You knew this was coming…

Feb. 6 (Bloomberg) — Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. made a last minute demand that New York drop claims filed against them Feb. 3 as a condition of a $25 billion nationwide settlement over foreclosure abuses, a person familiar with the matter said.

The deadline for states to sign the proposed deal is today. The push by the three banks raised a new obstacle in getting New York Attorney General Eric Schneiderman’s support for the deal, said the person. Schneiderman, along with the attorneys general of California, Nevada and Delaware, has voiced concerns about the terms of the accord.

Now we’ll see what sort of balls Schneiderman has.

This is what should happen — Schneiderman should tell them to go to hell.  If the other states want to settle, that’s fine, but for the banksters to play this sort of hostage game — well, it simply can’t be allowed to stand.

One would hope that Nevada’s AG, which recently passed a law that requires foreclosing parties to certify under penalty of felony indictment that they have the proper paperwork and chain of title before foreclosing, would also erect the middle finger.

Interestingly enough since that law went into effect rendering any false or robosigned filing a criminal felony (and $5,000 fine for each document) offense new foreclosure filings have effectively ceased by these very same banks. Never mind the 606 count indictment that came out of the Nevada AG’s office shortly thereafter.

Is that an admission that the banks don’t have proper title to the notes and can’t document proper procedure?  Good question.

But this much is certain — Schneiderman, California AG Kamala Harris and Deleware’s Beau Biden, along with Nevada and New York all ought to tell these banks to stick it.

Why?

That’s simple — those who were illegally foreclosed won’t get much if anything at all out of this deal, and the so-called “principal forgiveness” isn’t worth the paper it’s written on.  Those deals will be preferentially handed out to protect the banks’ second lines, doing little or nothing for the vast majority of the borrowers.

Worse, none of the proposed settlement will do a damn thing to address the harm that has been done or extract punishment.  And it is punishment that is needed — punishment so severe that nobody will ever think of doing it again.  We already have a so-called “settlement” with regard to wrongful foreclosures and similar with regard to Countrywide, and while it was supposed to grant billions in relief to homeowners it has both brought almost no actual help and not been enforced.

One of the key un-addressed issues is the fact that our land title system has been corrupted beyond belief by these institutions.  This must be fixed, and it is the banks who must fix it and spend whatever it takes to do so.  Every single assignment and mortgage has to be audited and cleared through either to the trust it is in or an admission must be made that it was never forwarded and the trusts are in fact empty artifices.  If the latter has occurred en-masse, and it certainly appears it has, people need to go to prison and those who bought these instruments in good faith and are holding empty boxes must be made whole.  If this collapses the major financial institutions in this country then so be it — we cannot have a nation where being a “big company” means you can literally blow farts at the law any time you please.

The worst part of this is not just that the FBI warned early in the decade of an epidemic of fraud, or that property appraisers sent a petition warning of the same thing.  Oh no, there was actually an investigation at Fannie that showed these practices were rampant — including robosigning — in 2003.

This is a decade-long, and perhaps longer, outrage. The entities involved must be held to account.  A decade or more of abuse of the public is not compensated for with $25 billion, with the firms involved going about their business in the usual “cost of doing business” sort of handslap.  This apparent organized set of actions, recklessly (at best) or even intentionally taken calls for recession of banking licenses and revocation of corporate charters, along with indictments where still possible under the statute of limitations.

Nothing less will do.

Why the AGs Must Not Settle: Robo-signing Is Just the Tip of the Iceberg

A foreclosure settlement between five major banks guilty of “robo-signing” and the attorneys general of the 50 states is pending for Monday, February 6^th; but it is still not clear if all the AGs will sign.  California was to get over half of the $25 billion in settlement money, and California AG Kamala Harris has withstood pressure to settle. 

That is good.  She and the other AGs should not sign until a thorough investigation has been conducted.  The evidence to date suggests that “robo-signing” was not a mere technical default or sloppy business practice but was part and parcel of a much larger fraud, the fraud that brought down the whole economy in 2008.  It is not just distressed homeowners but the entire economy that has paid the price, resulting in massive unemployment and a shrunken tax base, throwing state and local governments into insolvency and forcing austerity measures and cutbacks in government services across the nation.

The details of the robo-signing scam were spelled out in my last article, here.  The robo-signing fraud and its implications are expanded on below.

Why All the Robo-signing?

Over half the homes in the country are now held in the name of an electronic database called MERS—Mortgage Electronic Registration Services.  MERS is a smokescreen behind which mortgages were sold to trusts that sold them to investors.  The mortgages were chopped into pieces and sold as “mortgage-backed securities” (MBS), which traded in a supposedly liquid market.  That meant the investors could sell them in the money market at any time on a day’s notice.  Yale economist Gary Gorton gives this example:

Suppose the institutional investor is Fidelity, and Fidelity has $500 million in cash that will be used to buy securities, but not right now. Right now Fidelity wants a safe place to earn interest, but such that the money is available in case the opportunity for buying securities arises. Fidelity goes to Bear Stearns and “deposits” the $500 million overnight for interest. What makes this deposit safe? The safety comes from the collateral that Bear Stearns provides. Bear Stearns holds some asset‐backed securities [with] a market value of $500 millions. These bonds are provided to Fidelity as collateral. Fidelity takes physical possession of these bonds. Since the transaction is overnight, Fidelity can get its money back the next morning, or it can agree to “roll” the trade. Fidelity earns, say, 3 percent.

That is where the robo-signing came in.  Foreclosure defense attorneys armed with the tools of discovery have discovered that robo-signing — involving falsified signatures assigning mortgages back to the trusts allegedly owning them — occurred not just occasionally or randomly but in virtually every case.  Why?  Because the mortgages had to be left free to be bought and sold on a daily basis in the money market by investors.  The investors are not interested in making 30 year loans.  They want something short-term with immediate rights of withdrawal like a deposit account.

The Hazards of Borrowing Short to Lend Long

The problem is that when panicked investors all exercise that right at once, there is no cheap funding available to back the 30 year mortgage loans, rendering the banks insolvent.  And that is what happened on September 15, 2008, when Lehman Brothers, a major investment bank like Bear Stearns, went bankrupt.

According to Representative Paul Kanjorski, speaking on C-SPAN in January 2009, the collapse of Lehman Brothers precipitated a $550 billion run on the money market funds.  A report by the Joint Economic Committee pointed to the fact that the $62 billion Reserve Primary Fund had “broken the buck” (fallen below a stable $1 per share) due to its Lehman investments.  The massive bank run that followed was the dire news that Treasury Secretary Henry Paulson presented to Congress behind closed doors, prompting Congressional approval of Paulson’s $700 billion bank bailout despite deep misgivings.

The sleight of hand that brought the banking system down was that the mortgages backing the money market were supposedly held by trusts that had lent money to homeowners for 15 years or 30 years.  It was the classic “borrowing short to lend long,” a shell game in which banks have engaged for hundreds of years, routinely precipitating bank panics and bank runs when the depositors or the investors all pull their short-term money out at the same time.

The Shadow Banking System Is Still Unregulated

Periodic bank panics were averted in the conventional banking system only when the government agreed to insure the deposits of individual depositors in 1933.  But FDIC insurance covered only $100,000 (now $250,000), and large institutional investors had far more than that to invest.  The shadow banking system, in which deposits were “insured” with mortgage-backed securities, developed in response.  But the shadow banking system is unregulated and is just as prone to another collapse today as it was in 2008.  The Dodd-Frank banking “reforms” barely touched it.  As noted in an article titled “Risky Debt Use on Repo Market Hits 2008 Levels” in today’s Financial Times:

In the repo market, banks pledge their securities as collateral for short-term loans from money managers and other investors.  The market played a key role in the build-up to the 2008 financial crisis. Banks used toxic assets, such as repackaged subprime loans, to secure trillions of dollars worth of cheap funding.

When the US housing bubble burst, the banks’ trading partners refused to accept such securities as collateral and the repo market rapidly contracted.

However, a study by Fitch Ratings says the proportion of bundled debt being used as security in repo transactions has returned to pre-crisis levels.

Using the repackaged loans can increase risk in the repo market, the rating agency says. This is because the securities may be prone to sudden pullbacks such as the one experienced in 2008.

We could be looking at another banking collapse at any time; and to fix the problem, we first need to know what is going on.  The AGs should not agree to drop the curtain on the robo-signing scandal until all the evidence is on the table.  It is not just a matter of punishing the guilty; it is a matter of a banking scheme based on fraud, one that ultimately does not work and has jeopardized the homes, savings and investments of the public not just recently but for hundreds of years.

The Way Out

There is another way to design a banking system.  The deposits of large institutional investors do not need to be backed by sliced and diced pieces of our homes to be “safe” (something that has proven not to be safe at all).  The large institutional investors seeking safety are largely “us” – the pension funds and mutual funds in which we have stored our savings and on which we rely for support when we can no longer work.  Hundreds of years of history have demonstrated that the only reliable guarantor is the government itself.

Our pension funds and mutual funds need a government guarantee just as much as our individual deposits do.  But we don’t want to be guaranteeing the gambling and derivatives schemes of too-big-to-fail, for-profit Wall Street banks playing fast and loose with our money.  Banking and credit need to be public utilities, operated for the benefit of the public in plain sight of the public.

Ellen Brown – Global Research

You have to wonder….

Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe.

Lenders have routinely delayed or blocked such transactions, known as short sales, in which they accept less from a buyer than the seller’s outstanding loan. Now banks have decided the deals are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.

You mean like, for example, Nevada deciding to actually treat perjury as the felony that it is, and issue a 606 count indictment (along with materially beefing up laws that criminalize this practice.)

It seems to me that perhaps — just perhaps — banks are coming to the conclusion that recovering something on an improperly-documented loan beats recovering nothing, and the latter is becoming increasingly likely.

The better question however is what sort of title is something who buys such a short sale getting?  Is the chain of title any good and did they actually get marketable title?  If not, and they bought owner’s title insurance, is that insurance able to pay (and is the defect not excluded)?

For homeowners who are dramatically underwater and not paying, however, these sorts of “bribes” do make sense.  Recovery value is going to be dramatically impaired if the person in the house is uncooperative and simply sits and waits for the sheriff to show up.  It’s also often that person’s best move if their credit is already trashed, and if they haven’t paid in a year, it is.

One item I’ve noted in the local area is that banks are stringing along short-sale buyers for months, often allegedly telling them they’ll approve a deal in 60 or 90 days and then when there’s a week or two left they ask for more time — usually another month.  Not only does that prevent the house from becoming part of the “cleaning” in the market it also holds the proposed buyer off the market — they are neither a homeowner or looking for another, conventional deal!

To the extent that we’re actually getting decisions and clearing of the market, even as a small incremental step, this is a positive development — even if the motive of the bank making the offer is questionable at best.

Here it comes!

NEW YORK – Attorney General Eric T. Schneiderman today filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process. The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as “MERS certifying officers,” have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.

The lawsuit further asserts that the MERS System has effectively eliminated homeowners’ and the public’s ability to track property transfers through the traditional public records system. Instead, this information is now stored only in a private database – which is plagued with inaccuracies and errors – over which MERS and its financial institution members exercise sole control. Additional defendants include BAC Home Loans Servicing, LP, Chase Home Finance LLC, EMC Mortgage Corporation, and Wells Fargo Home Mortgage, Inc.

“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages. Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law,” said Attorney General Schneiderman. “Our action demonstrates that there is one set of rules for all – no matter how big or powerful the institution may be – and that those rules will be enforced vigorously. Only through real accountability for the illegal and deceptive conduct in the foreclosure crisis will there be justice for New York’s homeowners.”

I like it, I predicted it, and now we have an attorney general with a set of balls who has finally stood up and acted upon what, in my view, was both inevitable and necessary to clear the property title system, return it to a functional state, and ultimately allow the market to clear and housing prices to return to sustainable value.

This appears to be NY’s answer to the Miller-brokered “settlement”; it appears to be rather succinct and easily-understood too, distilled down into something like this:

http://www.youtube.com/watch?v=EpMSyflKHE0

BREAKING: Obama to strike sweetheart deal with big banks: Proposed total restitution for the millions of Americans who lost their home due to illegal foreclosure tactics: $20 billion; 2011 big bank bonuses: $144 billion http://www.npa-us.org/call-obama-today You Can Call The White House at (202) 456-1111

Well what do we have here!

23 (ii) A declaration by the beneficiary made under the penalty of perjury stating that the beneficiary is the actual holder of the promissory note or other obligation secured by the deed of trust shall be sufficient proof as required under this subsection. A violation of this subsection (7)(a)(ii) is a class C felony as provided in RCW 28 9A.20.020 and 9A.20.021.

Bingo.  If this bill becomes law and you file a document foreclosing in Washington State claiming to be the beneficiary of a given mortgage and really aren’t, because, for instance, the trust never had the actual mortgage tendered into it, you go to prison.

It’s about damn time.

The bill is SB6199 and if you live in Washington State you can find your State Reps here: http://apps.leg.wa.gov/DistrictFinder/Default.aspx

The Market-Ticker

Discussion (registration required to post)

How should people prepare for the difficult years that are coming?  I get asked about that a lot.  Once people really examine the facts, it is not too hard to convince them that an economic collapse is coming.  But once they accept that reality, most of them want to know what they can do to prepare themselves and their families for the hard times that are ahead.  Well, the truth is that it does not have to be complicated.  Many of the things discussed throughout this article are things that most of us should be doing anyway.  Now is not the time to be splurging on luxuries or expensive vacations.  Now is not the time to be going into large amounts of debt.  Instead, we all need to get back to the basics and we all need to do what we can to become more independent of the system.  Just remember what happened back in 2008.  Millions of Americans lost their jobs and millions of Americans lost their homes.  Now experts all over the globe are warning that another great financial crisis that could be just as bad as 2008 (or even worse) is coming.  Those that don’t take the time to prepare this time are not going to have any excuse.

But there is also a lot of sensationalism out there.  There are some people out there that claim that the economy is going to collapse all at once and that we are going to go from where we are now to some type of a post-apocalyptic “Mad Max” society almost overnight.

Well, that is just not going to happen.  We are not going to wake up next week in a world where we are all fighting each other with sharp pointed sticks.

Just like anything else, an economic collapse takes time.  I like to describe what is happening using an analogy from the beach.  When you build a mighty sand castle, it is not totally destroyed by the first wave that comes along, right?

Well, it is the same thing with the U.S. economy.  It was the greatest economic machine that the world has ever seen, and it is most definitely in decline.  But there are stages to that decline.

The “wave” that came along in 2008 did a huge amount of damage.  Our economy has not recovered from that.

Now another wave is coming.  But that will not be the end.  There will be other waves after that.

Eventually, this thing is coming all the way down.  Someday America will be such a horror show that it will be hard to believe that it is the same place that many of us grew up in.

But in the short-term, we are going to be facing a major league recession and millions of Americans will lose their jobs.  It won’t be the end of the world, but for some people it may feel like it.

So when you are talking about “how to prepare”, the truth is that it depends on what kind of time frame you are talking about.

In the long-term, a lot of the things that even the hardcore survivalists are doing will not be nearly enough.

In the short-term, there are things that all of us can do to weather the coming storm….

Get Out Of Debt

The global financial system is headed for a massive crisis.  Just like in 2008, a lot of people are going to lose their jobs and a lot of people are going to lose their homes.

In such an environment, it makes sense to travel as “lightly” as possible.

That means getting rid of debt.

Some forms of debt are worse than others.  Mortgage debt is not that bad.  We all need somewhere to live, and not all of us can run out and immediately pay off our mortgages.

But there are other forms of debt that are absolutely toxic.  A good example of this is credit card debt.  There are very few things that are as good at bleeding your finances as credit card debt is.  For example, according to the credit card repayment calculator, if you have a $6000 balance on a credit card with a 20 percent interest rate and only pay the minimum payment each time, it will take you 54 years to pay off that credit card.

During those 54 years you will pay $26,168 in interest rate charges on that credit card balance in addition to the $6000 in principal that you are required to pay back.  That is before any fees or penalties are even calculated.

But a lot of Americans still have not learned to stay away from credit card debt.  In fact, one out of every seven Americans has at least 10 credit cards.

Ouch.

The truth is that in future years there is a good chance that you may be facing a situation where you are not making as much income, so you want to try to start reducing your expenses right now.  Getting out of debt will help you to do this.

Save Money

A shockingly high number of American families are operating without any kind of financial cushion whatsoever….

-According to a Harris Interactive survey taken in 2010, 77 percent of all Americans are living paycheck to paycheck.

-According to one recent survey, one out of every three Americans would not be able to make a mortgage or rent payment next month if they suddenly lost their current job.

This is one reason why so many Americans have lost their homes and why so many Americans have fallen below the poverty level in recent years.  They simply had no cushion.

Last year, 2.6 million more Americans dropped into poverty.  That was the largest increase that we have seen since the U.S. government began keeping statistics on this back in 1959.

Don’t let this happen to you.  At a minimum, everyone out there should have a cushion that will cover at least 6 months worth of expenses.  Preferably, you should have a cushion that will last you at least a year.

Yes, I know that is a tall order.  But you would be amazed at how much money the average American family wastes in a typical month.  Almost all of us have areas where we can cut back.

Trust me, in the middle of a major recession you will be really glad that you are sitting on a pile of savings.

Get Independent Of The System

What would you do if you lost your job tomorrow?

Would you have any other income?

How long would it be before you lost your home?

Those are very important questions.

The truth is that the system is failing and so we all need to work hard to become more independent of the system.

So what does that mean?

Well, instead of relying on someone else to employ you indefinitely, you can start up a business in your spare time.  Yes, it will cut into your television time, but if someday you lose your job you will be extremely happy that you still have some income coming in.

Another way of becoming more independent is to start a garden.

Yes, you can run down the street and buy giant piles of cheap food right now, but that will not be the case forever.

Store Food And Focus On The Essentials

I might get into a little trouble for saying this, but the truth is that there is not going to be a major famine in America in 2012.

However, that does not mean that you should not be storing food and other essentials.

In the old days, our grandparents always saved up food.  It was just a natural thing for them to do.  This was especially the case if they lived through the Great Depression.

When hard times come, you will be glad that you have food stored up.  Plus, food is never going to be cheaper than it is today.  Having food stored up is a great hedge against the rising food prices that we will see in the future.

No, we are not going to see hyperinflation by the end of the year like many of the sensationalists are warning.  But someday you will be really glad that you stored up food for yourself and your family.

We live in a world that is becoming more unstable with each passing month.  You never know when the next natural disaster, pandemic, war or national emergency will strike.

It only makes sense to store food and other basic essentials that you will need in the future.

In a previous article entitled “20 Things You Will Need To Survive When The Economy Collapses And The Next Great Depression Begins”, I listed 20 of the things that you would need in the event of a major disaster, a national emergency or a total economic collapse.  These are things that you are going to want to make sure that you have ready right now, because after the crisis begins it may be too late to prepare….

#1) Storable Food

#2) Clean Water

#3) Shelter

#4) Warm Clothing

#5) An Axe

#6) Lighters Or Matches

#7) Hiking Boots Or Comfortable Shoes

#8) A Flashlight And/Or Lantern

#9) A Radio

#10) Communication Equipment

#11) A Swiss Army Knife

#12) Personal Hygiene Items

#13) A First Aid Kit And Other Medical Supplies

#14) Extra Gasoline (But Be Very Careful How You Store It)

#15) A Sewing Kit

#16) Self-Defense Equipment

#17) A Compass

#18) A Hiking Backpack

#19) A Community

#20) A Backup Plan

In the comments to that article, the readers suggested the following additional items….

A K-Bar Fighting Knife

Salt

Extra Batteries

Medicine

A Camp Stove

Propane

Pet Food

Heirloom Seeds

Tools

An LED Headlamp

Candles

Clorox

Calcium Hypochlorite

Ziplock Bags

Maps Of Your Area

Binoculars

Sleeping Bags

Rifle For Hunting

Extra Socks

Gloves

Gold And Silver Coins For Bartering

Once again, a lot of these things are not going to be needed right away.  The economy is going to go through a lot more ups and downs before it totally dies.

In the short-term, keep an eye on the European debt crisis, the Japanese debt crisis and the U.S. debt crisis.  There are a lot of similarities between what happened back in 2008 and what is happening now.

And what happened following the crisis of 2008?

Unemployment shot through the roof.

So be prepared for that.

Make a plan for how you and your family will survive if you end up unemployed.

Also, when it comes to “how to prepare”, there is one aspect that is often overlooked.

During the difficult years ahead, we are all going to have to be mentally and spiritually tough.

It won’t matter how good your physical and financial preparations are if you are cowardly and paralyzed by fear.

The times that are coming are going to test all of our hearts.

Some people are going to make it and some people aren’t.

Some people will become so consumed with fear that they will give up completely.

Don’t let that happen to you.

Prepare your heart, soul, mind and body right now for what is coming.  For those that are cowardly the years ahead will be a total nightmare, but for those that overcome the fear the years ahead have the potential to be a great adventure.

The Economic Collapse

On December 13, 2011, the Wall Street Journal published an article entitled “Banks in Push for Pact.” It was an obscure article buried in the real estate section.  The article contained this clause:  “Under the proposal, banks would be released from legal claims tied to servicing delinquent mortgages as well as certain mortgage-origination practices….”  Opponents of this proposed amnesty for mortgage-origination fraud have charged repeatedly that the federal government and Tom Miller, the Attorney General of Iowa, who is leading the settlement negotiations, support the amnesty.  Previously, Miller’s key lieutenant, but not the Obama administration, angrily denounced the charge.

The Four Levels of Control Fraud Involving Mortgages

Home lenders, particularly those making liar’s loans, typically committed endemic “accounting control fraud” on multiple levels.  Control fraud occurs when the persons controlling a seemingly legitimate entity use it as a “weapon” to defraud.  Accounting is the “weapon of choice” for financial control frauds.  Mortgage frauds can be grouped into four levels, each of them exceptionally widespread:  loan origination fraud by the lenders and their agents, the fraudulent sale of fraudulent mortgages, the fraudulent pooling and sale of collateralized debt obligations (CDOs) in which the underlying was largely fraudulent mortgages, and foreclosure fraud.

Loan Origination Fraud

The classic economics article describing such frauds is George Akerlof and Paul Romer’s “Looting: the Economic Underworld of Bankruptcy for Profit” (1993).  The recipe” for accounting control fraud by a lender (or purchaser) has four ingredients.

1. Extreme growth by making (or purchasing)
2. Loans of extremely poor quality at a premium yield
3. While employing extreme leverage, and
4. Providing grossly inadequate allowances for loan and lease losses (ALLL)

Origination fraud involved a series of mutually supportive frauds: inflating the borrower’s income, inflating the appraised value of the home, providing grossly inadequate allowances for loan and lease losses (ALLL), and failing to recognize losses on fraudulent loans held in portfolio.  It was also common for federally insured lenders to file false reports with and make false statements to the regulators.  Lenders that made liar’s loans were “accounting control frauds.”  Their CEOs cause them to create perverse incentives to suborn the supposedly independent experts to provide opinions that inflate values and understate risk in order to aid and abet the underlying accounting fraud.  These perverse incentives create a “Gresham’s” dynamic in which bad ethics drives good ethics out of the marketplace.  The result is “echo” fraud epidemics.  Each of these frauds constitutes a federal felony.  Most of the frauds I have described are also felonies under state law.  Collectively, there were millions of origination frauds with a total dollar amount of fraudulent originations well in excess of $1 trillion.

The Fraudulent Sale of Fraudulent Loans

The second level of fraud is the fraudulent sale by the lenders of the fraudulent loans.   This form of fraud required endemic false “reps and warranties.”  Roughly 90 percent of liar’s loans were sold, so this second level of fraud also constitutes millions of federal and state felonies and roughly $1 trillion in fraudulent sales.

The Frauds involved in Pooling Fraudulent Loans to Create and Sell Fraudulent CDOs

The third level of fraud is the sale of collateralized debt obligations (CDOs) “backed” by fraudulent liar’s loans through false disclosures.  This level of fraud constitutes tens of thousands of federal felonies and roughly $1 trillion in fraudulent sales.

Foreclosure Fraud

The fourth level of fraud is foreclosure fraud.  The best known of these frauds involved the commission of hundreds of thousands of felonies through the filing of false affidavits to secure foreclosures (inaptly called “robo signing”).

Massive Foreclosure Fraud Generated the Global Settlement Discussions

It was this last level of fraud that prompted the settlement discussions.  What one must keep constantly in mind when dealing with lenders that are control frauds is that they and their senior officers will be represented by the best criminal defense lawyers.  America still does many things superbly, and we do lawyers really well.  The fraudulent officers who control banks engaged in control fraud will spend bank funds like water for their defense lawyers.  The old joke is that when one is dealt lemons one should make lemonade.  In law school, however, we consider that the “C minus” answer.  When dealt lemons; the best lawyers seek to make Dom Perignon.

Consider the setting – you represent a systemically dangerous institution (SDI) that was the beneficiary of a federal bailout.  Your client has made hundreds of thousands of fraudulent liar’s loans and fraudulently sold the great bulk of them.  If your client is held responsible for these frauds it will have to reveal that it is massively insolvent and face receivership.  Your client is also one of the largest mortgage loan servicers in the world.  A small law firm representing a borrower has taken the deposition of one of your client’s key employees who signed the affidavits necessary to support roughly ten thousand foreclosures a month – and admitted that the key statements she has made in each of those affidavits is false.  The somnolent federal government had finally been forced to admit that the banks have engaged in endemic foreclosure fraud.  The states are also involved.  This would be a nightmare scenario for any normal client.  For an SDI, however, it was an opportunity.

L’audace, encore l’audace, toujours l’audace!

(Audacity, more audacity, always audacity: the white collar defense lawyer’s creed)

One of the secrets to being an extraordinarily effective elite criminal is also true of their lawyers – audacity.  Elite white-collar criminals can frequently get away with grotesque criminal conduct if they use their exceptional advantages provided by wealth, privilege, and seeming legitimacy.   Even within the ranks of elite white-collar criminals, however, the CEOs who control SDIs – particularly during a financial crisis that they caused – are unique in their power to commit crimes with impunity.  They hold the national, even global, economy hostage.  Treasury Secretary Geithner has made this strategy simple by displaying the “Stockholm Syndrome.”  He has fallen in love with the criminals that are holding our economy hostage.  Geithner claims that the fraudulent SDIs are so fragile that they would collapse if they were even investigated seriously for fraud.  He conveniently ignores the fact that the primary reason for the SDIs’ fragility is that their CEOs looted the banks.

They can also use “their” bank to buy the modern equivalent of indulgences for even the most destructive frauds.  There are two non-exclusive means of buying indulgences.  The most obvious means is political contributions.  The finance industry is the leading funder of both political parties. The less obvious means of buying immunity arises from the dysfunctional nature of DOJ policies for (not) prosecuting major firms for serious felonies and the ability of the CEO to use corporate funds to purchase personal immunity from criminal prosecutions.  Five facts about the criminal defense of large firms must be kept prominently in mind when considering the defense of banksters.  First, the CEO will gladly trade off billions of dollars in payments by the bank and its liability insurers in order to secure immunity from criminal charges against the CEO and the senior officers who could implicate the CEO.

Second, the Department of Justice (DOJ) has essentially ceased to prosecute large firms for serious felonies.  DOJ was so traumatized by the consequences of prosecuting Arthur Andersen that it has decided to allow large firms to enter into “deferred prosecution” agreements (in which prosecution is, in reality, perpetually deferred).  Arthur Andersen had entered into two deferred prosecution agreements, and DOJ offered it a third, when AA refused the agreement and went to trial.

Third, while I have referred to the firm as the “client” and the firm and its insurers typically pay for the attorney fees and fines, it is the CEO that can hire and fire outside counsel.  Outside counsel, therefore, are chosen by fraudulent CEOs because they are willing to aid and abet the CEO in looting the real client (the firm).  This is a classic example of the fraudulent bank CEO deliberately creating a Gresham’s dynamic in which the least ethical members of the “independent” profession drive the most ethical out of lucrative representations.  In criminology jargon, control frauds are criminogenic.  Fraudulent CEOs use their ability to make compensation for officers, employees, and independent professionals perverse in order to create environments that cause widespread frauds that aid and abet the lender’s fraud scheme.  To put it in plainer, biblical English:  fraud begets fraud.

Fourth, the settlement payments are typically deductible from taxes.  This means that the defendant’s actual burden of paying the fine is much smaller than the announced amount of the fine.

Fifth, defense counsel typically promise to pay some portion of the fines to the victims of the fraud.  This is a brilliant tactic.  It makes the government attorneys feel good about the settlement and it allows them to bash opponents of the settlement as blocking relief for the victims.  The tactic, of course, is cynical and dishonest.  The weak settlement is what prevents a far greater recovery for the victims of the fraud.  The government does not have to wait for a settlement to aid the victims of foreclosure fraud.

Settlement discussions by counsel for control frauds with the government and shareholders are all about exceptionally able and zealous legal representation of the CEO at the expense of the client, its shareholders, and the public.  Only vigorous regulators and prosecutors can protect the firm, shareholders, and public from looting by these CEOs and the allies they generate.

The Proposed Deal: The $1 Trillion Lagniappe

The obvious deal that criminal defense counsel for banks always seek is to trade a showy amount of fines for de facto or even formal immunity for the CEO and other senior officers who led the frauds and became wealthy through the frauds.  Here, the defense counsel were far more audacious – they are demanding immunity not only from prosecution, but even from investigation, and they are demanding immunity for crimes they committed that have never been investigated by the state and local prosecutors.  The foreclosure fraud cases, while enormous, are by far the least of the banksters’ worries.  The potential loss exposure from the foreclosure fraud is measured in the tens of billions of dollars.  The potential loss exposure from fraudulent home loan originations is in the trillions of dollars – and a trillion is a thousand billion.  The banks’ CEOs are demanding, for a puny $25 billion, a release from liability for foreclosure fraud.  That is obscene on multiple levels.  Even President Obama concedes that the banks treat such fines as a mere “cost of doing business” (by which he means the “small tax on the wealth obtained by elites through doing fraudulent business”).  The senior officers involved in the fraud should be imprisoned.  Giving them immunity, allowing them to keep their bonuses “earned” through fraud, and keeping them in leadership roles are all despicable acts that should be anathema to every prosecutor.

But what came next went beyond scandal as usual.  The banks then demanded a lagniappe – a little something extra, for free, in a New Orleans restaurant – they wanted immunity for loan origination fraud.  The slight difference is that this lagniappe is worth trillions of dollars to the frauds.  It sickens me to inform the reader that the Obama administration is eager to provide the frauds with this lagniappe.  The Department of Housing and Urban Development (HUD), led by Secretary Shaun Donovan, is actively pushing this scandalous deal, with strong support in the background from Treasury Secretary Geithner.  The silence of Attorney General Holder, and President Obama, on this travesty is exceptional.

Worse, the banks are seeking immunity even from investigation of the over trillion dollars in mortgage origination fraud – and the Obama and Bush administrations’ supposed “investigations” of mortgage origination fraud by the large lenders that made the mass of liar’s loans are all unworthy of the word “investigations.”  It would take roughly 100 investigators, working for years, to do a serious investigation of any of the largest liar’s loan lenders.  There has never been, remotely, such an investigation by the federal government of the any large liar’s loan lender.  The Obama administration is reported to support the fraudulent financial CEOs’ dearest dream – de facto immunity even from investigation of over a trillion dollars in fraudulent liar’s loans origination.

The Republican Party and its candidates for the Party’s presidential nomination are not criticizing Obama’s proposed formal surrender to crony capitalism.  They only wish they were in complete power and could cash in even more heavily on the tidal bore of campaign contributions flowing out of the finance industry.

Miller, and everyone involved, knows there was endemic origination fraud

Miller no longer denies that he has joined the administration in favoring the banks’ most cherished dream – amnesty for originating a trillion dollars in fraudulent home loans.   Indeed, the settlement is designed to prevent even investigations of the mortgage origination fraud.

I confess that I am so naïve that I would have believed it impossible that any federal or state governmental entity would enter into such an abject surrender to crony capitalism.  Once I learned that they were seriously contemplating such a travesty I could not believe that Miller would support it.  I believed his lieutenant’s (Mr. Madigan’s) denunciation of criticism of the proposed amnesty.  (I have reviewed Madigan’s comments in preparing this piece and I see that they were artfully crafted to be disingenuous.) The testimony of Thomas J. Miller, Attorney General of Iowa, at a 2007 Federal Reserve Board hearing shows that he knows that the lenders engaged in massive origination fraud.

Over the last several years, the subprime market has created a race to the bottom in which unethical actors have been handsomely rewarded for their misdeeds and ethical actors have lost market share…. The market incentives rewarded irresponsible lending and made it more difficult for responsible lenders to compete. Strong regulations will create an even playing field in which ethical actors are no longer punished.

Despite the well documented performance struggles of 2006 vintage loans, originators continued to use products with the same characteristics in 2007.

Miller, T.  2007.  “Comments to the Federal Reserve Board ofGovernors on Adopting Regulations to Prohibit Unfair and Deceptive Acts andPractices under the Home Ownership and Equity Protection Act (HOEPA).” (August 14).  Miller was correct. We know that it was overwhelmingly lenders and their agents that put the lies in “liar’s” loans.  We know that 90 percent of liar’s loans were fraudulent.  We know that the industry massively increased the number of liar’s loans after warnings that the loans were endemically fraudulent.  The growth rate of liar’s loans was so rapid (over 500% from 2003-2006) that these fraudulent loans caused the housing bubble to hyper-inflate.  We know that no government entity ever caused any entity to make or purchase (and that includes Fannie and Freddie) liar’s loans.  Indeed, the government repeatedly warned of the dangers of liar’s loans.  We know that by 2006 roughly one-third of all home loans made that year were liar’s loans – which means there were millions of fraudulent loans made annually and, collectively, trillions of dollars in fraudulently originated home loans.

What must be done

Our economy and our democracy cannot succeed under crony capitalism.  Please join me in writing to Congress, the administration, your state attorney general, the media, and any court that must approve this proposed settlement.  It is a disgrace.  President Obama is, of course, correct that some actions can be illegal but exceptionally unethical and damaging.  He is about to take precisely such an action in derogation of his oath of office to defend and protect the constitution of the United States of America.  The fraudulent CEOs of the banks that became wealthy by causing the financial crisis and the Great Recession are treating us as fools who will give trillion dollar plus gifts to the least deserving, most arrogant, and least ethical elites.  Have we fallen so low as a people that we will allow this to happen?

Please join me in supporting the Attorney Generals of New York, Delaware, and California who have opposed this settlement.  As for President Obama, I hope that he will make this New Year’s resolution:  “I resolve to honor my oath of office and faithfully execute the laws of the United States and defend its constitution, which is premised on justice and the rule of law.  No person, no matter how elite, is above that law.  I have today asked Messrs. Bernanke, Geithner, and Donovan for their resignations because of their support for bailing out the elite banks and granting de facto amnesty to fraudulent financial CEOs.  I, and my new Attorney General and new Secretary of the Treasury, have mutually resolved to make the vigorous prosecution of the elite financial frauds that drove the ongoing crisis our mission. ”

William K. Black – New Economic Perspectives

Consumer bankruptcy attorney Linda Tirelli holds up mortgage documents from one of the civil cases she is handling in her White Plains, New York office, December 14, 2011.

(Reuters) – Four years after the banking system nearly collapsed from reckless mortgage lending, federal prosecutors have stayed on the sidelines, even as judges around the country are pointing fingers at possible wrongdoing.

The federal government, as has been widely noted, has pressed few criminal cases against major lenders or senior executives for the events that led to the meltdown of 2007. Finding hard evidence has proved difficult, the Justice Department has said.

The government also hasn’t brought any prosecutions for dubious foreclosure practices deployed since 2007 by big banks and other mortgage-servicing companies.

But this part of the financial system, a Reuters examination shows, is filled with potential leads.

Foreclosure-related case files in just one New York federal bankruptcy court, for example, hold at least a dozen mortgage documents known as promissory notes bearing evidence of recently forged signatures and illegal alterations, according to a judge’s rulings and records reviewed by Reuters. Similarly altered notes have appeared in courts around the country.

Banks in the past two years have foreclosed on the houses of thousands of active-duty U.S. soldiers who are legally eligible to have foreclosures halted. Refusing to grant foreclosure stays is a misdemeanor under federal law.

The U.S. Treasury confirmed in November that it is conducting a civil investigation of 4,500 such foreclosures. Attorneys representing service members estimate banks have foreclosed on up to 30,000 military personnel in potential violation of the law.

In Alabama, a federal bankruptcy judge ruled last month that Wells Fargo & Co. had filed at least 630 sworn affidavits containing false “facts,” including claims that homeowners were in arrears for amounts not yet due.

Wells Fargo “took the law into its own hands” and disregarded laws banning perjury, Judge Margaret A. Mahoney declared.

And in thousands of cases, documents required to transfer ownership of mortgages have been falsified. Lacking originals needed to foreclose, mortgage servicers drew up new ones, falsely signed by their own staff as employees of the original lenders – many of which no longer exist.

But the mortgage-foreclosure mess has yet to yield any federal prosecution against the big banks that are the major servicers of home loans.

UNPRECEDENTED FRAUD

Reuters has identified one pending federal criminal investigation into suspected improper foreclosure procedures. That inquiry has been under way since 2009.

The investigation focuses on a defunct subsidiary of Jacksonville, Florida-based Lender Processing Services, the nation’s largest subcontractor of mortgage servicing duties for banks.

People close to the investigation said indictments may come as early as the end of this month. Nationwide press reports had showed photos of what appeared to be obviously forged signatures on foreclosure affidavits.

The Justice Department doesn’t disclose pending investigations, making it impossible to say if other criminal inquiries are underway. Officials in state attorneys’ general offices and lawyers in foreclosure cases say they have seen no signs of any other federal criminal investigation.

“I think it’s difficult to find a fraud of this size on the U.S. court system in U.S. history,” said Raymond Brescia, a visiting professor at Yale Law School who has written articles analyzing the role of courts in the financial crisis. “I can’t think of one where you have literally tens of thousands of fraudulent documents filed in tens of thousands of cases.”

Spokesmen for the five largest servicers – Bank of America Corp., Wells Fargo & Co., JP Morgan Chase & Co, Citigroup Inc., and Ally Financial Group – declined to comment about the possibility of widespread fraud for this article.

Paul Leonard, spokesman for the Housing Policy Council, whose membership includes those banks, said any faults in foreclosure cases are being addressed under a civil settlement earlier this year with federal regulators.

A portion of a mortgage document from one of the civil cases being litigated by New York consumer bankruptcy Attorney Linda Tirelli is seen in her office in White Plains, New York, December 14, 2011.

FALSE STATEMENTS

Justice Department and Federal Bureau of Investigation officials say they have brought mortgage-fraud criminal cases through their “Operation Stolen Dreams.” None, however, were against big banks. All targeted small-scale operators who allegedly defrauded banks with forged mortgage applications or took advantage of homeowners by falsely promising arrangements to get them out of default and then pocketing their money.

Justice Department spokeswoman Adora Andy declined to comment on the absence of prosecutions for foreclosure practices by big banks. She said in a statement: “The Department of Justice has been and will continue to aggressively investigate financial fraud wherever it occurs, including at all levels of the mortgage industry and, when we find evidence of a crime, we will not hesitate to pursue it.”

Some judges have accused banks of falsely stating in court that they are working on loan modifications for homeowners in default.

In a November 30 court hearing, not previously reported, a federal bankruptcy judge in New York accused Bank of America of falsely telling courts and the public that it was working to renegotiate loans.

“Bank of America issues constant press releases about how it is responsive to their borrowers on these issues. They are not, period,” said Judge Robert Drain, in a case involving homeowner Richard Tomasulo, a pharmacist from Crompond, New York. Drain said Bank of America had been telling the court since January that it was working to modify Tomasulo’s mortgage, but hadn’t done so.

“Whoever is in charge of this program and their supervisor, who should be following it, should be fired” because “they are frankly incompetent.”

Bank of America spokeswoman Jumana Bauwens said the bank has completed “nearly one million” modifications since 2008. The U.S. Treasury this year suspended loan modification incentive payments to the bank because it was “seriously deficient” in responding to requests for modifications.

CHEATERS AND LIARS

Foreclosure fraud came to light in September 2010, with evidence that employees of Ally Financial Corp. had committed “robo-signing,” in which low-level workers signed and swore to the facts in thousands of affidavits they hadn’t read or checked.

The affidavits were notarized outside the signers’ presence, in apparent violation of state and federal criminal laws.

Since then, mounting evidence of possible foreclosure fraud has convinced judges and state regulators that servicers have harmed homeowners and the investors who bought mortgage-backed securities.

A unit of the Justice Department that oversees bankruptcy court cases, the U.S. Trustees Program, said in its 2010 annual report that there were “pervasive and longstanding problems regarding mortgage loan servicing,” which “are not merely ‘technical’ but cause real harm to homeowners in bankruptcy.”

Banks, the Trustees Program says, have falsified affidavits by claiming homeowners owe fees for services never rendered and by overstating how much owners are behind on payments.

Former federal prosecutor Daniel Richman, a professor of criminal law at Columbia University Law School, says a central question is who prosecutors would target in criminal investigations. Richman said it would be easy but not worthwhile to charge large numbers of rank-and-file workers who, directed by supervisors, falsely churned out affidavits.

He said criminal investigations would be warranted, but harder to bring, “if there are particular individuals who lie at the heart of this conduct in a very significant way.”

In October 2010, members of Congress pressed the Justice Department to investigate. Attorney General Eric Holder said investigations were best left to the states, with help from the Justice Department.

The Office of the Comptroller of the Currency, the top bank regulator, quickly negotiated settlements with the 14 largest servicers, requiring changes in practices and “remediation” for harmed homeowners. That settlement allows the banks to choose their own contractors to determine who was harmed and by how much.

Lawmakers and homeowner advocates have criticized the arrangement, contending that it will let the banks avoid making all wronged homeowners whole, because the contractors are paid by and answer to the banks.

Since then, the department’s civil division has worked with a shaky coalition of all 50 states, which have been seeking a civil settlement with five banks that are the largest loan servicers. The negotiations center on requiring them to pay $20 billion or more in penalties, only some of which would go to compensate wronged homeowners.

A undated combination graphic shows two versions of a promissory note filed by Wells Fargo & Co. The first, above, does not show that Wells Fargo owns the mortgage loan, and therefore lacks the right to foreclose. The version below, filed later, bears an additional stamp that appears to give the bank ownership. But federal bankruptcy judge Martin Glenn dismissed Wells Fargo’s foreclosure attempt, questioning the validity of these and other documents.

STATES TAKE ACTION

Federal law enforcement has been noticeably absent, even in areas hardest hit by the crisis, such as Las Vegas.

In 2010 the FBI’s Las Vegas office shut down its mortgage fraud task force, which had focused on small-scale swindlers.

Tim Gallagher, chief of the FBI’s financial crimes section, said that the Las Vegas office had asked to transfer agents to other duties.

Impatient with the lack of federal prosecution, states including New York, Massachusetts, Delaware and California have launched their own investigations of the banks.

In November, it became the first state to file criminal charges. The state attorney general obtained a 606-count indictment against two California-based executives of Lender Processing Services.

It accuses the executives of paying Nevada notaries to forge the pair’s signatures and falsely notarize them on notices of default, documents Nevada requires in foreclosure actions. State officials said more indictments are expected.

In an interview, John Kelleher, Nevada’s chief deputy attorney general, said the investigation began in response to citizen complaints.

“We were concerned and then shocked at the sheer number of fraudulent documents we were finding that had been filed with the county recorder,” Kelleher said.

Investigators found “tens of thousands” of false records filed on behalf of big mortgage servicers, he said.

The two executives have pleaded not guilty. In a press release, the company said: “LPS acknowledges the signing procedures on some of these documents were flawed; however, the company also believes these documents were properly authorized and their recording did not result in a wrongful foreclosure.”

BACK HOME IN NEW YORK

The U.S. Attorney’s Office in Manhattan is the federal prosecutors’ office that traditionally has filed the most cases against top banks and financiers. But it hasn’t brought any foreclosure-related criminal cases involving Wall Street’s biggest financial houses or the law firms that represent them.

To date the only step it has taken publicly was an October 2011 civil settlement with New York State’s largest foreclosure law firm.

The Steven J. Baum P.C. law firm, based near Buffalo, New York, in recent years filed approximately 40 per cent of all foreclosures in New York State, on behalf of banks and other mortgage servicers. Court records show that the firm angered state court judges for alleged false statements and filing suspect documents.

Arthur Schack, a state court judge in Brooklyn, in a 2010 ruling said that pleadings by the Baum firm on behalf of HSBC Bank, a unit of London-based HSBC Holdings, in a foreclosure case were “so incredible, outrageous, ludicrous and disingenuous that they should have been authorized by the late Rod Serling, creator of the famous science-fiction television series, The Twilight Zone.”

Another state judge that year imposed $5,000 in sanctions and ordered the firm to pay $14,500 in attorneys’ fees, ruling that “misrepresentation of the material statements here was outrageous.”

But the U.S. Attorney’s office in Manhattan filed no criminal charges against the Baum firm. Instead, it signed a settlement with Baum ending an inquiry “relating to foreclosure practices.” The agreement made no allegations of wrongdoing, but required the firm to improve its foreclosure practices.

Baum agreed to pay a $2 million civil penalty, but didn’t admit wrongdoing.

The law firm said it would shut down after New York Times columnist Joe Nocera in November published photographs of a 2010 Baum firm Halloween party in which employees dressed up as homeless people. Another showed part of Baum’s office decorated to look like a row of foreclosed houses.

“The settlement between the Manhattan U.S. Attorney’s Office and the Steven J. Baum Law Firm resulted in immediate and comprehensive reforms of the firm’s business practices,” said Ellen Davis, spokeswoman for the Manhattan U.S. Attorney’s office.

Earl Wells III, a spokesman for Baum, said the lawyer wouldn’t comment because “he’s laying low right now.”

An HSBC spokesman said: “We are working closely with the regulators to address any matters raised regarding” the bank’s foreclosure practices.

BROKEN PROMISES

The most serious potential foreclosure violations involve falsified mortgage promissory notes, the documents homeowners sign vowing to repay mortgage loans. Courts uniformly have ruled that unless a creditor legally owns the promissory note, it has no legal right to foreclose. For each mortgage there is only one promissory note.

Bankruptcy court records reviewed by Reuters show that at least a dozen radically different documents purporting to be the authentic promissory note have turned up in foreclosure cases involving six different properties in the federal bankruptcy court for the Southern District of New York.

In one, Wells Fargo is battling to foreclose on the Bronx home of Tindala Mims, a single mother who works as an ambulance driver. In September 2010, Wells Fargo filed a promissory note bearing a signed stamp showing that the note belonged to defunct Washington Mutual Bank, not Wells Fargo. The judge threw out the case.

In a second attempt, the court was given a different version of the note. But inspection showed physical alterations. A variety of marks on the original were missing or seemed obviously altered on the second. And the second version had a stamped endorsement, missing on the first, that appeared to give Wells Fargo the right to foreclose.

The judge threw out the second attempt too. Wells Fargo is trying a third time. It declined to comment on the case.

Linda Tirelli, Mims’ lawyer, in October sued Wells Fargo, alleging “fabrication of documents.”

“It seems to me that Washington is deathly afraid of the banking industry,” Tirelli said. “If you’re talking about filing false documents and filing false notarizations, do you really think that the U.S. Attorney would find it too difficult to prosecute?”

The office of U.S. Attorney Preet Bharara in Manhattan has routinely brought charges involving forgery and filing false documents against smaller targets.

In April, the FBI arrested seven employees of the USA Beauty School in Manhattan. Bharara’s office alleged that the seven suspects had forged documents such as high school diplomas, attendance records and applications for financial aid for students taking cosmetology classes.

In August, Bharara’s office filed felony charges against a sports-memorabilia company’s CEO, accusing him of auctioning jerseys falsely advertised as “game used” by Major League Baseball players.

In a press conference, a U.S. Postal Inspection Service official said prosecution was important because “victims felt that they had a piece of history only to be defrauded and left with a feeling of heartbreak.”

Given the record of Bharara’s office, and those of his fellow U.S. Attorneys around the country, to aggressively pursue violations both big and small, the absence of cases involving the foreclosure fiasco seems to stand out.

“Why there hasn’t been more robust prosecution is a mystery,” said Brescia, the visiting professor at Yale.

SOUCE: Reuters: (Editing by Michael Williams and Chris Kaufman; Reporting By Scot Paltrow)