Archive for the ‘Mortgage market’ Category
Attorney General Chris Koster today announced that the state of Missouri and Lorraine Brown, former President of DocX, LLC, have reached a plea agreement. Under the agreement, Ms. Brown will plead guilty to one felony count of forgery, one felony count of perjury, and one misdemeanor count of making a false declaration.
Brown will be sentenced to a term of imprisonment of not less than two years and not to exceed three years in the Missouri Department of Corrections.
Ms. Brown is the former President of the company DocX, LLC. During the period of March to October 2009, DocX, at the direction of Brown, instituted a surrogate signing policy whereby employees signed, not their name, but the names of other employees on thousands of mortgage documents that were notarized and filed across the country. Prior to 2009, similar signing practices were also employed at DocX. Brown concealed these practices from her clients, the national mortgage servicers, and the parent company of DocX. The practices of DocX were brought to national attention by a “60 Minutes” report and resulted in several major lenders temporarily suspending foreclosures in 2010.
And that’s not all! It be Federal too….
The guilty plea of Lorraine Brown, 56, of Alpharetta, Ga., was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Middle District of Florida Robert E. O’Neill; and Michael Steinbach, Special Agent in Charge of the FBI’s Jacksonville Field Office.
The plea, to conspiracy to commit mail and wire fraud, was entered before U.S. Magistrate Judge Monte C. Richardson in Jacksonville federal court. Brown faces a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the crime. The date for sentencing has not yet been set.
“Lorraine Brown participated in a scheme to fabricate mortgage-related documents at the height of the financial crisis,” said Assistant Attorney General Breuer. “She was responsible for more than a million fraudulent documents entering the system, directing company employees to forge and falsify documents relied on by property recorders, title insurers and others. Appropriately, she now faces the prospect of prison time.”
Ah, look what showed up…
So now about all those destroyed chains of title and alleged “mortgage trusts” that actually have no mortgages in them….
Release Date: September 13, 2012
For immediate release
Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable.
In other words all the stuff The Fed has done has not worked.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.
In other words what The Fed has done thus far has not worked.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
Ah, now we get to the rub, don’t we?
See, The Fed has no short-term securities left; they’ve basically sold them all, and at the end of “Twist” will have sold them all. They also own something like 70% of the long end of the curve, and if they buy much more they’ll destroy what little liquidity is left.
So the question is this: Can this do anything positive?
The answer is this: Let’s look at the figures.
Let us assume we get 50 basis points in downward movement from today’s figures — which means a 30 year mortgage goes from ~3.5% to 3.25% for a conforming note.
Let’s further presume that we’re going to finance $200,000. This produces a payment of $895.48.
If the rate moves to 3.25% then the financed amount rises to $206,317, or about a 3% increase in house prices.
That’s all Bernanke gets out of this, assuming you get 50 basis points — and you won’t, as the 10 year will move up while MBS move down. You’ll probably get 25 basis points, which means you’ll get a whole 1.5% increase in home prices.
The net effect is null in terms of market impact.
The stock market is up nearly 200 points but the fact of the matter is that Bernanke is lying about the expected results — they are an economic nullity.
This is the reality of the lower boundary; the difference in price support from 5% to 3% is large but as you approach zero the additional movement you can actually achieve becomes smaller and smaller while the required amount of purchases to effect that change becomes larger and larger.
Worse, the potential impact of a dislocation event in the market goes way up as the leverage at The Fed goes up as well.
The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.
No you won’t. You didn’t this time and you won’t forward either.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.
That’s even worse. The PPI number was smoking and oil is now up 1.25% today, with basically all of it coming after the announcement.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit the description of the time period over which exceptionally low levels for the federal funds rate are likely to be warranted.
This “accomodation” cannot work because for each dollar emitted into the economy purchasing power is debased by the same dollar. This is an effectivetax on everyone — including saved capital.
But in this case the real problem is that the “impact” from this program is an economic nullity.
Bernanke took this action, in my opinion, in an attempt to find the last few points on the stock market because he knows, as does the rest of the FOMC, that Europe (and China, for that matter) is about to blow — and that we’re simply not making any progress economically. Therefore he felt compelled to “do something”, even if the “something” is economically pointless, simply to avoid the stock market throwing a temper tantrum.
In the end the bottom line is that The Fed has shot its last bullet and it was a dud, as it is simply impossible for them to provide effective policy accommodation at this point in the cycle.
Sometimes law is complex, nuanced, difficult. Other times it’s black and white…you just read the words, look at the facts and the answer is unavoidable. Such is the case with the simmering dispute over the fact that the notes that are part of nearly every residential foreclosure case are not negotiable instruments. Oh sure, too many courts won’t take the time to consider the argument and…just yesterday I heard an appellate court argument where the judges just kept repeating the mantra, “this is a negotiable instrument” without ever doing any analysis at all and without any finding of that “fact” from the trial court. The attorney needed to stop the appellate judge right there and say, “No Your Honor, it’s Not A Negotiable Instrument”.
Matt then goes into a rather complicated and technical discussion of what all this means. I’ll try to simplify it.
A negotiable instrument is (under the UCC Section 3) something that involves only (1) the payment of money, and (2) possibly the payment of interest. It can be payable on demand or a specific time.
Because it is an instrument that has no real interpretation available as to whether the terms were complied with or not (it’s just about money) these can be passed around as if they were cash by simply “negotiating” (signing) the back. You can pass a check around like this; it is a negotiable instrument because it is payable on demand and it is only an instrument for a given amount of money.
A mortgage inherently contains other conditions, such as “you will maintain insurance”, “you can prepay without penalty (or with one)”, “the following things can be charged to you other than principal and interest”, and “the note might be accelerated (due in full) if I do (or don’t do!) x, y or z.”
None of these are simply the payment of money on a given schedule or upon demand, coupled with a possible payment of interest. All involve other conditions, which make the note non-negotiable.
The reason it’s not negotiable is that the formal process of assignment transfers not only the note but also the obligations of the parties, including the beneficiary — who might have obligations. It is thereforemuch more formal than something that is “negotiable”. Assignments require formalities like notaries and such, because everyone has to agree – - not just the borrower. And if the formalities are not followed then the assignment simply never happened and title to the note in question remains with the original party.
The import of this decision, assuming it stands, is significant. It means that the “defenses” to all the fraudclosure crap may just evaporate, as once you force recognition of all of those formalities if they didn’t happen then the guy standing in front of the judge asking to steal your house fails, as he’s not the right person to be making the request — that is, he’s a thief instead of a forecloser!
And once you force these institutions to come to court with true and complete documents you find that they can’t — they have played “fast and loose” with the documents, they don’t have them at all, they try to cheat and forge them, and in some cases it appears they are trying to collect twice on the same instrument!
You can bet this ruling will be challenged, but there is hope so long as we have some real jurists that remain on the bench. And as Matt explains, attempting to use these arguments “pro-se” is dangerous,but the fact remains that there is progress in this decision.
Discussion (registration required to post)
For me, the most significant development from the Fed’s announcement is a change in policy where the Fed will re-invest proceeds of maturing MBS securities in new issues of Agency MBS paper. Prior to today, the Fed re-invested principal repayments in Treasury bonds.
I wrote about the possibility of a mega mortgage ReFi by Fannie and Freddie (here and here). I (and many readers) pointed to an obvious flaw in the ReFi story. If a Trillion or so of mortgages were rapidly prepaid, then who would buy all of the new (much lower coupon) mortgage paper?
Now we have the answer. The Fed will put the new MBS paper back on its Balance Sheet, $ for $. There will still be many bondholders outside of the Fed who will get prepaid much faster than they had assumed. Most of that is in pension/bond funds. No one cares about them.
I think that Treasury will announce the plans for a Mega Refi in the not too distant future. It could come this weekend or next week. Obama will wait just enough time after the complex Fed decision so that 99% of all people don’t connect these two dots.
In that 1% will be Republicans. They are going to be mad as hens tonight that Bernanke ignored their last minute plea not to play more monetary games. The authors of that letter, McConnell, Boehner, Kyle and Cantor are really going to be peeved. Not only did the Fed step further on the gas, they greased the skids for an Administration’s plan to ReFi mortgages.
It’s not at all clear that the Fed’s latest move are going to accomplish a thing. I’m not sure that the Big ReFi is going to be such a success either. But that doesn’t matter.
What’s important about this is that the Republicans will respond. They will not give Obama another leg up with his one-year stimulus program. Any chance of that went up in smoke with the Fed’s VERY political decision on MBS today. Can you say, “Collusion”?
This is a real circus now. In this one the bears aren’t dancing. They’re fighting. The claws are out and it’s going to get bloody.
Geithner may try, but he cannot compel Attorneys General in both parties to settle for pennies on the dollar and relinquish all of their liability for consumer protection violations and fraud upon state courts. He cannot influence investors who see a giant meal ticket in the form of forcing big banks to repurchase faulty mortgage backed securities. If there was a magic bullet in this debacle, it would already have been fired.
Now that sounds interesting. We know that the banks have been furiously lobbying in Washington DC to cast off the liability for their former actions. The problem? These are state law issues and Washington DC has no jurisdiction – even though it would like to so it can accept their bribes, er, “campaign contributions” to make it all go away.
They’ve trotted out Kathryn Wylde, the President of the Partnership for New York City, to attack Eric Schneiderman for his intervention in the Bank of America settlement with investors over mortgage backed securities. Wylde is going to bat for BofA as well as the Bank of New York Mellon, the trustee for the MBS in the settlement. And she is actually arguing that Schneiderman, by defending the rights of investors and seeking the truth on out and out securitization fraud, is threatening the existence of the financial sector in New York City. No, really.
That’s nothing new. The old “tanks in the street” argument is repeatedly trotted out – “the economy will collapse if you don’t let us continue to loot!”
Of course the problem with such a premise is that there’s only so much blood in the vampire’s victims, and eventually it all gets sucked out. Then the victim undergoes circulatory collapse and the looting stops, like it or not.
We’re there folks.
But some of the AGs who believe in their job description are starting to catch up here. And try as the elites and oligarchs might to stop them, a tipping point is being reached where the public may understand just how much the mortgage industry wrecked the system of private property in this country.
That would be nice.
The true tipping point is reached when ordinary Americans – including those who are paying their mortgages – come to realize that their titles have been clouded as well, and may be no good at all. Oh sure, you may believe you got a release of your mortgage, but if the bank in question never had the conveyance in the first place they gave you a worthless piece of paper. The truly bad news, if it comes at all, will only come later – perhaps many years later.
Can this eventually be sorted out? Probably. But you’re going to pay for it if the AGs don’t do their job and force the institutions that screwed this up to fix it – at their expense. Despite common belief your title insurance is going to be cold comfort, if any at all, simply because title insurance companies are rather thinly-capitalized – they exist to deal with things like a fence that is 2′ over the property line, not a situation where the entire value of your home is owned by someone other than you. Any material number of those sorts of claims and they’re bust – all of them.
The proper thing for these AGs to do is to bring criminal charges – not just civil ones. After all, mass fraud isn’t a civil matter, especially when you’re dispossessing people of their homes without any evidence that you actually hold the paper in question, and to cover this up you perpetuate fraud upon the court by “robosigning” and “creating” documents that you cannot produce – never mind assessing fees that are questionable at best.
There is a bill pending before the Washington Legislature that would “reform” foreclosure procedures. Among the provisions of SB-5275 is:
7 (a) That, for residential real estate property, before the notice of trustee’s sale is recorded, transmitted, or served, the trustee shall have proof that the beneficiary (bank) is the owner of the promissory note or obligation secured by the deed of trust. A declaration by the beneficiary (bank) made under penalty of perjury stating that the beneficiary (bank) 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.
Why not just produce the actual paper? It’s no harder than producing a declaration, right?
If you have it.
Why did the state do this?
It appears they were paid off.
(2) For each owner-occupied residential real property for which a notice of default has been issued, the beneficiary issuing the notice of default, or directing that a trustee or authorized agent issue the notice of default, shall remit two hundred fifty dollars to the department to be deposited, as provided under section 11 of this act, into the foreclosure fairness account. The two hundred fifty dollar payment is required per property and not per notice of default. The beneficiary shall remit the total amount required in a lump sum each quarter.
In exchange for the $250 consumer financial rape fee the banks may present nothing more than a bare declaration that they have a properly-assigned and transferred note. No proof is required.
Now normally I might go along with this, but not now. Why not?
Because these very same banks have admitted to filing 150,000 affidavits in the last couple of years in which the person swearing to personal knowledge hadn’t even read the document. That is, they lied. That’s perjury, and it’s exactly what the banks can do in this case, should this bill become law.
Normally the threat of prosecution for perjury would be enough to stop malfeasance, but it isn’t in this case because not one criminal indictment has been issued against any of the individuals or firms involved in the former false swearing, and therefore I must assume that there will be no penalty for lying in the instant case here in Washington State either.
You’ve been sold out Washington State, and if you allow this bill to be passed, you’re going to be bent over the table by the banksters while they pay a token fee in the form of a “foreclosure tax” to the state – and you get screwed out of your house without them having to prove they actually own the debt that is secured by the property.
Your “representatives” at work.