The Sad Future of Housing According to Zillow

Is housing on a ‘sugar high’?
http://realestate.msn.com/blogs/blog–is-housing-on-a-sugar-high
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The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Analysis: The Banks have been paying a lot of money to plant articles around the country and in media generally to give us the impression that the recession is over, they did their job in preventing it, and the housing crisis has turned the corner with prices rising. Housing prices are rising in some places because of a glut of cheap money (see mortgage meltdown 1996-2008); other than that the whole thing is an outright lie. Even their own analysts don’t agree with the articles and statements made on behalf of the megabanks.

You can’t take half the blood out of a person and expect them not to be anemic, weak and dizzy. The megabanks took more than that out of our economic system and parked it around the world out of reach of all but the select few who are members of the club. For the rest of us, earning a living is becoming increasingly difficult, getting approval for a reasonably priced mortgage is difficult unless you go for one of the new deals that are out there at 2.5%, 15 years fixed rate, supposedly. Besides the fact that they are going to steer you into an entirely different loan product in the classic bait and switch, they are restarting the “securitization” scheme that wrecked us in the first place.

Who is making money at 2.5%? How can you even have a budget for advertising much less appear dozens of times per day on TV, radio, magazines and newspapers? The answer to these and other similar questions lies in the fact that on average, the mortgages are going to be at much higher rates than those advertised, the incidence of force-placed insurance on fully insured homes will be increased to become a regular major contributor to income to the megabanks in the form of kickbacks or commissions and simply price gouging, and no doubt someone has come up with a really creative way to make certain the loans, on the whole, go into default decreasing the value of a “portfolio” or “pool” of loans to less than half of the nominal value placed on the note — but increasing the profits from betting against the same mortgages they represented as being underwritten according to industry standards.

The fact is that the Federal Reserve cannot keep rates down indefinitely, and the rush to gold and other currencies shows that the big players who know more than you do are getting ready for a major devaluation of currency in the U.S. The “inflation” that accompanies a devaluation might work to the benefit of the homeowners who owe the old dollars but can pay with the new dollars (if they have any). But increased rates mean higher payments, and higher payments combined with no credit and low wages and low median income spells disaster for the demand side of housing. Simply  put: housing prices are going down again and they are already starting to slip.

The only reason inventories of homes for sale are “low” is because of the shadow inventory of homes set for foreclosure sales, the zombie houses that have been stripped and are worthless and the homeowners who are so far underwater that they can’t make it to the closing table. It is a very unpersuasive recovery. Zillow outlines it chapter and verse.

Working backwards, the reason for all this is simple theft using exotic sounding names of financial instruments that were never funded or used. In the end, the loan was from the investors and the debt was and is between the investors and the homeowners. Everyone else is an intermediary. Those conduits for the loan have no stake in it. They have their agreements for fees but that is about it.

There are only two ways of going on this: (1) do the same thing all over again and kick the can down the road to the next blowout recession or (2) stop kidding ourselves that housing prices are going anywhere but down unless we expose the truth of what happened in these so-called mortgage loans funded with money stolen from investors under the premise that the money would fund a REMIC trust which would then acquire loans and be secured, on record, for their interest. Anyone out there see the trust on any document in any loan closing that didn’t end up in litigation? No?

That’s because the intermediaries were and are asserting ownership stakes in loans that never came out of their pocket, loans for which they have no risk of loss and loans that were acquired on paper by other intermediaries when the debt was at all times material hereto owned by the investor lender. AND THAT is why you must LEAD with the deficiencies in the money trail and NOT with the DOCUMENT trail, which will merely have you running down a rabbit hole dug special for you.

The Future of Home Values – Taking a Closer Look at Price-to-Income Fundamentals
http://www.zillowblog.com/research/2013/04/09/the-future-of-home-values-taking-a-closer-look-at-price-to-income-fundamentals/

Banks Keep Winning, But Borrowers Are Picking Up the Pace

What’s the Next Step? Consult with Neil Garfield

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For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editors’ Analysis: Based upon reports coming from around the country, and especially in Florida, Nevada, New York, and other states, it seems that while the tide hasn’t turned, borrowers are finally mounting a meaningful challenge to the improper, illegal and fraudulent practices used at loan originations , assignments and foreclosures. As I have discussed with dozens of attorneys now, the strategies I suggested 6 years ago, once thought of as “fringe” are now becoming mainstream and the banks are feeling the pinch if not the bite of homeowners’ wrath.

The expression I like to use is that “At the end of the day everyone knows everything.” By using DENY and Discover tactics or strategies like that, borrowers are shifting the urden of persuasion onto the would-be foreclosers who in most cases do not have “the goods.” They are not a creditor, they didn’t fund the loan, they didn’t buy the loan and they don’t have any legal authorization to pursue foreclosure, submit a credit bid or otherwise trade in houses that were never subject to a perfected lien, and never owned by them.

It is becoming perfectly clear that something wrong is happening when the foreclosure strategies of the Wall Street puppets results in tens of thousands of homes being abandoned, blighting entire neighborhoods, towns and even cities. The banks are not stupid, although arrogance is not far from stupidity.

In ordinary times in any ordinary recession, the banks would do almost anything to avoid foreclose. They simply don’t have the money or the desire to acquire a portfolio of properties and they certainly don’t want to foreclose where the the end result is that the value of the collateral is diminished BELOW ZERO. And they certainly would not pursue policies that they knew would tank housing prices because it would only decrease the value of the loan and the likelihood of getting repaid for the loans they made.

But these are not ordinary times. Banks DO want price declines, so they can create REITS and other vehicles to pick up cheap properties. They DO want foreclosures even where the value of a blighted neighborhood is not worth the taxes, maintenance and insurance to keep the properties.

The reason is simple: if the loan is a total failure and under applicable state law they are able to create the appearance of a valid foreclosure, then the case is closed. Investors have not questioned the foreclosure process, mostly because they think that the basic problem was in the low underwriting standards which  certainly did contribute to the mortgage meltdown. If you look at most of the mortgages they have fatal flaws which increase the likelihood that the loan will fail — especially with blacks and other minorities who have been deprived of decent education and couldn’t possibly understand the deals they were signing.

Disclosure was required — but never made in terms that the borrowers understood — that the loans were being priced too high for the income of the household, and priced higher that the rates for which the household qualified. Blacks were 3.5x more likelihood to be steered into subprime loans when they qualified for conventional loans. People of Latin decent were treated like trash too being presented with documents that not only went above their education or sophistication in real estate transactions but also used words they never learned in English.

But the real reason I learned in my interviews was unrelated to the defective foreclosures. It goes back to the study made by Katherine Ann Porter when she was at the University of Iowa. Her study of thousands of mortgages and foreclosures came to the inescapable conclusion that at least 40% of all the origination documents were intentionally destroyed or claimed as lost. Other studies have shown the figure to be higher than 65%.

In ordinary times the  promissory note executed by the borrower in a conventional residential loan is a negotiable document supported by consideration from the payee who loaned money to the borrower. These notes were given to a custodian of records whose job was to preserve and protect these papers because they were considered by all accounting standards as CASH EQUIVALENT.

So on the balance sheet of the lender the cash was added to cash equivalents as total liquidity of the lender or bank. [What you are looking for on the balance sheet of the "lenders" are "loans receivable" and corresponding entry on the liability side of a reserve for bad debt. You won't find it in the "new mortgages" because they never had the real stake or risk of loss on that loan and therefore was excluded entirely from the balance sheet or placed in a category in loans held for sale along with a footnote or entry that zeroed out the asset of loans for sale because they were committed to third parties who had table funded the loan contrary to the express rules of TILA and Reg Z which state that the loans are presumptively predatory loans if the pattern of lending was  table funded loans.] See My workbooks on www.livinglies-store.com

The notes were considered liquid because there was always a secondary market in which to sell the notes and mortgages. And there, the proper chain of authorized signatures, resolutions, and endorsements was carefully followed, same as they would require from any borrower claiming an asset as proof of their credit-worthiness.

So why would any bank or any reasonable person intentionally destroy the original documents that constituted by definition the origination of the loan collateralize by a supposedly perfected lien? In my seminars and workbooks I answer this question with an example: “If you tell someone you have a hundred dollar bill and that they can have it if they buy to from you for $100, but that you will hold onto it because you will make some more money for them by lending it out, then the fraud is complete. And there you have the beginning of a PONZI scheme.

As long as you are paying them as though they had $100 invested, they are happy. But what if you were holding a $10 bill and not a $100 bill. What if they took your word for it that you were holding a $100 bill. AND what if now they want to see the $100 bill? Now you have a problem. You have no $100 bill to show them. You never did. For a while you could take incoming investor money and then show the original investor the money but when investors stop buying new deals, then you don’t have the $100 bills to show everyone you dealt with because all you ever had was a $10 bill.

So better to say that you destroyed it under the premise that the digitized copy would suffice or lost it because of the complexity of the securitization process than to admit that you never had it to begin with. If you admit it, you go to jail and you are ordered to pay restitution, your assets seized and marshaled to return as much money as possible to the victims of the PONZI scam.

If you don’t admit it, then there is the possibility that after probing why the investors didn’t get their money back, they start discovering how you were using their money, and what you were doing as business plan. The only way to shut that off and make it least likely that investors would ever question whether you had represented the deal correctly at the beginning, to avoid criminal prosecution, is to COMPLETE the FORECLOSURE Process which gives the further appearance that there is an official state government seal of approval on a perfectly illegal foreclosure and probably an economic crime.

See below for the suffering and light and lives lost because of this incredible crime that nobody seems to want to prosecute. A crime, by the way, they has corrupted title records that will haunt us for decades to come.

wall-street-kept-winning-on-mortgages-upending-homeowners.html

2.3 million homes about to hit the market as banks grab them up at bargain basement prices

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Editor’s Comment: There are few places on Earth where morality is so twisted as you will find on Wall Street, yet we know we need a financial center and bankers motivated by money. The answer is in regulating them like a utility with a few feet added to the leash.

As we stand the banks have inserted themselves into the mortgage process as though they were lenders, traded the loans, sold the loans and bought insurance all payable to themselves. The money came from you and me in our managed funds for retirement and pensions, and the announcement of slashed benefits will come after the election. Obama is likely to want to do something about the problem for retirees on fixed incomes whereas Romney will again say “let it bottom out” like he says about housing, like he said about car manufacturing and dozens of other companies and industries. But Obama is not doing nearly enough so you hardly be surprised with voter disappointment.

Now that they have control over the title to homes they essentially stole, they are about to dump those houses on the market driving prices down further, and enabling them and their preferred clients to buy the homes en masse at the artificially low prices created by the banks themselves. What a world.

If this doesn’t make you want to fight them, what will. Millions of young Americans of all races, creeds, men and women have lost their lives preserving our liberties and freedom from this type of bullying and for the right to protection of our property and our lives through due process.

They died trying to stop this day. Don’t you owe it to yourself and your grandchildren to stand up and fight, without the risk of loss of life and limb?

2.3 million distressed homes have yet to hit market

by

Just under 2.3 million U.S. homes made up a “shadow inventory” of distressed properties that are likely to hit the housing market in the future, according Santa Ana-based data giant CoreLogic.

That’s down from July 2011, when the hidden supply of distressed homes that could become a drag on home prices totaled 2.6 million units, according to the report.

As of July, the shadow inventory consisted of 345,000 bank-owned units (dark blue), 900,000 homes in foreclosure (light blue), and 1 million homes that were 90 days or more behind on mortgage payments (red).

CoreLogic’s estimate of shadow inventory has dropped steadily since February.

The report said that decline could be a sign that home prices will rise.

“This is yet another hopeful sign that the housing market is slowly healing,” said CoreLogic President and CEO Anand Nallathambi.

The data firm defines shadow inventory as homes where owners are 90 days or more behind on mortgage payments, homes in some stage of the foreclosure process or bank-owned foreclosures that have yet to be listed for sale.

Details from the July report show:

It would take six months to sell all 2.3 million units of shadow inventory based on July’s sales pace.
Just over 1 million units in the shadow inventory are homes that are 90 days or more late on mortgage payments but are not yet in the foreclosure process.
More than 900,000 units are in some stage of foreclosure.
About 345,000 units have gone back to banks after a foreclosure but aren’t yet on the market.
The estimated value of homes in the shadow inventory was $382 billion in July, down from $397 billion in July 2011.

Predictions of Price Increases Versus Predictions of Values

“Just because the market looks better to you on the money doesn’t mean it has recovered from the corruption of title. You still need a lawyer and you absolutely need to do a title and securitization search or at least a consult with someone who can review the past history of the property. The risk here is that you can start off as a “buyer” and end up as a “loser” when title fails and the title policy doesn’t cover it.” —Neil F Garfield, livinglies.me

Morgan Stanley predicts 9 % growth in prices this year alone and another strong year next year. The projection is preposterous. But the idea is out there and it will have its effect as the housing market scrapes the bottom of the barrel. The more confidence people have that the worst of the housing crisis is over the more they will tend to take another look at buying and that will have its own effect.

Schiller takes this psychological game to a new level in the New York times, suggesting that a crowd mentality was the reason for the boom, the reason for the bust and the reason we will come back out of it. But at least he understands the difference between values which are the fundamentals of housing transactions and prices which are the product of psychological factors. The fact remains that median income, while rising slightly lately, showing the incredible strength of the American economy despite all odds against it, is still largely flat when you take a couple of steps back to look at the whole picture.

Median income is the obvious indicator upon which economists agree to set values for housing and other things consumers buy. The reason is the same as any three year old can understand. If people don’t have the money or the credit, they won’t get it because they can’t.

Is another boom and bust bubble coming our way? Probably. That is because despite the various “restrictions” and regulations, the securitization claims against mortgages are on the rise which means that nobody has the risk that a normal bank would have doing a straight out one on one loan of the bank to a consumer. The loopholes abound where the participants can make pornographic fees on a relatively simple mortgage even if it is conventional with someone who has a high credit rating.

As the credit rating declines and as the rules loosen up a bit, the big money is in higher interest rate loans where the loan interest is higher than the amount sought by investors who are still buying mortgage backed bonds and exotic variations of those instruments and still buying the concept of REMIC trust, despite the fact there is no trust, nobody to trust, and nobody in charge, giving plausible deniability to everyone in the chain of “securitization.”

 

Underwater homes under 40 and over 55 still in dire straights

Obama response unclear. He keeps saying that the  object here is not to include “undeserving” borrowers who are just trying to get out of a bad deal a deal that went bad or whose eyes were bigger than their pocket book. As long as he keeps saying that he is missing the whole point. This was a Ponzi Scheme and even if the borrowers were convicted felons behind bars they would still be victims of THIS Scheme. ALl the elements are present — identity theft, diversion of funds, false documentation to both sides, fabrication of documents as the lies came under scrutiny, forgeries, surrogate signing, robo-signing, and profits 1000 times the usual profits for processing or originating loans.

None of these profits were disclosed to either the lender-investor nor the homeowner borrower, violating a myriad of mending and contract laws. It doesn’t matter whether the borrower is perceived as deserving relief — they all are if they were fraud victims.

If the average guy on the street knows we have been screwed without all the economic statistics, why won’t Obama at least acknowledge it?

See Vast geography contains underwater homes inviting homeowners to walk away from homes they are willing to pay for

More Lies: Housing Data

BUYERS SHOULD BEWARE OF “GREAT DEALS”

AND ASK CITY OFFICIALS FOR REAL DATA

“You have to ask yourself the question “WHY?” why would banks reject modifications where borrowers would keep paying and instead foreclose and then abandon the house. Something is going on here.” — Neil F Garfield, livinglies.me

“The real answer is to go to the banks and stop asking for answers and start asking for the money they made while everyone else lost on the deal.” — Neil F Garfield http://www.livinglies.me

Editor’s Note: It’s all happening because whenever reporters, officials or investors research the housing market, they are getting data from the very people who don’t want you to know anything. Going to the Banks for mortgage and housing data is no different from asking a convicted felon (let’s say a rapist) for education on sex. You are going to hear what they want to tell you, not the facts.

As the article below points out, Banks and Realtors, as well as others who have a stake in making you believe that the housing market is (a) not that bad and (b) is getting better. Both statements are untrue. The people to ask are the city officials who are dealing with the aftermath of the holocaust caused by Wall Street mortgage manipulations, the county recorders, and the people themselves who live in neighborhoods that have been destroyed by foreclosure because most of the homes are vacant , stripped or the headquarters of the latest gang of thieves or drug dealers.

As pointed out below, the official Bank figures state that there are 5,000 vacant homes in Chicago. In a city that size, one would think that the vacancy is within reason. But the true facts are that more than 100,000 homes are vacant, with probably the same number about to be vacant as the homeowners confront mortgage servicers and banks claiming their homes but not yet doing anything about it.

These are the people who have strategically defaulted, stayed in the home, and then waited or put up a fight, lasting months or even years without payments, thus recovering part of the investment they made when they bought the house or bought the silly loan product that the “lender” pushed on them, knowing that the home would be in foreclosure.

So these people are sitting on homes that at best are worth 50% of the appraised value used when the “loan” was closed (albeit with someone other than the investor-lender). This part of the problem can be easily fixed by principal reductions or corrections to reflect market reality. Businesses do it everyday in Chapter 11 reorganizations. But the Banks bought their way into legislation that prevented bankruptcy judges from stripping residential liens down to their true value — which is the underlying value of the property.

So the only practical alternative is to walk away and let whoever wants to foreclose, go ahead and steal the property with a credit bid that comes from a party who never was a creditor in the financial transaction between the borrower and the lender. It all seems surreal but it is true.

THE RECESSION: Then you have the unemployment problem and the underemployment problem where people who had an income no longer have that income and they are running out of savings, retirement funds and credit to keep making the payments. This (a) obviously presents imminent foreclosures that are not yet on anyone’s books and (b) hides a valuation problem for homes that is sickening if you are accustomed to thinking of this problem as a cyclical problem that will fix itself.

As unemployment and underemployment rises, and wages either stagnate or go down as a result of inflation and a weak economy, median income drops. It is just a mathematical computation: arithmetic. If people don’t have the income to buy or maintain a house they are not going to own one. As the Case-Schiller index clearly shows, proven over 120 years of analysis, home valuations are so closely tied to median income that they can be considered the same thing.

The housing market stinks and it is dropping. City officials are stuck with figuring out how, on shrinking budgets, they are going to deal with so large a number of homes that are vacant with an endless supply of vacant homes in sight. Some cities are bull dozing the homes while others consider using eminent domain to ward off future foreclosures. The real answer is to go to the banks and stop asking for answers and start asking for the money they made while everyone else lost on the deal.

As intermediaries, the banks are supposed to get paid for their service in processing transactions, deposits and loans. We now have the banks entering any transaction they want as a principal without disclosure to either the borrower or the lender, and then, temporarily “owning” the loan, selling it 20-30 times. Having done that and made a fortune, they toss the “loss” over to the investor lender when there is nothing left in the investment. Pensions get slashed, retirement funds get reduced, and median income drops even further.

Very Bad Things Happen When We Depend on the same People Who Caused the Foreclosure Crisis to Track Its Destruction

Alternetnet/ by Sam Jewler, Chris Herwig

See Full article at very-bad-things-happen-when-we-depend-same-people-who-caused-foreclosure-crisis-track

Eurozone Recession in Overdrive

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Editor’s Comment:

France, Italy, Spain All at record lows in GDP

Mish Shedlock nails it in the article below. We are reminded again that where the banks get control of political policy, every avenue will be explored before Governments do the right thing — or the country explodes into chaos and a new Government is born. For those who have studied French history, these reports sound earily like the conditions that preceded the French Revolution and the bloodbath that followed. Rioting is commonplace. And the rioters are not just expressing outrage; they have lost faith in the their government, their currency and their prospects. Japanese seminars abound on how to store money and move to other countries. Malasia looks good to them. 

And here in the United States, the steam keeps building under the lid while the banks, realtors and other groups try to convince us that the recession, and the mortgage crisis that brought it on, is over and will NOW recover. Despite years of such “prosperity is just around the corners’ spinning, and some people still believe it when they hear it, we know from history, including our own, that revolution of one sort or another, doesn’t take a majority of citizens to get involved. In fact, every major revolution in every major country occurred with a small band of “fringe” people leading the way until their sucesses attracted the mainstream people who thought they could ride the storm and survive the aftermath.

Over the next 60 days, long-term unemployment benefits are over in this country. GDP is in for another hit. That was money going into the hands of people who were spending it the moment they received it. The full multiplier effect has been keeping our economy floating and now THAT is going away. 

Home prices are now at their lowest level since 2002 and all responsible analysts tell us that housing prices are going down another 15% and I think they are right. The economies of the world are crashing because the people have no money to spend. Even the employed are underemployed and can’t make enouogh money to pay for housing and other major purchases except on a much lower scale. 

We are in a depression, not a recession and the fact that this Depression is not yet as bad as the Great Depression should not lull us into a false sense that this is just a cycle that will run its course. It isn’t. This is the end of modern commerce unless we do something about it. And the ONLY thing left to do is to provide a mechanism where the middle class is suddenly redeployed with cash in their hands to buy things and cause commerce to renew. Don’t look to China or India either which are experiencing sharp decines in GDP. 

There is only one piece of currency that will restore the middle class . Iceland proved it as have other countries. FORCE BANKS TO REDUCE HOUSEHOLD DEBT. Between the mortgage chicanery and credit cards, government borrowing on terms they didn’t understand, and most banks that were “in the game” without knowing the rules, the money is gone. It isn’t the bank that has been robbed, nor government spending that is ripping the economies of the world apart. It is the banks themselves that siphoned off all our currency and our liquidity, and won’t put it back. They have lost their franchise through greed. It is time to nationalize the banks and then let them operate privately as utilities regulated as though they provide the lifeblood of the world.   

The “anti-regulators” are mere apologists for the new aristoracy that has pulled off a coup d’etat and pulled the wool over the eyes of the media and the public.

Eurozone Retail Sales Crash: Record Declines in France and Italy, Overall Revenues Drop at Near Record Pace

by Mike “Mish” Shedlock

Retail sales in France, Italy, and the eurozone as a whole hit the skids according to Markit. Retail sales in Germany were positive, but barely.

Steepest Decline in French History

Further sharp fall in French retail sales during May

 Key points:

  • Month-on-month decline in sales matches April’s survey-record
  • Steepest year-on-year decline in series history
  • Purchase price inflation eases to near-stagnation

Sales fell on an annual basis at the steepest pace recorded since the inception of the survey in January 2004. Margins continued to be squeezed amid an intense competitive environment, despite purchase price inflation easing to near-stagnation.

The headline Retail PMI® registered 41.4 in May, matching April’s survey-record low. French retailers indicated that actual sales came in well below previously set targets during May. The degree of undershoot was the greatest since February 2010.

Record Declines in Italy

Record year-on-year decrease in Italian retail sales in May

 Key points:

  • High street spending down sharply, albeit at weaker monthly rate
  • Job shedding steepest in series history
  • Discounting and cost inflation reduce profitability

Summary:

The Italian retail sector remained in contraction during May, with sales again falling sharply in spite of widespread discounting. Cost pressures meanwhile grew from April’s recent low on the back of rising transport costs, thereby adding more pressure to margins. Consequently, firms shed staff at a marked and accelerated rate that was the steepest since data were first compiled in January 2004.

High street spending across Italy contracted sharply on the month during May, albeit at a slightly slower rate than that registered during April. This was signalled by the seasonally adjusted Italian Retail PMI® posting at 35.8, up from 32.8. Sales fell for the fifteenth month straight, and panellists continued to highlight low consumer confidence and falling disposable incomes as the main factors behind the decline.

German Sales Show Slight Growth

German retail sales return to growth in May

 Key points:

  • Retail PMI points to marginal month-on-month rise in sales
  • Like-for-like sales higher than one year earlier
  • Wholesale price inflation eases markedly

The seasonally adjusted Germany Retail PMI rose from 47.4 in April to 50.7 in May, to indicate a marginal increase in sales on a month-on-month basis. That said, the rate of expansion was lower than those seen throughout the first quarter of 2012. Companies that reported a rise in sales since April generally noted that more favourable weather conditions had resulted in higher customer footfall.

Survey respondents indicated that actual sales fell short of initial targets for the second month running in May.

Sharp Drop in Overall Sales, Revenues Decline at Near Record Pace

Eurozone retail sales continue to fall sharply in May

 Key points: 

  • Retail PMI improves to 43.3, but still signals steep monthly drop in sales
  • Near-record annual fall in sales
  • Wholesale price inflation slows sharply

Summary of May findings:

The Eurozone retail sector remained firmly in contraction in May, according to PMI® data from Markit. Sales fell sharply on a month-on-month basis, and revenues compared with a year ago were down at a near-record rate. There were signs of easing pressure on retailer’s purchasing costs, however, as the rate of purchase price inflation slowed sharply to a 19-month low.

This should bury the notion the eurozone recession will be short and shallow.


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

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Editor’s Comment:

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

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

Make the Record

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

We meet every week!

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

FACEBOOK PAGE FOR “FORECLOSURE STRATEGIST”

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

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

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

MEETUP PAGE FOR FORECLOSURE STRATEGISTS:

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

May your opportunities be bountiful and your possibilities unlimited.

“Emissary of Observation”

Darrell Blomberg

602-686-7355

Darrell@ForeclosureStrategists.com

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.

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


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 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.

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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.

Current Bank Plan Is Same as $10 million Interest Free Loan for Every American

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“I wonder how many audience members know that Bair’s plan is more or less exactly the revenue model for all of America’s biggest banks. You go to the Fed, get a buttload of free money, lend it out at interest (perversely enough, including loans right back to the U.S. government), then pocket the profit.” Matt Taibbi

From Rolling Stone’s Matt Taibbi on Sheila Bair’s Sarcastic Piece

I hope everyone saw ex-Federal Deposit Insurance Corporation chief Sheila Bair’s editorial in the Washington Post, entitled, “Fix Income Inequality with $10 million Loans for Everyone!” The piece might have set a world record for public bitter sarcasm by a former top regulatory official.

In it, Bair points out that since we’ve been giving zero-interest loans to all of the big banks, why don’t we do the same thing for actual people, to solve the income inequality program? If the Fed handed out $10 million to every person, and then got each of those people to invest, say, in foreign debt, we could all be back on our feet in no time:

Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.)

Every time I watch a Republican debate, and hear these supposedly anti-welfare crowds booing the idea of stiffer regulation of Wall Street, I wonder how many audience members know that Bair’s plan is more or less exactly the revenue model for all of America’s biggest banks. You go to the Fed, get a buttload of free money, lend it out at interest (perversely enough, including loans right back to the U.S. government), then pocket the profit.

Considering that we now know that the Fed gave out something like $16 trillion in secret emergency loans to big banks on top of the bailouts we actually knew about, you might ask yourself: How are these guys in financial trouble? How can they not be making mountains of money, risk-free? But they are in financial trouble:

• We’re about to see yet another big blow to all of the usual suspects – Goldman, Citi, Bank of America, and especially Morgan Stanley, all of whom face potential downgrades by Moody’s in the near future.

We’ve known this was coming for some time, but the news this week is that the giant money-managing firm BlackRock is talking about moving its business elsewhere. Laurence Fink, BlackRock’s CEO, told the New York Times: “If Moody’s does indeed downgrade these institutions, we may have a need to move some business around to higher-rated institutions.”

It’s one thing when Zero Hedge, William Black, myself, or some rogue Fed officers in Dallas decide to point fingers at the big banks. But when big money players stop trading with those firms, that’s when the death spirals begin.

Morgan Stanley in particular should be sweating. They’re apparently going to be downgraded three notches, where they’ll be joining Citi and Bank of America at a level just above junk. But no worries: Bank CFO Ruth Porat announced that a three-level downgrade was “manageable” and that only losers rely totally on agencies like Moody’s to judge creditworthiness. “A lot of clients are doing their own credit work,” she said.

• Meanwhile, Bank of America reported its first-quarter results yesterday. Despite that massive ongoing support from the Fed, it earned just $653 million in the first quarter, but astonishingly the results were hailed by most of the financial media as good news. Its home-turf paper, the San Francisco Chronicle, crowed that BOA “Posts Higher Profits As Trading Results Rebound.” Bloomberg, meanwhile, summed up results this way: “Bank of America Beats Analyst Estimates As Trading Jumps.”

But the New York Times noted that BOA’s first-quarter profit of $653 million was down from $2 billion a year ago, and paled compared to results of more successful banks like Chase and Wells Fargo.

Zero Hedge, meanwhile, posted an amusing commentary on BOA’s results, pointing out that the bank quietly reclassified nearly two billion dollars’ worth of real estate loans. This is from BOA’s report:

During 1Q12, the bank regulatory agencies jointly issued interagency supervisory guidance on nonaccrual policies for junior-lien consumer real estate loans. In accordance with this new guidance, beginning in 1Q12, we classify junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. As a result of this change, we reclassified $1.85B of performing home equity loans to nonperforming.

In other words, Bank of America described nearly two billion dollars of crap on their books as performing loans, until the government this year forced them to admit it was crap.

ZH and others also noted that BOA wildly underestimated its exposure to litigation, but that’s nothing new. Anyway, despite the inconsistencies in its report, and despite the fact that it’s about to be downgraded – again – Bank of America’s shares are up again, pushing $9 today.

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