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There is a battle going on in the media. On the one hand the banks are flooding virtually all outlets with stories about how the foreclosure crisis is behind us and how the stocks of the mega banks are a great investment. So why are we continuing to see “Settlements” and fines and sanctions on the increase, along with whistle blower settlements that are drawing out the people who even now continue to remain anonymous even as they continue to feed essential information to law enforcement and bank regulators? The latest is an award of $14 million from the SEC for assistance with an undisclosed case against an undisclosed bank.
Despite the “good news” stories we see how delinquencies and foreclosures are being reported by more reliable sources as increasing for the first time in a while, plus the fact that banks are selling off deficiency judgments to debt collectors, thus refreshing the nightmare of foreclosure fraud committed by the banks. Borrowers are still being thrown under the bus in order to prop up an ailing economy — ailing only because the wealth of average households was siphoned off in just a few years and will continue for the unforeseeable future.
Then there is the issue of the stock prices of the banks and the index stocks generally. Flooding the marketplace with stories about how strong the banks are, how the economy is improving — while the more accurate reports that the economy is stagnating (see Schiller’s latest projections), how it will continue to stagnate, how Europe is turning downright gloomy, and the banks are teetering on a myth, to wit: that their balance sheets are solid. But the balance sheets are not solid.
Two essential tricks are being allowed by the SEC and bank regulators. First they are allowing banks to report ownership of bonds that are actually owned by investors — and that the bonds are worth 100 cents on the dollar. This changes Tier 3 Assets (assets valued by management) to Tier 1 Assets or Tier 2 Assets (reference to a liquid market price because of the purchases by the Federal Reserve at 100 cents on the dollar. Under auditing and reporting rules this is all legal despite the fact that the bonds are (a) not owned by the banks and (b) are worthless because they were issued by REMIC Trusts that never received the proceeds of sale of the MBS.
Second, the banks are being allowed to launder their own ill gotten profits through their “proprietary trading” desks. I didn’t see the purchases by the Federal reserve coming because I naively thought the government would not be complicit in this massive fraud upon the American people. But I did predict as far back as 2007 that the earnings reports of the banks.
If you are pursued for deficiency I think there are numerous defenses that can be raised. This development, based upon the arrogance of the banks, might be the exact vehicle homeowners, students and other borrowers are looking for. While the collectors will assert that the case is over and a judgment was rendered, borrowers have an opportunity to raise several issues including “show me the money!” If the whole thing can exposed as a fraudulent effort to collect money that was owed to a party who didn’t even know they were being cheated (investors in REMICs) both the delinquency and the foreclosure might be eviscerated.
We also see a strong uptick on the number of homes that are cleaned out when there was no hint of foreclosure. Why are these “mistakes” happening? The answer is simple — the banks have created the illusion of “Chinese walls that often bleed over into reality. They have three or more computer systems that draw on different indexes and database applications that function outside of the purview of the custodian of records — which is why the no certificate, affidavit or testimony of a records custodian is EVER offered in litigation. The records custodians simply don’t know and have plausible deniability as to the actual conduct of the bank that employs them.
And why would the banks oppose the Smart programs offered by charitable institutions and the more aggressive AMGAR program started by livinglies? In both cases they get paid all they are going to get paid from the property sale. In the Smart programs around the country, the association buys the property at auction or from the “REO” inventory. Then they sell it back to the homeowner under reasonable mortgage terms, and sell off the mortgage in the secondary market. In AMGAR, the offer is made to pay the entire amount claimed as due — if the bank can prove payment, ownership and balance. WHY ARE THE BANKS OPPOSING METHODS TO PAY THEM IN FULL?
And then there is the period in which homeowners have a right of redemption. It seems there are several options available to homeowners even if they flat out lose — they can still sell the house, pay off the fraudulent judgment and pocket the profits.
Here are some of the other news stories to give you context:
The Forbes article takes issue with Robert Schiller’s chilling assessment of our economic prospects. The problem is he is a Nobel prize winner who studies this day in and day out while the editor’s of Forbes are only aware of the surface data. Schiller is right and as he predicted along with dozens of others (including myself) the cause is the crisis in household debt which is driven mostly by “mortgage” debt. The Federal Reserve, at least until Yellen became Chairman, has been more interested in propping up the banks even if it is based upon several layers of outright lies. Household wealth has vanished and the debt crisis is flowing over the top. AND now the banks have the temerity to pursue delinquency judgments — again using their time-honored technique of distancing themselves from remote entities that are simply debt collectors.
Filed under: foreclosure