Lehman Brothers

Force Placing Escrows Is About Greed Not Taxes and Insurance

February 23, 2011 By Steve Dibert 1 Comment

Since starting MFI-Miami almost three years ago, my staff and I have reviewed nearly 800 mortgage files and in nearly 70% of those file where the homeowner had their taxes and insurance escrowed, the were some serious issues.

“Never ask when you can take” –Ferengi Rule of Acquisition #52

One of my clients in northern Michigan had been escrowing her payments to Countrywide Home Loans and later Bank of America for nearly 3 years. Last year, because of some family issues Bank of America began foreclosure proceedings against her. While her attorney and I began preparing her lawsuit against BAC Home Loan Servicing and their attorney, Trott & Trott for illegally foreclosing, Grand Traverse County initiated a tax foreclosure for unpaid property taxes from 2007. Taxes that were supposed have been paid by Countrywide Home Loans.

Another client in Massachusetts had BAC Home Loan Servicing force place flood insurance as part of her escrow payment. This would have been fine had she actually lived in a FEMA designated flood plane but she didn’t. As part of the investigation, I contacted the insurance company Bank of America had listed on her statement that they were paying $400 a month to and discovered this insurance company did not have any record of my client in their system and they don’t offer flood insurance. They only offer homeowners insurance to active and retired military personnel.

An attorney friend of mine in Fort Lauderdale, had Chase Home Finance force place an insurance policy on his home and forced him to escrow the policy because his homeowners policy lapsed for three weeks two years prior while he had been in Europe on business. Even though there was a current paid policy in place and there were no claims filed in the three week period the policy had lapsed.

Several months ago, OCWEN force placed tax and insurance escrow on a client of mine in Illinois who was one day late paying his summer tax bill.

Last week, Fox-4 News in Dallas reported the story of Bertha Andrews in Dallas, who was forced out of her house by OCWEN. OCWEN paid her tax bill of $3500 and tacked $400 a month on to her mortgage payment even though Ms. Andrews had a tax deferment from Dallas County until she sold her home because she was taking care of her ailing mother.

Last week, Philadelphia homeowner, Patrick Rodgers successfully sued Wells Fargo for not answering his Qualified Written Request when they increased his homeowner’s policy from an $180,000 policy to a $1,000,000 policy. Wells Fargo claimed it was for the rebuilding costs if something happened to the turn of the century home. Although the value on the home was under $200,000 and the homeowner only owed $130,000.

“Never be afraid to mislabel a product.” –Ferengi Rule of Acquisition #239

This is nothing compared to what they like to do for homeowners going into modifications. HAMP guidelines dictate that all HAMP approved modification must include escrowed taxes and insurance payments during both the trial period and after the permanent modification is approved.

When the homeowner receives the letter proposing modification terms, it usual contains a lower interest rate a lower principal and interest payment. This all sound great until you read the amount for the escrowed taxes and insurance. In most cases, the escrow payments are usually 200% to 250% more than what the homeowner was paying prior to the modification.

BAC Home Loan Servicing is infamous for doing this. Like my client, Lynne Lucas who I’ve written about several times. Last year, when she opened her modification approval letter from BAC Home Loan Servicing, she discovered they were lowering their interest rate from 6.5% to 4.75% which sounded great until she read demanding a monthly escrow payment of $580.17 a month from her despite her homeowners insurance being current and their taxes were current. This is a 250% increase from the $231.17 underwriters at Countrywide Home Loans used for the cost of taxes and insurance when they approved the loan in 2005. All of this increased her payment by $570 per month to $1,723.65. This meant she was paying BAC $6962.04 per year in taxes and insurance when her taxes and insurance are actually $2900 per year.

In the majority of cases I investigate, mortgage servicers are not paying the taxes in a timely manner and that’s if they’re even paying them. In most cases, the mortgage servicer usually waits until days before the property goes into tax foreclosure before paying the tax bill and in most states this means the tax bill is 24 months delinquent. Like I said, that’s if they actually pay them.

In Lynne Lucas’s case and most other modification cases, when you add up the proposed escrow payments over a two year period it adds up to the exact number the homeowner was behind on their mortgage. In the off chance the mortgage servicer does pay the taxes, they bill it to the trustee for the asset backed security or just eat it because they bought the loan from the trustee for pennies on the dollar and will recover when they sell the property after the foreclosure. So they’re really not out any money. In non-modification cases they do it simply to line their pockets.

“Not even dishonesty can tarnish the shine of profit.” –Ferengi Rule of Acquisition #181

The mortgage servicers pull this bullshit simply because they know the system in Washington DC will let them get away with it. Like two bit hood, they know it’s to easier to steal from grandma and the disabled then it is a member of the Plutocracy.

After all, the reason Bernie Madoff went to jail was not because he ripped people off but because he ripped off members of the Plutocracy. The ponzi scheme Madoff ran looks like kindergarten production of the movie, Wall Street compared to the $70 Trillion ponzi scheme that Morgan Stanley, Lehman Brothers, Bear Stearns, Bank of America, Citigroup, Wells Fargo, JPMorgan Chase, Deutsche Bank and Goldman Sachs all have their hand in it.

Last week, Matt Taibbi wrote a great piece in Rolling Stone about how the banks know they can get away with ripping off grandma because of the revolving door at the SEC. The banks also have the Speaker of the House, John Boehner as their financial bukkake boy.

You also have the Acting Comptroller of the Currency John Walsh whitewashing over these abuses by the banks which service most of the mortgage loans in this country.

Two years ago, I wrote a piece about how the FBI’s white collar crime division knew of as early as 2003 that the financial crisis was looming. The Bush Administration’s solution to this was to gut the FBI’s white collar crime division by nearly 65%.

Banks know grandma or the over extended middle class in this country won’t fight back and the ones who do don’t have the testicular fortitude to fight them indefinitely.

Filed Under: Steve's Blog Tagged With: Bank of America, Bear Stearns, BofA, Citigroup, Deutsche Bank, economic meltdown, Escrow Payments, financial crisis, Forced Placed Escrow, foreclosure crisis, Goldman Sachs, Housing Crisis, JPMorgan Chase, lehman brothers, mfi-miami, miscalculated escrows, Morgan Stanley, Mortgage Crisis, mortgage fraud, mortgages, Steve Dibert, unpaid escrows, Wells Fargo

Why Isn’t Wall Street in Jail?

February 17, 2011 By Steve Dibert 1 Comment

Matt Taibbi, Rolling Stone

Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.

“Everything’s fucked up, and nobody goes to jail,” he said. “That’s your whole story right there. Hell, you don’t even have to write the rest of it. Just write that.”

I put down my notebook. “Just that?”

“That’s right,” he said, signaling to the waitress for the check. “Everything’s fucked up, and nobody goes to jail. You can end the piece right there.”

Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world’s wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.

This article appears in the March 3, 2011 issue of Rolling Stone. The issue is available now on newsstands and will appear in the online archive February 18.

The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What’s more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even “one dollar” just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick “The Gorilla” Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.

Invasion of the Home Snatchers

Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. “If the allegations in these settlements are true,” says Jed Rakoff, a federal judge in the Southern District of New York, “it’s management buying its way off cheap, from the pockets of their victims.”

Explaining the Crisis With Dogma

December 19, 2010 By Steve Dibert 2 Comments

Joe Nocera, NY Times

I’m talking about that odd 13-page “report” issued on Wednesday by the four Republican members of theFinancial Crisis Inquiry Commission. The F.C.I.C., of course, is the 10-member, supposedly bipartisan panel that was created by Congress last year and charged with examining the root causes of the financial crisis.

After a year and a half of hearings, including questioning over 800 witnesses, reviewing millions of pages of documents, and spending some $6 million in taxpayers’ money, its final report is due to be delivered in a month.

Except that in Washington these days, there is no such thing as bipartisan. On every major issue facing the country, Democrats and Republicans have competing narratives. Why should anyone expect anything different when it comes to the origins of the financial crisis?

Although commission members had long made a show of trying to work collaboratively, there was always a fair amount of underlying tension. Some of that tension had to do with the internal dynamics of the commission — the general sense of chaos, for instance, and the supposedly autocratic style of its Democratic chairman, Phil Angelides.

But more recently, it has had to do with the growing tug of war between the commissioners over which financial crisis narrative would win out. The Republican minority, fearing their view would get short shrift, pre-emptively put forward a CliffsNotes version of their theory of the case. In other words, they responded to a report that hasn’t even yet been written, much less read and voted on by the members.

Is there such a word as “presponse?” Perhaps we should coin it to describe what took place this week at the F.C.I.C.

It would all be pretty laughable if it didn’t have serious consequences. But it does. First, with the commission’s Republican members having now issued this public, partisan smoke signal, the final product, no matter how rigorous, will be inevitably dismissed as a Democratic document. As a result, it will have little impact and, once Bill O’Reilly has finished mocking it, will be consigned to the dustbin of history. By creating this partisan rift, the Republicans have succeeded in tarring the entire enterprise.

That is a genuine shame. When the commission was formed last year, there were high hopes that it could act as a modern-day Pecora investigation — which rooted out Wall Street corruption in the wake of the crash of 1929, and helped create the political groundswell for such key reforms as the Glass-Steagall Act. That investigation was led by Ferdinand Pecora, who held the country spellbound through some two years of nonstop investigations. Clearly, this effort isn’t going to come close to that one.

“I think we can officially stop comparing these guys to the Pecora Committee,” said Michael Perino, author of an engaging recent book about Pecora, “The Hellhound of Wall Street.” Mr. Perino added, “It is disparaging to Pecora.”

The second consequence is even more important. Next year, the House of Representatives will be in Republican hands. High on the agenda for the new majority is its own version of financial reform. The Republicans hope to minimize the impact of the Dodd-Frank bill while at the same attacking — and fixing — what they see as the “true” culprit of the financial crisis.

To fix a problem, though, it helps to know what the problem is. The F.C.I.C., with all those witnesses and documents, could have really helped here. But the paper released by the commission’s Republicans this week reads as if they couldn’t be bothered. It simply reiterates longstanding Republican dogma that could have been written without a $6 million investigation. None of which bodes particularly well for the next two years of “financial reform.”

The problem the Republicans want to fix is the two government-sponsored entities, Fannie Mae and Freddie Mac. Without question, Fannie and Freddie need fixing. A week beforeLehman Brothers collapsed in September 2008, both entities were so troubled that they had to be taken over by the federal government. Since then, the G.S.E.’s, as they’re called in Washington, have cost the taxpayer around $150 billion in losses, far more than, say, the American International Group.

They have also, though, served a critical purpose. With the private mortgage market essentially broken, virtually every mortgage made in America, postcrisis, has required a guarantee from Fannie, Freddie or the Federal Housing Administration. With the banks unwilling to make mortgage loans on their own, you simply cannot buy a house in America today without Fannie and Freddie’s help.

New York Fed Warehousing Junk Loans

March 22, 2010 By Steve Dibert Leave a Comment

Ryan Grim, Huffington Post

As Lehman Brothers careened toward bankruptcy in 2008, the New York Federal Reserve Bank came to its rescue, sopping up junk loans that the investment bank couldn’t sell in the market, according to a report from court-appointed examiner Anton R. Valukas.

The New York Fed, under the direction of now-Treasury Secretary Tim Geithner, knowingly allowed itself to be used as a “warehouse” for junk loans, the report says, even though Fed guidelines say it can only accept investment grade bonds.

Meanwhile, the Fed and Geithner both strongly oppose a congressional measure to authorize an independent audit of the central bank and its lending facilities. The provision passed the House but is under attack in the Senate, where Banking Committee Chairman Chris Dodd (D-Conn.) says he hopes to stop it.

Without an audit, the Fed is able to conceal the specifics of what it holds on its balance sheet. If the Lehman deal is any indication, the Fed is hiding billions of dollars in toxic loans on its books.

“The Fed legally is forbidden from taking such assets. There’s a legal requirement that the Fed’s assets be investment grade,” Rep. Alan Grayson (D-Fla.) told HuffPost. Grayson, who is the cosponsor of the Grayson-Paul Audit the Fed measure that passed the House, said the Lehman scandal shows precisely why such an audit is needed.

“The net result of this is we know the Fed knowingly bought assets for more than they were worth — substantially more than they were worth — and actually created a market for garbage that Lehman was more than happy to push on the Fed because they regarded the public as the suckers of last resort,” said Grayson.

Read more here: http://www.huffingtonpost.com/2010/03/22/new-york-fed-warehousing_n_508443.html

Filed Under: Financial News, Mortgage News, New York Tagged With: banking, banks, Business News, Federal Reserve, Federal Reserve Lehman Brothers, financial crisis, Lehman Bankruptcy, lehman brothers, Lehman Report, New York Fed, NY Fed, NY Fed Lehman, Wall Street

Force Placing Escrows Is About Greed Not Taxes and Insurance

Why Isn’t Wall Street in Jail?

Explaining the Crisis With Dogma

New York Fed Warehousing Junk Loans

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