FedUpUSA

Archive for November 16th, 2010

I am writing you today and asking that you vote NO on HR 3808 that was vetoed by the president before ajournment a few weeks ago.

“H.R. 3808 Interstate Recognition of Notarization Act of 2010″ is legislation that the banks of the country have pushed through sleezily trying to get around the FRAUD that they have perpetuated in the handling of mortgages.They securitized these mortgages and now no longer know who owns the pieces of them and cannot foreclose upon consumers who have fallen behind. Rather than have proper documentation showing chain of title they have not kept records showing the different organizations/trusts that owned these mortgages and have been accused of “Robosigning” foreclosure documents and creating out of thin air the chain of title that they need to foreclose. This legislation is to force courts to accept these “robosigned” documents that are notorized by notaries in states outside of their juristiction.

The banks are trying to cover their fraud, nothing more, nothing less.

Please vote NO on HR 3808.

Thank you.

Everyone needs to pay attention to this.  Washington has been told in no uncertain terms how pervasive and blatant the fraud in the mortgage industry is and how it is continuing.  They have been told outright that taxpayer dollars are going towards covering up this fraud.   Keep in mind the person speaking in the video and  the person that helped compile this report is a sitting SENATOR who ADMITS that there is a massive fraud being perpetrated on the American People.  Yet, I’ve seen nothing done in Washington to protect the taxpers from these criminal lenders/banks.  How long will the American people stand for this?

“Clear and uncontested property rights are the foundation of the housing market. If these rights fall into question, that foundation could collapse.” -Ted Kaufman, Congressional Oversight Panel, November 16, 2010

The Congressional Oversight Panel, the TARP watchdog program formerly chaired by Elizabeth Warren and now helmed by former Senator Ted Kaufman, has released a report detailing the failures in the mortgage servicing industry, and the threats to the overall housing market, financial sector and greater economy. The report is chilling; while it rightly says that we don’t yet know the extent of the fraud involved (they call it “irregularities”), even a small chunk of the mortgage-backed securities market going sour would have major implications for all of us. As Ted Kaufman notes, the private-label MBS market totals $7.6 trillion dollars. You don’t have to see much of that break down before you get to the total market capitalization of the biggest financial institutions on Wall Street.

The report (PDF) tries to get at the enormity of this problem, and tries to wake up regulators who are not seeing the serious systemic risk that mortgage companies have created. The panel clearly doesn’t buy the argument from the banks that this is merely about robo-signers, and once the documents get scrutinized better and put in order, the problem will go away. In fact, they give credence to the theory that the document fraud was and is an attempt to cover up a much larger fraud.

The worst-case scenario is considerably grimmer. In this view, which has been articulated by academics and homeowner advocates, the “robo-signing” of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure. In essence, banks may be unable to prove that they own the mortgage loans they claim to own.

The risk stems from the possibility that the rapid growth of mortgage securitization outpaced the ability of the legal and financial system to track mortgage loan ownership. In earlier years, under the traditional mortgage model, a homeowner borrowed money from a single bank and then paid back the same bank. In the rare instances when a bank transferred its rights, the sale was recorded by hand in the borrower?s county property office. Thus, the ownership of any individual mortgage could be easily demonstrated.

Nowadays, a single mortgage loan may be sold dozens of times between various banks across the country. In the view of some market participants, the sheer speed of the modern mortgage market has rendered obsolete the traditional ink-and-paper recordation process, so the financial industry developed an electronic transfer process that bypasses county property offices.

This electronic process has, however, faced legal challenges that could, in an extreme scenario, call into question the validity of 33 million mortgage loans.

It’s a thick report with a lot of data, essentially what we’ve been going through here for months: the chain of title questions, the improper conveyance of the mortgage and the note, the use of MERS as an electronic registry of questionable legality, the breakdown of the securitization process, the bad underwriting standards on loans that banks knowingly put into mortgage pools, the repurchase apocalypse, etc., etc. They point out that not only would the worst-case scenario lead to judges voiding foreclosures based on a lack of standing, it could spell problems for the foreclosure mitigation operations run out of Treasury. Servicers might not be able to legally grant a loan modification under HAMP. It could mean that you’ve been paying the wrong person your mortgage for years and years. It could mean that anyone buying a home could be at risk for having their sale nullified and the previous owners take control of the property.

The panel report makes three recommendations. One, Treasury should conduct new stress tests that take this potential danger into account and look at the exposure of the banks to this crisis. Two, Treasury should take a hard look at the effects of these documentation problems on foreclosure prevention programs like HAMP. Three, lenders and servicers “should not undertake to foreclose on any homeowner unless they are able to do so in full compliance with applicable laws and their contractual agreements with the homeowner.”

It’s a big report, and I’ll add more here if I find anything else noteworthy in it. More at the Washington Post and CNBC. A reminder that the Senate Banking Committee will hold a hearing on this issue at 2:30et today. I’ll be live-blogging the hearing.

UPDATE: I like this phrasing, from page 14:

Effective transfers of real estate depend on parties? being able to answer seemingly straightforward questions: who owns the property? how did they come to own it? can anyone make a competing claim to it? The irregularities have the potential to make these seemingly simple questions complex.

That’s the root of the problem – the actions of a group of companies who effectively broke the housing market, and are now breaking the law in a shortcut to putting it back together.

UPDATE II: From page 29, this is an element I haven’t harped on enough:

Local Actions – Despite the state attorneys’ general national approach to investigating document irregularities, there may be separate state initiatives. Under traditional mortgage recording practices, each time a mortgage is transferred from a seller to a buyer, the transfer must be recorded and a fee paid to the local government. Although each fee is not large – typically around $30 – the fees for the rapid transfers inherent in the mortgage securitization process could easily add up to hundreds of dollars per securitization. The MERS system was intended in part to bypass these fees. Local jurisdictions, deprived of mortgage recording tax revenue, may file lawsuits against originators, servicers, and MERS.

Basically, MERS was a highly sophisticated form of tax evasion. If county records offices credibly assert that MERS avoided fees on millions of loan transfers, they could seek that money from MERS and its sponsors. For tax-starved municipal governments, many of whom have been screwed by the banks with interest-rate swaps and other deals, this could be the way to get their comeuppance. I eagerly await the first municipality brave enough to try this.

UPDATE III: Good explanation of the Clayton Holdings due diligence scandal starts on page 39.

UPDATE IV: This is a VERY good explanation that adds further to the suggestion that servicers now have a strong incentive to foreclose instead of modify loans.

Another concern involves how HAMP servicers have been calculating the costs of foreclosure under the program’s NPV test. Foreclosures carry significant costs leading up to the acquisition of a property’s title. If, by cutting corners in the foreclosure process, servicers were able to lower the cost of foreclosure artificially, their own internal cost comparison analysis might have differed from the official NPV analysis. In such instances, servicers would have an incentive to lose paperwork or otherwise deny modifications that they would be compelled to make under the program standards.

Conversely, foreclosure irregularities could have the perverse effect of encouraging servicers to modify more loans through HAMP. If foreclosure irregularities lead to additional litigation and delays in foreclosure proceedings, they will increase the costs of foreclosure. Treasury may then update the HAMP NPV model to reflect these new realities. With the costs of foreclosure higher, the NPV model will find more modifications to be NPV-positive, resulting in more HAMP modifications.

Basically, there isn’t much cost associated with foreclosures for the servicers, and so they do the cost-benefit analysis and find them preferable to modifications

FireDogLake

Please take a moment to ask Senator Kaufman what he is going to DO about this fraud that he has discovered (and has written a lengthy report about), which is being perpetrated on a massive scale against the American People:

Contact Senator Ted Kaufman

Also please contact the Senate Banking Committee, under whose perview investigations of the mortgage industry (including MERS), securitization and banking fraud fall.

Ben Bernanke and the rest of the folks over at the Federal Reserve did not just wake up one day and decide that they wanted to start printing hundreds of billions of dollars out of thin air.  The truth is that the economic forces that have brought us to this point have taken decades to develop.  In the post-World War 2 era, when the U.S. economy has fallen into a recession, either the Federal Reserve would lower interest rates or the U.S. government would indulge in even more deficit spending to stimulate the economy.  But now, as you will see below, both of those alternatives have been exhausted.  In addition, we are now rapidly reaching the point where there are simply not enough lenders out there to feed the U.S. government’s voracious appetite for debt.  So now the Federal Reserve is openly printing hundreds of billions of dollars that will enable them to finance U.S. government borrowing, and (they hope) stimulate the U.S. economy at the same time.  Unfortunately, the rest of the world is not amused.  Nations such as China, Japan and many of the oil-exporting nations of the Middle East have accumulated a lot of U.S. dollars and a lot of U.S. Treasuries and they are not pleased that those investments are now being significantly devalued.

So how did we get to this point?  Why is the Federal Reserve printing money out of thin air in a desperate attempt to stimulate the economy?

Well, the Federal Reserve has more or less exhausted all of the other tools that it has traditionally used to help the economy during an economic downturn.  As you can see from the chart below, the Federal Reserve has lowered interest rates during past recessions.  The goal of lowering interest rates is to make it less expensive to borrow money and thus spark more economic activity.  Well, as you can see, the Federal Reserve has no place else to go with interest rates.  Over the past 30 years, rates have consistently been pushed down, down, down and now they are kissing the floor….

Another way that the U.S. economy has been “stimulated” over the past 30 years is through increased government spending.  The theory is that if the government spends more money, that will get more cash into the hands of the people and spark more economic activity.  That was the whole idea behind the “economic stimulus packages” that were pushed through Congress.  However, increased government spending always comes at a very high cost under our current system.  Government debt is now totally out of control.  As you can see below, the U.S. national debt has exploded from about one trillion dollars in 1980 to over 13 trillion dollars today.  Currently, there is very little appetite in Congress for more government spending to stimulate the economy, especially after the results of the November election.

Most Americans don’t realize it, but much of our incredible “prosperity” over the last 30 years has been fueled by the mountains of debt that we have accumulated.  Now U.S. government debt is exploding at an exponential rate….

Sadly, the U.S. government has absolutely no self-control when it comes to spending money.  Our politicians are absolutely addicted to debt.

The truth is that the U.S. government just can’t seem to stop wasting money. One of the most comical news stories of the past few days involved the Recovery Independent Advisory Panel, which is a sub-committee of the larger Recovery Accountability and Transparency board.  This panel will be holding a meeting on November 22nd to discuss how to prevent “fraud, waste, and abuse” of economic stimulus funds.

So where will this meeting be held?

It is going to be held at the ultra-luxurious Ritz Carlton Hotel in Phoenix, Arizona.

Yes, seriously.

You just can’t make this stuff up.

So if the Federal Reserve cannot stimulate the economy through lower interest rates and the U.S. government cannot stimulate the economy by spending even more money, what does that leave us with?

Unfortunately, that leaves us with either doing nothing or with having the Federal Reserve print money out of thin air and shovel it into the economy.

Sadly, even after months of news headlines about quantitative easing, most Americans still do not understand what it is.  The following is a short video that is very humorous but that also does a good job of simply explaining what quantitative easing is and why it is bad for the U.S. economy….

For much more on why quantitative easing is so destructive, please see an article that I previously authored entitled “9 Reasons Why Quantitative Easing Is Bad For The U.S. Economy“.  The truth is that in an all-out effort to give the U.S. economy a short-term boost, the Federal Reserve is putting the entire world financial system in peril.

One group of prominent economists was so alarmed by this new round of quantitative easing that they recently wrote an open letter to Ben Bernanke warning of the dangers that flooding the economy with new money could create.  The following is an excerpt from the text of that open letter which was also posted on the website of the Wall Street Journal…..

We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued.  We do not believe such a plan is necessary or advisable under current circumstances.  The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all the economy’s problems on its own.”  In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.

We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.

The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.

But it isn’t just a few prominent economists that are expressing disapproval for this new round of quantitative easing.  The truth is that almost every major industrialized nation has spoken out against all of this money printing by the Fed.  Meanwhile, Barack Obama continues to publicly defend Ben Bernanke and this new round of quantitative easing at every opportunity.

That is some “change you can believe in”, eh?

Unfortunately, the danger that quantitative easing poses to our financial system is much greater than most Americans realize.

In order for the world financial system to operate smoothly, the rest of the world much have a great deal of faith in the U.S. dollar and in U.S. Treasuries.  Ben Bernanke had promised Congress (and the rest of the globe) that the Federal Reserve would not monetize U.S. government debt and that he was going to keep the U.S. dollar strong.  But now Bernanke has broken his promises once again.  At this point Bernanke has lost a ton of credibility.  Unfortunately, Barack Obama and many of the key members of Congress continue to express unwavering support for him.

The rest of the world can see what is going on.  They are not stupid.  They are not going to keep pouring hundreds of billions into U.S. Treasuries if the Federal Reserve is going to “cheat” whenever economic conditions get a little tough.

If the day arrives when the rest of the globe completely loses faith in the U.S. dollar and in U.S. Treasuries, it is going to create a complete and total financial disaster – especially for the United States.

The Economic Collapse