Posts Tagged ‘wall street’

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.

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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Blaming Fannie & Freddie: Taking The Easy Way Out

“Will Obama Slay The Fannie and Freddie Beast?”  is the headline of one story appearing in Newsweek today. Basically, it appears that instead of doing anything to the major players that actually caused the economy to collapse, you know, those fat cat Wall Street CEOs with their stupid, blow-up-the-housing market schemes, once again the easy target gets the blame: poor people who shouldn’t have been able to buy homes in the first place.

The Obama administration appears to be suggesting — very subtly — that homeownership isn’t a God-given right. That the American dream has morphed into an American entitlement. That millions of people who should not have been homeowners in the first place ended up paralyzed by unsustainable debt as a result

The American Dream is indeed powerful and one of its major tenets is owning your own home. Why is that such a tenet, though? Because for years, owning a home was the only asset any except the top five percent of Americans could claim.  Having said that, homeownership has never been an entitlement and the idea that giving poorer Americans the ability to purchase homes led to this crisis is completely incorrect. It is par for the course, however, as it is easy to blame everything on those least able to represent themselves. Poor and working class Americans  don’t have a powerful lobby like Wall Street does.

The fact is that the financial crisis was NOT caused by making loans to poor people to buy homes. It was NOT caused by the CRA or Fannie and Freddie. It was caused by greedy Wall Street bankers knowingly creating financial products that were doomed to fail from the very beginning.  The Center For Responsible Lending and others have done studies which have  revealed that risky borrowers weren’t the problem;  it was the terms of the loans themselves .  In fact, the majority of people who received “subprime” loans could have qualified for conventional mortgages, with a much lower default risk.  Furthermore, most of the loans made were not loans to first time homebuyers: the majority were refinances and loans made to homeowners moving from one house to another.  

It is deeply saddening to me that the Obama Administration appears to be buying into the Republican talking points, given to them straight from Wall Street, that the cause of the crisis was government intervention to try and help people get a leg up when true cause was the absence  of government in making sure that the mortgage products that were being peddled to the American people were safe and sustainable.

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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Kondaur Capital and Jon Daurio In Foreclosure News Again

vulture

 

I wrote about the debt buyer, Kondaur Capital, back in May. Remember those guys, the company that’s headed by former Ameriquest executive Jon Daurio?  They buy “scratch and dent” mortgages for pennies on the dollar, then get the homeowners out as quickly as possible and sell the home for a profit.  The Wall Street Journal just did another piece on them.

Apparently, one Baltimore homeowner, Eddie Patrick, was talked into dropping his lawsuit against Kondaur when it promised to “work with him” on a loan modification. They foreclosed on him anyway and then offered to sell the house back to him for $140k, which Mr, Patrick, not being made of money like these Wall Street scum, can’t afford.  Mr Patrick’s six year old son is battling brain cancer and recently had two operations. Kondaur has since generously offered Mr. Patrick $8,100 to move by the end of August and has lowered the sales price on the home to $130k.

This Daurio guy is a virtual font of insane and inane comments, especially since the fellow used to originate subprime loans that he knew full well the borrowers could never repay:

We help borrowers understand they have a house they can’t afford.

Except that they probably CAN afford the home with a decent mortgage on it. Most of the people who were sold “subprime” loans could have qualified for cheaper and safer conventional mortgages, as I noted here

The vast majority of these people knew the risk they were taking. Like so many of the borrowers I dealt with when I was originating loans, they thought housing prices were going up.

Actually, it was guys like Daurio who sold borrowers the bill of goods that prices would always go up and they could always refinance at a later date to get a better deal.  I’m going to get a little nasty here, but I can’t stand people like this Daurio, the architects of the current depression. No, Daurio, you ass, the borrowers weren’t aware of the risks, but you sure were, and you convinced them that home prices never fall. You and your Wall Street magic made it seem like they could afford these loans, when in fact, they could not.

Attributed to him, but paraphrased by the author of the WSJ article  is this little gem:

It is no surprise that some borrowers are unhappy when Kondaur forces them to face the music, Mr. Daurio says, but it isn’t his fault that borrowers got themselves into houses they can’t afford.

At the risk of repeating myself, actually, it is your fault, Daurio. You and your Wall Street brethren created these toxic mortgages and foisted them off on people. And now you want to profit off of the mess you made? Really? And this is being allowed?

Ok, enough excoriating of our pal, Daurio.  The real story here is that the regulators don’t know how to treat debt buyers like Kondaur. Are they debt collectors or mortgage lenders?  North Carolina’s chief deputy banking commissioner, Mark Pearce says:

I have concerns that some of these activities fall through the cracks of the regulatory structure.

For the first time, debt buyers, those denizens of the debt collection underworld, are entering the mortgage market, and our current laws aren’t clear on how to deal with them.  This doesn’t meant that current law won’t protect you from these predators, it just means it’s going to be a tougher fight.

Show Me The Note Rule Slowing Foreclosure Filings In Florida

“Show me the note” has become a foreclosure process rule in the state of Florida.  The new rule, handed down by the Florida Supreme Court, requires that lenders prove that they own the mortgage, and therefore have the right to foreclose, before starting the process.

During the housing boom, when mortgages were being issued left and right and later bundled together and securitized for sale on Wall Street,  it became an all too common practice to lose track of the original note, which is evidence of the debt that the borrower is required to repay. 

The problem with this is that without the note, lenders really have no way to prove that they are owed the money and have the right to foreclose on the property. This is important because if a lender were allowed to foreclose on a property without proving their legal claim, the true holder of the note could initiate a new foreclosure proceeding and leave the borrower on the hook for the money a second time, and with no home to forfeit.

As a result of this new rule, the rapid pace of foreclosure filings has slowed somewhat. This can only be a good thing for beleaguered homeowners as they try to save their homes from foreclosure.

Profiting From The Economic Collapse: Kondaur Capital

 

foreclosure sale

I originally found out about Kondaur Capital  when I read this article about how Wall Street is planning on creating securities of delinquent mortgages to sell to investors.  It made me curious about the company and so I did some digging around and what I found out isn’t pretty.

Kondaur  is a debt collector who specializes in purchasing delinquent mortgages on residential property.  There is apparently a market for “bad paper” because servicers and lenders are overwhelmed with delinquent mortgages right now. Some are willing to sell off some of the notes they hold for a few for pennies on the dollar in order to get them off their books.

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Here We Go Again: Wall Street’s New Plan To Make Money Off Delinquent Loans

I read about this on Mandelman Matters this morning and I couldn’t quite credit it, so I had to go digging for the original story, and sure enough, here it is. Wall Street actually wants to securitize delinquent mortgage loans on residential properties to sell to

investors who in recent months have been willing to accept lower-quality assets in return for greater yield.

In other words, investors who are willing to make riskier bets  for a larger return. Isn’t treating our residential mortgage market like it was a casino what got us into this mess in the first place?  Of course the Wall Street folks haven’t felt an ounce of pain from the economic collapse, so I guess everything has been hunky-dory for them.  Most of them are wealthy beyond imagining, at the cost of millions of foreclosures across America, millions of broken dreams and shattered lives. So, I guess it is no wonder that these same wizards would think nothing of doing the same thing again. 

Franken Amendment Regarding Credit Rating Agencies Passes 64-35

An important amendment that makes the current financial reform bill winding its way through Congress stronger has been passed by a vote of 64-35. Introduced by Senator Franken of Minnesota, this amendment would create a clearing house through which all credit agencies, such as Fitch Ratings, Standard & Poors, and Moody’s would be assigned to rate debt instruments.

Currently, securities firms may choose which agency to use based on the ratings the agency gives the bonds they wish to sell. This ability to shop around for the highest ratings constitutes a major conflict of interest since it incentivizes the rating agencies to inflate their ratings in order to compete for more business. This systemic conflict of interest played a major role in the financial collapse that we are still crawling out from under.

What the Franken amendment does is to put an non-biased, intermediary agency in between the securities brokers and the credit rating agencies.  Since this intermediary agency would assign out work to the credit rating agencies on a random basis, the incentive to rate a security higher in order to get more business would be gone.

Way to go, Senator Franken and Congress!

David Frum: Wall Street Didn’t Cause Financial Crisis- It Was China!

I had to laugh when I read this editorial by neo-con David Frum on CNN today.

To his credit, he acknowledges that Americans did not take out mortgages to buy homes they knew they couldn’t afford or that they borrowed too much because they wanted big screen TVs in every room.  He gets it right when he says that Americans were borrowing because incomes have not been keeping pace with the cost of living, but from there, he shifts into “alternate universe land.”

He says, and I kid you not, that China’s growth caused the financial collapse because it was buying up US debt like crazy in order to keep its factories fully staffed with workers, and of course, the largest source of American debt was U.S. mortgages. Wall Street, seeing the Chinese demand for U.S debt created the vehicles to produce more of it: mortgage backed securities. They were just the middle men.  Ergo,  it wasn’t Wall Street that increased the demand to the point that mortgage brokers were peddling risky loans doomed to fail, it was the Chinese hunger for American debt!

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