FiredogLake is reporting this morning that six Senators have demanded criminal and regulatory action by the FHFA regarding the blatant fraud in the mortgage industry.
The six Democrats – Sherrod Brown, Barbara Boxer, Sheldon Whitehouse, Debbie Stabenow, Tom Harkin and Mark Begich – pushed back on the idea that these are merely technical errors, as the FHFA letter intimates, rather than systematic violations of the law:
There have been attempts to dismiss the reported violations as minor technical paperwork errors, and to employ the defense that these were harmless errors because the homeowners were in foreclosure and would have lost their houses anyway. These are not technicalities, they are not isolated cases – it is likely that over 200,000 foreclosures have now been suspended – and these improprieties cast doubt on the foreclosures in question.
Rather than a few rogue employees disregarding company policy, the policies themselves were flawed, indicating that there is a systemic problem with the manner in which loss mitigation and foreclosure operations are being conducted by most, if not all, mortgage servicers. This pattern of behavior has undermined the integrity of the housing market, creating uncertainty for home sales and the availability of title insurance.
We shouldn’t be reassuring the banks and their servicers that they’ll make it through this all right, we should be filling out criminal charges. The banks basically never changed their policies from the questionable lending practices of the subprime mortgage scandal – they couldn’t be trifled with basic legal procedures, and they hired a bunch of incompetents to push the paperwork. When the defaults rose, the same gang of idiots failed to provide any relief for homeowners through mortgage modification. And now they’re breaking the laws surrounding foreclosure, to cover up for their other fraudulent activities with proper mortgage assignment.
While this has started to become an election issue, with familiar battle lines, it should be noted that only Barbara Boxer among these six is up for re-election. I do think this issue resonates and is pretty clear:
To Cuban-born Jose Martinez, 65, a lifelong Republican from the Miami area who works in liquor manufacturing and export, “It seems like a joke that we are a country with laws and the banks keep stealing.”
As for remedies, the Senators suggest forcing the servicers to work with homeowners to modify loans, to impose “tailored moratoriums” for certain lenders as per their authority as regulators of banks and non-bank institutions that are the parent companies of the servicers, and to “review and reform” the financial incentives that make it beneficial for the servicers to foreclose. They are looking at the issue in a comprehensive way and beyond the “technical errors” argument which is clearly false.
As has been tediously and thoroughly documented on this website now for more than 2 years, there is no ‘procedural error’ – this was blatant, intential and orchestrated fraud from the very top down to the bottom of the mortgage industry. While it is easy to just ‘blame homeowners’ , the fact is, homeowners were not the predators.
This is WRONG HEADED thinking! It is NOT illegal to default on a debt, but it IS a CRIME to commit fraud – and the latter is what the banks have done, the former is what the homeowners have done. While there is no denying that there were some homeowners that lied on their mortgage applications, that number pales in comparison to the number of lenders, brokers and banks that lied to prospective buyers in order to put them into homes they knew darn well they couldn’t afford. The more mortgages they could write, the more money they made. Prospective buyers were no longer people they were helping to purchase a home in a price range that was sustainable, they were a profit stream. Often times it wasn’t the buyer who lied on the application at all, it was the lender who altered documents before submitting the loan for underwriting without the knowledge of the buyer!
The other problem with the idea of blaming the homeowner is that the homeowners were NOT the experts. The lenders were – and when they told people ‘this is how you do it’ and ‘yes you can afford this’ and ‘this is a fantastic deal’ – how were laypeople supposed to know better? Being naive and uneducated about the home-buying process is not a criminal act. All these creative toxic loans were crammed down the public’s throats which caused home prices to skyrocket far out of the reach of average wages. While inflation in food, energy, clothing and everything else also increased at a historic rate at the same time, wages were FALLING. Often times, people had NO CHOICE but to take on more credit than they were comfortable with because the government policies were not only creating rampant inflation, but they were mandating that banks lend to people who they deemed ‘underserved’ – minorities, poor people, the unemployed – basically the government forced banks to lend to those who could not afford to pay. For reference, at the peak, home prices had inflated to more than 7 times wages. This is historically and definitively unsustainable….yet banks were processing loans with 60% DTIs and this was advertised to the public as acceptable!
Nowhere was this more evident than in the State of Ohio. The State itself attempted to kick subprime lenders out of Ohio because it had become exceedingly clear that the predatory lending practices were entrapping people by putting them into loans they could not pay for and ultimately ending up with entire neighborhoods where the vast majority of houses were in some stage of foreclosure. Unfortunately, the Federal Government told the State of Ohio, that they could not stop these lenders from operating in the State because that would be ‘discrimination.’ So, basically the federal government gave these lenders a license to commit fraud and forced the State of Ohio to accept it.
As for the lenders, at first they weren’t so sure that lending to those that couldn’t pay would be such a great idea. So, to offset this risk in lending to people they KNEW couldn’t pay, they came up with mortgage backed securities and other ‘creative investment vehicles’ that they could buy and sell like stocks. As fast as they could bundle and pool these things together, they would sell them to individual investors, pension funds and anyone who was looking for big returns….because after all, home prices only go up, right? Thing is, long after people got weary of taking on more debt, the demand for mortgages became driven ENTIRELY by the banks THEMSELVES because the toxic instruments they created were a cash cow….as long as home prices were going up – they kept inflating the values of the securities so they could continue to profit from them.
It was when ALL private sector demand stopped because no one could take on any more debt, that the wheels started to come off back in late 2007. Then the banks and Wall Street were bailed out with taxpayer money and we’ve now seen them again inflate the prices of fuel and commodities with their taxpayer money that they gamble with – but because the hole is so large, the over $1 Trillion in taxpayer money is not enough to prevent the over $14 Trillion in leveraged security instruments from imploding.
THAT is the summary of the true depths of the fraud we are dealing with. Long after real demand for home mortages stopped, the banks continued to leverage these instruments, fraudulently inflate their values and sell them to investors. Because profits depended upon doing this in bulk, the rule of law was abandoned in transferrence of title. MERS (Mortgage Electronic Registration Systems) was invented by the banks themselves in order for them to more rapidly offload these ‘investments’ without the pesky business of continuity of the chain of title of the collateral (that would be your home). Now, quite frankly, no one with any sort of mortgage transaction since 2002 can be sure of whether or not their title is clear, nor can they be sure they are actually paying the entity to which they truly owe money!
Meanwhile, the banks and lenders are foreclosing as quickly as they can, often times facilitating this process with ‘recreated’ (forged) documents, robo-signers and false affidavits as has been documented extensively here on FedUpUSA. Multiple courts across the country have discovered much of this fraud, and some banks have now claimed to be temporarily halting foreclosures to ‘sort out this procedural error’, but even that is a lie. Foreclosures especially continue unabated and at an accelerated pace in non-judicial states where the lenders can be sure they never have to prove their standing or right to foreclose. Essentially, what the banks are doing amounts to asset stripping the public. They deceived the public with the loans themselves, the loans began to default, so they got Congress to give them more than $700 Billion in bailout money and now that the fraud is beginning to be exposed, they are taking possession of the collateral as quickly as possible, even if they have no legal rights to do so. Asset stripping at every possible level. This will continue until or unless we stop it.
Clearly the enormous economic crisis we face today was largely created by the banks/lenders and Wall Street and the stupid policies of our government. Homeowners were the victims here. At the very least they deserve:
#1. Their day in court to discover exactly WHO owns their mortgage; they have a right to know to whom they are actually indebted (and it is not the servicers). This is a legal right of every debtor under the FDCPA – The Fair Debt Collection Practices Act
#2. The opportunity to negotiate with the actual party to whom they are indebted (in most cases, the servicer was ALREADY PAID when the note was sold and has absolutely no motivation or consideration for negotiating a fair market price – this is why HAMP was such a failure!)
#3. The opportunity to have clear title to the asset that they purchased – and if that title is not clear, they are entitled to restitution under USC 15 § 1641 , which allows for the sanction of expunging interest on the debt which encumbers that property wherein a title has been fraudulently transferred. In addition, wherein the chain of title has been broken, there should be a release of that collateral, making the mortgage loan an unsecured debt (like a credit card), which also makes the debt dischargeable under Chapter 7 Bankruptcy.
As for the political angle of all this – it sure seems to me that the Republicans are vastly missing here. Is it that they truly want to snatch defeat from the jaws of victory this November? The surest way to lose much of the momentum they have been building this election cycle is to be completely silent on the issue of fraud, or worse, seen as defending fraud! I make no secret of the fact that I am and always have been a staunch conservative and I believe that part of that ideology includes a moral and ethical obligation. Hasn’t the Tea Party been demanding a return to principles over politics and party? This election hinges upon which party gets their constituents to the polls and up until this point all the enthusiasm has come from the re-engergized Tea Party groups. I am now seeing some of the liberal base become re-engergized in response to the issue of the massive fraud that has been perpetrated upon America by the banking sector and Wall Street. Certainly, the fact is not lost on me that much of the blame for enabling this to happen resides with Congress and much of the way was paved by liberals with their mandates to loan to those that could not afford it. It also is not lost on me that Wall Street and the banks gave more to Democrats in the past 4 years than any time in history. Coincidence? I think not. But in a strange twist of irony, we now have Democrats leading the way in pursuit of the prosecution of fraud in this industry.
So, why are Republicans missing? This could be an issue that they slam-dunk Democrats with – but we have only deafening silence. Could it be that Wall Street and the big banks are now giving all that money to the GOP? Will Tea Party voters allow Republicans to be bought, in direct conflict with the values that they have been espousing? Can the Republicans afford to risk losing voter support to gain all that Wall Street money they’ve long been missing?
Somebody better wake up – we have only 3 weeks to go. Either all this effort by the Tea Parties to clean up our government and demand morals and ethics will be wasted as we end up with more of the same crap we have had just under a different label or the Tea Partiers really DO stand for something. Either the Republicans are worth surviving as a party with principles or they are not.