Hiring an Expert: What Are you Looking For in Foreclosure Litigation?

I have spent the last 7 years developing the narrative for an expert opinion that could be presented, believed and sustained in court. In writing to a probable new expert we will offer through the livinglies.store.com I summarized what attorneys should be looking for when they consult with an expert in structured finance (i.e., derivatives, securitization etc.).

Here  are some of the issues you want covered by the expert declaration and testimony in court. The basic rule of thumb is that the expert must have both the qualifications to testify as an expert and a persuasive narrative of why his conclusions are right. Without both, the testimony of the expert simply doesn’t matter and will be rejected.

If you are a proposed expert in structured finance, then here is what I would want to know, and what I think lawyers should ask, depending upon what fact pattern is present in each case.

One thing I need to know is whether you feel comfortable in talking about the ownership and balance of the loan.

In one example American Brokers Conduit was the payee on the note and mortgage. We alleged that they didn’t loan the money. Our narrative ran something like this: if you ask me for a loan, and I respond “Yes just sign this note and mortgage” AND THEN you sign the note and mortgage AND THEN I don’t give you a loan, ARE YOU PREPARED TO SAY THAT THE NOTE AND MORTGAGE WERE DEFECTIVE IN A BASIC WAY, TO WIT: THAT THE SIGNATURE ON THE NOTE AND MORTGAGE WAS PROCURED BY FRAUD OR MISTAKE AND THAT WITHOUT THE IDENTIFICATION OF THE REAL CREDITOR BOTH INSTRUMENTS ARE DEFECTIVE.

Would you, as a reasonable business person accept a note purporting to be a negotiable instrument under the UCC if you knew that the transferor neither funded the loan nor (if they purport to be a successor) paid for the assignment?

What is your opinion of your position if you found out after acceptance of the note and mortgage that there was doubt as to whether the obligation was funded or purchased for value? What would you do or suggest to a client in either of those positions — (1) knowledge [or "must have known] or (2) no knowledge [and later finding out that there is doubt as to funding and purchasing for value]?

Are you prepared to say that the fact that the borrower actually did receive money as a loan from another different party does not create a circumstance where the borrower is construed to convey any rights to anyone other than the source of funds or someone in actual privity with the lender — and that both note and mortgage are defective under normal recording statutes — and certainly not a commitment by the debtor to BOTH the source of the funds and the receiver of the signed promissory note and mortgage?

In the one case referred to above, the corporate representative conceded that ABC didn’t loan the money. He was unable to explain what was transferred by ABC to Regents and from Regents to 1st Nationwide and thence to CitiCorp by merger. He admitted that “Fannie Mae was the investor from the start.” You and I understand that neither Fannie and Freddie are lenders. They are guarantors and they serve as Master Trustee for hidden REMIC trusts. (Do you know or agree with that assertion?)

But the question is whether the note is actual “evidence of the debt” (the black letter definition of a promissory note when it contains a promise to pay) when the creditor is identified as a party who was not a lender. In the absence of disclosures of some representative capacity for an actual lender, are you prepared to testify that the note is unenforceable even if the debt is otherwise enforceable in relation to the actual source of funds?

Or would you say that it is not enforceable by the stated payee but it might still be evidence of the debt and evidence of the terms of repayment to the third party source? How does the marketplace treat such questions in valuing a note and mortgage?

The question is whether the expert actually believes and is willing to argue that these conclusions are true and correct.  The expert must earnestly believe these assertions to be true, logically and legally.
Is it acceptable to the prospective expert to see a result where the application of law and facts results in the homeowner getting his home free and clear — on the basis that the wrong party sued him or initiated foreclosure (in non judicial states), or that the notice of default, notice of acceleration, and statements of money due were wrong.
The approach is an attack on ownership and balance. The balance would be wrong, even if the ownership was established, if the payments were not applied properly. The payments include all payments received by the creditor.  That includes all servicer advances directly to trust beneficiaries, as well as insurance and loss sharing payments (i.e., from FDIC and others) paid and received on behalf of the investors directly or the trust beneficiaries.
Part of the reasoning here is that you really have an interesting problem. The Trust beneficiaries agreed to “loan” money to a REMIC trust in exchange for a complex formula of repayment under the indenture of the mortgage bond (contained in the Prospectus and Pooling and Servicing Agreement). Those terms are different than the terms signed by the homeowner.
So there are two agreements — the mortgage bond and the mortgage note. Different parties, new parties are in the PSA as insurers, servicers,servicer advances etc. all resulting in a DIFFERENT payment from an assortment of parties expected by the creditor —different than the one promised by the debtor whether you refer to the note as evidence of the debt or not.Add the complicating factor that without evidence that the Trust was ever funded (i.e., without evidence that the broker dealer sent the proceeds from the offering prospectus to the trust) how do we answer the basic contract question: was there a meeting of the minds? The expectations of the lender (investors) and the borrower (homeowner) are entirely different and the documents used are completely different.

How could the Trust have entered into any transaction for the origination or acquisition of loans without evidence of funding?

On what basis can the Trustee or servicer claim any authority if the Trust was not funded and was essentially ignored? Does the expert agree that avoiding or ignoring the trust means avoiding and  ignoring the prospectus AND the PSA, which contains the authority for ANYONE to act on behalf of the investors, who are no longer “trust beneficiaries” but just a group of investors without a vehicle for their investment?

ESSENTIAL QUESTION: Is the expert prepared to testify about this aspect of structured finance — i.e., how do you connect up the debtor and the creditor? As an expert you would be expected to be able to testify on exactly that question.

And finally there is testimony about the mortgage. If the mortgage secures the note (not the debt, necessarily), which is what is stated in the mortgage, then is the expert willing to testify that the mortgage was defective and should never have been recorded?

Would it not be true, in your estimation, that if a homeowner executes a mortgage in favor of a party posing as a lender, and that party is not a lender to the homeowner, that you could testify that the moment such a mortgage is recorded it probably clouds title?

Would you be willing to testify that based upon those facts, you would say that it is an unknown variable as to who to pay?

Would you be wiling to testify that if you don’t know who to pay, you have no basis for trusting a satisfaction of mortgage from any party including the the original mortgagee?

And lastly that if there is no basis on the face of the instruments or in recorded instruments to presume a valid creditor has been named, that no better presumptions would attach to any assignment, endorsement or other instrument of transfer?

For information concerning expert declarations, consultations and testimony from experts with appropriate credentials to be qualified as an expert, or for litigation support, please call 954-495-9867 or 520-405-1688.

The Big Cover-Up in Our Credit Nation

Regulators have confirmed that there were widespread errors by banks but that the errors didn’t really matter. They are trying to tell us that the errors had to do with modifications and other matters that really didn’t have any bearing on whether the loans were owned by parties seeking foreclosure or on whether the balance alleged to be due could be confirmed in any way, after deducting third party payments received by the foreclosing party. Every lawyer who spends their time doing foreclosure litigation knows that report is dead wrong.

So the government is actively assisting the banks is covering up the largest scam in human history. The banks own most of the people in government so it should come as no surprise. This finding will be used again and again to say that the complaints from borrowers are just disgruntled homeowners seeking to find their way out of self inflicted wound.

And now they seek to tell us in the courts that nothing there matters either. It doesn’t matter whether the foreclosing party actually owns the loan, received delivery of the note, or a valid assignment of the mortgage for value. The law says it matters but the bank lawyers, some appellate courts and lots of state court judges say that doesn’t apply — you got the money and stopped paying. That is all they need to know. So let’s look at that.

If I found out you were behind in your credit card payments and sued you, under the present theory you would have no defense to my lawsuit. It would be enough that you borrowed the money and stopped paying. The fact that I never loaned you the money nor bought the loan would be of no consequence. What about the credit card company?

Well first they would have to find out about the lawsuit to do anything. Second they could still bring their own lawsuit because mine was completely unfounded. And they could collect again. In the world of fake REMIC trusts, the trust beneficiaries have no right to the information on your loan nor the ability to inquire, audit or otherwise figure out what happened tot heir investment.

It is the perfect steal. The investors (like the credit card company) are getting paid by the borrowers and third party payments from insurance etc. or they have settled with the broker dealers on the fraudulent bonds. So when some stranger comes in and sues on the debt, or sues in foreclosure or issues of notice of default and notice of sale, the defense that the borrower has no debt relationship with the foreclosing party is swept aside.

The fact that neither the actual lender nor the actual victim of this scheme will ever be compensated for their loss doesn’t matter as long as the homeowner loses their home.  This is upside down law and politics. We have seen the banks intervene in student loans and drive that up to over $1 trillion in a country where the average household is $15,000 in debt — a total of $13 trillion dollars. The banks are inserting themselves in all sorts of transactions producing bizarre results.

The net result is undermining the U.S. economy and undermining the U.S. dollar as the reserve currency of the world. Lots of people talk about the fact that we have already lost 20% of our position as the reserve currency and that we are clearly headed for a decline to 50% and then poof, we will be just another country with a struggling currency. Printing money won’t be an option. Options are being explored to replace the U.S. dollar as the world’s reserve currency. No longer are companies requiring payments in U.S. dollars as the trend continues.

The banks themselves are preparing for a sudden devaluation of currency by getting into commodities rather than holding their money in US Currency. The same is true for most international corporations. We are on the verge of another collapse. And contrary to what the paid pundits of the banks are saying the answer is simple — just like Iceland did it — apply the law and reduce the household debt. The result is a healthy economy again and a strong dollar. But too many people are too heavily invested or tied to the banks to allow that option except on a case by case basis. So that is what we need to do — beat them on a case by case basis.

Fatal Flaws in the Origination of Loans and Assignments

The secured party, the identified creditor, the payee on the note, the mortgagee on the mortgage, the beneficiary under the deed of trust should have been the investor(s) — not the originator, not the aggregator, not the servicer, not any REMIC Trust, not any Trustee of a REMIC Trust, and not any Trustee substituted by a false beneficiary on a deed of Trust, not the master servicer and not even the broker dealer. And certainly not whoever is pretending to be a legal party in interest who, without injury to themselves or anyone they represent, could or should force the forfeiture of property in which they have no interest — all to the detriment of the investor-lenders and the borrowers.
There are two fatal flaws in the origination of the loan and in the origination of the assignment of the loan.

As I see it …

The REAL Transaction is between the investors, as an unnamed group, and the borrower(s). This is taken from the single transaction rule and step transaction doctrine that is used extensively in Tax Law. Since the REMIC trust is a tax creature, it seems all the more appropriate to use existing federal tax law decisions to decide the substance of these transactions.

If the money from the investors was actually channeled through the REMIC trust, through a bank account over which the Trustee for the REMIC trust had control, and if the Trustee had issued payment for the loan, and if that happened within the cutoff period, then if the loan was assigned during the cutoff period, and if the delivery of the documents called for in the PSA occurred within the cutoff period, then the transaction would be real and the paperwork would be real EXCEPT THAT

Where the originator of the loan was neither legally the lender nor legally a representative of the source of funds for the transaction, then by simple rules of contract, the originator was incapable of executing any transfer documents for the note or mortgage (deed of trust in nonjudicial states).

If the originator of the loan was not the lender, not the creditor, not a party who could legally execute a satisfaction of the mortgage and a cancellation of the note then who was?

Our answer is nobody, which I know is “counter-intuitive” — a euphemism for crazy conspiracy theorist. But here is why I know that the REMIC trust was never involved in the transaction and that the originator was never the source of funds except in those cases where securitization was never involved (less than 2% of all loans made, whether still existing or “satisfied” or “foreclosed”).

The broker dealer never intended for the REMIC trust to actually own the mortgage loans and caused the REMIC trust to issue mortgage bonds containing an indenture for repayment and ownership of the underlying loans. But there were never any underlying loans (except for some trusts created in the 1990’s). The prospectus said plainly that the excel spreadsheet attached to the prospectus contained loan information that would be replaced by the real loans once they were acquired. This is a practice on Wall Street called selling forward. In all other marketplaces, it is called fraud. But like short-selling, it is permissible on Wall Street.

The broker dealer never intended the investors to actually own the bonds either. Those were issued in street name nominee, non objecting status/ The broker dealer could report to the investor that the investor was the actual or equitable owner of the bonds in an end of month statement when in fact the promises in the Pooling and Servicing Agreement as to insurance, credit default swaps, overcollateralization (a violation of the terms of the promissory note executed by residential borrowers), cross collateralization (also a violation of the borrower’s note), guarantees, servicer advances and trust or trustee advances would all be payable, at the discretion of the broker dealer, to the broker dealer and perhaps never reported or paid to the “trust beneficiaries” who were in fact merely defrauded investors. The only reason the servicer advances were paid to the investors was to lull them into a false sense of security and to encourage them to buy still more of these empty (less than junk) bonds.

By re-creating the notes signed by residential borrowers as various different instruments, and there being no limit on the number of times it could be insured or subject to receiving the proceeds of credit default swaps, (and with the broker dealer being the Master Servicer with SOLE discretion as to whether to declare a credit event that was binding on the insurer, counter-party etc), the broker dealers were able to sell the loans multiple times and sell the bonds multiple times. The leverage at Bear Stearns stacked up to 42 times the actual transaction — for which the return was infinite because the Bear used investor money to do the deal.

Hence we know from direct evidence in the public domain that this was the plan for the “claim” of securitization — which is to say that there never was any securitization of any of the loans. The REMIC Trust was ignored, thus the PSA, servicer rights, etc. were all nonbinding, making all of them volunteers earning considerable money, undisclosed to the investors who would have been furious to see how their money was being used and the borrowers who didn’t see the train wreck coming even from 24 inches from the closing documents.

Before the first loan application was received (and obviously before the first “closing” occurred) the money had been taken from investors for the expressed purpose of funding loans through the REMIC Trust. The originator in all cases was subject to an assignment and assumption agreement which made the loan the property and liability of the counter-party to the A&A BEFORE the money was given to the borrower or paid out on behalf of the borrower. Without the investor, there would have been no loan. without the borrower, there would have been no investment (but there would still be an investor left holding the bag having advanced money for mortgage bonds issued by a REMIC trust that had no assets, and no income to pay the bonds off).

The closing agent never “noticed” that the funds did not come from the actual originator. Since the amount was right, the money went into the closing agent’s escrow account and was then applied by the escrow agent to fund the loan to the borrower. But the rules were that the originator was not allowed to touch or handle or process the money or any overpayment.

Wire transfer instructions specified that any overage was to be returned to the sender who was neither the originator nor any party in privity with the originator. This was intended to prevent moral hazard (theft, of the same type the banks themselves were committing) and to create a layer of bankruptcy remote, liability remote originators whose sins could only be visited upon the aggregators, and CDO conduits constructed by CDO managers in the broker dealers IF the proponent of a claim could pierce a dozen fire walls of corporate veils.

NOW to answer your question, if the REMIC trust was ignored, and was a sham used to steal money from pension funds, but the money of the pension fund landed on the “closing table,” then who should have been named on the note and mortgage (deed of trust beneficiary in non-judicial states)? Obviously the investor(s) should have been protected with a note and mortgage made out in their name or in the name of their entity. It wasn’t.

And the originator was intentionally isolated from privity with the source of funds. That means to me, and I assume you agree, that the investor(s) should have been on the note as payee, the investor(s) should have been on the mortgage as mortgagees (or beneficiaries under the deed of trust) but INSTEAD a stranger to the transaction with no money in the deal allowed their name to be rented as though they were the actual lender.

In turn it was this third party stranger nominee straw-man who supposedly executed assignments, endorsements, and other instruments of power or transfer (sometimes long after they went out of business) on a note and mortgage over which they had no right to control and in which they had no interest and for which they could suffer no loss.

Thus the paperwork that should have been used was never created, executed or delivered. The paperwork that that was created referred to a transaction between the named parties that never occurred. No state allows equitable mortgages, nor should they. But even if that theory was somehow employed here, it would be in favor of the individual investors who actually suffered the loss rather than the foreclosing entity who bears no risk of loss on the loan given to the borrower at closing. They might have other claims against numerous parties including the borrower, but those claims are unliquidated and unsecured.

The secured party, the identified creditor, the payee on the note, the mortgagee on the mortgage, the beneficiary under the deed of trust should have been the investor(s) — not the originator, not the aggregator, not the servicer, not any REMIC Trust, not any Trustee of a REMIC Trust, and not any Trustee substituted by a false beneficiary on a deed of Trust, not the master servicer and not even the broker dealer. And certainly not whoever is pretending to be a legal party in interest who, without injury to themselves or anyone they represent, could or should force the forfeiture of property in which they have no interest — all to the detriment of the investor-lenders and the borrowers.

Why any court would allow the conduits and bookkeepers to take over the show to the obvious detriment and damage to the real parties in interest is a question that only legal historians will be able to answer.

Wells Fargo Attempting to “offer” Modifications But Refusing to Put it in Writing

Danielle Kelley, Esq. is getting corroboration on trial modifications from lawyers and other professionals assisting homeowners all over the country. She is bearing down hard on situations where the homeowner enters into the trial modification, complies with all the terms, and then is faced with a unilateral decision by the bank to foreclose anyway. Decisions are coming that have forced the banks to reconsider that position and lately there are other tricks being deployed — like refusing to put the modification offer in writing. Thus puts the homeowner in the position of paying money for nothing, which appears to be exactly what the banks want.

Here is what Darrel Blomberg in Arizona wrote to me this morning:

We all remember the Wigod v. Wells Fargo Bank N.A. (673 F.3d 547) case out of the Seventh Circuit.  You know, the one where Wells Fargo had to fess up and honor a homeowner’s modification after the homeowner had agreed in writing to a trial loan modification offer and subsequently made all of the required payments.

Anyway, I’ve been helping an associate with his home loan assistance request with, none other than, Wells Fargo.  After many months of doing the document and financial proctology dance with Wells Fargo, my associate had a success.  Uh, of sorts.

Wells Fargo called him today with the details of his trial loan modification offer.  (Did you catch that?)

We were on the call together with Mr. E. of Wells Fargo.  Mr. E., his single point of contact (at least his third one) ran down the details of the trial loan modification offer.  That’s fine and dandy.  Here’s the killer.  Mr. E. was asked when the trial loan modification offer would be sent to the homeowner in writing.  My associate was informed that nothing would be sent out until my associate had completed his three trial payments.

I could see exactly where this was coming from.  Wigod!  So, this is Wells Fargo’s feeble attempt to make sure they can, without accountability, deny a defenseless homeowner their rightful modification because nothing has been reduced to writing.

Do you think you would ever be able to transact business orally with Wells Fargo at any of their branches?

My answer to him was this:

If you kept careful notes, then the fact of the matter is that you have been orally informed that the underwriting is complete. That is what the law says — if the offer is made it means the underwriting has been completed. Talk to Danielle Kelley about these details, whom I am copying on with this email. I think I would serve a letter demanding that the offer be sent in writing because in order to make the offer they had to complete the underwriting and that there would be no choice but to make the modification permanent after the trial payments were timely made. As to forcing them to put it in writing, I don’t know. They are obviously trying to get the trial payments and then keep their options open for foreclosure despite compliance by the borrower. The Courts are not liking that one bit.

NOTE: FOR MORE INFORMATION ON THIS, PLEASE SEND EMAIL TO neilFgarfield@hotmail.com.

To all readers: Please add to this post by commenting below.

Who is the DEADBEAT: Borrower or Bank?

Many thanks to Danielle Kelley, Esq. for appearing on last night’s members’ teleconference. I forgot to give the number out for the firm: 850-765-1236

Just to cap it off, here is her Post from yesterday at Danielle Kelley Blog:

Danielle Kelley, Esq.

The propaganda from the banks has been far-reaching.   Even if they devised a scheme to fraudulently throw away a homeowner’s hope at a modification, they are still pursuing the “deadbeat” homeowner argument.  The essence is that the homeowner was not paying, so it doesn’t matter what happened after the homeowner defaulted.

That “deadbeat” argument is a myth.  Whenever I interview a client, I am careful not to lead them.  I simply ask the question, “What caused you to go into default?”.  Nine times out of ten I will hear, “The bank said I had to be so many months behind to help me.”  Or in the alternative, “My payments kept increasing and I didn’t know why.  I called the bank to ask and they told me that unless I was behind in payments they couldn’t help.”  After that the homeowner is left at the mercy of bank who is pretending to consider them for a modification, but yet fraudulently thwarting that process.

The first answer is the “stop payment” answer, which I have discussed in a previous blog.  The second answer is now what I call the “bait and switch” on escrow accounts.  Homeowners who pay monthly to the bank, unless agreed otherwise, expect the bank to take part of that payment and pay the taxes and insurance on the property with it.  If the bank does not, the escrow account goes into the negative and the homeowner has to make up the difference in the payment.  It is called an “escrow shortage”.  And no one is immune, not even those who pay every month, on time, and would not dare to consider themselves as people who would fall into foreclosure.

I have seen it time and again.  In one case, BOA inflated the escrow account $12,000 which resulted in a payment of $900 more per month.  That very case would become my own, with my father on our Note.  When he called to ask “why” the payments were going up he was given the script “To get that $900 off you need help.  We can’t help you because you are current on your payments.  You need to show us you need our help by making a partial payment.”  Later when the partial payment was not applied, BOA stated that to be considered for a modification we had to stop paying altogether.  Left with four years of modification attempts in bad faith, we were requested by BOA (in order to keep the modification file open) to record a quit claim deed to myself and my husband which came with a high price for documentary stamps.  We were told to submit letters to the bank, and then told we could not mention the “stop payment” language in them.  The letters had to be all about how we were suffering a “hardship” with no blame pointed towards the bank.  The reasoning?  They had to get Freddie Mac, the loan “owner”, to approve a modification, and Freddie wouldn’t dare approve a modification if BOA had done something wrong.  To this day, BOA wants to pursue a foreclosure, yet they have absolutely no explanation for what inflated the escrow account to begin with.

In another case, unrelated to me, other than my representation of my client, the bank stopped paying the insurance in full.  The homeowner had no idea that the insurance policy had lapsed until a year later when they were asked to make up for an escrow deficiency.  At a payment climbing hundreds of dollars more than they ever agreed to pay, when they had been making their payments in full and counting on the bank, per the mortgage contract, to pay the insurance, they were now faced with payments they should have never been liable for.  They were not a “deadbeat”.  They were paying in full all along.

Then the truth is brought to light, and the deadbeat argument fails because we learn that no one, not one person, is immune from this.  If a homeowner is making monthly payments and depending on a bank to pay the taxes and insurance, they are at the mercy of the bank. And often to a bank like BOA who is seeking to foreclose loans to get them off of their books, as their own employee declarations filed in the HAMP case in Massachusetts show us.

They have no incentive not to deliberately inflate a homeowner’s escrow account and cause the payment to rise to the point where the homeowner calls them and eventually ends up in default.  Their own employees have stated that they profit from foreclosures over modifications.

So before the argument is bought that the homeowner in foreclosure is a “deadbeat”, know this much, the bank can cause you to become a “deadbeat” too, even if every payment is made in full and right on time.

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

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.

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


Costco Presents Mortgage Lending the Way It Is Supposed to Be

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Editor’s Comment: 

I have said the same thing dozens of times — with 7,000 community banks, savings banks and credit unions, the whole argument about Too Big To Fail falls flat on it’s face. The entire myth about large uncontrollable banks having the only capacity to make or aggregate loans or even grant huge loans to huge corporations and government entities is pure bull-crap.  

Costco has seen the light and Walmart is already fiddling with the concept of being the switchboard for lending institutions to communicate with prospective buyers and with each other. The result is personal service and clearer terms. The road is clear — the smart money is on the Costco and Walmart efforts. They are trusted, they are not trying to bamboozle borrowers and they are policing their lenders.

With the power of Costco and others, the pressure to clear up the colossal corruption of our title system will be impossible to resist. Eventually these giants will come up with the right questions and demand the right answers in or out of court. Unless Costco enters into a collusive arrangement with title companies and the large banks and servicers, their lenders will insist on absolute proof — not verbal assurances — that the title chain is intact. The ultimate result is that the banks, servicers and title companies will be required to retreat from their fraudulent, ruinous game.

The American Homeowners Cooperative and many other organisations will seek alliances with Costco and local lenders to provide the same service. Good going, Costco!

Now on sale at Costco: Mortgages

By Les Christie @CNNMoney

NEW YORK (CNNMoney) — Not only can Costco shoppers find bulk-packs of chicken wings, 24-rolls of toilet paper and large-screen TVs at a discount, they can now land themselves a mortgage.

After a year of testing, Costco (COST, Fortune 500) is rolling out a full-service mortgage lending program on its website in partnership with First Choice Bank, a New Jersey-based community bank, and 10 other lenders. Costco’s partners have issued more than 10,000 mortgages to members under the program. But Lauren Kutschka, Costco’s manager of financial services, expects that number to swell as the warehouse retailer markets the service more aggressively to millions of members in its stores and in its weekly publication Connection.

“I went in to buy some bottled water, big bags of chips, cereal and some Nutri-Grain bars that I eat on my route,” said Ray Sheets, a FedEx (FDX, Fortune 500) courier from Canton, Ga. “I saw a home loan brochure on my way out and picked it up.”

Sheets went onto Costco’s site, put in his information and quickly accessed offers from four lenders. The rates, closing costs and terms were listed up front. And the closing costs — of about $2,500 — were about a third of what he would have had to pay through other lenders, he said.

Within a few weeks, Sheets refinanced his $170,000, 15-year fixed mortgage carrying a 4.25% rate into a 30-year loan with a rate of 4%. The move lowered his monthly payment by nearly $500 to $811 a month.

Mortgages are just one of several financial products available to Costco’s members. The warehouse club also offers health and auto insurance, as well as stock brokerage services, said Kutschka.

Up next: Auto loans and student loans.

“We’ve always known that our members wanted more financial services,” she said. “Right now, we offer recreational vehicle and boat loans and we’re going to add auto loans to that. We’re also looking to offer student loans.”

Costco had started offering mortgages a couple of years ago but the service provider it was using didn’t share enough details about how it was dealing with Costco’s members, said Kutschka. So Costco started over from scratch, partnering with First Choice Bank to build a new mortgage lending portal.

It’s safe to sell your home again

Much like LendingTree, the site gathers quotes from various lenders. However, there is one key difference. Under the Costco program, the borrower’s identity is revealed only after they officially select the lender, said John Alexander, business development director at First Choice.

With many other lead-generation sites, the consumer fills out an application and any lender can make an offer and begin sending marketing communications to the applicant without restrictions.

Costco members will still need to do their homework and compare offers, though, said Keith Gumbinger of mortgage information company HSH.com. Even after a year of testing, Costco’s service is still new.

First Choice said it will police the other lenders to ensure they comply with Costco’s policies, which include giving accurate rates and terms and following up quickly on questions and requests. The technology enables Costco to monitor individual applications and make sure they are handled properly and expeditiously.

Costco takes no profit on the lending itself, but it does get paid to market the service.

Mortgage payments at lowest level in decades

In Sheets’ case, his lender, Bank of the Internet, sent a representative — an attorney — to his home to close on the loan, he said. She answered all his questions and explained all of the legal terms in the contract.

“There were no surprises,” he said.

Gumbinger said the service may prove better for people like Sheets, who are refinancing than those who are purchasing homes.

“The mortgage origination process is still a hands-on, face-to-face process,” he said. “It involves a comfort level and you don’t get that with an online service.”

That may be true in the initial stages of the borrowing process, but once a Costco borrower has chosen a lender the level of service steps up, as Ray Sheets’s lender did for him.

Given the size of Costco’s footprint and its ability to squeeze great deals out of vendors, Costco members should at least “include the site in their search plan,” said Gumbinger.

Foreclosure Strategists: Meeting in Phx: Learn about QWRs

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Editor’s Comment: 

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

Meeting: Tuesday, April 24, 2012, 7pm to 9pm

Qualified Written Requests (QWRs)

10-day Owner / Assignee Requests

Payoff Demand Requests

The goal of this meeting is to build an effective set of requests that operate within the law get us real answers from our loan servicers.

We will be discussing recent updates to Qualified Written Requests laws.  We will look at what the appropriate contents of the QWR should be.

Many people are blindly sending bloated letters demanding every possible bit of discovery.  A QWR loaded with arbitrary demands diminishes the effectiveness of your effort.  We will focus on drafting a succinct, laser-focused QWR that gets you the results you want.

Well also be studying the key points for effective 10-day Owner / Assignee and Payoff Request Letters.

**** PLEASE SEND ME ANY QUALIFIED WRITTEN REQUESTS (or 10-day assignee or payoff demand requests) THAT YOU HAVE ACCESS TO.  I WILL USE THESE AS A BASIS FOR THIS MEETING. ****

Tuesday, May 08, 2012

Special guest speaker:  Arizona Attorney General Tom Horne

We will be discussing among other things:

Arizona v Countrywide / Bank of America lawsuit
National Attorneys General Mortgage Settlement
Attorney General Legislative Efforts (Vasquez?)
OCC Complaints notarizations and all that is associated with that.

Please send me your thoughts and questions you’d like to ask Tom Horne.  More details for this meeting will follow.

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


AZ Secretary of State Ken Bennett Guest Speaker at Phoenix Foreclosure Strategists Meeting

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Foreclosure Strategists:  Phoenix Arizona

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

Meeting: Tuesday, April 17, 2012

Special guest speaker:  Arizona Secretary of State Ken Bennett

Some of the topics we will be discussing are:
Duties of the Secretary of the State
Oath’s of Office
Missing pages
Complaint Process
Notaries Public
Training & Commissioning
Can the public attend?
Administration of Oath
Duties
Notarized versus Acknowledged
Electronic Notarizations
Complaint Process
Who can file
Missing dates: “My Commission Expires: ____”
Procedural process
Interaction with Attorney General’s Office
Suspensions
Revocation of notary commission
Reinstatements
Informal Settlement Conferences
Paula Gruntmeir’s three retroactive reinstatements
Validity of Documents not properly acknowledged
Interaction with Legislative Process
Current efforts
Interaction with Attorney General’s Office
Have you written a guitar parody about Arizona Foreclosures?
Comments on Foreclosure effects on fellow Arizonans
Things we can expect from your office
Things we can do to support your efforts
Thank you!

IF YOU HAVE ANY ADDITIONAL TOPICS TO ADD TO THIS OUTLINE PLEASE GET THOSE TO ME NOW!

To further prepare for this meeting you may want to familiarize yourself with:

            Arizona Secretary of State’s website
            (http://www.azsos.gov)
            Annual Report of the Arizona Secretary of State
            (http://www.azsos.gov/public_services/annual_report/2011/Annual_Report.pdf) 

Tuesday, April 24, 2012

Qualified Written Requests (QWRs)

10-day Owner / Assignee Requests

Payoff Demand Letters

We will be discussing recent updates to Qualified Written Requests laws.  We will look at what the appropriate contents of the QWR should be.  Many people are blindly sending letters demanding every possible bit of discovery.  A QWR loaded with arbitrary demands diminishes the effectiveness of your effort.  Learn to draft a succinct, laser-focused QWR that gets you the results you want.

Well also be studying the key points for effective 10-day Owner / Assignee and Accounting Request Letters.  More details for this meeting will follow.

Tuesday, May 08, 2012

Special guest speaker:  Arizona Attorney General Tom Horne

We will be discussing among other things:

Arizona v Countrywide / Bank of America lawsuit
National Attorneys General Mortgage Settlement
Attorney General Legislative Efforts (Vasquez?)
OCC Complaints notarizations and all that is associated with that.

Please send me your thoughts and questions you’d like to ask Tom Horne.  More details for this meeting will follow.

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.)

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.

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 atwww.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.

May your opportunities be bountiful and your possibilities unlimited.

“Emissary of Observation”

Darrell Blomberg

602-686-7355

Darrell@ForeclosureStrategists.com

Believe It Or Not It’s Getting Worse

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Editor’s Comment: 

Foreclosures And The Bottomless Pit

Written by: Mike Whitney

“There are many good reasons to believe that the 5.5 million foreclosures we have seen are barely halfway through their full course. The United States may end up with a total of 8-10 million foreclosures before we are finished.” – Barry Ritholtz, The Big Picture

It all gets down to supply and demand. The banks have been keeping millions of homes off the market until a settlement was reached in the $25 billion robosigning scandal. Now that the 49-state deal has been finalized, the banks are preparing to put more of their of distressed homes up for sale. That will lead to lower prices and the next leg down in the 6-year long housing crisis.

According to Reuters, new foreclosures “begun by Deutsche Bank were up 47 percent from 2011. Those of Wells Fargo’s rose 68 percent and Bank of America’s, including BAC Home Loans Servicing, jumped nearly seven-fold — 251 starts versus 37 in the same period in 2011.”

So BofA, which unwisely purchased Countryside following the Crash of ’08, is scrambling to get its house in order by removing the deadwood from its balance sheet. Good luck with that.

In order to avoid a sudden plunge in prices–which would be devastating for bank balance sheets–the banks will continue to control the number of homes that are released onto the market. In 2011, existing home inventory shrunk by 20 percent year over year while the shadow backlog of distressed homes continued to grow in leaps and bounds. This shows that the banks are managing inventory to minimize their losses.

But even though “visible” inventory has shrunk by as much as 30 percent in some markets, housing prices have continued their downward trek, dropping roughly 4 percent in 2011. This reflects the truly dismal condition of the underlying economy that is wracked by high unemployment, flat wages, and soaring personal debt. Absent another round of fiscal stimulus, there’s little chance that housing sales will rebound in 2012 despite historic low rates and myriad government loan modification programs.

The biggest problem facing housing now is that ordinary working people can’t make their monthly payments. An article in Reuters summed it up like this: “The subprime stuff is long gone,” said Michael Redman, founder of 4closurefraud.org. “Now the folks being affected are hardworking, everyday Americans struggling because of the economy.”

So what we’re seeing now is the knock-on effects from high unemployment, tight credit, shitty wages and deep protracted economic stagnation. This is a policy issue, but policymakers refuse to address it, so housing will bump along the bottom for years to come. Now take a look at this article in the Wall Street Journal:

“Delinquent mortgage borrowers, take note: Banks still aren’t moving very fast to kick you out of your homes. February’s foreclosure settlement between big U.S. banks and state attorneys general should have been bad news for mortgage deadbeats — and for house prices. Having resolved charges that they had filed bogus documents to speed up repossessions, the banks should have felt free to move ahead with millions of foreclosures. They should also have started selling more repossessed houses, an influx of cheap supply that would weigh on the market.

So far, though, that’s not happening. …. as a result, the average number of days since the last mortgage payment had been made on homes in the foreclosure process rose to 667, up from 660 the previous month and 253 in February 2008. In other words, the average delinquent borrower could live rent-free for nearly two years without getting evicted, assuming the borrower chose to stay in the house.” (“The Foreclosure Deal Spares the Housing Market (So Far)”, Bloomberg)

Just to be clear, we do not agree with the author that the people who were victims in this vast criminal mortgage laundering scam– that destroyed the financial system and pushed the global economy into a Depression–can be fairly characterized as “mortgage deadbeats”. Even so, the point he makes is important, because it illustrates how the banks are fiddling with supply to avoid the losses on non-performing loans. Screwball accounting regulations allow the banks to keep mortgages on their books at fictitious prices (artificially high) until the house is sold. Only then, are they required to write down the difference. Considering that they still have millions of distressed homes on their books, this is no small matter. An accurate accounting of bank real estate inventory would show that most of the biggest banks in the country are technically insolvent.

So what does this mean for people who are thinking about buying a house in the near future? Should they hang on to their money and wait for another year or so or jump at that $450,000 McMansion with the Gothic parapets and custom Swedish sauna that’s been marked-down to a mere $185,000?

That’s hard to say. It depends on one’s own priorities. But one thing is certain, housing prices won’t be going up for a very long time. Maybe never. Moody’s ratings agency forecasts that we’ll see ”an 8% to 10% decline in housing prices” due to a 25 percent uptick in repossessed properties from 1 million in 2011. Unfortunately, Moody’s calculations are far too optimistic. In fact, “top housing analyst Laurie Goodman estimates the amount of shadow inventory at between 8 and 10 million homes, and Michael Olenick, using a different methodology, comes in at just under 9 million homes.” (Moody’s Foresees 10% Drop in US Housing Prices, naked capitalism)

Even if Goodman-Olenick’s predictions are wrong by half–which is unlikely–prices have a long way to go before they hit bottom.

LPS: So We Fabricated and Forged Documents… So what? Here’s what!!

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IT’S ALL ABOUT THE MONEY, STUPID!

Editor’s Analysis: This is the moment I have been waiting for. After years of saying the documents were real, they admit, in the face of a mountain of irrefutable evidence, that the documents were not real, but that as a convenience they should still be allowed to use them. Besides the obvious criminality and slander of tile and all sorts of other things that are attendant to these practices, there is a certain internal logic to their assertion and you should not dismiss it without thinking about it. Otherwise you will be left with your jaw hanging open wondering how an admitted criminal gets to keep the spoils of illegal activities.

I have been pounding on this subject for weeks because I could see in the motions being filed by banks and servicers that they had changed course and were now pursuing a new strategy that plays on the simple logic that you took a loan, you signed a note, you didn’t make the payments as stated in the note — everything else is window dressing and for the various parties in securitization to sort amongst themselves.

All foreclosure actions are actually, when they boil them down, just collection actions. It is about money owed. So far, the arguments that have worked have been those occasions where the conduct of the Bank has been so egregious that the Judge wasn’t going to let them have the money or the house even if they stood on their heads.

But to coordinate an attack on these foreclosures, you need to defeat the presumption that the collection effort is simple, that the homeowner didn’t pay a debt that was due, and that the arguments concerning the forged, fabricated, fraudulent documents are paperwork issues that can be taken up with law enforcement or civil suits between the various undefined participants in the non-existent securitization chain.

Now we have LPS admitting false assignments. The question that must be both asked and answered by you because you have enough data and expert opinions to raise the material fact that there was a reason why the false paperwork was fabricated and forged and it wasn’t because of volume. Start with the fact that they didn’t have any problem getting the paperwork signed they wanted in the more than 100 million mortgage transactions “closed” during this mortgage meltdown period. Volume doesn’t explain it.

Your first assertion should be payment and waiver because the creditor who loaned the money got paid and waived any remainder. You use the Securitization and title report from a credible expert who can back up what you are saying. That gets you past the motions to dismiss and into discovery, where these cases are won.

Your assertion should be that the paperwork was fabricated because there was no transaction to support the contents of any of the assignments. And from that you launch the basic attack on the loan closing itself. First, following the above line of reasoning, they used the same tactics to create false paperwork at closing that identified neither the lender (contrary to the requirements of TILA and state lending statutes), nor ALL of the terms of the transaction, as contained in the prospectus and PSA given to investors.

But let us be clear. There are only two ways you can get out of a debt: (1) payment and (2) waiver. There isn’t any other way so stop imagining that some forgery in the documents is going to give you the house. It won’t. But if you can show payment or waiver or both, then you have a material issue of fact that completely or at least partially depletes the presumption of the Judge that you simply don’t want to pay a legitimate debt from a loan you now regret.

Why are the terms of the securitization documentation important?

  1. Because it was the investor who came up with the money and it was the borrower who took it. The money transaction was between the investors and the homeowners, with everyone else an intermediary or conduit.
  2. It is ONLY the securitization documents that provide power or authority for the servicer or trustee to act as servicer or trustee of the mortgage backed security pool.
  3. If the deal was between the investor who put up the money and the homeowner who took it, where are the documents between the investor and the homeowner? They can only exist if we connect the closing documents with the homeowner with the closing documents with the investor. 
  4. But if the transfer or assignment documents were defective, faulty, forged and fabricated, as well as fraudulent attempts to transfer bad loans into pools that investors said they would only accept good loans, then the there is nothing in the REMIC, there is no trust, there is no trustee of the pool and the servicer has authority to service nothing. 
  5. That breaks the connection between the so-called closing documents with the homeowner and the so-called closing documents with the investor. No connection means no nexus. No nexus means the investors have a claim arising from the fact that they loaned money but they don’t get the benefit of a secured loan and they especially don’t get anything unless THEY make the claim.
  6. If the investors choose not to make the claim for collection or foreclosure, there is nothing anywhere in any law that allows an interloper to insert himself into the process and say that if the investor doesn’t want it, I’ll take it.
  7. Your position should address the reality: appraisal fraud, deceptive lending practices, violations of TILA all contributed to the acceptance of a faulty loan product. But that isn’t why your client doesn’t owe the money. Your client does owe the money, but it has been paid to the creditor and the balance has been waived in the insurance and credit default swap contracts as well as the the Federal bailouts.
  8. The source of funding has been paid in whole or in part, they received the monthly payments even while they declared a default against your client homeowner, and they waived any right to pursue the rest from homeowners because they wish to avoid the exposure to defenses and affirmative defenses that the homeowner will  bring in the mortgage origination process.
  9. The failure to identify the true creditor contrary to the requirements of law and the failure to describe in the note and mortgage the full terms of the loans creates a fatal defect when applied to THIS case on its facts, which you will be able to prove if you are allowed to proceed in discovery.
  10. Allowing interlopers into the process to pretend as though they were the mortgage lenders or successors leaves the homeowner with nobody to sue for offset, and no defenses to raise against a party who had nothing to do with either the investor or the homeowner in the closing with the investor wherein mortgage bonds were purchased, and the closing with the homeowner in which a portion of the funds collected were used to fund a loan to the homeowner.

LPS Uses Bogus Florida IG Report on Firing of Foreclosure Fraud Investigators in Motion to Dismiss Nevada Lawsuit

By: David Dayen http://news.firedoglake.com/2012/01/31/lps-uses-bogus-florida-ig-report-on-firing-of-foreclosure-fraud-investigators-in-motion-to-dismiss-nevada-lawsuit/

We’re at T-minus four days for sign-ons to the foreclosure fraud settlement, and we know that Florida’s Pam Bondi is on board, despite pushback from advocates in her state, ground zero for the foreclosure crisis. There’s an interesting nugget buried in this article, though.

Bondi spokeswoman Jennifer Meale said in an email that their concerns are “misguided” because the settlement would provide a historic level of monetary relief and will overhaul the mortgage industry.

“Rather than engaging in political grandstanding, Attorney General Bondi is working hard to reach an agreement that gets Floridians substantial relief now and holds banks accountable for their misconduct,” Meale wrote.

The settlement is expected to provide $1,800 each for about 750,000 families across the country. It is a response to such practices as “robo-signing” by bank employees who often knew little or nothing about the mortgage documents they were hired to sign.

Nevada, New York, Delaware, New Hampshire and Massachusetts contend the deal isn’t strong enough because it would protect banks from future civil liability.

It will not, though, fully release them from future state criminal lawsuits.

Put aside Bondi’s dissembling for a second, and the idea that an $1,800 for the theft of your home represents “historic” relief. This lawyer in Utah called it what it is: “An arbitrary system of modifications administered by the same banks that knowingly perpetrated the fraud on the homeowner in the first place, and allowed to get off by paying $1800 for an illegal foreclosed home. That’s outrageous.”

But New Hampshire? That’s a new one. I know that Attorney General Michael Delaney has done some preliminary investigations of foreclosure practices in his state, and I know he was present at that meeting of 15 AGs looking for an alternative to the settlement. But Delaney has been pretty quiet overall. Since when is he listed among the holdouts?

That could just be bad information. And to be clear, liability isn’t the central issue anymore. But I don’t know how states like Massachusetts and Nevada, with active legislation against banks and document processors over the same conduct that would be released here, could possibly sign on to this deal.

There’s some news on that front. Lender Processing Services, which has been sued by Nevada for deceptive practices in generating false documents, sought to dismiss the complaint today in a filing with a state court.

The complaint by Nevada Attorney General Catherine Cortez Masto fails to allege any document executed by subsidiaries was incorrect or caused any borrower financial harm, Lender Processing Services said in a statement today.

The state’s claims “are a collection of suppositions, legal conclusions and inflammatory labels,” the company said in the court filing. The document couldn’t be immediately verified in court records [...]

Nevada sued the company in December, claiming that it engaged in a pattern of “falsifying, forging and/or fraudulently executing” foreclosure documents, requiring employees to execute or notarize as many as 4,000 foreclosure- related documents a day, according to a statement from the attorney general. Lender Processing Services also demanded kickbacks from foreclosure firms, the office said.

Two interesting things here. First, LPS leans hard on the idea that borrowers weren’t harmed by the use of false documents. The implication here is that the borrower was delinquent anyway, so there’s no abuse going on. But the more important part of the motion to dismiss (copy at the link) comes when LPS makes the claim that robo-signing isn’t really a crime. It’s merely “signing of documents by an authorized agent,” says LPS, and that is permitted under Nevada law. Here’s one way they justify that (DocX is a subsidiary of LPS):

The State of Florida has reached an identical conclusion regarding DocX’s surrogate signed documents. Two assistant attorneys general involved in that state’s investigation of the mortgage crisis, including DocX, prepared an information power point presentation in which surrogate signing was characterized as “forgery.” The two attorneys were subsequently terminated for alleged fraud, deficient and improper investigatory practices which triggered a formal review by the Inspector General of Florida. In a recently issued official report, the propriety of the termination of the attorneys was confirmed, and specifically, the power point characterization of surrogate signing as “forgery” was determined to be unsupported by the legal definition of forgery.

Wow. So LPS used the whitewash IG report from Florida to justify the dismissal of their lawsuit in Nevada. And remember, LPS lobbyists more recently urged the Florida AG’s office to intervene on their behalf in a criminal case in Michigan. The connections between the Florida AG’s office and LPS just continue to grow.

This also happens to be BS. Pam Bondi made a recent motion in a Florida appeals court, as part of a case against the foreclosure mill David J. Stern, which stated, among other things, this:

The Attorney General’s motion asks the Fourth DCA to certify that its decision in Stern passes upon the following question of great public importance: whether the creation of invalid assignments of mortgages by a law firm and subsequent use of such documents by the firm in foreclosure litigation on behalf of the purported assignee is an unfair and deceptive trade practice which may be the subject of an investigation by the Office of the Attorney General.

This is a tacit acknowledgement of illegal assignments, which is functionally the opposite of what the IG report said. So of course LPS uses the latter in their Nevada case.

It’s completely insidious. And if the foreclosure fraud settlement goes through, LPS will surely point to that as another reason why they should be held harmless for their illegal conduct.

Deutsch Bank Inquiry Reveals Insider Influence by Paulson

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Editor’s Comment: At the end of the day, everyone knows everything. The billions that Paulson made are directly attributable to his ability to instruct Deutsch and others as to what should be put into the Credit Default Swaps and other hedge products that comprised his portfolio. He did this because they let him — and then he traded on what he not only knew, he was trading on what he had done — all to the detriment of the investors who had purchased mortgage bonds and other exotic instruments.
The singular question that comes out of all this is what happened to the money? Judges are fond of saying that there was a loan, it wasn’t paid and the borrower is the one who didn’t pay it. Everything else is just window dressing that can be addressed through lawsuits amongst the securitization participants so why should a lowly Judge sitting in on a foreclosure case mess with any of that?
The reason is that the debt, contrary to the Judges assumption (with considerable encouragement from the banks and servicers) was never owed to the originator or the intermediaries who were conduits in the funding of the loan. The debt was owed to the investor-lender. And those who are attempting to foreclose are illegally inserting themselves into mortgage documentation in which they have no interest directly or indirectly.
If they are owed money, which many of them are not because they waived the right of recovery from the homeowner, it is through an action for restitution or unjust enrichment, not mortgage foreclosure. Banks and servicers are intentionally blurring the distinction between the actual creditor-lender and those other parties who were co-obligees on the mortgage bond in order to get the benefit of of foreclosure on a loan they did not fund or purchase.
So how does that figure in to what happened here. Paulson an outside to the transaction with investors and an outside to the investors in the bogus loan products sold to homeowners, arranges a bet that the mortgages were fail. He is essentially selling the loans short with delivery later after they fail and are worth pennies. But the Swap doesn’t require delivery, so he just gets the money. The fees he paid for the SWAP are buried into the income statement of Deutsch in this case. So it looks like a transaction like a horse-race where you place a bet — win or lose you don’t get the horse and you don’t have to feed him either.
But in order for this transaction to occur, the money received by Deutsch and the money paid to Paulson must be the subject of a detailed accounting. Without a COMBO Title and Securitization search and Loan Level Accounting, you won’t see the whole picture — you only see the picture that the servicer presents in foreclosure which is snapshot of only the borrower payments, not the payments and receipts relating to the mortgage loan, which as we all know were never owned by Deutsch or anyone else because the transfer papers were never executed, delivered or recorded without fabrication and forgery.
Paulson is an extreme case where claw-back of that money will be fought tooth and nail. But that money was ill-gotten gains arranged by Paulson based upon insider information, that directly injured the investor-lenders who were still buying this stuff and directly injured the borrowers who were never credited with the money that either was received by the investor creditors, or should have been received or credited tot hem because the money was received on their behalf.
Once you factor in the third party obligee payments as set forth in the PSA and Prospectus, you will find that we have a choice: either the banks get to keep the money they stole from investors and borrowers, or the money must be returned. If it must be returned, then a portion of that should go to reducing the debt, as per the requirements of the note, for payment received by the creditor, whether or not it was paid by the borrower.
BOTTOM LINE: Securitization never happened. And the money that was passed around like a whiskey bottle (see Mike Stuckey’s article in 2009) has never been subject to an accounting. Your job, counselor, is not to prove that all this true, but to prove that you have a reasonable belief that the debt has been paid in whole or in part to the creditor and that the default doesn’t exist. This creates the issue of fact that allows you to proceed the next stage of litigation, including discovery where most of these cases settle. They settle because the intermediaries who are bringing these actions are doing so without authority or even interest from the investor-creditors.
What is needed, is a direct path between investor creditors and homeowners debtors to settle up and compare notes. This is what the banks and servicers are terrified about. When the books are compared, everyone will know how much is missing, that the investors should be paid in full and that the therefore  the debt does not exist as set forth in the closing papers with the borrower. Watch this Blog for an announcement for a program that provides just such a path — where investors and borrowers can get together, compare notes, settle up, modify or mediate their claims, leaving the investors in MUCH better position and a content homeowner who no longer needs to fear that his world, already turned upside down, will get worse.
It may still be that the homeowner borrower has on obligation, but it isn’t to the creditor that loaned the money that funded the mortgage loan. Any such debt is with a third party obligee whose cause of action has been intentionally blurred so that the pretenders can pretend that they have rights under a mortgage or deed of trust in which they have no interest on a deal where they was no transfer or sale.

SEC looks into Deutsche Bank CDO shorted by Paulson

Tuesday, January 31, 2012
Deutsche Bank is facing an SEC investigation for its role in structuring a synthetic CDO, according to a report by Der Spiegel. The German publication states that the bank’s actions in raising a CDO under its Start programme will come under question after it allegedly allowed hedge fund Paulson to select assets to go into the fund. The bank is then said to have neglected to have told investors about Paulson’s role in the transaction as well as concealing the fact that the hedge fund had taken a short position on the assets, allowing it to profit as the deal collapsed.
According to the article, Goldman Sachs settled a similar case with the SEC for $500 million regarding Goldman’s role in arranging an Abacus CDO.

 

Reuters: Ex-Credit Suisse Manager Pleads Guilty in Subprime Bond Probe

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Editor’s Comment: So SOMEONE is going to jail for up to five years. But the meat of this lies between the lines.
First, it was a conspiracy charge. You can’t run a PONZI scheme the size of the Madoff scheme without channels that are sending “marks” to you to “invest.” The securitization scam is several hundred times the size of the Madoff scam, and that means there were literally thousands of traders and managers who knew that they were acting improperly — illegally, that is.
Second, Higgs told a Federal Judge that his criminal behavior consisted of manipulation and inflation of the cash bond position markings in his tradings book (called ABNI), in order to hide the losses. Most people will never know what that means. It simply means that the trades were kept out of the system where losses would be easily apparent.
There are numerous reports that the book was kept literally in pencil on paper, so they could change the contents or destroy the book if that became necessary. This is why tracking the the actual money trail becomes challenging but it can be done through what one of our senior analysts calls “reverse engineering. IN other words, take the money going into the system and see where it went or where the trail ends. This will give you sufficient clues to determine whether payments in part or in whole were made to REMICS upon whose behalf foreclosures are being filed. In most cases, the figures are wrong, the debt to the investor has been paid in whole or in part, and there is no default. That is why we do the loan level accounting for those readers who are willing to fight about it.
Sadly, this guy seems like the fall guy for what was ordered by his managers. HIs statement that he fooled Credit Suisse management rings hollow when you compare the facts and the the history of the business. It simply isn’t possible for these events to occur without senior management knowing what was going on. Their mantra is plausible deniability. Soon you will see other people, like Higgs, who “flip” and testify against the large Banks upon which they depended for employment at rates of compensation that were too high — unless you factor in the hush money.

Ex-Credit Suisse manager pleads guilty in subprime probe

NEW YORK |

(Reuters) – A former London-based Credit Suisse trader pleaded guilty to a criminal conspiracy charge on Wednesday, and he is cooperating with a U.S. government investigation on writedowns of subprime mortgage derivatives at the height of the financial crisis.

David Higgs told a federal judge in New York that while he was a managing director in the investment banking division of Credit Suisse in 2007 and 2008, he and others manipulated and inflated the cash bond position markings of a trading book, called ABNI, in order to hide losses.

“As a result of my actions, senior management of Credit Suisse was given the false impression that the ABNI book was profitable and caused Credit Suisse to report false year-end numbers for 2007 in their books and records,” Higgs said in court. “I did this because I wanted to remain in good favor with my boss, Kareem Seregeldin, and enhance my job performance.”

Higgs said Seregeldin and others he did not identify had known about the manipulation and assisted in it.

Higgs faces a maximum possible prison sentence of up to 5 years on the charge of conspiracy to commit falsification of books and records and to commit wire fraud. He was released on a $500,000 bond and will be allowed to return to his home in Britain while the investigation continues.

(Reporting By Grant McCool; Editing by Lisa Von Ahn)

 

Nevada AG Asks Pointed Questions to DOJ and HUD

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See Full Letter from Masto to DOJ and HUD Here 1-27-12

Hawaii did it, Nevada did it and now other states are doing it. Seeing the devastating effect on the state economy and the ensuing effects on the nation’s economy and the world finance, State Attorney generals are taking matters into their own hands, and pressing the points that hurt. The Banks don’t like it because it undermined their narrative. This year, 2012, is the year when most of the truth will come out and it will blow your mind to find out just how pernicious and pervasive this false, faked, securitization has been.

The number of foreclosures has plummeted in those states that have put up a fight. Why? Not because they were banned but because those states that require proof of authority to foreclose, proof of the accounting and the proof of settlement or the ability to mediate, have all but eliminated foreclosures. Now the question is how do we correct the corruption of the the title registries, get people restored to their homes and force the pretenders to compensate victims of fraud, forgery, and outright theft.

Catherine Cortez Masto has mastered the basics of securitization and she, like Beau Biden in Delaware, Schneiderman in New York, Coakley in Maine and others don’t like what they see — corroboration of some of the worst nightmares of conspiracy theorists.

It won’t be long before the investigations get traction and start picking up steam. Indictments will follow but not for a few months, at least.

You will hear words from these prosecutors that you never thought you would hear about the banks conduct, the transfer of wealth through theft, and the commission of crimes  too numerous to list here. As the momentum picks up, you will see thousands convicted, jailed, defrocked from their law license, notary license, appraisal license, title license and even the license to do business in the states where they thought they had a lock on the whole thing. People are wide awake right now and when Americans awaken, things happen fast.

Here are some of the more important questions and my comments that were posed in a recently released letter to Thomas J. Perrelli at the U.S. Department of Justice and Shaun Donovan as secretary of the U.S. Department of Housing and Urban Development. It would be a good idea to take out those template discovery forms you have for clients and start your revisions. Stop assuming that anything the Banks said was true and start assuming the everything they said was false — including the losses they claimed to get the bailouts.

  1. What origination conduct did the federal agencies not release? [That's not my question, it is Masto's question. This is a direct frontal assault on the complicity of the Federal government in the mortgage mess. Inherently it addresses the issue of whether the origination process violated law, rules or regulations and whether there is a valid lien on most properties that were financed with investor money.]
  2. The State release refers to “…brother and sister corporations…” Please provide some clarity as to this particular phrase as used in the state release. [Masto is not going to be papered over by vague wording that could mean anything. She wants to know what went on. Where did the money go, and who were the parties involved?]
  3. The State release contains a provision that prevents the State AG’s and banking regulators from seeking to invalidate past assignments or foreclosures. Does this prevent States from effectively challenging future foreclosure actions that are based upon faulty prior assignments? [Masto nails it on the head. First of all this is AMNESTY for the Banks who committed crimes and want the government to ratify the crime since the government was complicit in allowing, creating and promoting the crime. It does nothing to clear up the title problems that currently exist or that will exist if the faulty assignments contain not only forgeries but fabrications of the truth of the transactions inherently referred to within the instruments.]
  4. Paraphrasing Masto, when will the results of existing investigations be made public — or do you want us to take your word for it that there are or are not weapons of mass financial destruction still hidden in the pile?
  5. Paraphrasing Masto, how will we be able toe enforce the new servicing standards or are we taking the word of the Banks and servicers who lied to us consistently up until this point in time?
  6. Paraphrasing Masto, how and when will consumers get relief if they were victims of fraud, chicanery and theft?
  7. Under what circumstances will the Monitor be able to access servicers source documents, i.e., the documents that form the underlying basis for the work papers? [Of course Masto knows that she will never see the source documents because they would contradict everything the Banks and servicers have said up until this point, one of many reasons she will not participate in the multi-state settlement.]
  8. What kind of data will the monitor be able to demand regarding the allocation and performance of servicers’ modification/other consumer relief? What compliance or enforcement provisions address the Monitor’s and States’ ability to enforce the consumer relief provisions? Before the claim of securitization of mortgage debt that never in fact was completed, there were simple formulas to determine whether the workout was good or bad for the lender. Now the servicers are using excuses like “everyone will do it” if they accept modifications, even though the proposed modifications i results in proceeds that are much higher than the results of foreclosure. So the real question is whether the consideration of modifications requires (a) authority and (b) no discretion if the proposed modification exceeds x% of fair market value of the collateral. If accepted, this change would have eliminated 2/3 of all the past foreclosures and 90% of the future ones.
  9. Please explain the assumptions on which the settlement value chart relies. It describes a maximum expected benefit; what is the minimum expected benefit? Can we get a range of values for each state.? [And what data exists showing the true liability for false, fraudulent, fabricated loans and foreclosures to compare with the settlement?]
  10. Paraphrasing Masto, how do these detailed formulas actually work in real life? What will be the effect on blighted areas and how can we as AG’s determine what risk is associated with acceptance of an agreement in which the probability of millions more foreclosures will take place under false pretenses, only to become abandoned property?

 

Fannie and Freddie Preventing Modifications and Betting Against Modifications at the Same Time

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Freddie Mac, Deutsche Bank Caught Up In Securities Allegations

By: David Dayen See Full Article on FIredoglake.com

One reason why I don’t think we should particularly accept a six-month timeline on significant action from the RMBS working group is that there’s so much already in the public record. I recognize that criminal or civil enforcement actions take voluminous legal work and due diligence, but quite a bit of it has already been done. The FCIC referred criminal fraud violations a year ago. Gretchen Morgenson notes all the evidence from private litigation that can be leveraged and used. And Pro Publica, in conjunction with NPR, offers this up today, which is somewhat tangential to what Eric Schneiderman wants to delve into because it’s post-crash conduct, but which still shows the element we’re dealing with and how many revelations are already out there:

Freddie Mac has invested billions of dollars betting that U.S. homeowners won’t be able to refinance their mortgages at today’s lower rates, according to an investigation by NPR and ProPublica, an independent, nonprofit newsroom [...]

In December, Freddie’s chief executive, Charles Haldeman, assured Congress his company is “helping financially strapped families reduce their mortgage costs through refinancing their mortgages.”

But public documents show that in 2010 and 2011, Freddie Mac set out to make gains for its own investment portfolio by using complex mortgage securities that brought in more money for Freddie Mac when homeowners in higher interest-rate loans were unable to qualify for a refinancing.

Those trades “put them squarely against the homeowner,” PIMCO’s Simon says.

Bascially, Freddie trapped its own borrowers, denying them refinances. And they stood to benefit from that, because the higher interest rates meant bigger streams of income from their MBS.

This may seem like a sidelight to the securitization bubble, but indeed, we’ve seen many instances of investment banks taking one side of a mortgage-backed securities bet, and selling investors the other side, without disclosure. That’s securities fraud. It’s been litigated. The SEC has been giving out settlements like candy for this kind of conduct. But it’s a central part of the unscrupulous behavior on Wall Street. You can see this today in the fact that the SEC is only now getting around to investigating CDOs from Deutsche Bank when Robert Khuzami, the current head of enforcement at the SEC and a co-chair of the RMBS working group, was working there as general counsel.

That brings up a whole other element about trusting the guys who swept this conduct under the rug to properly investigate it. But the larger point is that there’s a lot already on the table. In a sense, you may not need massive resources for this, because they can just pick up where others left off.

My reporting shows that Schneiderman actually has a few announcements on enforcement coming in the next few weeks. We don’t have to wait months. We can judge the seriousness of this thing pretty quickly.

 

Using UDCPA Fair Debt Collection Acts to get Money, Information and Fees

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RIPE AREA FOR STEADY INCOME FOR LAWYERS REPRESENTING HOMEOWNERS

Editor’s Comment: One small step for a man, one giant leap for mankind. You have both a private right of action against the debt collector and the right to apply to the FTC to set up administrative hearings, where these cases should probably be heard by experienced hearing officers who know what they are looking at.

The practice of playing the numbers on debt collection has been around for a long time. Whether the debt is real or not, there is a statute of limitations, bankruptcies and other obstacles to collection. A lot of times the debt is now owed at all, but byb pestering customers, the collection agency gets some money out of them, which they keep because they have already bought the portfolio at pennies or less on the dollar.

This is where servicers and other intermediaries in the fake securitization chain are going to get into hot water. The debt was created when the investor loaned the borrower the money. The intermediaries are by definition debt collectors under the UDCPA and they are, and have been banged for fines many times on individual cases.

This is an instance where the Obama administration is attacking the practice head-on and taking away their toys. So when the pretender lender comes knocking, it isn’t just a RESPA 6 (Qualified Written Request) that you send out, it is a UDCPA letter you send demanding to know both the identity and contact information for the creditor. As you can see from this article, failure to provide you with that information  plus the balance due and how it was computed, is a violation of that Federal Statute.

It might also be a shortcut way of identifying the pretender not as holder of the note but as agent for an undisclosed principal seeking to collect on a note that was defective in the first place because they did not identify the correct creditor (in violation of TILA) and it did not provide you with a proper accounting showing exactly what this “creditor” received that would reduce your loan balance.

The MAIN point here is that the servicer might well be the one sending you the notice of delinquency swhen they have performed zero due diligence as to the creditor’s accounting. Where the servicer itself or some other party is keeping the account current, as is often the case, the loan is neither delinquent nor susceptible to being declared in default — but they do it anyway.

Now that the FTC has declared war on debt collectors who perform illegally, and banged them with this fine, we can invoke the same administrative procedures and grievances with the FTC as to the collection efforts on mortgages where the “collector” is not the creditor and where the money demanded is not actually shown as due.

There is a presumption that if you didn’t make the payment as set forth in the note, then you must be delinquent and you must be declared (at some point) in default. But that is not true in most cases. There can only be a delinquency or default under the mortgage loan if the borrower has failed to make a payment or cure a payment that is actually due. If the payment has been made already, then no such payment is due, regardless of whether it came from the borrower or not.

This is why you need to know the four legs of the stool in order to object, sue, defend, and present genuine issues of fact before a trial court that will have no choice but to allow you to proceed to discovery. Discovery is where these cases settle because the pretenders know they didn’t fund the loan, they didn’t pay for the loan and the creditor has been paid in whole or in part, with a lower or zero balance remaining.

Just for reminders, the four legs of the stool are:

  1. The loan closing papers with the investors under which he agrees to advance funds into a pool in exchange for a note or bond from a REMIC (which is never properly constituted). Here the investors expects that the money advanced will be used for funding mortgages conforming with the standards set forth in the prospectus and pooling and servicing agreement. Note that there is no nexus or connection between the investor and the borrower because the borrower usually does not even exist at that point in time. If a nexus ever arises, it is when the loan is transferred into the pool, something which we all now know was never done until the loan went into litigation or foreclosure — obviously in violation of the cut-off date required by the IRS REMIC statute, and the concurrent cut-off date in the PSA. But more importantly is the money angle — the investors didn’t advance money for loans that were delinquent or in default. They invested their money for good quality performing loans. Thus there is no way that the loans could be transferred into the pools if they were already declared problematic, delinquent, or non-performing. The failure to provide a nexus between borrower and lender (investor) is fatal to the enforcement of the mortgage lien. The creditor has no interest in the loan and doesn’t want one. Any claim from third parties who also have no nexus with the borrower would be on causes of action that are separate or apart from the mortgage lien. (SEE COMBO TITLE AND SECURITIZATION REPORT ABOVE)
  2. The loan closing papers with the borrower(s), which are subject to roughly the same analysis with identical result. There is no nexus between the borrower and the investor because neither one knows the other, despite requirements in the TILA and RESPA laws that require disclosure of parties and their compensation. (SEE FORENSIC ANALYSIS TILA+ REPORT on Livinglies-store.com) The note does not describe the actual monetary transaction between the investor lender and the borrower. Instead it inserts a straw-man as “lender” and a straw-man as “beneficiary”. This usually takes the form of a new animal in mortgage lending called an “originator” who is a paid fee service provider whose sole duty is to pretend to be the lender, even though they never funded the loan, never bought the loan and never had any interest in the debt, the note or the mortgage. This is deemed by many in the title industry as a corrupted document that breaks the chain of title if any action was taken on such a loan in foreclosure. 
  3. The actual money trail which varies from both the requirements set forth in the paperwork with the investor lender and the paperwork with the homeowner borrower. A full accounting would show that the parties in the middle without any interest in the loan, bought, sold, transferred and used those fabricated, forged documents to initiate foreclosure and eviction proceedings. Under the investor documentation, the pretenders are allowed to use a legal PONZI scheme in which the investors money is used to pay him his interest income, although it is not reported as such. The servicer also has the option of taking money from other revenue and pools and paying certain investors in complete  violation of the explicit requirements of any standard promissory note from a borrower requiring that payments be credited to the account of the borrower. Instead, they make the payment and do not credit the borrower or they receive the money and they pay neither the investors nor the give credit to the borrowers. (see Loan Level Accounting REPORT on Livinglies-store.com). The servicers and intermediaries and attempting, with some success to take over the position of the investor without an assignment from the investor, and enforce a mortgage to which they are not a party.
  4. The Fourth legal of the stool arises from the false representations made in court or foreclosure proceedings. These representations made by people who purport to be authorized to substitute trustees, or file notice of defaults, notice of sales, notice of evictions, or lawsuits for all of those in judicial states, turn out to be at variance with all three of the other legs of the stool — the investor paperwork, the borrower’s paperwork and the actual money trail. 

Using a service like Elite Litigation Management services or others to present the matrix, which we also offer at livinglies-store.com, dial 480-405-1688, and you can present a poster-size board that shows a number of the discrepancy between all four legs of the stool, thus giving rise to the question of fact necessary to get to the next step in litigation. remember, if you go in thinking you have a magic bullet that will end your case, you are dreaming of a better worked than the one we have.

F.T.C. Fines a Collector of Debt $2.5 Million

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The Federal Trade Commission signaled on Monday that it would continue to crack down on debt collectors who harass consumers for money they may not even be legally obligated to pay.

In the second-largest penalty ever levied on a debt collector, the F.T.C. said that Asset Acceptance, one of the nation’s largest debt collection companies, had agreed to pay a $2.5 million civil penalty to settle charges that the company deceived consumers when trying to collect old debts.

The settlement is part of a broader effort to patrol the industry, agency officials said.

“Our attention to debt collection has increased over the past couple of years because the complaints have been on the rise,” said J. Reilly Dolan, assistant director for the F.T.C.’s division of financial practices.

Consumer complaints about debt collection companies consistently rank as the second-highest category among all complaints at the agency, behind identity theft. But in 2010, complaints jumped 17 percent to 140,036, which represented 11 percent of all complaints in the commission’s database, up from 119,540, or about 9 percent of complaints, in 2009.

Asset Acceptance, based in Warren, Mich., was charged with a variety of complaints, including failing to tell consumers that they could no longer be sued for failing to pay some debts because the debts were too old. The company’s collectors also failed to inform consumers that paying even a small portion of the amount owed would revive the debt — in other words, making a payment would extend the amount of time the collector could legally sue.

Debt collectors have only a certain number of years to sue consumers. The statute of limitations varies by state, but typically ranges from two to 15 years, Mr. Dolan said, beginning when a consumer fails to make a payment. But borrowers often do not realize that making a payment on the old debt may restart the clock.

Among other things, the complaint also contended that the company — which buys unpaid debts for pennies on the dollar from credit card companies, health clubs and telecommunications and utility providers and tries to collect them — reported inaccurate information about the consumers to the credit reporting agencies. It also said that Asset Acceptance failed to conduct a reasonable investigation when it was notified by one of the credit agencies that a debt was being disputed. Moreover, the complaint says that the company used illegal collection practices and that it continued to try to collect debts that consumers disputed even though the company failed to verify that the debt was valid.

The proposed settlement with Asset Acceptance requires the company to tell consumers whose debt may be too old to be collected that it will not sue. It also requires the company to investigate disputed debts and to ensure it has a reasonable basis for its claims before going after the consumer. It is also barred from placing debt on credit reports without notifying the consumer.

The penalty “is certainly a slap on the wrist and probably a little bit more, but it really depends on what the F.T.C. does to enforce this in the coming months and years,” said Robert Hobbs, deputy director at the National Consumer Law Center and author of “Fair Debt Collection” (National Consumer Law Center, 1987). But “it is a great step forward. It is not self-enforcing, and it has a mechanism for the F.T.C. to follow up.”

Still, while the settlement requires the company to take more responsibility for checking the statute of limitations before it contacts consumers, he said most states did not require debt collectors to do that. That means it is up to consumers to know the rules on the statute of limitations, which, he said, can be “an enormously complex legal question.”

In a statement, Asset Acceptance said that the settlement ended an F.T.C. investigation that began nearly six years ago, and that the company did not admit to any of the allegations. “We are pleased to have this matter behind us, and to have clarity on the F.T.C.’s policies and expectations of the debt collection industry,” said Rion Needs, president and chief executive of Asset Acceptance.

In March, another leading debt collection company, West Asset Management, agreed to pay $2.8 million, the largest civil penalty ever levied by the F.T.C., to settle charges that its collection techniques violated the law. The commission charged that West Asset’s collectors often called consumers multiple times a day, sometimes using rude and abusive language, about accounts that were not theirs. The Consumer Financial Protection Bureau and the F.T.C. now share enforcement authority for debt collection companies, though the new bureau has a power that the F.T.C. did not: it can write new rules for debt collectors. But F.T.C. officials said that debt collection enforcement would remain a top priority.

 

Are the Prosecutions Real or Just PR for an Election Year?

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Private Litigants Still Doing the Heavy Lifting that Government Should be Doing

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PRESIDENT OBAMA told the nation last week that he was convening a task force to investigate the abusive practices in the mortgage industry that led to our economic woes. Both lending and the practice of bundling loans into securities will come under scrutiny, he said, adding: “This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans.”

Some greeted this new task force — its unwieldy name is the Residential Mortgage-Backed Securities Working Group — with skepticism. It is an election year, after all, and many might wonder if this is just a public-relations response to the outrage against the institutions and executives that almost wrecked the economy.

If this task force nailed some big names, and soon, it would help to allay deep suspicions that the authorities have given powerful people and institutions a pass during this awful episode.

Such bars typically last five years, but some are permanent. The S.E.C.’s settlement with Angelo Mozilo, 73, former head of Countrywide Financial, barred him from acting as a director or officer of a public company for the rest of his life.

Some cases on the list are still being litigated. Those that have been settled have generated $1.97 billion in penalties, disgorgement and other monetary relief, according to the S.E.C. Harmed investors have received $355 million of that.

Drilling into the details, though, indicates that little of this money was paid by individuals. The payments came from companies, or more precisely, their shareholders.

Talk about making the wrong people pay.

Only one of the cases seems to involve a clawback of executive compensation. It’s the 2009 case against three former top executives of New Century Financial, a quintessential Wild West lender. Together, the three paid $1.5 million when settling charges of making false and misleading statements about the company’s soundness as it imploded.

If this is justice, it’s certainly not rough. Brad Morrice, the company’s former chief executive, returned just $542,000 to regulators; he took home at least $2.9 million in incentive pay in the two years before New Century collapsed.

It seems obvious that until executives are forced to dig deep into their own pockets to pay penalties in these matters, they will be tempted to take as many risks as possible to generate fat paychecks. Then they will move on to the next opportunity.

The S.E.C. is clearly proud of its financial crisis cases. But comparing its tally with the mountainous evidence produced in private lawsuits shows how much more work there is to be done.

Consider the most recent complaint filed by the Assured Guaranty Corporation, an insurer of mortgage securities, against Bear Stearns, the defunct brokerage firm; EMC, Bear’s mortgage origination and servicing unit; and JPMorgan Chase, which bought Bear in March 2008.

Filed in November, the complaint shows what kinds of revealing material can be dug up by determined investigators.

The complaint contends that Bear Stearns knew it was stuffing its mortgage-backed securities with crummy loans. It cites an e-mail written by a former EMC analyst in the unit that dealt with these instruments. “I have been toying with the idea of writing a book about our experiences,” the analyst wrote. “Think of all of the crap that went on and how nobody outside of the company would believe us … the fact that data was constantly changing and we sold loans without the data being correct — wouldn’t investors who bought the MBS’s want to know that?”

Indeed they would.

Discovery in the case also identifies top executives who oversaw the mortgage machine that felled Bear Stearns. Thomas F. Marano, senior managing director and designated principal of the mortgage- and asset-backed securities department, was “well aware of the amount of risk that was being taken on in terms of acquiring assets and … the activities with respect to securitization,” the complaint said, citing a Bear Stearns executive’s deposition.

The complaint also contends that John Mongelluzzo, the Bear Stearns vice president for due diligence, misled investigators for the Financial Crisis Inquiry Commission when he described the extensive vetting the company did when it bundled mortgages.

Mr. Mongelluzzo told the commission that Bear Steams tested “all of the due diligence firms and their contract underwriters, and if they couldn’t pass the underwriting test, they weren’t permitted to work on our transactions,” the complaint said. He also told the investigators that the company “instituted a process where we went out and audited the individual diligence firms to see what their processes were and what they were doing internally as well.”

But in a subsequent deposition, Mr. Mongelluzzo conceded that Bear had not started to test its underwriters until February 2007, well after the mortgage market had begun crumbling, and that it didn’t begin its audit program of due diligence vendors until April 2007.

Mr. Marano is now chairman and chief executive of Residential Capital, the mortgage unit of Ally Financial. Mr. Mongelluzzo is an executive there as well. Both declined to comment.

It is to be expected that investigators for private law firms will turn up loads of ammunition to help them in their court battles. But in the past, law enforcement was similarly aggressive in its own pursuits.

Now, the balance seems to have shifted, with private litigants doing more legal heavy lifting than those who serve the public.

Perhaps the new working group will right this imbalance. But its members don’t have a lot of time, with the election coming. Private litigants have drawn a pretty clear road map for the places that this new group might go. Its leaders should welcome the assistance, given that the clock is ticking.

Cuomo Appoints New Cop: Homeowners Hopeful That Truth Will be Revealed

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Expanding Reach, Cuomo Creates Second Cop on Financial Beat

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ALBANY — Benjamin M. Lawsky is not the attorney general of New York State.

But one could be forgiven for being confused. Since Gov. Andrew M. Cuomo installed him as superintendent of a new state agency, the Department of Financial Services, which became active in October, Mr. Lawsky has been making headlines normally associated with attorneys general.

He has forced insurers to turn over more than $100 million in unpaid death benefits to surviving family members, dispatched rafts of subpoenas to banks, and pressed lenders to curb abusive foreclosure practices.

Critics say the new financial services agency reflects Mr. Cuomo’s expansive view of his executive powers, which he has continually sought to strengthen during his 13 months in office. They also see an attempt by the governor to encroach on the turf of Attorney General Eric T. Schneiderman, a fellow Democrat with whom Mr. Cuomo has had a precarious relationship.

Supporters say it is an auspicious time to have two cops on the financial beat — after all, the agency, which subsumed the existing Banking and Insurance Departments, came into being as the Occupy Wall Street movement was finding its footing and focusing its critique on those very industries.

Mr. Lawsky, in his first few months on the job, is using a playbook that he helped write as a top lieutenant in the attorney general’s office when Mr. Cuomo held that post, gravitating toward headline-grabbing cases while looking for negotiated solutions with industry executives.

“We set our priorities here often simply based on what the big issues are,” Mr. Lawsky, 41, said in an interview. “Does that come from the world of Andrew Cuomo? Yes, because government shouldn’t be a waste of time. Government should be about making a difference in people’s lives.”

For his part, Mr. Schneiderman has not allowed himself to be rolled over.

Last year, he helped beat back an effort by Mr. Cuomo’s office to give Mr. Lawsky and the new agency even more expansive powers that would have cut into the heart of the attorney general’s jurisdiction. The governor’s proposal, which would have allowed Mr. Lawsky to investigate violations of the Martin Act, the sweeping state securities law used by former Gov. Eliot Spitzer and his successors to pursue financial malfeasance, alarmed Wall Street and even academics.

Writing in The New York Law Journal, Jonathan R. Macey, a Yale Law School professor, called it “a naked and highly suspicious power grab.”

And in a recent interview, John C. Coffee Jr., a law professor at Columbia University, put it this way: “Cuomo made his fame as attorney general, and he sort of treated that jurisdiction as portable and took it with him as governor.”

The Cuomo administration backed off, dropping the Martin Act provision. Nonetheless, the new agency, besides absorbing two major regulatory bodies, has gained a number of new powers. It has broader authority to fight fraud beyond the insurers and state-chartered banks it licenses, and its reach has extended to all manner of financial products, including student lending, credit cards and tax refund anticipation loans.

Eric R. Dinallo, a partner at Debevoise & Plimpton and former state insurance superintendent, likened the new agency to the Securities and Exchange Commission, in the way it combines regulation and enforcement under one roof.

“It’s not common to have a combined regulatory and enforcement function,” he said, adding, “It’s effectively very competitive with the attorney general’s jurisdiction.”

The two agencies are publicly cordial, but behind the scenes they are much like two boxers feeling each other out in an opening round. Already, turfs are overlapping.

Mr. Schneiderman, a liberal-minded attorney general, made a national name for himself in his first year by spurning a settlement that the Obama administration and other attorneys general had been negotiating with the banking industry over foreclosure practices. Then last week, President Obama, vowing to get tougher on Wall Street, reached out to Mr. Schneiderman, naming him co-chairman of a new financial crimes unit to prosecute large-scale financial fraud.

At the same time, Mr. Cuomo, in his State of the State address this month, turned to Mr. Lawsky, not Mr. Schneiderman, on the issue, directing the Department of Financial Services to create a Foreclosure Relief Unit. And Mr. Lawsky has moved on his own to secure deals with smaller lenders on curbing abuses.

Asked whether he supported Mr. Schneiderman’s stance on the national negotiations, Mr. Lawsky was noncommittal.

“We’re not commenting at all on the ongoing negotiations because we are at least tangentially a part of them and could ultimately be called on to sign or not sign,” he said, adding, “We want to see what the final proposal is.”

Danny Kanner, a spokesman for Mr. Schneiderman, said in a statement that the two offices “will continue to work together toward our common purpose of protecting consumers, investors, and the integrity of New York’s global markets.”

“In the aftermath of the financial crisis,” the statement said, “we need more willing hands on deck, not less, to meet that critical objective.”

Mr. Lawsky said he was learning to balance the roles of regulator and enforcer. And during his years as a top aide to Mr. Cuomo, Mr. Lawsky has been known as one of the relatively few administration officials to play nicely with others.

“A lot of people like to paint me as a tough guy because I’m a former prosecutor,” he said, adding: “You are being handed a huge amount of power over people’s lives and their businesses. It’s not something you willy-nilly bang people over the head with.”

Mr. Lawsky grew up in New York and Pittsburgh, received his undergraduate and law degrees from Columbia, and worked under four United States attorneys for the Southern District of New York, prosecuting everything from insider trading to terror and mob cases. He is a runner, but last had time to train for and run a marathon — the Marine Corps Marathon — in 2009. (His time was 3:40:17.)

Perhaps his most notable early achievement has been putting pressure on health insurers to make public proposed rate increases. But his office also pointed to early relationships he has formed with both industry executives and consumer groups.

Theodore A. Mathas, chief executive of the New York Life Insurance Company, said, “Ben is approachable, he’s a good listener and he’s quickly grasped a lot of complex things we’ve thrown at him.” Michael P. Smith, president of the New York Bankers Association, said, “We are very pleased with his performance.”

On the consumer advocacy side, Charles Bell, programs director for Consumers Union, said, “We’ve been pleased that they have reached out,” adding that a group of consumer advocates was meeting with the agency monthly on a variety of topics.

Mr. Lawsky does know how to answer the tough questions. During a recent online question-and-answer session with the public, the first questioner asked: “Mr. Lawsky, are you copying the governor’s hairstyle? It seems you have a similar look.” He replied: “That never occurred to me. It’s very flattering. Thanks.”

 

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