Ritholtz: Why foreclosure fraud is so dangerous to property rights

[boutons_deux]

you're wrong about that. in this case predatory international finance has superceded the power of the USA.

predatory BigCorp is pushing hard for TPP/TTIP so they, and others, can reign sovereign over nations, eg, expansion of ISDS, being used now by Transcanada to shakedown US taxpayers for $500M because US govt decided to block a Canadian investment.

I wonder if $500M revenue for Transcanada under ISDS would be tax free in Canada.

[boutons_deux]

Authorities Reach $3.2B Settlement With Morgan Stanley

Federal and state authorities on Thursday announced a $3.2 billion settlement with Morgan Stanley over bank practices that contributed to the 2008 financial crisis, including misrepresentations about the value of mortgage-backed securities.

The nationwide settlement, negotiated by the working group appointed by President Barack Obama in 2012, says the bank acknowledges that it increased the acceptable risk levels for mortgage loans pooled and sold to investors without telling them. Loans with material defects were included, packaged into the securities and sold.

http://www.theepochtimes.com/n3/1963...organ-stanley/

[Winehole23]

foreclosure fraud still happening, despite billions in fines and promises to do better:

The California Supreme Court on Thursday ruled unanimously in favor of a fraudulently foreclosed-upon homeowner in a case that should serve as a wake-up call to state and federal prosecutors that mortgage companies continue to use false do ents to evict homeowners on a daily basis.


“A homeowner who has been foreclosed on by one with no right to do so has suffered an injurious invasion of his or her legal rights at the foreclosing en y’s hands,” the justices wrote.


But maddeningly, practically nobody in a position of authority has stepped up to prevent those injurious invasions.


The case, Yvanova v. New Century Mortgage Corporation, sends a powerful signal from the nation’s biggest state that the massive false do ent scandal, first discovered nearly a decade ago, is not over, despite mortgage company promises to the contrary.

https://theintercept.com/2016/02/19/...w-enforcement/

[boutons_deux]

you're wrong about that. in this case predatory international finance has superceded the power of the USA.

Of course it has. BigFinance, with unregulated capital, secret flows, has superceded all nations' laws. TPP/TTIP suppress national sovereignty even further.

[Winehole23]

BigFinance, with unregulated capital, secret flows, has superceded all nations' laws.

you exaggerate a tendency. history isn't over yet.

[boutons_deux]

you exaggerate a tendency. history isn't over yet.

... show us how and who is going to reign in BigFinance and BigCorp from superceding national sovereignty.

[Winehole23]

history ain't over. I don't have a crystal ball.

do you?

[boutons_deux]

history ain't over. I don't have a crystal ball.

do you?

your position is the same a climate deniers, "climate changes", "planet used to be lot hotter, so no problem now", etc, etc.

inequality continues to increase, the 1%/BigCorp owns enough Congress people to block any progress, solutions. My crystal ball, always reasonable, looks at the recent past of 40 years, and the current, to predict we will continue on exactly the same decline for the foreseeable future.

red, slave states, gerrymandered, voter suppressed, rigged vote counting, C-U, gutted VRA, the VRWC/1%/BigCorp power/wealth bloc buying, gutting govt at Fed and state levels, all add up to everything staying bad, getting worse for the 99%.

[boutons_deux]

Yale Law Journal: “In Defense of ‘Free Houses'”

The Yale Law School Journal has published a new article, “In Defense of ‘Free Houses'” (hat tip Deontos), which makes an argument that I wish had gotten an airing when the foreclosure crisis was national news. From the opening section:

When addressing faulty foreclosures, courts are afraid to bar future attempts to foreclose—that is, afraid of giving borrowers “free houses.” While courts rarely explain the reasoning behind this aversion, it seems to arise from a reflexive belief that such an outcome would be unjust.

Courts are therefore quick to sidestep well-established principles of res judicata in favor of ad hoc measures meant to protect banks against the specter of “free houses.”

This Comment argues that this approach is misguided; courts should issue final judgments in favor of homeowners in cases where banks fail to prove the elements required for foreclosure. Furthermore, these judgments should have res judicata effect—thus giving homeowners “free houses.” This approach has several benefits: it is consistent with longstanding res judicata principles in other forms of civil litigation, it provides a necessary market-correcting incentive to promote greater responsibility among foreclosure litigators, and it alleviates the tremendous costs of successive foreclosure proceedings…

So what should courts do when banks lose their foreclosure cases? As described above, one approach—that taken by the Florida and Maine Supreme Courts—is to bend the rules of res judicata to avoid a windfall for homeowners. This approach creates few benefits and significant economic problems…[We argue that further subsidizing banks’ poor litigation practices results
in deadweight loss by contributing to negative public-health outcomes and by disincentivizing banks from improving their servicing and litigation techniques. We also explain how granting winning homeowners “free houses” will not negatively affect the mortgage market.

http://www.nakedcapitalism.com/2016/...+capitalism%29

So the courts protect the banks by allowing them to steal homes from citizens with faulty foreclosures, which is "just", because allowing citizens to keep their "free" homes becase when foreclosures are faulty is "unjust".

[Winehole23]

David Dayen's new book about foreclosure fraud is out: http://thenewpress.com/books/chain-of- le

[boutons_deux]

How one woman beat the big banks: The amazing, true story about how Wall Street’s mortgage fraud unraveled

Sued by a giant bank, Lisa Epstein didn't have many options. Then she found the small print that changed everything

Something about the magnitude of the crisis and the constancy of voices tagging foreclosure victims like her as irresolute deadbeats made her more determined to prove everyone wrong, to keep searching until she found something she could call justice.

While running through all this, Lisa kept coming back to Count II, the “Re-establishment of Lost Note.”

A mortgage has two parts. There’s the promissory note, the IOU from borrower to lender, and the mortgage, which creates the lien on the home in case of default. Foreclosure laws vary from state to state and evolve with every court decision, but in the simplest terms, to be able to foreclose, a financial ins ution must hold the mortgage, the note, or both. This gives you standing, as it would in most judicial contexts: if you accuse someone of stealing your car, you’d need to establish that you actually owned it in the first place.

During securitization, mortgages were transferred from the originator through a series of intermediaries and then to the trustee, who administers the mortgage-backed trust. Lisa’s case featured three parties in all— DHI Mortgage (originator), JPMorgan Chase (depositor), and U.S. Bank (trustee)—but sometimes these deals had as many as seven or eight transfers. The securitizations included intermediaries mostly to reassure investors that they would still get payments if the originator went out of business, which actually happened quite a bit. This desire for “bankruptcy remoteness” drove securitization transfers, and it didn’t hurt that every transfer generated another fee.

At each stage there would have to be do ented evidence of transfer, like links in a chain—a chain of le, which lays out the different transactions.

You can’t skip a link: the chain must show evidence of transfers from originator to depositor to trustee, and everyone in between, in precise order.

Mortgages are assigned with a signed piece of paper affirming the transaction.

Notes are endorsed the same way you would endorse the back of a check. Theoretically, the originator could endorse the note “in blank,” so that anyone in possession of the note could enforce it. But that theory ran up against the reality of the securitization agreements.
When Lisa finally found copies of the rules governing securitizations, known as the pooling and servicing agreements (PSAs), they all had roughly the same language about transfers. This comes from the prospectus of Soundview Home Loan Trust 2006-OPT2:

On the Closing Date, the Depositor will transfer to the Trust all of its right, le and interest in and to each Mortgage Loan, the related mortgage note, Mortgage, assignment of mortgage in recordable form in blank or to the Trustee and other related do ents received from the Originator pursuant to the Master Agreement (collectively, the “Related Do ents”). . . .

The Pooling Agreement will require that, within the time period specified therein, the Depositor will deliver or cause to be delivered to the Trustee (or a custodian on behalf of the Trustee) the mortgage notes endorsed to the Trustee on behalf of the Certificateholders and the Related Do ents.

The mortgage and the note had to be physically conveyed into the trust and delivered to the do ent custodian, with the mortgages assigned and the notes endorsed with a wet-ink signature at every step along the way, culminating in assignments and endorsements to the trustee.

And this had to be done within ninety days of the transaction, with no grace period beyond that closing date. Only then would you have a “true sale” of the loans from originator to trustee.

Most trusts were created under New York State trust law, which is unbelievably clear. It stipulates that the pooling and servicing agreements are the governing do ents.

Any transaction that doesn’t comply with the PSA is void. Failure to convey mortgages and notes would result in noncompliance.

That means the trust would be unfunded and effectively not exist. Ownership would revert back to the last verifiable owner in the chain.

And under New York law, there was no mechanism to transfer mortgages and notes after the closing date.
There are tax consequences associated with this failure as well. All securitization trusts were set up as REMICs. If the trust closed without the key do ents conveyed over, those assets would not qualify for the REMIC tax exemption. They could not be added later, especially in the middle of foreclosure, because REMICs cannot acquire nonperforming assets. As a result, any income derived from the assets would get taxed, under the law, at 100 percent.

And the trustee, in Lisa’s case U.S. Bank, would not have the right to collect on the promissory note or use the mortgage lien to foreclose on the borrower. As Neil Garfield put it, “There is an 18-minute Nixonian gap in the record that cannot be cured.” Activists took to calling it “securitization FAIL.”

The prevalence of “lost” notes, including Lisa’s, created more su ion. If the notes were safely stowed away by the trustee’s do ent custodian, losing them could never be an issue. One study hinted that the losses could be systemic.

Neil Garfield originally got interested in securitization FAIL after reading a November 2007 report by law professor Katherine Porter, then of the University of Iowa. Porter examined public court records in 1,733 bankruptcy cases filed in 2006.

She found near-universal disagreement between borrowers and mortgage servicers over amounts owed, with multiple instances of illegally imposed fees, including charging homeowners for ordinary office activities like delivering faxes or creating payoff statements.

But one passage leaped out at Garfield: in a majority of cases, servicers lacked one or more pieces of do entation needed to establish the validity of the debt. That included the note, which was missing over 40 percent of the time.

http://www.salon.com/2016/05/22/how_...aud_unraveled/

my working assumption: the entirety of BigFinance is 100% corrupt, until proven otherwise.

[boutons_deux]

Bank of America $1.27 billion U.S. mortgage penalty is voided

The 2nd U.S. Circuit Court of Appeals in New York found insufficient proof under federal fraud statutes to establish Bank of America's liability over a mortgage program called "Hustle" run by the former Countrywide Financial Corp.

"The trial evidence fails to demonstrate the contemporaneous fraudulent intent necessary to prove a scheme to defraud through contractual promises,"

http://www.reuters.com/article/us-ba...-idUSKCN0YE20S

Countrywide was so FRAUDLENT that it went bankrupt. no "intent"?

The ing judicial system is as rigged as the legislatures that rig law to protect the 1% and screw the 99%.

[boutons_deux]

The legal technicality that let BofA skate on an alleged billion-dollar mortgage fraud

(Countrywide's 'Hustle' program) was...the vehicle for a brazen fraud...driven by a hunger for profits and oblivious to the harms.

— U.S. District Judge Jed S. Rakoff


"You wonder why the American people are so cynical," he told me after the decision came down. "It's because there's an endless reservoir of ways to figure out how to hold no one accountable for illegal conduct."

Rakoff found that Countrywide/BofA set up a mortgage program known as the "High Speed Swim Lane," or "Hustle," to crank out low-quality mortgages at great speed. Under the leadership of BofA executive Rebecca Mairone, Rakoff concluded after trial, the conventional quality-control measures for mortgages were thrown out the window. (Rakoff hit Mairone with a $1-million penalty, which was also overturned by the appeals judges.)

With speed and volume taking precedence over quality, a huge percentage of these loans was destined to be lousy. Sure enough, more than 42% of the loans were "materially defective," Rakoff found. As far as Fannie and Freddie knew, however, they all still met Countrywide's contractual representation that all the loans were "investment quality."

Instead, Rakoff wrote, HSSL "was from start to finish the vehicle for a brazen fraud...driven by a hunger for profits and oblivious to the harms thereby visited, not just on the immediate victims but also on the financial system as a whole."

Fannie and Freddie, he concluded, "would never have purchased any loans from the Bank Defendants if they known that Countrywide had intentionally lied to them."

So how, you might ask, could Bank of America wriggle out of that one?

The judges based their ruling on the contracts that Countrywide had reached with Fannie and Freddie, pledging to provide those government-sponsored firms with "investment quality" mortgages.

There was no evidence, the appellate judges found, that the executives who signed those contracts intended at the time to stuff the pipeline with toxic junk. It just turned out that way.

Because there was no intent to defraud when the contracts were signed, the judges ruled, this whole affair is merely a case of breach of contract, not fraud. The penalties for a breach are much lower than those for fraud--often, the guilty party has to give back the money it got from breaking the contract. According to the judges' analysis, a mere breach of contract can't be elevated into a case for fraud.

Wrongdoing executive now know they only have to dredge up a preexisting contract "breached" by their behavior--since few businesses enter into contract plotting in advance to make it the vehicle for fraud, this becomes an all-purpose get-out-of-jail-free card.

http://www.latimes.com/business/hilt...nap-story.html

[boutons_deux]

Bank of America’s Winning Excuse: We Didn’t Mean To

A federal appeals court overturned a $1.3 billion judgement against Bank of America, ruling that good intentions at the outset shield bankers from fines for subsequent fraud.

the head of underwriting at Countrywide wrote an alarmed e-mail, with a list of questions from employees, such as,

does “the request to move loans mean we no longer care about quality?”

The executive in charge of the decision, Rebecca Mairone, replied,

“So - it sounds like it may work. Is that what I am hearing?”

To federal prosecutors—and to a jury in Manhattan—the hustle sounded like fraud. And in 2013, Bank of America, which had by then taken over Countrywide, was found liable for fraud and later ordered to pay a $1.27 billion judgment to the government.

If a en y (in this case, a bank) enters into a contract pure of heart and only deceives its partners afterward, is that fraud?
The three-judge panel’s answer was no. Bank of America is no longer required to pay the judgment.

https://www.propublica.org/article/b...-didnt-mean-to

BigFinance is ECSTATIC how the "judges" opened a huge gateway to systemic fraud:

BigFinance signs a contract with "pure heart" ( BigFinance is with "pure heart"? ) which permits systemic, unlimited fraud under the contract.

[boutons_deux]

goddam, BigFinance is polluted with criminals.

SEC Settles Fraud Charges With Mortgage Company and Executives

First Mortgage Corporation (FMC) is a mortgage lender that issued Ginnie Mae RMBS backed by loans it originated. The SEC alleged that from March 2011 to March 2015, FMC and its senior-most executives pulled current, performing loans out of Ginnie Mae RMBS by falsely claiming they were delinquent in order to sell them at a profit into newly issued RMBS.

The company caused its Ginnie Mae RMBS prospectuses to be false and misleading by improperly and deceptively using a Ginnie Mae rule that gave issuers the option to repurchase loans that were delinquent by three or more months.

According to the complaint, FMC purposely delayed depositing checks from borrowers who had been behind on their loans, falsely claiming to both investors and Ginnie Mae that such loans remained delinquent when in reality they were current.

This was done with the knowledge and approval of the company’s senior-most management. After repurchasing at prices applicable to delinquent loans, FMC was able to resell the loans into new Ginnie Mae RMBS pools at higher prices applicable to current loans for an immediate, nearly risk-free profit. Investors, meanwhile, were wrongly deprived of the erest payments on the repurchased loans.

http://247wallst.com/investing/2016/...F7+Wall+St.%29

BigFinance defrauds the govt of $Ms, nobody goes to jail.

but if a Human-Amerian defrauds IRS of $Ms, then .... ?

[boutons_deux]

Chain of le: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud

There is a rot at the heart of our democracy, rooted in a nagging mystery that has yet to be unraveled.

It gnaws at people, occupies their thoughts, leaves them searching for answers in the chill of the night.

Americans want to know why no high-ranking Wall Street executive has gone to jail for the conduct that precipitated the financial crisis.

The oddest thing about the predominance of the question is that everyone already assumes they know the answer.

They believe that too many politicians, regulators, and law enforcement officials, bought off with campaign contributions or the promise of a future job, simply allowed banker miscreants to annihilate the law in pursuit of profit.

But they must not like the explanation very much, because they keep asking why, as if they want to be proven wrong, to be given a different story.

http://prospect.org/article/great-foreclosure-fraud

anybody need any more proof that America is ed and un able?

[boutons_deux]

How Housing’s New Players Spiraled Into Banks’ Old Mistakes

Some private equity firms that came in as the cleanup crew for the housing crisis are now repeating errors that banks committed, while others are bypassing the working poor.

When the housing crisis sent the American economy to the brink of disaster in 2008, millions of people lost their homes. The banking system had failed homeowners and their families.

New investors soon swept in — mainly private equity firms — promising to do better.

But some of these new investors are repeating the mistakes that banks committed throughout the housing crisis, an investigation by The New York Times has found. They are quickly foreclosing on homeowners. They are losing families’ mortgage paperwork, much as the banks did. And many of these practices were enabled by the federal government, which sold tens of thousands of discounted mortgages to private equity investors, while making few demands on how they treated struggling homeowners.

The rising importance of private equity in the housing market is one of the most consequential transformations of the post-crisis American financial landscape. A home, after all, is the single largest investment most families will ever make.

Private equity firms, and the mortgage companies they own, face less oversight than the banks. And yet they are the cleanup crew for the worst housing crisis since the Great Depression.

Out of the more than a dozen private equity firms operating in the housing industry, The Times examined three of the largest to assess their impact on homeowners and renters.

http://www.nytimes.com/2016/06/27/business/dealbook/private-equity-housing-missteps.html?smid=tw-share&_r=0

Capitalism was created by capitalists to over each over but above all to over non-capitalists.

The entire BigFinance system is as 100% criminally corrupt as the corrupt political class.

[boutons_deux]

Sorry you lost your home: Americans deserve more than an apology for the foreclosure fraud epidemic

Despite talk of "recovery," former homeowners remain scarred after their government abandoned them

“I lost my home of 30 years to fraudclosure.”

“I have been fighting this bank for over five years now. I am finally losing everything to their fraud.”

I cannot convince a judge disinclined to rule in their favor, or a bank disinclined to see them as anything but a financial asset to be plucked, to change their minds.

since my book “Chain of le: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud” came out. Hundreds of people have emailed me, sent me letters, attended my public events, to relate their personal horror stories of foreclosure and dispossession. They come from across America, from different social and economic backgrounds. Some lost everything, and some haven’t given up.

It’s impossible to expend the time and resources necessary to verify these and the hundreds of other stories I get daily. I can’t even get through all the names of these victims. But I can paint a picture of the type of people who write them, which is nothing like the one the industry frames, a tale of deadbeats and losers who miss mortgage payments and try to scam banks into acquiring a free house.

These people are meticulous. They’ve kept every scrap of paper related to their cases, probably to preserve their own sanity. They know how the law works. Their perseverance, even while recognizing the odds against them, is remarkable.

Political analysts still manage to wonder why people are angry in a time of economic recovery, without ever even hinting recognition of the scarring impact of the foreclosure disaster.

More than 9.3 million American families gave up their home between 2006 and 2014, either in a foreclosure or a short sale or some other transaction. That translates to about 14 million people, all of whom have family and friends and colleagues who at least know of the pain caused by the foreclosure crisis.

There have been more since then.

http://www.salon.com/2016/08/09/sorr...raud-epidemic/

Obama and his DoJ wouldn't dare go after corrupt, criminal, predatory BigFinance.

[boutons_deux]

DoJ Asks Deutsche Bank to Pay $14 Billion in Mortgage Settlement

The Wall Street Journal reported that the Department of Justice is seeking $14 billion from Deutsche Bank to settle its claims in a series of mortgage abuses. According to the Journal, Deutsche’s position is that $2 to $3 billion as a reasonable figure. Analysts anticipated that the maximum settlement amount would be in the $4.5 to $5 billion range.

A few of the very high profile mortgage settlements have had leaks about the negotiations over the headline amount, such as the $16.6 billion Bank of America settlement for mortgage abuses. In those cases, the final amount was not terribly below the government regulators’ asking amount. One reason is that even though it’s generally understood that the government does not to devote the resources to litigating such complex cases, the flip side is that the defendant is even less able to stand the uncertainty and bad press of having talks break down and having the government move into another phase of discovery in preparation for a trial, which would be hugely damaging from a repe ional standpoint.

Nevertheless, the fact of the leak and the Journal exposing the apparently big gap between the government’s ask and Deutsche’s bid can cynically be seen as part of the negotiation theater. In some past cases like the settlement negotiations with JP Morgan, the press leak appeared to be to put pressure on the bank to be more realistic, as well as manage shareholder expectations. Here, the dynamics may be different. First, Deutsche is in a weak position politically, not just by virtue of being a foreign bank, but as being widely recognized within the financial services industry and almost certainly by regulators as being awash in managerial and internal control failures. It’s walking wounded.

http://www.nakedcapitalism.com/2016/...+capitalism%29

[Winehole23]

Deutche Bank only has $5.5B set aside for judgments.

[Winehole23]

it is time for an honest appraisal of one of the lingering mysteries of the financial crisis: Why were there were no prosecutions of major executives?

It’s a fair question. I believe, as discussed previously, there were 10 areas where fraud and abuse took place. These were the Mortgage Electronic Registration Systems; mortgage pools; securitization; “misplaced” mortgage notes; force-placed insurance; servicing fees; fake do ents; false affidavits, perjury and robo-signing; foreclosure mills; and active military members losing homes while on duty.


I am convinced that these cases were easy to prosecute, that a first-year law student would have a 90 percent conviction rate, that the do entary evidence was overwhelming, especially of mortgage and foreclosure fraud. As we know, there were no prosecutions of any significance -- not at the state level, not at a federal level.


After much research, I have come to believe that at the highest levels of government, the financial industry managed to convince prosecutors that it was against societal interests to bust bankers. The revolving door between government and the private sector, between regulators and regulated, figures in this. If you’re a prosecutor, but you might like a big payday from business, do you really want to go hard on the companies that might offer you a job one day?

https://www.bloomberg.com/view/artic...ill-is-with-us

[Winehole23]

The bigger problem has been the normalization of fraud.

[CosmicCowboy]

Deutche Bank only has $5.5B set aside for judgments.

Based on previous settlements with other banks that should be plenty.

[Winehole23]

Bargain down from $14B. They'll meet somewhere in between.

They're gonna get slammed, they're guilty as .

It's not clear that their temerity of playing innocent will pass unchallenged. DB might have to concede it did something wrong and pay a historic fine.

[Winehole23]

For National Security reasons, probably, the banks were not allowed to fall on their faces and explain it to their investors. The capitalist empire par excellence in a house fire, as London Banker pointed out, cannot ever allow its system of payment to fail, so that government did what any sensible landlord would do: to save what it really cares about first. The banks and quasi-banks that oversold the bubble and normalized fraud.