Posts Tagged ‘foreclosures’

Small Time Crooks Vs. The True Masterminds Of The Economic Collapse

Recently two mortgage brokers and a real estate appraiser in Minneapolis were indicted on fraud charges for allegedly inducing lenders to make more than 1 million dollars in mortgage loans on properties based on false information regarding the properties’ values.

Over and over, we see stories like this play out across the United States, and yet the true criminals, the Wall Street financiers, the orchestrators of the worst economic collapse since the Great Depression, have  gotten away virtually scot-free with their ill gotten gains while the country continues to drown in foreclosures.

Now, I am not saying that the small timers aren’t guilty of fraud nor that they should not be gone after: of course they should. By the same token, Lloyd Blankfein of Goldman Sachs and Jamie Diamond of Chase certainly have dirty hands, and the scope of the fraud these men were involved in numbers in the billions of dollars, if not trillions, at this point.

Every day, I read stories about how the U.S. housing market continues to decline. Every day, I hear about more people losing their homes to foreclosure. Every day, I hear about the millions of unemployed who simply can’t find work because there is none to be had.

Contrast the plight of ordinary Americans with fortunes of the prime Wall Street movers, whose bank accounts are overflowing with cash, mostly owing to their ill-gotten gains made during this time of crisis. How can it be right that the very people who brought down our economy can profit nicely and get away with it?

Sure, some of the small timers, like the guys out in Minneapolis, are getting their just desserts for the crimes they committed, but the true atrocities remain unanswered.

Foreclosures Are Dragging Down The Economy

Typically, construction jobs and more specifically, new home construction jobs spur economic growth and herald the end of recessions past. This is not happening today, and for very good reason. A recent Huffington Post article cited that thirty percent of home sales were of foreclosed properties. To put it another way, close to a third of all home sales taking place today involve foreclosures. That’s huge, and until foreclosures stop driving the housing market and until the huge inventory of available homes is reduced, home values will continue to decline and developers will not be inclined to build new housing developments.

The foreclosure crisis is a national emergency and clearly, none of the government programs designed to help families in foreclosure are helping enough people to make a difference. The problem is that all of the programs currently available remain voluntary on the part of the banks and are designed to ensure that the banks continue to profit, even if the underlying loan is so poorly underwritten and so poorly constructed as to be ultimately designed to fail.

Priority number one has got to be to stabilize the housing market, and that means stopping foreclosures. I don’t just mean delaying them, because all that does is kick the can down the road, I mean actually doing something that will stop them and keep families in their homes. To do that, the banks are going to have to lump it and a mass loan modification program needs to be implemented.

This will definitely mean that some banks are going to go under. Some banks are so seriously over-leveraged that it is only through governmental efforts to aid them in concealing the true state of their balance sheets that they remain open and profitable. Yes, profitable. The worst banks (Bank of America, Wells Fargo, Chase) remain open and profitable while drowning in a sea of foreclosures. How is that? Because current efforts to staunch the foreclosure crisis have resulted in massive delays that have allowed the banks to essentially ignore “mark to market” rules and over-report their assets and diminish their liabilities. Let’s face it, a thousand homes for which the value has dropped by hundreds of thousands of dollars are not assets. No, they are  huge liabilities, and the banks get to hide this fact. Banks like this deserve to go under.

Now, we’ve heard the arguments against mass modifications: it will create a moral hazard; it will keep people in homes they shouldn’t have been able to buy anyway, it will reward deadbeats, etc. The time for recriminations and blame has passed. The foreclosure crisis is crippling the economy and is in large part the reason why unemployment remains so high and why growth is stagnating.  So what, if a few people get to keep homes that they shouldn’t have been able to buy. Let’s weigh that against the certainty that the United States is falling into a depression the likes of which has not been seen since the 1930’s.

Elizabeth Warren Stops Obama From Signing Foreclosure Friendly Bill

 

You might be wondering why would our government would try to loosen the documentation standards to make it easier for banks to foreclose on homeowners in the the midst of the worst foreclosure crisis in the history of the United States. Yeah, I am wondering about that, too.

See, both houses of congress passed a bill that would have made it easier for banks to foreclose across state lines by easing notarization standards. President Obama was going to sign the bill, too. Another win for the banks who are awash in profits while millions of homeowners flounder under the weight of the sagging economy and the bad loans that Wall Street pushed on them.

Elizabeth Warren who has been given broad authority in shaping the new watchdog agency within the Fed dedicated to making sure that all financial products are safe for the American consumer, and who reports directly to President Obama, persuaded him to veto the bill, and so he did.

Wall Street and the financial industry do not like Ms. Warren. She pulls no punches and tells it like it is. She also understands the plight of the middle class and how hard it is for American families to make it these days and she is the champion of average every day Americans long missing from Obama’s Administration.

Thank You, Captain Obvious!

Ok, so I haven’t been updating here much lately, but I am back, and I came across this post at Crooks and Liars today about the testimony at yet ANOTHER foreclosure crisis hearing in the House. Yet another financial expert is telling our Congressmen that the Treasury is all about protecting the banks and not the American people.

Umm..let’s see. The foreclosure crisis started in late 2007 and rapidly picked up steam when it finally took a tumble off a cliff in the fall of 2008. There have been  plenty of congressional and senatorial hearings during this time, with our representatives and senators wringing their hands about what can be done to fix the mess. Since then, millions of families have been foreclosed on, most of them, I might add, wrongfully, given the fact that we now know the extent of the mortgage fraud on the parts of servicers, Wall Street, and the brokers that sold these crappy, crappy loans to the American people.

Since then, what do we have to show for it? Bush tried Hope For Homeowners, and that didn’t work because no one who was in trouble could qualify. Then Obama comes along and he tries HAMP. Although HAMP has done better than Hope for Homeowners, it must still be classified as a complete failure because it is at best a band aid over the gaping wound that is the U.S. housing market. Millions of families have lost their homes since the advent of the crisis and millions more will lose their homes before its over.

So, why has nothing changed? Why can’t the government keep our great nation from bleeding out? As Adam Levitin put it “The federal regulators don’t want to get info from the servicers, because then they’d have to do something about it.” and “The prime directive coming out of the Treasury is ‘protect the banks and don’t force them to recognize their losses.”

As I have said many times, the only way to fix the foreclosure mess, which by the way, is one of the major impediments to a full and thriving economic recovery, is to tell the banks they’ve got to take their lumps, and modify every single distressed loan in the nation. Sure, this will cause  some banks will fail, but other, more stable banks will rise up to take their place. That’s capitalism. The bankers were the ones to take enormous risks with our money and the financial stability of the entire nation and they should be made to pay for their folly. The American people have already paid in blood, sweat and tears for what was largely not their fault.

Speaker Pelosi and 30 California Democrats: “Banks Need To Be Held Accountable.”

Today, Speaker Pelosi and 30 California Democrats told the justice department that “it is time that the banks were held accountable for their practices.” Really? You guys are just figuring this out? Wow, Congress is sure slow on the uptake…or maybe it’s all that Goldman Sucks money flowing into the pockets of elected officials that’s clogging up their brains.

Let’s see: over the past two years, we have seen the foreclosure rate continue to rise and hundreds of thousands of Americans have been kicked out of their homes in spite of programs designed to help them. Going through the HAMP process is a nightmare in and of itself, aside from the trauma of foreclosure itself, because the banks just don’t want to cooperate. They won’t even cooperate on short sales most of the time! Recently, we’ve had the Ally Bank signature debacle and another company, Lender Processing Services (LPS) has been in the news lately because apparently they’ve been having their employees sign authorized employees’ signatures to foreclosure documents.

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Paperwork Issues Have Halted Foreclosures In Only 23 States

You may have heard about the Ally Bank employee who admitted that he signed off on foreclosures without actually verifying who owns the mortgage and the amounts owed. As a result, thousands of foreclosures have been stalled until the mess can get sorted out.

There were similar happenings at Wells Fargo and JP Morgan Chase which have resulted in the mortgage giants having to stop the foreclosure process until the documents can be sorted out. Furthermore,  recent news about so-called “foreclosure mill law-firms” who regularly submit false documents on behalf of the banks to “speed up the process” has also come to light.

It is clear that the fraud that precipitated the foreclosure crisis is now rife within the foreclosure process itself. There has been little accountability pressed on the banks and so far, they’ve gotten away with hundreds of thousands of foreclosures, of which a significant percentage may have been completed fraudulently.

To their credit, many state governments have acted quickly to enact laws that demand the lender make sure it has the right to foreclose and even if it does, that foreclosure must be the last resort step. However, some Federal action to impose at least a 90 day moratorium on foreclosures nation wide would help in making sure that more fraudulent foreclosures take place and that more borrowers have the time to try and save their homes.

Walking Away To Better Times

Much ado has been made about “walking away” from your mortgage by the financial services industry and the government. They say that it is wrong, that you signed a contract when you bought your home and you should honor it. They promise dire consequences ahead for you if you just walk away and hand your lender the keys to your home.

Homeowners walking away from their homes certainly is a problem for the banks: it causes them to have to face some serious losses and is a gigantic reality check. Banks don’t like reality checks much…they love playing with their funny money.

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Bank Of America Lagging Behind In HAMP Modifications

Recent data released by the government reveal that Bank of America, for all its touting as a loan modification leader,  is the least responsive to beleaguered homeowners in need of mortgage assistance.

The numbers show that Bank of America has offered only 24% of homeowners whose HAMP modifications were cancelled alternative modifications while the big eight servicers have offered 44.5 % of this group alternative modifications. Further, where trial modifications have been denied, the big eight have offered 33% of these folks alternative modifications while Bank of America has offered only 11% of this group alternative modifications.

As for HAMP modifications, fifty percent of Bank of America’s trial modifications are still ongoing after six months even though the government specifically has ordered the banks to either convert the trials to permanent modifications or cancel them in three months. Only 26% of all Bank of America’s trial modifications have been converted to permanent ones.

Bank of America talks a good game and releases its own figures just prior to the time when the government releases its numbers. While Bank of America does have the greatest number of permanent modifications, this figure is misleading since it has the largest number of eligible loans out of any other servicer.

Major Federal Court Ruling: Borrowers Are Third Party Beneficiaries Under HAMP

gavel

 

As you know, one of the major hurdles for HAMP has been the lack of enforceability on the borrower’s side. I have said on this very blog many times that HAMP, well-intentioned as it may be, had no teeth.

Well, in a recent ruling, a Southern California Federal Court Judge, M. James Lorenz, may have just given HAMP some badly needed dentures.  The ruling was made on behalf of the plaintiff, Ademar Marques, who sued Wells Fargo for breach of contract under HAMP. There have been and are a number of lawsuits alleging the same thing and the big question has been, how will the courts rule. Now we have an answer from at least one Federal Court.

The judge ruled that borrowers are intended third party beneficiaries to the contract made between the servicers and the Federal government when the servicers agree to participate in HAMP.  What this means is that, according to this ruling, borrowers do have standing to sue for breach of contract under HAMP. 

While there is no guarantee that other judges will rule similarly, it does establish precedent in case law for other judges to follow. It certainly means that cases in California, one of the states hardest hit by the foreclosure crisis, that there is hope for homeowners struggling to get their loans modified.

Elizabeth Warren Predicted The Financial Collapse Back In 2004

 

Elizabeth Warren,  a Harvard Law Professor and the current chairwoman of the Congressional Oversight Committee in charge of overseeing usage of the TARP bailout funds, predicted the financial collapse long before anyone else was talking about it.

In this 2004 interview with Dean Lawrence R. Velvel where she discusses her book, The Two Income Trap,  she reveals the instability that pervades the lives of most middle class Americans and why so many end up in Bankruptcy court. She says that in order to keep up with the expenses, people with median incomes have been forced to borrow and borrow. Why? Because the median income in the United States is increasingly not enough to keep up with the cost of living. She talks about the fixed expenses that families have, such as the mortgage payment, health insurance, and educational expenses as having grown dramatically in the last generation. It is important to understand, here, that, these fixed expenses can’t be cut back.  That’s why they’re called “fixed expenses.”

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