NY TIMES EDITORIAL: MAKE THE BANKS ANSWER!

Will the Banks Finally Have to Answer?

At long last, there may be a serious investigation into the mortgage mess — the kind that results in clarity as well as big fines and maybe even accountability.

Gretchen Morgenson reported in The Times on Tuesday that Eric Schneiderman, the New York attorney general, wants to discuss mortgage operations during the housing bubble with executives of Bank of America, Goldman Sachs and Morgan Stanley. He has also requested documents and information from the banks, examined material given to his predecessor, Andrew Cuomo, and studied issues raised in lawsuits against the banks.

Mr. Schneiderman would not comment on the investigation. What is needed is a broad inquiry into how banks inflated the housing bubble, profiting as it expanded and getting bailed out when it burst — leaving investors and homeowners devastated.

Any serious investigation must take a close look at “securitization” — the pooling of thousands of home loans into securities that were sold to investors the world over. Three years after it all imploded — and even after Congress vowed to get answers and names — Americans still don’t have answers to vitally important questions.

Topping the list: Did the big banks know (if not, why not?) that billions in loans and related securities were destined to fail? Did they intentionally mislead investors and insurers or were they just incompetent?

An investigation must also figure out the extent of wrongdoing in Wall Street practices that fed the securitization pipeline. By extending credit to mortgage lenders, Wall Street allowed them to make loans far longer than they otherwise could have. Did Wall Street purposely inflate the bubble when it enabled loans to uncreditworthy borrowers for unreasonably priced homes?

All indications are that last year’s robo-signing scandal, in which banks were found to have filed false court documents in foreclosure cases, was just the tip of an iceberg. A growing body of Congressional testimony, academic research, court cases and other evidence suggests pervasive defects, and potentially vast lawbreaking, in the securitization and foreclosure process.

It has also been suggested that federal and state officials have ignored or played down allegations of widespread illegality, a charge that is all too easy to believe. A recent federal investigation into banks’ foreclosure abuses ended with a wrist slap. Talks between state attorneys general and banks over those abuses appear hamstrung, in part, by the apparent failure of state officials to do a thorough investigation on which to base demands for meaningful reforms and stiff penalties.

It is critical that someone stand up and say “no” to allegations that go unexamined, to wrongdoing without redress. Mr. Schneiderman, it’s up to you.

29 Responses

  1. http://www.cbsnews.com/video/watch/?id=7361572n

    The foreclosure scandal – CBS 60 Minutes

    Mr. Moynihan —

    You’re a crook, sir. You forged your signature on papers to assume control of my house fraudulently while using tax-payers money just for the purpose of acquiring homes fraudulently with lies and bullying tactics and more lies.

    Your greed is beyond belief and YOU should be in jail. And I’ll make sure you will end up in jail —

    How many in congress are you paying off so they look the other way?

    For your information, sir, I repeat — all I was offered by Countrywide way back in February 2009 was a refi at a lower interest rate on my beloved home of 30 years. I’ve never paid late or in reduced payments, ever. But you told me, as you told millions of Americans, to default on my mortgage to qualify for the Obama Home Affordable Modification Program (HAMP), which is a scam. This, despite my many letters of concern requesting information.

    You then forged a bank signature on so-called Home Affordable Modification Program documents, while I was still waiting for your response — which came two years late — in obfuscation, threats and lies.

    You are a CROOK. It will give me great pleasure to sue you and see you in jail.

    “anonymous (street meat)”

  2. Bank America– I asked for lower interest loan to redo. They said my home is only worth 1/4 of what I bought it for and I even added $75,000 more money in it. On a lake was at about $350,000 now they say only $70,000 and they got to be lying crooks. It was not livable and lot cost $250,000 before I did any improvements. Stripped and added rooms and total over do. They need further investigation just on my home

  3. cubed2k

    First, “Paid” does not necessarily mean “Paid” by you.

    Second, MBS as guaranteed by the GSEs — is valid MBS- and the government guarantee provides the triple A rating. At one time, before subprime, the GSEs controlled the mortgage market. But, this shifted as “loans” were funneled from GSEs to the banks. These “loans” were either rejected by GSEs due to non-compliance in underwriting — or collection rights sold by GSEs to banks as the loans were in default. Very often this was a manufactured default. In either case, all that is “refinanced” at subprime origination is collection rights to charged-off GSE debt. There is no need to fund collection rights — and “notes” are not transferred in the same way- because they are not “notes” anymore. Which is why the trusts were barely funded and “notes” not transferred. Only collection rights transferred collection rights are transferred by assignment only — as there is no note). Which means — unsecured debt.

    As the subprime refinances (all subprime were refinance) gained momentum — the “mortgage” market reversed — with banks – not GSEs– holding the largest share of the once upon a time – “mortgages.” . Since the collapse — it has reversed again — GSEs now hold 97% of all newly originated loans. Subprime securitization is not about to return anytime soon — if ever.

    The banks purchased the collection rights from GSEs — and, in that capacity became an “investor.” What they funded at subprime origination was just any “cash-out” that subprime refinance requested. Nothing else needed to be funded. The bottom tranches (proportionally much smaller) in subprime securitization were sold first — to itself (as a bank debt buyer “investor”) and to other debt buyers/hedge funds — for which the bank most likely held proprietary relationship (and to who they would sell collection rights if necessary – an example is the Merrill Lynch and Blackrock relationship – BofA just dumped all remaining interest in Blackrock — Blackrock is largest manger to government Maiden Lane — who took all the toxic remnants from banks and AIG).

    A security MUST be derived from CURRENT cash flows (in contrast to an investment that does not have to be current cash flows). The collection rights purchased by banks were securitized because – as long as people were paying — there was cash flows. The subprime securitizations orchestrated “Credit support” by providing many subordinate tranches — that supposedly provided sufficient credit enhancement in order to get a triple A rating. As the bank debt buyers/hedge funds purchased the subordinate tranches — the security underwriter (Bank subsidiary) kept the senior pass- through tranche certificates. Thus, as cash was paid — went to the banks. The banks then repackaged these subprime trusts into derivative CDOs – that passed through current cash payments to security investors — those are the subprime security investors — as opposed to the original “investors” — collection rights debt buyer banks and subsequently hedge funds – in which the bank invested and supported.

    When the subprime market collapsed — the entire market fell — including security investors in GSE MBS loans. By the way, if pension funds — who can invest in valid MBS, invested in subprime trusts — they were not doing due diligence — and were likely prohibited from investing in such CDOs — as the risk was clearly spelled out in prospectus. It was foreigners who loved these CDOs and squared CDOs. And, for this reason, and international implications — the government stepped in to bail out AIG — (swap provider) to assure foreigners were taken of. Which also why foreigners will not be suing — they have been paid back. Security investors that do sue — are suing for the difference in interest rate that lost by having securities “matured” (paid-off) earlier than promised. So now they have to look for an alternative security investment that will pay the same high yield — impossible to find today.

    The big question is — where do collection rights currently lie — as the subprime trusts have been torn apart by swap payout?? Most of the banks have completed their disposition of these “rights” to other hedge funds/debt buyers — but, BofA had more difficulty and much still remains with them.

    Due to the financial crisis spillover — foreclosures have spilled over to GSE loans — as many homes are underwater — and unemployment is high. These homeowners are victims too.

    Point is — Paid does not always mean Paid by you. Subprime is different from GSE loans. And, there is a big difference between a current cash Pass-through security investor — and an “investor.” The Fed Res has made this clear — but, takes a long time for courts to catch on. This is typical.

  4. cubed2k or ANONYMOUS

    A question about all the foreign losers in this mess.
    How long do they have to bring suits?

  5. ANON,

    please explain:

    “There is a BIG difference between “investors” and “security investors” — IT IS NOT THE SAME.”

  6. ANONYOUS,
    do you know what you saying here?

    “This is not to say that valid MBS security investors did not suffer. As the market collapsed due to the subprime fraud — all were brought down.”

    Ok, why did subprime market collapse? Because the scram went to a stop, so all involved realized it and said to themselves we must stop buying MBS/ABS. They all said to themselves, game over, time to get out, don’t buy the MBS/ABS anymore. That resulted in a complete freeze, no more liquidity, no more buyers and sellers. Or they created their own “bank run” on the secondary market.

    And of course the TAXpayers paid. But did we really pay, no, they just created more money via Fed Res QE schemes.

  7. ANONYMOUS,

    My last QWS to Servicer was on 28 Fed 2011. Asking for original creditor, name, address, contact. To date, no response back. Our latest refiance, who new servicer is supposedly servicing, prior loan was indeed paid off and recorded in the land records. However, no assignment of loans has been recorded while the refince DOT has been recorded. I have deducted that the refinance lender was indeed just a broker for Chase, but Chase is not on the DOT, only the lender who is actually a broker in the deal which we did not know at the time. This is actually as per everything Neil has been saying. The original parties were not at the table, one party was not disclosed.

  8. John Anderson,

    You point out much in your post.

    But do not agree with your opening statement —- “As time runs out for the investors, who put up the money and lost most if not all of it,”

    The only investors who put up any money for subprime trusts — were collection rights debt buyer “investors.”

    The security pass-through tranches for cash flows were retained by the security underwriter. And, these pass-through tranches were based on fraud — these were NOT traditional MBS securities. Only received higher credit rating due to the support by the bottom-feeder “investor” debt buyers — who purchased collection rights — dirt cheap.

    Security investors in these bogus trusts (repackaged into CDOs) — were never the creditor — and did not blindly invest in high risk pass-throughs — they chased high yields — at American homeowner expense. Without these high yield chasers — subprime securitization would never have come to market. Biggest demand for these “securities” — came from foreigners.

    This is not to say that valid MBS security investors did not suffer. As the market collapsed due to the subprime fraud — all were brought down.

    But, again, security investors are not the creditor — as security investors NEVER lend any money directly to any borrower. This is not the way it works. No SECURITY investor funded any mortgage. And, only debt buyer “investors” funded the refinance of subprime collection rights — fraudulently used in false securitizations. This is what collapsed the market. But, then again, the economy had been driven by this fraud for years. Of Congress would promote — and regulators turned a blind eye. .

    Subprime securitizaton was a huge disaster. And, the fraud started — at origination.

    We have been programmed to believe that the crisis was fraud upon “investors.” When it was the very debt buyer investors that perpetrated the fraud. There is a BIG difference between “investors” and “security investors” — IT IS NOT THE SAME.

    Until the public realizes this — we will remain in a rabbit hole.

  9. Here Here John A,nderson, I would agree with your writing.

    “Of course the people did not know that the very banksters that they loathed were the owners of this private institution.”

    AND MOST STILL DO NOT KNOW.

    “A bill was proposed and the representative would travel back to hear his constituents opinions of the legislation and conduct their own straw poll on the issue, and unless it strongly conflicted their own opinion, vote as the majority of their constituents were in favor of, as required by being THEIR REPRESENATIVE.”

    AND PROBABLY STILL DO NOT KNOW THIS.

    IT IS NOW SOMEBODY GETS ELECTED SO HE CAN CHANGE THINGS HOW HE THINKS IT OUGHT TO BE AND THAT IS WHAT HE COMMUNICATES TO THE PEOPLE TO GET ELECTED. WHO CHANT HELP ME, HELP ME, HELP ME. THERE IS NO REPRESENTATION OF THE PEOPLE ANYMORE.

    I THINK YOU ARE CORREST, ALL REPRESENTATIVES ON ANY GOVERNMENT LEVEL SHOULD WEAR PATCHES STATING WHO THEIR SPONSERS ARE.

    SOME WISE AND TALENTED VIDEO EDITING TECHNICIAN SHOULD GET A PUBLIC VIDEO OF A SESSION IN CONGRESS ON SOME DEBATE ON SOME BILL OR LAW AND SUCH PERSON SHOULD WORK THE COMPUTER MAGIC AND PUT PATCHES ON THE REPRESENTATIVES AND SHOW IT ON YOU TUBE. WHY EVEN PRESIDENTIAL DEBATES.

  10. As time runs out for the investors, who put up the money and lost most if not all of it, “unless they were insured” the people who did this are offshoring the loot and waiting for the next shoe to drop. The stock market has done a surprising rebound, based on nothing other than their manipulation of it, and is headed for another crash soon as they once again shear the sheep.
    They are doing everything they can do to encourage a revolution. I fear that when it comes the people who got us where were at will be behind it.
    This has happened many times. A little over a hundred years ago there were a series of panic’s in the stock market. It turned out that the major banks were manipulating the stock market. When this was proven, the public was extremely pissed off, and the practice was front page news, and congress called out for regulation of the industry.
    What the people got was the Federal Reserve System, that later gave birth to the Internal Revenue Service.
    Of course the people did not know that the very banksters that they loathed were the owners of this private institution.
    I believe and support the nonviolent overthrow of our federal government, declaring bankruptcy of the debt, the restitution of the constitution, less the unconstitutional 16Th amendment, and the patriot act’s.
    The corruption you see has always been with us, just not so bold faced. When election time comes the TV is filled with 30 second sound bites usually saying something negative about the person running against the person or party paying for the spot. No debates sponsored by the Chamber of Commerce or public television. And if they did few would watch, much less attend.
    Ignorance and apathy is the damnation of our society and the direct cause of where we find ourselves. People have lost faith in this system of ours, that used to be the envy of the world.
    Our politicians, on every level of City, State and Federal “especially federal” knows that they are elected by the number of negative spot ad’s that they can have played on television, and the number of positive billboards on themselves.
    If we want to clean up our system and improve it I have some suggestions.
    The people are going to have to start voting on issues, not just for representatives. The system we have was fine 100 years ago when state capitals was days of travel away and Washington was weeks.
    A bill was proposed and the representative would travel back to hear his constituents opinions of the legislation and conduct their own straw poll on the issue, and unless it strongly conflicted their own opinion, vote as the majority of their constituents were in favor of, as required by being THEIR REPRESENATIVE.
    To often now these legislators feel they only represent themselves and their sponsors. So maybe it should be like NASCAR, where they wear corporate labels on their coats, so we can see who owns them.
    I live in Pinellas County Florida, and we have a Board of County Commissioners that vote on issues, laws, and regulations. They get a vote and I should get a vote to. I do not live in the City of St Petersburg so I should not have a say in how they handle their affairs.
    The Pinellas County Supervisor of Elections is in charge of tallying the votes in Pinellas County, and it has a website and there it should be, that I can set up using my social security number and a 8 character password, I should be allowed to vote on the proposed motion, regulation, law or everything that they vote on.
    Ditto on the state house’s and federal house’s. If the people had a say in whats passed, most brainless and corrupt legislation would be stopped in it’s tracks.
    People tell me it wouldn’t work because most people are to lazy to study the issues, and would not vote, but under this plan it would not matter because if the voters rejected a proposal by 60% no matter how many voted, the bill or proposal would have to be set aside for 30 days before it could be voted on again. This would give the proponents of the action time to inform and educate the public to its benefits. If it fails to pass the 40% approval rate of the public, it could still pass into law, if our full time legislators feel that it’s the right thing to do. They will do so knowing the will of the people were against it. And if the public does not end up satisfied with the result, they know what to do with that official at election time.
    Of course it would require our federal legislatures to set this system up. And I think it could happen if enough people supported it, but were back to the ignorance and apathy thing.

  11. The trusts are empty. It’s a proven fact. I have seen many notes made out to the trustee. They needed to be endorsed over to the name of the trust. Obviously with the REMIC rules that is impossible to fix now.

    This would mean that a large percentage of the securities issue are fraudulent.

  12. martha raysik — is RIGHT!! And, where is “misleading” as to borrower and foreclosure victims???

    The fraudulent “trusts” were largely organized under NY laws. Often, AGs from site of source of fraud — Wall Street – get involved to have considerable control from onset as to a settlement. Much more going on — behind the scene!!!

    The real victims — and not the investors — MUST be protected. Focus on investors has been to direct attention against the real victims — the homeowners. Investors were/are the perpetrators!!!! And, yes – Martha –also – “The Insurers ARE THEM.”

  13. Thanks, E. Tolle!

  14. @hkcon,

    Going from carie’s “How do you make sociopathic materialists behave ethically?” to “sociopathic materialists” just a new way to say capitalism sucks and communism is the only way…WTF? That’s a bit of a leap wouldn’t you say? I sure would.

    And your statement “groups looking to find any way they can to disrupt and bring chaos here”…in case you live in a gated community and don’t get out much, let me be the 1st to tell you that disruption and chaos are already here big time, and they weren’t brought on by any community groups, that’s for damned sure.

    Carie’s phrase “sociopathic materialists” couldn’t possibly better describe the maniacal hubris and total reckless abandon these morons have perpetrated on America without a care in the world of the damage wrought.

    I for one won’t mark your words, except to say your words are way off the mark.

  15. …and it’s “couldn’t care less”…not “could”…

  16. Uh, I’m talking about the Wall Street crooks—hello?

  17. Hey carie,
    is “sociopathic materialists” just a new way to say capitalism sucks and communism is the only way???? You people all understand that these so called “community organizations” are socialist and communist groups looking to find any way they can to disrupt and bring chaos here so that people will look to them for answers. BE CAREFUL WHO YOU GET INTO BED WITH AS YOU GO DOWN THIS PATH. These demonstrations at the shareholder meetings are 1. not going to do anything productive and 2. these groups could care less about foreclosure they see this as a way to knock America down and maybe keep her down. MARK MY WORDS!!!!!!!

  18. They need to be held accountable the same way they are making us. What’s fair is fair, but opps, this is Wall Street that thinks their invincible!

  19. As a Realtor and watching these banks /servicing companies illegally rip these homes from the American home owners, and the banks being insured by foreclosing so they could receive 80% of the so called loss, with all those billions of tax dollars the gov gave to the banks that they said was to help home owners, instead only made sure the banks were insured on the loss to foreclose on home owners, the securities were stolen from the home owner, and the trial mods were false hope long enough for the servicing companies to collect more fee’s just long enough to say denied …with tax payers monies , why the hell is this legalized criminal activity allowed ? I will tell you why (their all the same dam bunch of people ) that’s why!!! right down to the judges who have not listened to these people, But now that the American people are finally opening up their eyes to this legalized criminal activity to steal what is not even theirs in the first place because of unrecorded broken chains of title, separating the note from the security makes foreclosure unenforceable.. No assignment no foreclosure, etc. the law has not been followed… judges have turned a blind eye to the following of the law on this, Gov is either ignorant or criminal, leadership is criminal or ignorant.. hum take your pick!!
    Dare to be Bold !!
    Jen Quinn / Realtor

  20. My question is:

    How do you make sociopathic materialists behave ethically??? Is that even possible???

  21. Wall Street needs to be shuttered with metal bars and turned into a federal prison. Buses from D.C. arriving daily with their friends from the Hill as well.

    I’m with Pamela….revolution is way overdue. It’s time to put a stop to this reckless governance and fraudulent system once and for all. Turning everything that Main Street makes into a gambling device for these pimps has crashed and burned into its only possible conclusion i.e. destruction and collapse.

    Lock them all up and start over.

  22. all the players are in complete denial.. i just filed a claim with my title insurer because mers discharged a mortgage from the previous owners of my property as nominee for a company who never held the mortgage. the title isnurer is telling me this is just a clerical error, and not a title flaw. excuse me? if the mortgage was never discharged properly then it still encumbers the property. the title insurer doesnt want to admit mers did any wrong by filing a false discharge because they are a shareholder of mers. the bullsh@# never ends my friends.

  23. All investigations must lead to AG Eric Holder’s office.

    Holder is complicit in the control fraud.

    Before joining the Obama White House, Holder was a partner at Covington Burling, the white shoe law firm representing MERS. The firm wrote the legal opinion justifying MERS business model to the lending and title industry.

    MERS, of course, was the energizer bunny of control fraud.

    When Robo-signing scandal broke in October, Holder steered DOJ investigations toward borrowers and away from Big Gov and Big Bank bad actors.

    Many in law enforcement beleive Holder is running out the clock on the 5-year statute of limitations. Holder needs to resign and be indicted for obstruction of justice.

    Until then, America will no longer be a nation of laws, but of men.

  24. From someone who has been in the business of originating and servicing loans for some 40 years, trust me on this – there is no way out for the banks and I have to believe that.

    They can do the right thing right now if they are smart, and that is to step up to the plate save the taxpayers even more money by confirming that the ammunition which this new man on the scene has, is correct.

    And Goldman Sachs has already been pegged it would seem to begin the process that will be far reaching for all of Wall Street.

  25. Excellent point Martha. While Gretchen has done some reporting at least, there is a line that mainstream reporters cannot cross without upsetting bosses and such. Alternatively, we can blame other media for wildly ignoring the housing bubble, the bailouts and epic control fraud, Follow the money, and take Dick Bove as a recent example.

  26. Crossing the moat.

  27. But really its okay cause it was only just a small illegality.What a crock.When are people going to get the idea these guys are gonna play this as long as they can an get as much out of it as they can.Revolution is long over due and peaceful protests are getting us nowhere fast.Time to put boots on the ground and make it happen.

  28. Gretchen Morgenson always has good points, but sadly she repeats part of the propagandic fantasty that is perpetuated on America. When she states”

    Did they intentionally mislead investors and insurers…”
    She allows them once more to succeed in the obscurity of “The system.”
    WHO ARE THE INSURERS? As mostly this is what it will be the claims, I mean this is the American way right- Everything is insured, so they will be the poor-sad-party that will be harmed, right?

    Trace the money.
    The Insurers ARE THEM. Take the paint off the pony, as underneath its still smells like Ass! They sue each other, and make all this hullabaloo- but it’s just whitewash. It’s the same hub that it all flows from. They won a long time ago, and this is just a game to them.

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