ACT ONE – The shot across all bank bows

As the month of August came to a close, Nevada’s attorney general, Catherine Masto, filed her second amended complaint against Bank of America and friends.  Yves Smith provided the analysis in her post on Naked Capitalism,Nevada Lawsuit Shows Bank of America’s Criminal Incompetence, and all I can tell you is that it reads like a John Grisham or even a Robert Ludlum novel, I don’t know if it quite rises to the level of a John le Carre, but it’s a great read.  Oh, and spoiler alert… there’s going to be a sequel.

She says that the litigation by the attorney general is “significant not merely due to the damages and remedies sought, but because it paves the way for private lawsuits.”  So, that I like the sound of that… private lawsuits are good where Bank of America is concerned.  Here’s what she had to say about the complaint itself…

And make no mistake about it, this filing is a doozy. It shows the Federal/state attorney general mortgage settlement effort to be a complete travesty. The claim describes, in considerable detail, how various Bank of America units engaged in misconduct in virtually every aspect of its residential mortgage business.

The complaint describes abuses from the very outset of the securitization process: how borrowers were mis-sold mortgages (it describes how entire products were effectively predatory), how investors were misled as to their quality, how they were not conveyed properly to securitization trusts, how borrowers were subject to abusive servicing (as in charged improper and impermissible fees), how promises made under the old consent decree regarding mortgage modifications were violated (for instance, even though interest rate reductions were promised, instead modifications often resulted in HIGHER interest rates), and the filing of fraudulent paperwork to execute foreclosures.

Metaphorically, this complaint was a shot across all the bank bows.

ACT TWO – A robo-felony is born

Next, on November 7, 2011, the Wall Street Journal, in its article titled: Nevada Foreclosure Filings Dry Up After ‘Robo-Signing’ Law, described a new felony law that Nevada’s state Assembly passed and that took effect on October 1, 2011, that’s designed to crack down on “robo-signing.”  That’s what we call it when bank employees sign off hundreds of thousands of legal filings, lying about having personally reviewed each case.

The new law holds individuals criminally liable for such false representations and provides for civil penalties of $5,000 for each violation.

Early results say the law is working. In fact, during the first month after the law took effect, notices of default fell from 5,380 to just over 600, a drop of 88 percent, according to data tracked by ForeclosureRadar.com.

The new law also bans trustees from handling foreclosures if a subsidiary of the foreclosing bank, which means that Bank of America’s use of subsidiary, Recon Trust, in Nevada, is no longer allowed.  And ReconTrust didn’t file any NODs in October, about which a Bank of America spokesliar declined to comment.

Of course, the banking lobby is going with the SOP, claiming that the law is going to slow foreclosures, which we all know, hurts everyone.  And then I’m sure there was something about how there’s going to be no lending in Nevada in the future, and stuff like that.

Those behind the bill cleverly, if transparently, say that it’s not about stopping foreclosures, it about guarding against potential title defects that can lead judges to later invalidate foreclosures, as has happened in both Michigan and Massachusetts.  Tisha Black Chernine, a real-estate lawyer in Las Vegas who helped draft the bill, was quoted by the WSJ as having said the following when talking about healing the housing markets…

“This is not at all about preventing foreclosures. It is about helping end users.  We need to make sure foreclosures are done properly.  People taking title pursuant to a bad foreclosure run the risk of having no title at all.”

Okay, so that her story and she’s sticking to it, I suppose.  And if people are buying that, and it’s working with the bank, then I’m in favor of saying it.  Heck, I’d tell BofA scary bedtime stories about all sorts of thing every night all year if I thought it would get them to do a Scrooge-like turnaround as far as the foreclosure crisis is concerned.

So, while Nevada’s NODs dropped by 88 percent, foreclosures picked in the other 49 states.  Looking at loans bundled and sold as mortgage-backed securities without any government guarantees, Fitch ratings attributed the spike in foreclosures to making up for time lost pretending to investigate robo-signing, which started during the fall of 2010, and caused intermittent delays for several months.

Read more here

Keeping Fannie Mae and Freddie Mac in business will cost taxpayers billions. But getting the federal government out of the mortgage business would cost home buyers dearly, in the form of higher interest rates.

The Obama administration will begin tackling this dilemma next Tuesday at a public conference on the future of the mortgage system. Fannie and Freddie lost a combined $9 billion in the April-to-June quarter and have needed more than $148 billion to stay afloat since the government rescued them nearly two years ago.

Figuring out what to do with Fannie and Freddie could take years and involves a more difficult question: How much should the government do to subsidize the housing market?

The government has helped make mortgages attractive to Americans for decades with a range of policies, from allowing homeowners to deduct mortgage interest payments to backing loans that make long-term fixed-rate mortgages widely available.

Now, Fannie and Freddie are facing scrutiny for the billions that taxpayers have covered for the bad loans made during the housing boom. And the administration and Congress are under pressure to address Fannie and Freddie’s role that contributed to the mortgage crisis after leaving that out of the broader financial regulatory overhaul.

Some would like the government to scale back its support for Fannie and Freddie to give the private sector a chance to compete. But others say ending it is unrealistic because it would make the 30-year fixed rate mortgage less available or more expensive.

“When Congress overhauls the housing finance system, it’s going to have to preserve something close to the status quo,” said Jaret Seiberg, an analyst with Concept Capital’s Washington Research Group. “Our whole housing system is built upon the ability of borrowers to get 30-year fixed-rate mortgages. You just can’t remove that product from the market.”

Without the government’s backing, banks would prefer not to make loans that leave interest rates fixed for more than five years. They don’t want to take the risks that interest rates will skyrocket, leaving them with an unprofitable loan a decade later.

Fannie and Freddie buy home loans from lenders, package them into bonds with a guarantee against default and sell them to investors. The pair nearly collapsed two years under the weight of soaring foreclosures and defaults.

Read more here: http://www.huffingtonpost.com/2010/08/09/freddie-mac-post-huge-los_n_675400.html

While the GOP is putting legislation in place to shove homeowners further underwater, Democrats are scrambling to throw them a lifeline.

Barney Frank (D-MA), Chair of the House Financial Services Committee, and Rep. Maxine Waters (D-CA), a ranking member of the Committee, sponsored an amendment to the Financial Reform Bill that would provide a two year bridge loan to struggling homeowners who have lost their job and can’t afford their mortgage. The creation of the loan program could help as many as 400,000 unemployed homeowners avoid foreclosure.

The provision has made it through the House and the House-Senate Conference Committee For The Financial Reform Bill will decide on or around the 22nd of June whether it makes into the final bill.

The program is based on a successful model used in Pennsylvania. The provision would make loans to unemployed homeowners to help them pay their mortgage for a maximum of two years or until they find new employment, at which time they would be expected to repay the loan amount in full.  It would be paid for using federal dollars that have already been designated for foreclosure prevention and like the Pennsylvania model it is based on, could actually produce a profit for the federal government.

This program could be a win-win all around: Homeowners who have lost their jobs through no fault of their own would be provided a loan for two years while they looked for work and got back on their feet; banks would get their money for the next two years; and a portion of the funds allocated to the failing HAMP program wouldn’t go to pay servicer salaries and bonuses.

The Obama administration has offered a forbearance of three months to unemployed homeowners, but considering the average unemployment averages 7.5 months, three months would only serve to sink homeowners deeper into financial and emotional despair.

The opposition to this amendment on the part of the GOP is astounding as they continue to hammer away at the middle class, side with the banks, and stack the deck in favor of Wall Street.

Last week Ryan Grim of Huffington Post reported that the House Republicans pushed legislation through the House to punish homeowners who are behind on their mortgages — an ironic, cruel, and hypocritical use of big government to hold back the middle-class and already cash strapped homeowners. According to a GOP memo, sent last Thursday, “families that have chosen to stop paying their mortgage and instead use the extra money they are saving each month to “buy season tickets to Disneyland…take a Carnival cruise to Mexico…and go out to dinner more often.”

“It [sic] disgusts me that the Republicans would use Big Government to interfere with the sanctity of contract,” said Dean Baker, an economist with the progressive-leaning Center for Economic Policy and Research.

Of the hundreds of stories we’ve received at ShametheBanks.org from homeowners losing their homes I have yet to read one in which someone is recounting the fabulous time they had on their Mexican cruise or their fun filled trip to Disneyland.

“We started the loan modification process in July and were notified our three trial payments would be close to what the reduced payment would be once approved for final modification 2,800. The 3 mos turned into 7 mos. During this time I am still unemployed and receive the maximum 405.00 weekly in unemployment. We faxed and resubmitted the same documents time and again. Every month we received late statements with no record,” writes Lisa Bielawski of Long Island NY in her story – far from a trip to Disneyland or a lavish night on the town.

In addition to wanting to punish homeowners in default, the GOP has also taken to attacking the unemployed, insinuating that they are lazy and shouldn’t receive government assistance in the form of much needed and deserved unemployment benefits. Georgia Republican Rep. John Linder suggested Thursday that extended unemployment benefits keep people from looking for work. “And even when businesses are willing to hire, nearly two years of unemployment benefits are too much of an allure for some,” Linder said.

Foreclosures across the country have escalated to an estimated 300,000 a month. The banks and many of their allies in Congress would like us to believe that foreclosures are the result of irresponsible homeowners who simply don’t want to pay their mortgage. The simple truth is that unemployment is now the main reason for foreclosure, accounting for 58 percent of all foreclosures according to NeighborWorks America – up from 49 percent in June of last year.

Massachusetts residents brought this problem to Congressman Frank’s attention when 600 people met with him in November. The meeting was sponsored by the community improvement organizations that are part of the PICO National Network of faith based community organizations; Brockton Interfaith Community and the Massachusetts Communities Action Network.  Congressman Frank pledged to take action on this issue of unemployed homeowners facing foreclosure and has followed through by getting this amendment passed in the House bill – now its fate remains with the House-Senate Conference Committee on the Financial Reform legislation who will decide this month whether the provision becomes part of the final bill.

In the midst of a GOP tsunami against the middle class this is a buoy of sensibility.

What can you do? Contact your member of Congress, particularly if they sit on the House-Senate Conference Committee, and tell them you want this amendment in the final bill. We’ve provided a listing and sample letter at ShametheBanks.org in this fact sheet provided by Massachusetts Communities Action Network. It contains more information about the amendment, a list of the House and Senate conferees, and a sample letter.

Janet Tavakoli, President Tavakoli Structured Finance

If a high-on-crack driver crashed his speeding rental car into your house and killed your spouse, you would be outraged if law enforcers took bribes and gave the driver a pass on a blood test. If the judge then merely fined the killer and ordered you to pay it, you would appeal, wondering what happened to justice. If the government then handed the crack-driver keys to a bigger rental car and presented you with the rental bill, you would certainly protest.

How is it, then, that you have remained largely silent in the face of the same sort of behavior by Wall Street and Washington? Bonus-seeking bankers careened off the right path and ran Ponzi schemes that nearly ruined our economy. Bureaucrats and elected officials bailed them out without demanding consequences. Bankers are revving their engines again.

Bankers Get Bonuses, the USA Gets the Great Recession

Taxpayers are asked to believe that over-borrowing by U.S. consumers created a global financial crisis. This myth aids and abets Wall Street. The economy was nearly destroyed because banks borrowed massively, and they borrowed many multiples more than they could afford. Wall Street pumped the Fed’s cheap money through financial meth labs, and deceptive financial vehicles ran over securities laws at top speed.

More than 20% of mortgage loans–including originally sound loans–are underwater, meaning the borrower owes more than the home is worth. Official unemployment numbers hover at around 10%. If you include underemployment, it is around 18%. In depressed areas where the nation’s poorest–chiefly minorities–have been hurt the most, unemployment has soared past 30%. For this destitute group, unemployment combined with underemployment exceeds 50%.

As U.S. soldiers fought wars in Iraq and Afghanistan, Wall Street flattened Main Street. Our foreign wars drag on, while the U.S. battles a crippling recession at home.

Read more here:  http://www.huffingtonpost.com/janet-tavakoli/wall-street-and-washingto_b_462205.html

The New York Times now lists the “broader” rate of unemployment as being 17.5 percent. This contrasts sharply with the official government figure of 10.2 percent. The Times accounts for the disparity by factoring in the officially unemployed, the discouraged, and the underemployed — people who are working part time.

Of course, the Times refers to current economic conditions as the Great Recession. Let’s not mince words. It’s a depression. We’ve also heard TV news commentators say this is the “worst recession since the Great Depression.” Hold it. Back up for just one minute. The Great Depression wasn’t a recession. It’s not okay to rewrite history.

Read the rest of the unemployment article from The New York Times…

Do you own a law firm? Would you like to utilize our mortgage auditing services for foreclosure defense cases? Contact MFI-Miami now.

Americans are becoming day laborers? You can’t be serious? The Las Vegas Sun says it’s true. The publication recently discovered that American citizens are joining illegal immigrants on street corners in Nevada, hoping to earn a day’s pay. This new phenomenon is a disturbing commentary on the state of the labor market. It clearly foreshadows what financial analyst Jim Willie refers to as America’s thrust into third-world status. Read more about American day laborers…

Do you own a law firm? Would you like to utilize our mortgage auditing services for foreclosure defense cases? Contact MFI-Miami now.

As soon as the job opening was posted on the afternoon of Friday, July 10, the deluge began.

C.R. England, a nationwide trucking company, needed an administrative assistant for its bustling driver training school here. Responsibilities included data entry, assembling paperwork and making copies.

It was a bona-fide opening at a decent wage, making it the rarest of commodities here in northwest Indiana, where steel industry layoffs have helped drive unemployment to about 10 percent.

When Stacey Ross, C. R. England’s head of corporate recruiting, arrived at her desk at the company’s Salt Lake City headquarters the next Monday, she found about 300 applications in the company’s e-mail inbox. Read more about scarce jobs…

The incredibly high rate of unemployment makes it all the more difficult to prevent foreclosures. Clearly, the banks shouldn’t have been bailed out. Consumers should have received the cash infusion. They’re the engine the powers the American economy.

One incredibly effective solution to the high rate of unemployment would be to require American companies to manufacture their products in the United States. They could be given tax cuts as an incentive.

The President should remember one thing: There will be no economic recovery without jobs.

Do you own a law firm? Would you like to utilize our mortgage auditing services for foreclosure defense cases? Contact MFI-Miami now!