid illegal instruments recorded in title registries all over the country affecting the title of more than 20 million households.

All we need to do is admit it. The loans are unsecured and the only fair way of handling things is to bring all the parties to the table, work out a deal and stop the foreclosures. This isn’t going to happen unless the chief law enforcement officers of each state and the clerks of the title registry offices wake up to the fact that they are part of the problem. It takes guts to audit the title registry like they did in San Francisco and other states, cities and counties. But the reward is that the truth is known and only by knowing the truth will we correct the problem.

The housing market is continuing to suffer because we are living a series of lies. The government, realtors and the banks and servicers all need us to believe these lies because they say that if we admit them, the entire financial system will dissolve. Ask any Joe or Josephine on the street — the financial system has already failed for them. Income inequality has never been worse and history shows that (1) the more the inequality the more power those with wealth possess to keep things going their way and (2) this eventually leads to chaos and violence. As Jefferson said in the Declaration of Independence, people will endure almost anything until they just cannot endure it any longer. That time is coming closer than anyone realizes.

Only weeks before France erupted into a bloody revolution with gruesome dispatch of aristocrats, the upper class thought that the masses could be kept in line as long as they were thrown a few crumbs now and then. That behavior of the masses grew from small measures exacted from a resisting government infrastructure to simply taking what they wanted. Out of sheer numbers the aristocracy was unable to fight back against an entire country that was literally up in arms about the unfairness of the system. But even the leaders of the French Revolution and the Merican revolution understood that someone must be in charge and that an infrastructure of laws and enfrocement, confidence in the marketplace and fair dealing must be the status quo. Disturb that and you end up with overthrow of existing authority replaced by nothing of any power or consequence.

Both human nature and history are clear. We can all agree that the those who possess the right stuff should be rich and the rest of us should have a fair shot at getting rich. There is no punishment of the rich or even wealth redistribution. The problem is not wealth inequality. And “class warfare” is not the right word for what is going on — but it might well be the right words if the upper class continue to step on the rest of the people. The problem is that there is no solution to wealth inequality unless the upper class cooperates in bringing order and a fair playing field to the marketplace —- or face the consequences of what people do when they can’t feed, house, educate or protect their children.

LaRouche: The Glass-Steagall Moment Is Upon Us

Spanish collapse can bring down the Trans-Atlantic system this weekend

Abruptly, but lawfully, the Spanish debt crisis has erupted over the past 48 hours into a systemic rupture in the entire trans-Atlantic financial and monetary facade, posing the immediate question: Will the European Monetary Union and the entire trans-Atlantic financial system survive to the end of this holiday weekend?



Late on Friday afternoon, the Spanish government revealed that the cost of bailing out the Bankia bank, which was nationalized on May 9, will now cost Spanish taxpayers nearly 24 billion euro—and rising. Many other Spanish banks are facing imminent collapse or bailout; the autonomous Spanish regions, with gigantic debts of their own, are all now bankrupt and desperate for their own bailout. Over the last week, Spanish and foreign depositors have been pulling their money out of the weakest Spanish banks in a panic, in a repeat of the capital flight out of the Greek banks months ago. 



The situations in Greece, Italy, Portugal, and Ireland are equally on the edge of total disintegration—and the exposure of the big Wall Street banks to this European disintegration is so enormous that there is no portion of the trans-Atlantic system that is exempt from the sudden, crushing reality of this collapse.



Whether or not the system holds together for a few days or weeks more, or whether it literally goes into total meltdown in the coming hours, the moment of truth has arrived, when all options to hold the current system together have run out.

Today, in response to this immediate crisis, American political economist Lyndon LaRouche issued a clarion call to action. Referring to the overall trans-Atlantic financial bubble, in light of the Spanish debt explosion of the past 48 hours, LaRouche pinpointed its significance as follows:

“The rate of collapse now exceeds the rate of the attempts to overtake the collapse. That means that, essentially, the entire European system, in its present form, is in the process of a hopeless degeneration. Now, this is something comparable to what happened in Germany in 1923, and they’ve caught themselves in a trap, where a rate of collapse exceeds the rate of their attempt to overtake yesterday.

“So therefore, we’re in a new situation, and the only solution in Europe, in particular, is Glass-Steagall, or the Glass-Steagall equivalent, with no fooling around. Straight Glass-Steagall — no bailouts! None! In other words, you have to collapse the entire euro system. The entirety of the euro system has to collapse. But it has to collapse in the right way; it has to be a voluntary collapse, which is like a Glass-Steagall process. This means the end of the euro, really. The euro system is about to end, because you can’t sustain it.

“Everything is disintegrating now in Europe. It can be rescued very simply, by a Glass-Steagall type of operation, and then going back to the currencies which existed before. In other words, you need a stable system of currencies, or you can’t have a recovery at all! In other words, if the rate of inflation is higher than the rate of your bailout, then what happens when you try to increase the bailout, you increase the hysteria. You increase the rate of collapse. In other words, the rate of collapse exceeds the rate of bailout.

“And now, you have Spain, and Portugal implicitly, and the situation in Greece. Italy’s going to go in the same direction. So the present system, which Obama’s trying to sustain, in his own peculiar way, is not going to work. There’s no hope for the system. Nor is there any hope for the U.S. system in its present form. The remedies, the problems, are somewhat different between Europe and the United States, but the nature of the disease is the same. They both have the same disease: It’s called the British disease. It’s hyperinflation.

“So, now you’re in a situation where the only way you can avoid a rate of hyperinflation beyond the rate of hyper-collapse is Glass-Steagall, or the equivalent. You have to save something, you have to save the essentials. Well, the essentials are: You take all the things that go into the bailout category, and you cancel them. How do you cancel them? Very simple: Glass-Steagall. Anything that is not fungible in terms of Glass-Steagall categories doesn’t get paid! It doesn’t get unpaid either; it just doesn’t get paid. Because you remove these things from the categories of things that you’re responsible to pay. You’re not responsible to bail out gambling, you’re not responsible to pay out gambling debts.

“Now, the gambling debts are the hyperinflation. So now, we might as well say it: The United States, among other nations, is hopelessly bankrupt.

“But this is the situation! This is what reality is! And what happens, is the entire U.S. government operation is beyond reckoning. It is collapsing! And there’s only one thing you can do: The equivalent of Glass-Steagall: You take those accounts, which are accounts which are worthy, which are essential to society, you freeze the currencies, their prices, and no bailout. And you don’t pay anything that does not correspond to a real credit. It’s the only solution. The point has been reached—it’s here! You’re in a bottomless pit, very much like Germany 1923, Weimar.

“And in any kind of hyperinflation, this is something you come to. And there’s only one way to do it: Get rid of the bad debt! It’s going to have to happen.

“The entire world system is in a crisis. It’s a general breakdown crisis which is centered in the trans-Atlantic community. That’s where the center of the crisis is. So, in the United States, we’re on the verge of a breakdown, a blowout; it can happen at any time. When will it happen, we don’t know, because we’ve seen this kind of thing before, as in 1923 Germany, November-December 1923, this was the situation. And it went on after that, but it’s a breakdown crisis. And that’s it.

“Those who thought there could be a bailout, or they had some recipe that things were going to be fine, that things would be manageable, that’s all gone! You’re now relieved of that great burden. You need have no anxiety about the U.S. dollar. Why worry about it? Either it’s dead or it’s not! And the only way it’s not going to be dead, is by an end of bailout. That’s the situation.

“We don’t know exactly where the breakdown point comes. But it’s coming, because we’re already in a system in which the rate of breakdown is greater than the rate of any bailout possible! And there’s only one way you can do that: Cancel a whole category of obligations! Those that don’t fit the Glass-Steagall standard, or the equivalent of Glass-Steagall standard: Cancel it, immediately! We don’t pay anything on gambling debts. Present us something that’s not a gambling debt, and we may be able to deal with that.”

LaRouche concluded with a stark warning:

“If you think that this system is going to continue, and you can find some way to get out of this problem, you can not get out of this problem, because you are the problem! Your failure to do Glass-Steagall, is the problem. And it’s your failure! Don’t blame somebody else: If you didn’t force through Glass-Steagall, it’s your fault, and it continues to be your fault! It’s your mistake, which is continuing!

“And that’s the situation we have in Europe, and that, really, is also the situation in the United States.

“But that’s where we are! It’s exactly the situation we face now, and there’s no other discussion that really means much, until we can decide to end the bailout, and to absolutely cancel all illegitimate debt—that is, bailout debt!

“There’s only one solution: The solution is, get rid of the illegitimate disease, the hyperinflation! Get rid of the hyperinflationary factor. Cancel the hyperinflation! Don’t pay those debts! Don’t cancel them, just don’t pay them! You declare them outside the economy, outside the responsibility of government: We can no longer afford to sustain you, therefore, you’ll have to find other remedies of your own. That’s where you are. It had to come, it has been coming.”


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

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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

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.”

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: 

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.

The Reporter Who Saw it Coming

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Editor’s Comment:

By Dean Starkman

Mike Hudson thought he was merely exposing injustice, but he also was unearthing the roots of a global financial meltdown.

Mike Hudson began reporting on the subprime mortgage business in the early 1990s when it was still a marginal, if ethically challenged, business. His work on the “poverty industry” (pawnshops, rent-to-own operators, check-cashing operations) led him to what were then known as “second-lien” mortgages. From his street-level perspective, he could see the abuses and asymmetries of the market in a way that the conventional business press could not. But because it ran mostly in small publications, his reporting was largely ignored. Hudson pursued the story nationally, via a muckraking book, Merchants of Misery (Common Courage Press, 1996); in a 10,000-word expose on Citigroup-as-subprime-factory, which won a Polk award in 2004 for the small alternative magazine Southern Exposure; and in a series on the subprime leader, Ameriquest, co-written as a freelancer, for the Los Angeles Times in 2005. He continued to pursue the subject as it metastasized into the trillion-dollar center of the Financial Crisis of 2008—briefly at The Wall Street Journal and now at the Center for Public Integrity. Hudson, 52, is the son of an ex-Marine and legendary local basketball coach. He started out on rural weeklies, covering championship tomatoes and large fish and such, even produced a cooking column. But as a reporter for The Roanoke Times he turned to muckraking and never looked back. CJR’s Dean Starkman interviewed Hudson in the spring of 2011.

Follow the ex-employees

The great thing about The Roanoke Times was that there was an emphasis on investigation but there was also an emphasis on storytelling and writing. And they would bring in lots of people like Roy Peter Clark and William Zinsser, the On Writing Well guy. The Providence Journal book, the How I Wrote the Story, was a bit of a Bible for me.

As I was doing a series on poverty in Roanoke, one of the local legal aid attorneys was like, “It’s not just the lack of money—it’s also what happens when they try to get out of poverty.” He said basically there are three ways out: they bought a house, so they got some equity; they bought a car so they could get some mobility; or they went back to school to get a better job. And in every case, he had example after example of folks, who because they were doing just that, had actually gotten deeper in poverty, trapped in unbelievable debt.

His clients often dealt with for-profit trade schools, truck driving schools that would close down; medical assistant’s schools that no one hired from; and again and again they’d be three, four, five, eight thousand dollars in debt, and unable to repay it, and then of course prevented from ever again going back to school because they couldn’t get another a student loan. So that got me thinking about what I came to know as the poverty industry.

I applied for an Alicia Patterson Fellowship and proposed doing stories on check-cashing outlets, pawn shops, second-mortgage lenders (they didn’t call themselves subprime in those days). This was ’91. We didn’t have access to the Internet, but I came across a wire story about something called the Boston “second-mortgage scandal,” and got somebody to send me a thick stack of clips. It was really impressive. The Boston Globe and other news organizations were taking on the lenders and the mortgage brokers, and the closing attorneys, and on and on.

I was trying to make the story not just local but national. I had some local cases involving Associates [First Capital Corp., then a unit of Ford Motor Corp.]. Basically, it turned out that Ford Motor Company, the old-line carmaker, was the biggest subprime lender in the country. The evidence was pretty clear that they were doing many of the same kinds of bait-and-switch salesmanship and, in some cases, pure fraud, that we later saw take over the mortgage market. I felt like this was a big story; this is the one! Later, investigations and Congressional hearings corroborated what I was finding in ’94, ’95, and ’96. And it seems so self-evident now, but I learned that finding ex-employees often gives you a window into what’s really going on with a company. The problem has always been finding them and getting them to talk.

I spent the better part of the ‘90s writing about the poverty industry and about predatory lending. As a reporter you don’t want to be defined by one subject. So I was actually working on a book about the history of racial integration in sports, interviewing old Negro-league baseball players. I was really trying to change a little bit of how I was moving forward career-wise. But it’s like the old mafia-movie line: every time I think I’m out, they pull me back in.

Subprime goes mainstream

In the fall of 2002, the Federal Trade Commission announced a big settlement with Citigroup, which had bought Associates, and at first I saw it as a positive development, like they had nailed the big bad actor. I’m doing a 1,000-word freelance thing, but of course as I started to report I started hearing from people who were saying that this settlement is basically giving them absolution, and allowed them to move forward with what was, by Citi standards, a pretty modest settlement. And the other thing that struck me was the media was treating this as though Citigroup was cleaning up this legacy problem, when Citi itself had its own problems. There had been a big magazine story about [Citigroup Chief Sanford I.] “Sandy” Weill. It was like “Sandy’s Comeback.” I saw this and said, ‘Whoa, this is an example of the mainstreaming of subprime.’

I pitched a story about how these settlements weren’t what they seemed, and got turned down a lot of places. Eventually I went to Southern Exposure and called the editor there, Gary Ashwill, and he said, “That’s a great story, we’ll put it on the cover.” And I said, “Well how much space can we have?” and he said, “How much do we need?” That was not something you heard in journalism in those days.

I interviewed 150 people, mostly borrowers, attorneys, experts, industry people, but the stuff that really moves the story are the former employees. Many of them had just gotten fired for complaining internally. They were upset about what had gone on—to some degree about how the company treated them, but usually very upset about how the company had pressured them and their co-workers to mistreat their customers.

As a result of the Citigroup stuff, I got a call from a filmmaker [James Scurlock] who was working on what eventually became Maxed Out, about credit cards and student loans and all that kind of stuff. And he asked if I could go visit, and in some cases revisit, some of the people I had interviewed and he would follow me with a camera. So I did sessions in rural Mississippi, Brooklyn and Queens, and Pittsburg. Again and again you would hear people talk about these bad loans they got. But also about stress. I remember a guy in Brooklyn, not too far from where I live now, who paused and said something along the lines of: ‘You know I’m not proud of this, but I have to say I really considered killing myself.’ Again and again people talked about how bad they felt about having gotten into these situations. It was powerful and eye-opening. They didn’t understand, in many cases, that they’d been taken in by very skillful salesmen who manipulated them into taking out loans that were bad for them.

If one person tells you that story, you say okay, well maybe it’s true, but you don’t know. But you’ve got a woman in San Francisco saying, “I was lied to and here’s how they lied to me,” and then you’ve got a loan officer for the same company in suburban Kansas saying, “This is what we did to people.” And then you have another loan officer in Florida and another borrower in another state. You start to see the pattern.

People always want some great statistic [proving systemic fraud], but it’s really, really hard to do that. And statistics data doesn’t always tell us what happened. If you looked at some of the big numbers during the mortgage boom, it would look like everything was fine because of the fact that they refinanced people over and over again. So essentially a lot of what was happening was very Ponzi-like—pushing down the road the problems and hiding what was going on. But I was not talking to analysts. I was not talking to high-level corporate executives. I was not talking to experts. I was talking to the lowest level people in the industry— loan officers, branch managers. I was talking to borrowers. And I was doing it across the country and doing it in large numbers. And when you actually did the shoe-leather reporting, you came up with a very different picture than the PR spin you were getting at the high level.

One day Rich Lord [who had just published the muckraking book, American Nightmare: Predatory Lending and the Foreclosure of the American Dream, Common Courage Press, 2004) and I went to his house. We were sitting in his study. Rich had spent a lot of time writing about Household [International, parent of Household Finance], and I had spent a lot of time writing about Citigroup. Household had been number one in subprime, and then CitiFinancial/Citigroup was number one. This was in the fall of 2004. We asked, well, who’s next? Rich suggested Ameriquest.

I went back home to Roanoke and got on the PACER—computerized court records—system and started looking up Ameriquest cases, and found lots of borrower suits and ex-employee suits. There was one in particular, which basically said that the guy had been fired because he had complained that Ameriquest business ethics were terrible. I just found the guy in the Kansas City phone book and called him up, and he told me a really compelling story. One of the things that really stuck out is, he said to me, “Have you ever seen the movie Boiler Room [2000, about an unethical pump-and-dump brokerage firm]?”

By the time I had roughly ten former employees, most of them willing to be on the record, I thought: this is a really good story, this is important. In a sense I feel like I helped them become whistleblowers because they had no idea how to blow the whistle or what to do. And Ameriquest at that point was on its way to being the largest subprime lender. So, I started trying to pitch the story. While I had a full-time gig at the Roanoke Times, for me the most important thing was finding the right place to place it.

The Los Angeles Times liked the story and teamed me with Scott Reckard, and we worked through much of the fall of 2004 and early 2005. We had thirty or so former employees, almost all of them basically saying that they had seen improper, illegal, fraudulent practices, some of whom acknowledged that they’d done it themselves: bait-and-switch salesmanship, inflating people’s incomes on their loan applications, and inflating appraisals. Or they were cutting and pasting W2s or faking a tax return. It was called the “art department”—blatant forgery, doctoring the documents. You know, it was pretty eye-opening stuff. One of the best details was that many people said they showed Boiler Room—as a training tape! And the other important thing about the story was that Ameriquest was being held up by politicians, and even by the media, as the gold standard—the company cleaning up the industry, reversing age-old bad practices in this market. To me, theirs was partly a story of the triumph of public relations.

Leaving Roanoke

I’d been in Roanoke almost 20 years as a reporter, and so, what’s the next step? I resigned from the Roanoke Times and for most of 2005 I was freelancing fulltime. I made virtually no money that year, but by working on the Ameriquest story, it helped me move to the next thing. I interviewed with The Wall Street Journal [and was hired to cover the bond market]. Of course I came in pitching mortgage-backed securities as a great story. I could have said it with more urgency in the proposal, but I didn’t want to come off as like an advocate, or half-cocked.

Daily bond market coverage is their bread-and-butter, and it’s something that needs to be done. And I tried to do the best I could on it. But I definitely felt a little bit like a point guard playing small forward. I was doing what I could for the team but I was not playing in a position where my talents and my skills were being used to the highest.

I wanted to do a documentary. I wanted to do a book [which would become The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America—and Spawned a Global Crisis, Times Books, 2010]. I felt like I had a lot of information, a lot of stuff that needed to be told, and an understanding that many other reporters didn’t have. And I could see a lot of the writing focused on deadbeat borrowers lying about their income, rather than how things were really happening.

Through my reporting I knew two things: I knew that there were a lot of predatory and fraudulent practices throughout the subprime industry. It wasn’t isolated pockets, it wasn’t rogue lenders, it wasn’t rogue employees. It was really endemic. And I also knew that Wall Street played a big role in this, and that Wall Street was driving or condoning and/or profiting from a lot of these practices. I understood that, basically, the subprime lenders, like Ameriquest and even like Countrywide, were really just creatures of Wall Street. Wall Street loaned these companies money; they then made loans; they off-loaded the loans to Wall Street; Wall Street then sold them [as securities to investors]. And it was just this magic circle of cash flowing. The one thing I didn’t understand was all the fancy financial alchemy—the derivatives, the swaps, that were added on to put them on steroids.

It’s clear that people inside a company, one or two or three people, could commit fraud and get away with it, on occasion, despite the best efforts of a company. But I don’t think it can happen in a widespread way when a company has basic compliance systems in place. The best way to connect the dots from the sleazy practices on the ground to people at high levels was to say, okay, they did have these compliance people in place; they had fraud investigators, loan underwriters, and compliance officers. Did they do their jobs? And if they did, what happened to them?

In late 2010, at the Center for Public Integrity, I got a tip about a whistleblower case involving someone who worked at a high level at Countrywide. This is Eileen Foster, who had been an executive vice president, the top fraud investigator at Countrywide. She was claiming before OSHA that she was fired for reporting widespread fraud, but also for trying to protect other whistleblowers within the company who were also reporting fraud at the branch level and at the regional level, all over the country. The interesting thing is that no one in the government had ever contacted her! [This became “Countrywide Protected Fraudsters by Silencing Whistleblowers, say Former Employees,” September 22 and 23, 2011, one of CPI’s best-read stories of the year; 60 Minutes followed with its own interview of Foster, in a segment called, “Prosecuting Wall Street,” December 14, 2011.] It was very exciting. We worked really hard to do follow-up stories. I did about eight stories afterward, many about General Electric, a big player in the subprime world. We found eight former mortgage unit employees who had tried to warn about abuses and whom management had shunted aside.

I just feel like there needs to be more investigative reporting in the mix, and especially more investigative reporting—of problems that are going on now, rather than post-mortems or tick-tocks about financial disasters or crashes or bankruptcies that have already happened.

And that’s hard to do. It takes a real commitment from a news organization, and it can be a high-wire thing because you’re working on these stories for a long time, and market players you’re writing about yell and scream and do some real pushback. But there needs to be more of the sort of early warning journalism. It’s part of the big tent, what a newspaper is.

Foreclosure Strategists: Phx. Meet tomorrow with AZ AG Tom Horne

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Editor’s Comment:

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

Meeting: Tuesday, May 8th, 2012, 7pm to 9pm

Special guest speaker:  Arizona Attorney General Tom Horne

We will be discussing among other things:

Brief bio / history

Arizona v Countrywide / Bank of America lawsuit settlement

National Attorneys’ General Mortgage Settlement

Appropriation of National Mortgage Settlement Funds

Attorney General’s Legislative Efforts pertaining to foreclosures

Submitted and submitting complaints to the Attorney General’s office

Joint efforts between the Attorney General’s office and other agencies

Adding effectiveness to homeowner’s OCC Complaints

Please send me your thoughts and questions you’d like to ask Tom Horne.

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

Mortgage Rates in U.S. Decline to Record Lows With 30-Year Loan at 3.84%

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Editor’s Comment:

It appears as though Bloomberg has joined the media club tacit agreement to ignore housing and more particularly Investment Banking or relegate them to just another statistic. The possibilities of a deep, long recession created by the Banks using consumer debt are avoiđed and ignored regardless of the writer or projection based upon reliable indexes.

Why is it that Bloomberg News refuses to tell us the news? The facts are that median income has been flat for more than 30 years. The financial sector convinced the government to allow banks to replace income with consumer debt. The crescendo was reached in the housing market where the Case/Schiller index shows a flash spike in prices of homes while the values of homes remained constant. The culprit is always the same — the lure of lower payments with the result being the oppressive amount of debt burden that can no longer be avoided or ignored. The median consumer has neither the cash nor credit to buy.

Each year we hear predictions of a recovery in the housing market, or that green shoots are appearing. We congratulate ourselves on avoiding the abyss. But the predictions and the congratulations are either premature or they will forever be wrong.

The financial sector is allowed to play in our economy for only one reason— to provide capital to satisfy the needs of business for innovation, growth and operations. Instead, we find ourselves with bloated TBTF myths, the capital drained from our middle and lower classes that would be spent supporting an economy of production and service. That money has been acquired and maintained by the financal sector giants, notwithstanding the reports of layoffs.

From any perspective other than one driven by ideology one must admit that the economy has undergone a change in its foundation — and that these changes are ephemeral and cannot be sustained. With GDP now reliant on figures from the financial sector which for the longest time hovered around 16%, our “economy” would be 50% LESS without the financial sector reporting bloated revenues and profits just as they contributed to the false spike in prices of homes. Bloated incomes inflated the stampede of workers to Wall Street.

Investigative reporting shows that the tier 2 yield spread premium imposed by the investment bankers — taking huge amounts of investment capital and converting the capital into service “income” — forced a structure that could not work, was guaranteed not to work and which ultimately did fail with the TBTF banks reaping profits while the rest of the economy suffered.

The current economic structure is equally unsustainable with income and wealth inequality reaching disturbing levels. What happens when you wake up and realize that the real economy of production of goods and service is actually, according to your own figures, worth 1/3 less than what we are reporting as GDP. How will we explain increasing profits reported by the TBTF banks? where did that money come from? Is it real or is it just what we want to hear want to believe and are afraid to face?


DO You Want It To Slow Down or to Stop

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Real Property, Mortgages, Workouts and Foreclosures in the United States

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Someone sent me a story about a guy who did one of those “California” stops at a stop sign, rolling through at a slightly slower speed than he had been going. A policeman stops him and informs the driver he had not made a full stop. The driver replied that he had made a rolling stop which is the same thing — after all he had slowed down because of the stop sign. The police officer invites him out of the car whereupon the policeman commences beating the driver around the head and body and then says to to the driver “Do you want me to slow down or do you want me to stop?”

The story is funny —sort of — because it makes a point. And I would make the same point about the foreclosures. Do we want a slow down in stealing of property away from people through foreclosures, even short-sales and other delays, or do we just want them to stop. The answer for me is that I want them to stop — except in those cases where the loan was between a normal borrower and a normal lender whose name is properly on the paperwork and who actually loaned the money.

Slowing down the pace of foreclosures because of the presence of forgeries, fabrications and fraud is not the answer. Stopping them and reversing the ones that occurred is the answer. And giving HAMP an actual chance to work (or some other mediated settlement) is the rest of the answer.

These “loans” are between parties who have no documentation as to their positions (the investor/lenders and the homeowner/borrowers) and whose presence was unknown to the other because of cloaks and subterfuge by investment bankers. The chain of documentation refers to a loan from an originator who never loaned a dime and never booked the loan as a receivable on their balance sheet in most cases. And so the entire chain of documents leading up the “securitization” chain are empty documents referring to transactions that never occurred and thus could never result ina perfected security interest in the property.

The solution is what homeowners are offering — converting an undocumented unsecured interest into a documented, secured interest reflecting current economic realities and that will provide the investor/lenders with far greater benefits than foreclosure which leads to ghost towns, bull dozing neighborhoods and other societal problems all for the single purpose of justifying taking every penny as fees for banks, servicers and other parties in the chain, which now, under the April 12 Bulletin from the CFPB, are to be considered just as responsible as banks and servicers.

It should be noted that the homeowners are in most instances offering MORE than the home is worth as the principal due on the note and waiving all other litigation rights.

So do we want it slowed down or stopped. Do we want speed or justice. Do we want the common man to be given back a chance at happiness and prosperity or do we want theft of wealth from the common man to be rewarded with amnesty and further subsidies?


WSJ: Home Ownership at 15 Year Low

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Editor’s Comment:

If you read what the realtors are putting out these days you would have the impression that the housing Market is at bottom, that this is the time to buy (all realtors say that all the time) and that the Market has nowhere to go but up. Reality Check: that is exactly what they said in 2011, 2010, 2009, etc. Meanwhile the Market keeps going down because the median income (the ability to pay for housing) of the average person is going down each month. Case/Schiller have proven in an analysis and chart that goes back to the 1880′s that home prices and median income are inextricably linked.

The banks also want you to think the Market has hit bottom and they are journalists and other shills to say so. The faster they get rid of the real estate the less likely they think it will be that the old homeowner will come back and reclaim the property.

But the Wall Street Journal reports that home ownership is at a 15 year low while assets and income at the banks are at an all-time high. 1998 was the last year we saw so few people owning their own home. Take a look at the purported balance sheets of banks then and now. You will understand the figures — the degree to which the banks siphoned money out of the economy. Remember the only reason we let Wall Street exist is that it is supposedly the capitalist engine providing liquidity to consumers and small business owners alike who buy the things that are made.

Before we developed amnesia about why Wall Street exists and it’s job, the financial sector contributed 16% of this nation’s Gross Domestic Product. Now it is up near 50% which means we are reporting revenues and profits based upon derivatives whose value is derived from other derivatives and after a while you finally get to a real transaction where somebody made something and somebody bought something.

This is unsustainable and more reminiscent of the total lack of understanding that French aristocracy demonstrated when starving people from the streets chopped their heads off with the collusion of the merging merchant class. The control of our society by the banks will stop because it is impossible to sustain. What is surprising is that the lopsided figures in our economy don’t produce more outcries and predictions of disaster which undoubtedly will come to pass unless the bankers are put back in their place at 16% of GDP. That means someone in power needs to trim back the TBTF banks by 2/3. It’s a tall order, but somebody needs to do it.

 It is not as hard as it seems. Most of the assets reported on the balance sheets of the TBTF banks are fake anyway.

People Have Answers, Will Anyone Listen?

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Editor’s Comment: 

Thanks to Home Preservation Network for alerting us to John Griffith’s Statement before the Congressional Progressive Caucus U.S. House of Representatives.  See his statement below.  

People who know the systemic flaws caused by Wall Street are getting closer to the microphone. The Banks are hoping it is too late — but I don’t think we are even close to the point where the blame shifts solidly to their illegal activities. The testimony is clear, well-balanced, and based on facts. 

On the high costs of foreclosure John Griffith proves the point that there is an “invisible hand” pushing homes into foreclosure when they should be settled modified under HAMP. There can be no doubt nor any need for interpretation — even the smiliest analysis shows that investors would be better off accepting modification proposals to a huge degree. Yet most people, especially those that fail to add tacit procuration language in their proposal and who fail to include an economic analysis, submit proposals that provide proceeds to investors that are at least 50% higher than the projected return from foreclosure. And that is the most liberal estimate. Think about all those tens of thousands of homes being bull-dozed. What return did the investor get on those?

That is why we now include a HAMP analysis in support of proposals as part of our forensic analysis. We were given the idea by Martin Andelman (Mandelman Matters). When we performed the analysis the results were startling and clearly showed, as some judges around the country have pointed out, that the HAMP loan modification proposals were NOT considered. In those cases where the burden if proof was placed on the pretender lender, it was clear that they never had any intention other than foreclosure. Upon findings like that, the cases settled just like every case where the pretender loses the battle on discovery.

Despite clear predictions of increased strategic defaults based upon data that shows that strategic defaults are increasing at an exponential level, the Bank narrative is that if they let homeowners modify mortgages, it will hurt the Market and encourage more deadbeats to do the same. The risk of strategic defaults comes not from people delinquent in their payments but from businesspeople who look at the principal due, see no hope that the value of the home will rise substantially for decades, and see that the home is worth less than half the mortgage claimed. No reasonable business person would maintain the status quo. 

The case for principal reductions (corrections) is made clear by the one simple fact that the homes are not worth and never were worth the value of the used in true loans. The failure of the financial industry to perform simple, long-standing underwriting duties — like verifying the value of the collateral created a risk for the “lenders” (whoever they are) that did not exist and was present without any input from the borrower who was relying on the same appraisals that the Banks intentionally cooked up so they could move the money and earn their fees.

Many people are suggesting paths forward. Those that are serious and not just positioning in an election year, recognize that the station becomes more muddled each day, the false foreclosures on fatally defective documents must stop, but that the buying and selling and refinancing of properties presents still more problems and risks. In the end the solution must hold the perpetrators to account and deliver relief to homeowners who have an opportunity to maintain possession and ownership of their homes and who may have the right to recapture fraudulently foreclosed homes with illegal evictions. The homes have been stolen. It is time to catch the thief, return the purse and seize the property of the thief to recapture ill-gotten gains.

Statement of John Griffith Policy Analyst Center for American Progress Action Fund

Before

The Congressional Progressive Caucus U.S. House of Representatives

Hearing On

Turning the Tide: Preventing More Foreclosures and Holding Wrong-Doers Accountable

Good afternoon Co-Chairman Grijalva, Co-Chairman Ellison, and members of the caucus. I am John Griffith, an Economic Policy Analyst at the Center for American Progress Action Fund, where my work focuses on housing policy.

It is an honor to be here today to discuss ways to soften the blow of the ongoing foreclosure crisis. It’s clear that lenders, investors, and policymakers—particularly the government-controlled mortgage giants Fannie Mae and Freddie Mac—must do all they can to avoid another wave of costly and economy-crushing foreclosures. Today I will discuss why principal reduction—lowering the amount the borrower actually owes on a loan in exchange for a higher likelihood of repayment—is a critical tool in that effort.

Specifically, I will discuss the following:

1      First, the high cost of foreclosure. Foreclosure is typically the worst outcome for every party involved, since it results in extraordinarily high costs to borrowers, lenders, and investors, not to mention the carry-on effects for the surrounding community.

2      Second, the economic case for principal reduction. Research shows that equity is an important predictor of default. Since principal reduction is the only way to permanently improve a struggling borrower’s equity position, it is often the most effective way to help a deeply underwater borrower avoid foreclosure.

3      Third, the business case for Fannie and Freddie to embrace principal reduction. By refusing to offer write-downs on the loans they own or guarantee, Fannie, Freddie, and their regulator, the Federal Housing Finance Agency, or FHFA, are significantly lagging behind the private sector. And FHFA’s own analysis shows that it can be a money-saver: Principal reductions would save the enterprises about $10 billion compared to doing nothing, and $1.7 billion compared to alternative foreclosure mitigation tools, according to data released earlier this month.

4      Fourth, a possible path forward. In a recent report my former colleague Jordan Eizenga and I propose a principal-reduction pilot at Fannie and Freddie that focuses on deeply underwater borrowers facing long-term economic hardships. The pilot would include special rules to maximize returns to Fannie, Freddie, and the taxpayers supporting them without creating skewed incentives for borrowers.

Fifth, a bit of perspective. To adequately meet the challenge before us, any principal-reduction initiative must be part of a multipronged

To read John Griffith’s entire testimony go to: http://www.americanprogressaction.org/issues/2012/04/pdf/griffith_testimony.pdf


HOAs Retaliate Against Banks Skipping Out on Paying Maintenance Expenses

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Editor’s Comment: 

Having had the experience of representing Condominium Associations, Cooperatives and Homeowners Associations in Florida on a large scale, I am acutely aware of the pain they feel when “neighbors” don’t pay their monthly fees. The rest of the homeowners must pick up the slack and in many cases there were special assessments against the owners to pay for the shortfall.

The Banks, always playing the game, would get their Judgement of Foreclosure and then postpone the actual sale indefinitely because they could and because they didn’t want the liability of association dues, association compliance etc. So Florida actually had to pass a law that required the bank to start paying maintenance after they received a Final Judgment of foreclosure. Apparently, judging from the article below, that law has been rescinded or eviscerated by the intensive bank lobbying going on in all 50 state legislatures and in Congress.

With the foreclosure crisis desiccating entire neighborhoods, it sometimes comes down to a handful of homeowners who are paying the tab for the maintenance of the entire complex. So those homeowners, who were now on the Board of directors of the association jumped in and are now getting the benefits of self-help through renting abandoned homes and condos as though they owned it. In some cases they are turning a profit, attracting new buyers in and getting a pretty good bang for their buck — if they do it right.

You might remember the uproar that occurred when I reported that a number of people were making this situation  into a business model: by renting out at lower rates homes that were abandoned by both the homeowner and the “bank” or other pretender lender that put the home into default and foreclosure, these “entrepreneurs” are making money on assets that don’t belong to them.

That is a bad thing, right? Only if you are not a bank or pretender lender who are doing exactly the same thing. If a non-creditor took title to property by submitting a credit bid, then they don’t have real title. Whether they sell it or rent it out, they are making money off of an asset that was never owned by them and in which they never had any financial interest, risk or loss.

That of course is the problem with the corruption of our title system, and the failure of due process, especially in the non-judicial states where foreclosures are routinely processed on behalf of non-creditors who submit “credit bids” at auction. My answer as previously posted, is that the HOA and the homeowner should collude with each other the same way that the substituted trustees collude with the pretender lender. The  homeowner falls behind in payments causing the association to sue for those payments and to foreclose on the lien. The lawsuit names the homeowner and all other lenders on record reciting in the pleading that the existing mortgage on record has been satisfied or abandoned.

We all know that in many cases the lender of record is a sham corporation that was created to front as straw-man for the real lenders (investors). So the court enters a default against the lender of record, and then awards judgment to the association along with a sale date during which period the homeowner redeems the property with a settlement agreement in which the court quiets title to the homeowner.

At that point, if any party wishes to foreclose, whether they are in a judicial state or otherwise, they must proceed judicially by pleading and proving that they were a real party in interest and that they should have received notice of the foreclosure by the Association. In many cases, where it is institution versus association or another institution the same arguments advanced by homeowners are advanced by the association or institution.

The difference is that the argument coming from a creditor is taken far more seriously by the courts —- all the way up to the Supreme Court of the state (like the Landmark case in Kansas). In all such cases I have reviewed, the court found and was affirmed in its finding that the foreclosure by the first creditor to get to the mat won the case. This is one of several reasons why I have given my permission to start a national law firm rolling out into all 50 states. In a word, “if you want something done right, you have to do it yourself.”

Canceled foreclosure sales saddle neighbors, HOAs with expenses

By Mark Puente

Kathy Lane envisioned a picturesque neighborhood with tree-lined streets when she moved to FishHawk Ranch in 2004.

These days, she stares at an eyesore.

Two doors away, the back yard of an abandoned home overflows with trash; rain pours in open windows; weeds have overgrown the lawn. The pool, filled with black muck, draws swarms of bugs.

“I was expecting well-kept yards,” Lane said. “I live two doors from a dump. If it goes up in flames and catches our house on fire, who is responsible?”

The foreclosure crisis has littered the region with thousands of abandoned homes. The houses sit idle as banks have been slow to seize them in the final stage of the foreclosure process, the public auction.

Although recent headlines proclaim the worst of the housing crisis is over, the decrepit homes are a constant reminder that cleaning up the foreclosure mess remains a work in progress.

The house on Lane’s street in Lithia went into foreclosure in 2008 and has been vacant for more than a year. Aurora Loan Services had set an auction for February but canceled it.

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.”

Taxpayers also pay for the delays.

Hillsborough Circuit Judge Herbert Baumann Jr. said the Clerk of Courts’ workers spend hours filing paperwork when banks repeatedly cancel auctions.

“It does create more work,” he said. “Clerks do expend a lot of resources on this.”

• • •

No neighborhood is immune.

Even the tony streets in Tampa’s Avila and St. Petersburg’s Snell Isle have “lost houses.”

While the homes sit in limbo, homeowners associations lose money when lenders delay taking titles. The associations may mow lawns and make minor repairs, but that forces other residents to shoulder higher assessments.

Associations have few options to force lenders to sell the homes.

HOAs can seize properties through foreclosure when owners stop paying monthly assessments. Some go a step further by renting out the seized properties to recoup lost dues. Still, those actions cost the associations thousands in legal fees.

Lane, the FishHawk Ranch resident, is baffled by the banks’ inaction.

“Every day you expect a poltergeist,” she said. “We have to live here.”

She isn’t alone.

Tampa-based Rizzetta & Co. manages more than 100 community associations with 32,000 homes in Florida, including most associations in FishHawk Ranch. The firm has been deluged in recent years with calls about the abandoned homes and delinquent assessments.

Pete Williams, a Rizzetta manager, attributes the canceled auctions to money.

“The banks never want to take ownership,” he said. “They have to pay the fees going forward. The costs are considerable.”

Even McGrady, the Pinellas-Pasco judge, believes money is behind the canceled sales.

“After a while, you begin to question their motives,” the judge said.

• • •

On the flip side, some experts contend that the banks’ slowness helps stabilize the real estate market. Putting thousands of homes for sale at once could depress prices. Letting them trickle to the market brings higher prices.

And some cancellations occur because lenders and homeowners agree to loan modifications or because homeowners and defense attorneys find errors in bank documents.

The cancellations are currently down in Hillsborough and Pinellas. But that’s because lenders halted foreclosures in late 2010 amid allegations they used robo-signers and false documentation to speed up the foreclosure process.

Still, the delays have allowed some owners to live free for years and dodge assessments.

In June 2009, a Pasco judge granted U.S. Bank a final judgment to seize a home in the Valencia Gardens subdivision in Land O’Lakes. U.S. Bank scheduled the auction for September 2009 but has canceled it eight times. The most recent cancellation occurred last month.

The homeowners have lived in the home but have not paid dues to the Valencia Gardens Homeowners Association. The association is objecting to the cancellations and has asked a judge to order the bank to sell the home. Thirty-eight delinquent homeowners owe the association $56,000.

The shortfall has forced the HOA to convert water fountains into flower beds and to scale back on other projects, said Gail Spector, the president.

The group began cracking down on delinquent residents last year by threatening foreclosure lawsuits against them. Spector knows residents have lost jobs but said other homeowners shouldn’t be burdened with the unpaid dues.

“You have to treat everybody the same,” Spector said. “We are fixing and paying for everything. That’s not fair.”

Leonard J. Mankin, a Clearwater-based law firm, represents hundreds of associations across Florida. Attorney Brandon Mullis has asked a judge to sanction U.S. Bank and to force the sale of the home in Valencia Gardens.

It is now common, he said, for banks to cancel auctions seven or eight times in many foreclosure cases.

Mullis questions why lenders file court documents saying they are “negotiating or reviewing for possible loss mitigation options” when the houses have been vacant a year or longer.

He is fighting another case in Palm Harbor. The Bank of New York Mellon has canceled seven auctions — even though the homeowner defaulted on the mortgage in 2008. The bank canceled the seventh auction in February because it wanted to exhaust options to prevent the foreclosure.

Mullis scoffed.

“This action leaves the burden to fall on those neighboring residents who are forced to pay higher assessments while the property next door further deteriorates,” he said.

The Florida Bankers Association disagrees.

Anthony DiMarco, executive vice president, said lenders are overwhelmed with thousands of foreclosures and aren’t cancelling sales to skirt maintenance and assessments.

“They are trying to move cases forward,” he said. “We’d rather keep people in homes.”

Guest Writer Shares Info on Fraud in CA Foreclosure Cases

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Editor’s Comment: The following information was submitted to the blog by a law firm.  We do not know this law firm.  We are simply passing along information that may be of interest to Californians.  As always, please do your research.

From counsel for Consumer Rights Defenders for our loyal followers, you may be interested in this California information which is not meant to be legal advise, just some information that is public knowledge. Call if you need foreclosure help at 818.453.3585 ask for Steve or Sara.   Ms. Stephens Esq7777@aol.com

___________

Elements of fraud cause of action: A plaintiff seeking a remedy based upon fraud must allege and prove all of the following basic elements:

· Defendant’s false representation or concealment of a ‘material’ fact (see Rest.2d Torts | 538(2)(a); Engalla v. Permanente Med. Group, Inc. (1997) 15 Cal.4th 951, 977, 64 Cal.Rptr.2d 843, 859–misrepresentation deemed ‘material’ if ‘a reasonable (person) would attach importance to its existence or nonexistence in determining his choice of action in the transaction’);

· Defendant made the representation with knowledge of its falsity or without sufficient knowledge of the subject to warrant a representation;

· The representation was made with the intent to induce plaintiff (or a class to which plaintiff belonged) to act upon it (see Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 869, 76 Cal.Rptr.3d 325, 333–fraud by false representations means intent to induce ‘reliance’; fraud by concealment involves intent to induce ‘conduct’);

· Plaintiff entered into the contract in ‘justifiable reliance’ upon the representation (see Ostayan v. Serrano Reconveyance Co. (2000) 77 Cal.App.4th 1411, 1419, 92 Cal.Rptr.2d 577, 583–P’s admission of no reliance on a representation made by D precludes cause of action for intentional or negligent misrepresentation); and

· As a result of reliance upon the false representation, plaintiff has suffered damages. [Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239, 44 Cal.Rptr.2d 352, 359; see Manderville v. PCG & S Group, Inc. (2007) 146 Cal.App.4th 1486, 1498, 55 Cal.Rptr.3d 59, 68; and Auerbach v. Great Western Bank (1999) 74 Cal.App.4th 1172, 1184, 88 Cal.Rptr.2d 718, 727--'Deception without resulting loss is not actionable fraud' (¶ 11:357.1)]

(1) [11:354.1] Particularized pleading required: A fraud cause of action must be pleaded with particularity; i.e., every element of the cause of action must be alleged factually and specifically in full. [Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216, 197 Cal.Rptr. 783, 795; see Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73, 269 Cal.Rptr. 337, 345--complaint must plead facts showing 'how, when, where, to whom, and by what means the representations were tendered'; Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268-1269, 258 Cal.Rptr. 787, 790--fraud complaint deficient if it neither shows cause and effect relationship between alleged fraud and damages sought nor alleges definite amount of damages suffered]

How Did H & R Block Get into the Subprime Mortgage Business?

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Tax Preparer Slammed with $24 Million in Fines on Toxic Mortgages

Editor’s Comment:  You really have to think about some of these stories and what they mean. 

1. Where is the synergy in a merger between Option One and H&R Block? The answers that they were both performing services for fees and neither one was ever a banker, lender or even investor sourcing the funds that were used to lure borrowers into deals that were so convoluted that even Alan Greenspan admits he didn’t understand them.

2. The charge is that they didn’t reveal that they could not buy back all the bad mortgages — meaning they did buy back some of them. which ones? And were some of those mortgages foreclosed in the name of a stranger to the transaction? WORSE YET — how many satisfactions of mortgages were executed by Ocwen, which was not the creditor, never the lender, and never the successor to any creditor. Follow the money trail. The only trail that exists is the trail leading from the investor’s banks accounts into the escrow agent’s trust account with instructions to refund any excess to parties who were complete strangers to the transaction disclosed to the borrower. The intermediary account in which the investor money was deposited was used to pay pornographic fees and profits to the investment banker and close affiliates as “participants” in a scheme of ” securitization” that never took place.

3. Under what terms were the loans purchased? Was it the note, the mortgage or the obligation? There are differences between all three.

4. Since they didn’t have the money to buy back the loans it might be inferred that they never had that money. In other words, they appeared on the “closing papers” as lender when in fact they never had the money to loan and they merely had performed a fee for service — I.e., acting as though they were the lender when they were not.

5. Who was the lender? If the money came from investors, then we know how to identify the creditor. but if we assume that the loan might have been paid or purchased by Option One, then isn’t the lender’s obligation paid? let’s see those actual repurchase transactions.

6. If that isn’t right then Option One must be correctly identified as the lender on the note and mortgage even though they never loaned any money and may or may not have purchased the entire loan, just the receivable, the right to sell the property — but how does anyone purchase the right to submit a credit bid at the foreclosure auction when everyone knows they were not the creditor?

7. How could any of these entities have any loans on their books when they were never the source of funds and why are they being allowed to claim losses obviously fell on the investors who put up the money on toxic mortgages believing them to be triple A rated. 

8. Why would anyone underwrite a bad deal unless they knew they would not lose any money? These mortgages were bad mortgages that under normal circumstances would never have been  offered by any bank loaning its own money or the it’s depositors. 

9. The terms of the deal MUST have been that nobody except the investors loses money on this deal and the kickers is that the investors appear to have waived their right to foreclose. 

10. So the thieves who cooked up this deal get paid for creating it and then end up with the house because the befuddled borrower doesn’t realise that either the debts are paid (at least the one secured by the mortgage) or that the debt has been paid down under terms of the loan (see PSA et al) that were never disclosed to the borrower — contrary to TILA.

11. The Courts must understand that there is a difference between paying a debt and buying the debt. The Courts must require any “assignment” to be tested b discovery where the money trail can be examined. What they will discover is that there is no money trail and that the assignment was a sham.  

12. And if the origination documents show the wrong creditor and fail disclose the true fees and profits of all parties identified with the transaction, the documents — note, mortgage and settlement statements are fatally defective and cannot create a perfected lien without overturning centuries of common law, statutory law and regulations governing the banking and lending industries.

H&R Block Unit Pays $28.2M to Settle SEC Claims Regarding Sale of Subprime Mortgages

By Kansas City Business Journal

H&R Block Inc. subsidiary Option One Mortgage Corp. agreed to pay $28.2 million to settle Securities and Exchange Commission    charges that it had misled investors, federal officials announced Tuesday.

The SEC alleged that Option One promised to repurchase or replace residential mortgage-backed securities it sold in 2007 that breached representations and warranties. The subsidiary did not disclose that its financial situation had degraded such that it could not fulfill its repurchase promises.

Robert Khuzami, director of the SEC’s Division of Enforcement, said in a release that Option One’s subprime mortgage business was hit hard by the collapse of the housing market.

“The company nonetheless concealed from investors that its perilous finances created risk that it would not be able to fulfill its duties to repurchase or replace faulty mortgages in its (residential mortgage-backed securities) portfolios,” Khuzami said in the release.

The SEC said Option One was one of the nation’s largest subprime mortgage lenders, with originations of $40 billion in its 2006 fiscal year. When the housing market began to decline in 2006, the unit was faced with falling revenue and hundreds of millions of dollars’ worth of margin calls from creditors.

Parent company H&R Block (NYSE: HRB) provided financing for Option One to meet margin calls and repurchase obligations, but Block was not obligated to do so. Option One did not disclose this reliance to investors.

Option One, now Sand Canyon Corp., did not admit or deny the allegations. It agreed to pay disgorgement of $14.25 million, prejudgment interest of nearly $4 million and a penalty of $10 million.

Kansas City-based H&R Block reported that it still had $430.19 million of mortgage loans on its books from Option One as of Jan. 31. That’s down 16.2 percent from the same period the previous year.

How the Goldman Vampire Squid Just Captured Europe

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Editor’s Comment:

Guest Writer:  Ellen Brown

Ellen is an attorney and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com.  She is also chairman of the Public Banking Institute.

How the Goldman Vampire Squid Just Captured Europe

By Ellen Brown, Truthout | News Analysis

The Goldman Sachs coup that failed in America has nearly succeeded in Europe – a permanent, irrevocable, unchallengeable bailout for the banks underwritten by the taxpayers.

In September 2008, Henry Paulson, former CEO of Goldman Sachs, managed to extort a $700 billion bank bailout from Congress. But to pull it off, he had to fall on his knees and threaten the collapse of the entire global financial system and the imposition of martial law; and the bailout was a one-time affair. Paulson’s plea for a permanent bailout fund – the Troubled Asset Relief Program or TARP – was opposed by Congress and ultimately rejected.

By December 2011, European Central Bank President Mario Draghi, former vice president of Goldman Sachs Europe, was able to approve a 500 billion euro bailout for European banks without asking anyone’s permission. And in January 2012, a permanent rescue funding program called the European Stability Mechanism (ESM) was passed in the dead of night with barely even a mention in the press. The ESM imposes an open-ended debt on EU member governments, putting taxpayers on the hook for whatever the ESM’s eurocrat overseers demand.

The bankers’ coup has triumphed in Europe seemingly without a fight. The ESM is cheered by euro zone governments, their creditors and “the market” alike, because it means investors will keep buying sovereign debt. All is sacrificed to the demands of the creditors, because where else can the money be had to float the crippling debts of the euro zone governments?

There is another alternative to debt slavery to the banks. But first, a closer look at the nefarious underbelly of the ESM and Goldman’s silent takeover of the ECB….

The Dark Side of the ESM

The ESM is a permanent rescue facility slated to replace the temporary European Financial Stability Facility and European Financial Stabilization Mechanism as soon as member states representing 90 percent of the capital commitments have ratified it, something that is expected to happen in July 2012. A December 2011 YouTube video titled “The shocking truth of the pending EU collapse!” originally posted in German, gives such a revealing look at the ESM that it is worth quoting here at length. It states:

The EU is planning a new treaty called the European Stability Mechanism, or ESM: a treaty of debt…. The authorized capital stock shall be 700 billion euros. Question: why 700 billion?… [Probable answer: it simply mimicked the $700 billion the US Congress bought into in 2008.][Article 9]: “,,, ESM Members hereby irrevocably and unconditionally undertake to pay on demand any capital call made on them … within seven days of receipt of such demand.” … If the ESM needs money, we have seven days to pay…. But what does “irrevocably and unconditionally” mean? What if we have a new parliament, one that does not want to transfer money to the ESM?…

[Article 10]: “The Board of Governors may decide to change the authorized capital and amend Article 8 … accordingly.” Question: … 700 billion is just the beginning? The ESM can stock up the fund as much as it wants to, any time it wants to? And we would then be required under Article 9 to irrevocably and unconditionally pay up?

[Article 27, lines 2-3]: “The ESM, its property, funding and assets … shall enjoy immunity from every form of judicial process…. ” Question: So the ESM program can sue us, but we can’t challenge it in court?

[Article 27, line 4]: “The property, funding and assets of the ESM shall … be immune from search, requisition, confiscation, expropriation, or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.” Question: … [T]his means that neither our governments, nor our legislatures, nor any of our democratic laws have any effect on the ESM organization? That’s a pretty powerful treaty!

[Article 30]: “Governors, alternate Governors, Directors, alternate Directors, the Managing Director and staff members shall be immune from legal process with respect to acts performed by them … and shall enjoy inviolability in respect of their official papers and documents.” Question: So anyone involved in the ESM is off the hook? They can’t be held accountable for anything? … The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity. There are no independent reviewers and no existing laws apply? Governments cannot take action against it? Europe’s national budgets in the hands of one single unelected intergovernmental organization? Is that the future of Europe? Is that the new EU – a Europe devoid of sovereign democracies?

The Goldman Squid Captures the ECB

Last November, without fanfare and barely noticed in the press, former Goldman executive Mario Draghi replaced Jean-Claude Trichet as head of the ECB. Draghi wasted no time doing for the banks what the ECB has refused to do for its member governments – lavish money on them at very cheap rates. French blogger Simon Thorpe reports:

On the 21st of December, the ECB “lent” 489 billion euros to European Banks at the extremely generous rate of just 1% over 3 years. I say “lent,” but in reality, they just ran the printing presses. The ECB doesn’t have the money to lend. It’s Quantitative Easing again.The money was gobbled up virtually instantaneously by a total of 523 banks. It’s complete madness. The ECB hopes that the banks will do something useful with it – like lending the money to the Greeks, who are currently paying 18% to the bond markets to get money. But there are absolutely no strings attached. If the banks decide to pay bonuses with the money, that’s fine. Or they might just shift all the money to tax havens.

At 18 percent interest, debt doublesin just four years. It is this onerous interest burden – not the debt itself – that is crippling Greece and other debtor nations. Thorpe proposes the obvious solution:

Why not lend the money to the Greek government directly? Or to the Portuguese government, currently having to borrow money at 11.9%? Or the Hungarian government, currently paying 8.53%. Or the Irish government, currently paying 8.51%? Or the Italian government, who are having to pay 7.06%?

The stock objection to that alternative is that Article 123 of the Lisbon Treaty prevents the ECB from lending to governments. But Thorpe reasons:

My understanding is that Article 123 is there to prevent elected governments from abusing Central Banks by ordering them to print money to finance excessive spending. That, we are told, is why the ECB has to be independent from governments. OK. But what we have now is a million times worse. The ECB is now completely in the hands of the banking sector. “We want half a billion of really cheap money!!” they say. OK, no problem. Mario is here to fix that. And no need to consult anyone. By the time the ECB makes the announcement, the money has already disappeared.

At least if the ECB was working under the supervision of elected governments, we would have some influence when we elect those governments. But the bunch that now has their grubby hands on the instruments of power are now totally out of control.

Goldman Sachs and the financial technocrats have taken over the European ship. Democracy has gone out the window, all in the name of keeping the central bank independent from the “abuses” of government. Yet, the government is the people – or it should be. A democratically elected government represents the people. Europeans are being hoodwinked into relinquishing their cherished democracy to a rogue band of financial pirates, and the rest of the world is not far behind.

Rather than ratifying the draconian ESM treaty, Europeans would be better advised to reverse Article 123 of the Lisbon treaty. Then, the ECB could issue credit directly to its member governments. Alternatively, euro zone governments could re-establish their economic sovereignty by reviving their publicly owned central banks and using them to issue the credit of the nation for the benefit of the nation, effectively interest free. This is not a new idea, but has been used historically to very good effect, e.g. in Australia through the Commonwealth Bank of Australia and in Canada through the Bank of Canada.

Today, the issuance of money and credit has become the private right of vampire rentiers, who are using it to squeeze the lifeblood out of economies. This right needs to be returned to sovereign governments. Credit should be a public utility, dispensed and managed for the benefit of the people.

To add your signature to a letter to parliamentarians blocking ratification of the ESM, click here.

National Notary Association Takes Up Robosigning

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Editor’s Comment: 

National Notary Association to take Up Issue of  Forgery, Robosigning and attesting to authority in corporate capacity.  Arizona’s Ken Bennett, Secretary of State, is among the officials leading the charge on this issue.

Notary Trade Group: Foreclosure Fraud Crisis Highlights Need For Legal, Trusted, Ethical Notarizations

Posted: 21 Apr 2012 09:07 PM PDT

The National Notary Association recently announced:

§ With the foreclosure ‘robo-signing’ crisis and the National Mortgage Settlement sending shockwaves through America’s mortgage industry, three nationally prominent Secretaries of State will convene a special Keynote Panel at the National Notary Association’s 34th Annual Conference this June to discuss the growing demand for trusted, legal notarizations, and what Notaries need to do to increase public protections and reduce liability risks.

§ Secretaries of State Elaine Marshall of North Carolina, Beth Chapman of Alabama, and Ken Bennett of Arizona are at the forefront of developments transforming the role of Notaries Public. Their insights will be a highlight of Conference 2012 — especially in light of mounting nationwide concerns over notarial compliance and risk management.

§ We are pleased that these three influential Secretaries — all of whom are among the top minds in notarial issues — will join us to address the nation’s Notaries and their employers during this critical time,” said NNA President and Chief Executive Officer Thomas A. Heymann.

§ The foreclosure crisis put the spotlight squarely on the high value of legal and ethical notarizations. These Secretaries will provide their perspectives on what needs to be done to strengthen the notarial process and avoid these types of financial crises.”

For more, see Secretaries of State to Address Notary Compliance, Liability, Consumer Protection Following National Mortgage Settlement(Distinguished State Leaders Will Convene Keynote Panel at the National Notary Association’s 2012 Conference in San Diego).

Don’t leave or enter short sale home without quiet title and adequate title insurance.

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U.S. home short sales surpass foreclosure deals for first time

Editor’s Comment: 

Well of course short sales will be higher than REO sales. REO sales of foreclosed property where the bank or its agent owns the property presents a virtually impossible situation with respect to title. The odds are rising every day that a homeowner is going to sue, reverse the eviction, reverse the foreclosure, get title free of the mortgage and note and have the right to exclusive possession. We are getting reports of this across the country. While the banks are trying to keep a stiff upper lip about it all they are in a state of panic (!) because of the loss of ill-gotten gains they thought they had in the bag and (2) because this loss must now be written down on their balance sheet which means that their capital reserves must be correspondingly increased. Where will they get the money?

 SO REO sales are going to be increasingly problematic.

But in a short sale it is the actual homeowner who signs the deed. That eliminates a wild card that is totally out of the control of the banks. The balance of the problem is that the satisfaction of the old mortgage is being executed by parties who have no ownership of the loan nor any agency authority to represent the true creditors (in most cases). But if the short-sale goes thorugh the new buyer can file a quiet title action for a few hundred dollars in fees and a couple of hundred dollars in court costs, and get a judge to sign off on all title claims. To paraphrase American Express’ “don’t leave home without it” It is the best interest of both the old homeowner who could be subject to liability a second time if the real creditor wakes up and in the interest of the new buyer who doesn’t want to lose his home to the claims of some creditor who can actually prove a case. So don’t leave or enter a short-sale home with quiet title — and a REAL title insurance policy that does not exclude claims arising from supposed securitization of the loan.

U.S. home short sales surpass foreclosure deals for first time                                        New Mexico Business Weekly

In a sign that banks are becoming more willing to sell houses for less than the amount that is owed on them, the number of U.S. home short sales surpassed foreclosure deals for the first time, Bloomberg reports, citing Lender Processing Services Inc.

Short sales accounted for 23.9 percent of home purchases in January, the most recent month available, compared with 19.7 percent for sales of foreclosed homes, data compiled by the company show. A year earlier, 16.3 percent of transactions were short sales and 24.9 percent involved foreclosures.

The three largest banks in New Mexico are Wells Fargo, Bank of America and U.S. Bancorp    , respectively.

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