Archive for February 13th, 2013
Washington is seeking help from an unlikely group in its effort to distribute billions of dollars to struggling homeowners in foreclosure: the same banks accused of abusing homeowners with shoddy foreclosure practices.
In doing so, the regulators are trying to speed the process after a flawed, independent foreclosure review delayed relief for millions of borrowers, according to people briefed on the matter. But housing advocates worry that the banks, eager to end the costly process, could take shortcuts as they comb through loan files for errors, potentially diverting aid from the neediest homeowners.
Regulators say they will check the work. And banks have already agreed to pay a fixed amount to troubled homeowners, creating another backstop.
According to officials involved in the process, who spoke anonymously because the matter is not public, the regulators had few alternatives.
Last month, the Office of the Comptroller of the Currency scuttled the foreclosure review by independent consultants because it was marred by delays and inefficiency. Instead, the regulator struck a multibillion-dollar settlement directly with the nation’s largest banks, a deal that includes $3.6 billion in payments to aggrieved homeowners.
To accelerate the payments, the comptroller’s office decided to cut out the middlemen, the consultants, from the reviews. In a conference call last week, the government outlined a plan to use the lenders instead, according to people with direct knowledge of the discussion. Banks will now have to assess each loan for potential errors, which will help determine the size of the payments to homeowners.
The decision to tap the banks for support is the latest twist in the review of more than four million foreclosures, a process that has incensed lawmakers and ensnared the nation’s largest lenders. Regulators are eager to make the payments to homeowners, who have languished for more than a year.
In 2012, housing advocates, regulators and some bank executives suggested the comptroller’s office release an initial round of payments to homeowners, people briefed on the matter said. Such a move might have quelled suspicions among homeowners that the independent review was an empty promise, or worse, a fraud. But the effort went nowhere.
Now, the first payments to homeowners are not expected until late March.
For Judie Lee, 51, a paralegal who is battling to save her three-bedroom home in Lynn, Mass., it might not come in time. Ms. Lee says she submitted a request for aid more than six months ago after a series of botched loan modifications.
“We are in trouble,” said Ms. Lee, who said that she fell behind on her loan payments after losing a job in 2007.
Under the plan outlined last week, the banks will pore over loan files like Ms. Lee’s to identify the worst possible errors. Military personnel illegally foreclosed on, for example, will rank highest on the list. Borrowers who might be current on their loan payments – and therefore did not warrant a foreclosure – will be next.
Regulators will then decide how much money to pay each category of borrower. The worse the errors, the bigger the payout.
The plan, regulators say, offers a more equitable way to divide the money than paying the same amount to each homeowner.
The strategy, though, presents potential conflicts of interests. The banks, in haste to meet tight deadlines, could fail to provide an accurate portrayal of what went wrong. The loan files are also in disarray, officials say, complicating the task for banks.
“The whole process has been a slap in the face to homeowners and a slap on the wrist to banks,” said Isaac Simon Hodes, an organizer with the community group Lynn United for Change. “The latest development shows how there has been no accountability.”
Regulators say the lenders have no incentive to manipulate the reviews. Under the settlement, the banks committed to dole out a set amount. Bank of America must distribute $1.1 billion to homeowners. Wells Fargo owes more than $700 million. The costs will not change, regardless of what the banks find in the loan files in the coming weeks.
The Office of the Comptroller of the Currency, which is running the review, also said it would perform regular checks on the banks’ work and make sure they adopt controls to prevent errors.
“Regulators will verify and test the work of servicers to slot borrowers into broad categories and then regulators will determine the amount of payment for each category,” explained Morris Morgan, the deputy comptroller in charge of supervising large banks.
By relying on the banks, regulators can part ways with the consultants.
Despite billing for roughly $2 billion in fees in the 14-month review, consultants examined only a sliver of the 500,000 complaints filed by homeowners, people involved in the matter said. Their efforts were stymied, in part, because regulators urged consultants to first scrutinize a random sample of the four million foreclosures before digging into specific homeowner complaints, the people involved said. The decision, the people said, may have undercut the scope of the settlement and potentially deprived homeowners of additional relief.
Consultants were also criticized for a faulty review process.
Some consulting firms, including the Promontory Financial Group, farmed out much of the work to contract employees. Others faced questions about their objectivity. The consultants, critics note, were paid billions of dollars by the same banks they were expected to police.
Some consultants say they sounded repeated alarms about the process. Last spring, a group of consulting firm executives met with comptroller officials in Washington to voice concerns that the reviews were too narrow, according to people with direct knowledge of the meetings.
Other people close to the review say consultants were only partly to blame for the problem. The review process, with its narrow focus, was created by the comptroller’s office in 2011, under previous leadership.
Now, some consultants feel spurned by the regulators’ decision to hand off the review.
“Why did you not trust the banks a month ago?” asked one consultant who spoke anonymously for fear of offending regulators. “And why do you solely rely on them now?”
There comes a point where you just want to throw up your hands — or in this case, start drinking heavily.
Last night was one such occasion.
Let’s dispense with the easy part of the proclamations made by the idiot-in-chief first: Gun control.
The entirety of Obama’s polemics in that regard, arguing “these (dead) people deserve a vote“, comes down to the premise that criminals will obey the law. But we know this to be false, which is why we call them criminals.
Specifically, the ugly murder of the young woman in Chicago who performed in DC just a few days before she died, in a city that boasts of some of the strictest gun laws in the nation, makes the point: The gang-banger who shot her didn’t care that it was illegal to possess the gun, and what’s worse is that law-abiding citizens, who do follow the law, were unable to legally possess the only device known to be effective in stopping said gang-bangers — that is, a gun.
The facts on this point are simple: It is disparity of force that allows criminals to get away with most of their crimes, irrespective of whether those criminals are the “small tyrants” such as gang-bangers or the really big ones like Pol Pot and Hitler.
Never forget that Adam Lanza, the accused (and now dead) shooter in Newtown, stole his weapons by murdering their owner. There is no law that would have been effective in stopping him from doing so.
The rest of OuchBama’s speech could be summed up as one line: The cost of everything is going up.
He at the same time cheered some of those things (stocks and houses) while decrying the others or outright lying about them(medical care, cost of living generally, etc.)
Then he advocated for a 25% increase in the cost of labor at the bottom end through a hike in the minimum wage from $7.25 to $9.00.
But why is the cost of living going up? Remember this law?
The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shallmaintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
The law says that the Federal Reserve shall make policy such as to produce stable prices.
That is, neither rising or falling.
Yet for 100 years, serially, in virtually each and every case, The Federal Reserve has done no such thing, as demonstrated by its own “inflation” data. 2% “inflation” is not “stable prices”, never mind the historical fact of alleged “inflation” that has averaged closer to 3%.
And that’s assuming you believe the data, in which it is claimed that health insurance, which incidentally the BLS says was up 9.9% over the last 12 months, is only 0.656% of the average family’s expense profile.
1/2 of 1%? Really?
The easiest way to lie about what’s going on in people’s economic lives is to simply bury the assumptions you use in your data so that nobody finds it, and then point to that data and say “look, everything is just fine!” The common word for this islying.
Whether the issue was the minimum wage, the cost of college and the crushing debts being taken on by our young adults as a consequence or health care, Obama’s “answer” was the same – emit more credit into the system in some form or fashion. The problem with that “answer” is that this is exactly how we got into the mess in the first place, while the architects of that mess were standing behind the microphone and seated in The House, furiously pointing in every direction instead of taking responsibility for their own actions and inactions.
There is no “growth” answer to a moribund economy when you have intentionally created false demand by pumping cheap credit. When you build an economy on that which is not real, you cannot make it real by waving your hands.
Rand Paul delivered an interesting response in the Tea Party Express SOTU rebuttal last night, but again the utter refusal to deal with the drivers of the issue were evident. The so-called “Penny Plan” is a high-sounding idea that is at its core a fraud for two reasons — first, because Congress cannot compel a future Congress’ actions and second, because exponential growth mean that linear projections, which the “Penny Plan” is based on, are inherent mathematical frauds.
There is only one way to stop the destruction of our economy: An immediate and permanent cessation of deficit spending. Not 5 years from now, not 10, not 30 or 40 – now.
The driver of our deficit spending is all centered in health care. And it is the monopoly practices in the entire sector, whether it be in drugs, devices or service provision, that is driving that behavior. “Rent seeking” doesn’t work if you can’t enforce your demands as the market undercuts your attempts to extort more than a fair market value for your good or service. But when Juanita the illegal Mexican invader can come into this country 8 months pregnant, barefoot and addicted to drugs, dropping a $2 million NICU bill on the taxpayer, every pig up and down the trough can extort their slop from everyone in the country.
Likewise, when pharmaceutical companies can force Americans to pay for the development of every drug they develop while effectively giving away that R&D to the rest of the world, they effectively extort that money from all of us.
I have spilled much digital ink on the nuances of this problem in addition to dedicating a large part of Leverage to this part of the problem. That’s because if we don’t deal with this problem none of the rest matters; this black hole is literally eating our government and economy alive!
There are only three actions that will stop the spiral:
- An immediate stop to deficit spending.
- A permanent and immediate stop to the monopolist behavior in the health-care system.
- Actual enforcement of The Fed’s “price stability” mandate, with prison terms for non-compliance.
We do those three things, and we do them now, or our nation’s economy and government financing mechanism dies.
The Eurozone is not a debt crisis that is “fixed,” it is a debt crisis waiting to implode.
The happy-talk that the Eurozone debt crisis has been resolved is ubiquitous. But when did ubiquitous happy-talk make it correct? Since the crisis is about debt–too much of it, and too much of it cannot and will not be paid back–then perhaps it would be prudent to look at two charts of eurozone credit, courtesy of the insightful chart-based website Market Daily Briefing.
Here is total Eurozone credit since the inception of the euro. This is roughly equivalent to TCMDO (Total Credit Market Debt Owed) in the U.S.
Notice that total credit owed has nearly tripled since the introduction of the euro in 1999, and that it continued to expand robustly after a brief pause in the global financial crisis of late 2008-early 2009. Recently, its expansion has flattened, but there is essentially no evidence that credit has declined, i.e. deleveraging.
Next up: Eurozone credit growth. Recall that debt-based, consumption-based economies like Europe, the U.S., China, Japan, et al. cannot expand without credit growth. Thus any decline of credit growth spells deflation:
This is not a debt crisis that is “fixed,” this is a debt crisis waiting to implode. Total credit owed is still sky-high–only a trivial percentage of the debt has been written down or renounced.
Meanwhile, the credit growth needed to drive expanding consumption has literally fallen into the abyss.
This is the worst of all possible worlds in a debt-dependent economy: a massive overhang of impaired debt and a collapse in credit growth.
The only thing that’s been “fixed” is the mainstream media’s perception management propaganda. So is perception all there is to reality? The next six months should provide an answer.
Charles Hugh Smith – Of Two Minds
All those who were dispossessed of their homes….. when do they get them back?
GRAND RAPIDS — The former president of a mortgage document processing company has pleaded guilty to a racketeering charge in Michigan.
The state attorney general’s office says Lorraine Brown pleaded guilty Monday in a Kent County circuit courtroom. She faces up to 20 years in prison when sentenced on May 2.
The state says that the 51-year-old Brown orchestrated a robo-signing scheme in which employees fraudulently signed another authorized person’s name on mortgage documents to expedite foreclosures.
So about all those titles that were fraudulently transferred away from the owners of the homes, and the subsequent resales by banks which are factually void as you cannot convey that which you never had lawful possession of.
We’re going to see that addressed….. exactly when?
Why do I know this is going to be crickets, despite the fact that now we have a criminal racketeering guilty plea on the table?
The reason for that, of course, is simple – if the banks had to unwind these transactions and cover the damages of everyone harmed by them they would collapse instantly.
Therefore it won’t be done, even though this individual and the firm undertook this at those institutions’ behest!