Ritholtz: Why foreclosure fraud is so dangerous to property rights

[Winehole23]

A federal auditor has warned that the Obama administration’s failure to crack down on recalcitrant banks risks harming distressed borrowers.

The warning, offered in a report released early Thursday, contrasts with comments earlier in the week by Barack Obama, US president, who chided banks for giving borrowers the “runaround” when it came to lowering their mortgage payments through refinancings.


The US Treasury department has the authority to penalise banks for their noncompliance with the administration’s Making Home Affordable programme, but it has not been using that authority to ensure banks are not harming homeowners and improperly benefiting from taxpayer-provided aid, according to the Special Inspector General for the Troubled asset relief programme (Sigtarp).


The audit underscores the degree to which, three years after coming into office, Mr Obama has fallen short on promises to help troubled borrowers keep their homes. Initiatives launched beginning in early 2009 have fizzled out, disappointing members of Congress, key administration officials and Mr Obama’s supporters.

http://www.ft.com/intl/cms/s/0/53ec3...#axzz1kadWIzO5

[Winehole23]

New York's attorney general on Friday accused some of the nation's largest banks of deceit and fraud in using an electronic mortgage registry that he said puts homeowners at a disadvantage in foreclosures while saving banks over $2 billion.

Democrat Eric Schneiderman sued Bank of America, J.P. Morgan Chase and Wells Fargo over their use of the Mortgage Electronic Registration Systems Inc., or MERS, claiming the banks submitted court do ents containing false and misleading information that appeared to provide the authority for foreclosures when there was none.


The lawsuit also names the registry operator, MERSCORP Inc. of Virginia.
Schneiderman claims the MERS system has eliminated homeowners' ability to track property transfers through traditional public records. He said the electronic system now stores that data and is plagued by inaccuracies and what the lawsuit calls "faulty and sloppy do ent preparation and execution practices."


"The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages," Schneiderman said Friday. "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."

Read more: http://www.seattlepi.com/news/articl...#ixzz1lXKSvnBW

[boutons_deux]

MERS also allowed lenders to evade local property transfer fees.

[boutons_deux]

bag lawyers, lazy/biased judges, lenders and banks have been stealing $Bs and homes for a LONG TIME

A Mortgage Tornado Warning, Unheeded

In 2003, when home prices were flying high, he compiled a dossier of improprieties on one of the giants of the business, Fannie Mae.

In hindsight, what he found looks like a blueprint of today’s foreclosure crisis. Even then, Mr. Lavalle discovered, some loan-servicing companies that worked for Fannie Mae routinely filed false foreclosure do ents, not unlike the fraudulent paperwork that has since made “robo-signing” a household term. Even then, he found, the nation’s electronic mortgage registry was playing fast and loose with the law — something that courts have belatedly recognized, too.

You might wonder why Mr. Lavalle didn’t speak up. But he did. For two years, he corresponded with Fannie executives and lawyers. Fannie later hired a Washington law firm to investigate his claims. In May 2006, that firm, using some of Mr. Lavalle’s research, issued a confidential, 147-page report corroborating many of his findings.

And there, apparently, is where it ended. There is little evidence that Fannie Mae’s management or board ever took serious action. Known internally as O.C.J. Case No. 5595, in reference to the company’s Office of Corporate Justice, this 2006 report suggests just how deep, and how far back, our mortgage and foreclosure problems really go.

“It is axiomatic that the practice of submitting false pleadings and affidavits is unlawful,” said the report, a copy of which was obtained by The New York Times. “With his complaint, Mr. Lavalle has identified an issue that Fannie Mae needs to address promptly.”

Almost all of the abuses that Mr. Lavalle began identifying in 2003 have since come to widespread attention. The revelations have roiled the mortgage industry and left Fannie, Freddie and big banks with potentially enormous legal liabilities. More worrying is that the kinds of problems that Mr. Lavalle flagged so long ago, and that Fannie apparently ignored, have evicted people from their homes through improper or fraudulent foreclosures.

LIKE most people, Nye Lavalle had little interest in the mortgage industry until things got personal. Raised in comfortable surroundings in Grosse Pointe, Mich., just outside Detroit, he began his business career in the 1970s, managing professional tennis players. In the 1980s, he ran SMG, a thriving consulting and research firm.

Then he tried to pay off a loan on a home his family had bought in Dallas in 1988. The balance was roughly $100,000, and the property was valued at about $175,000, Mr. Lavalle said. But when he combed through figures provided by his lender, Savings of America, he found substantial discrepancies in the accounting that had inflated his bill by $18,000. The loan servicer had repeatedly charged him late fees for payments he had made on time, as well as for unnecessary appraisals and force-placed hazard insurance, he said.

Mr. Lavalle refused to pay. The bank refused to bend. The balance rose as the bank tacked on lawyers’ fees and the loan was deemed delinquent. The fight continued after his mortgage was allegedly sold to EMC, a Bear Stearns unit.

Unlike most people, Mr. Lavalle had the time and money to fight. He persuaded his family to help him pay for a lawsuit against EMC and Bear Stearns. Seven years and a small fortune later, they lost the house in Dallas. Back then, judges weren’t as interested in mortgage practices as some are now, he said.

report didn’t conclude that Mr. Lavalle was wrong on the legal issues. It simply said that few people would have the financial resources to challenge foreclosures. In other words, few people would be like Mr. Lavalle.

http://www.nytimes.com/2012/02/05/bu...tornado&st=cse

[boutons_deux]

Why State Attorneys General Shouldn't Settle on Robo-Signing



http://www.truth-out.org/print/12237

[boutons_deux]

Will the Attorneys General Sell Out the Pension Funds?

A shocking aspect of the proposed foreclosure fraud settlement among bailed-out banks,... namely the bailed-out banks' ability to pay their "penalty" with other people's money

The federal government really wants the B.O.B.s to use pension fund money to pay their "penalty."

The feds see the banks' ability to spend firefighters', teachers' and cops' money as a design feature, not a flaw.

I am fixating on the pension funds because attorneys general usually protect state pension funds from theft.

http://www.huffingtonpost.com/abigai...b_1255152.html

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Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage “Settlement”

http://www.nakedcapitalism.com/2012/...apitulate.html


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HUD Secretary Expects “Substantial” Payment of Foreclosure Fraud Settlement with MBS Investor Money

Housing and Urban Development Secretary Shaun Donovan mostly confirmed that private-label mortgage-backed securities investors, not banks or servicers, will end up shouldering the cost of much of the imminent foreclosure fraud settlement despite the risk of litigation from investors who are likely to challenge the forced losses on their securities in court.

http://news.firedoglake.com/2012/02/...nvestor-money/

====

Wall St gain and up, Human-Americans risk and pays for them again.

and you right-wingers want to hand SS to Wall St?

[boutons_deux]

Mirabile Dictu! Missouri Attorney General Files Criminal Lawsuit on Robosiging

“Linda Greene” has become a household word to those on the foreclosure fraud beat. And it turns out, for once, that the work of diligent investigators such as the foreclosure attorneys around Max Gardner, and investigators like Lynn Szymoniak and Lisa Epstein led to press coverage which in turn spurred prosecutors to act.

What is striking about the indictment by a Missouri grand jury is that the Missouri AG Chris Koster has decided to challenge the banks’ party line that robosigning and related abuses were mere “paperwork problems.” He’s called robosiging what it is: forgery. The 136 count indictment is for forgeries and false declarations, and the targets are LPS subsidiary and its founder and past president, Lorraine Brown. From a press release by Koster:

Today’s indictment reflects our firm conviction that when you sign your name to a legal do ent, it matters,” Koster said. “Mass-producing fraudulent signatures on millions of real estate do ents across America cons utes forgery. When you file those do ents in our state, you are committing a crime under Missouri law.

The forgery and false declaration counts each allege that the person whose name appears on 68 notarized deeds of release on behalf of the lender is not the person who actually signed the paperwork. The do ents were then submitted to the Boone County Recorder of Deeds as though they were genuine…

DOCX’s role in the robo-signing process came to national attention when 60 Minutes reported that Linda Green, an employee of DOCX, purportedly signed thousands of mortgage-related do ents on behalf of several different banks and in multiple handwritings. The 68 do ents on which the indictments are based were purportedly signed by Linda Green, but were in fact allegedly signed by someone else.

Forgery is a Class C felony and False Declaration is a Class B misdemeanor. If convicted on the most serious count, Brown could face up to seven years in prison for each count. DOCX could be fined up to $10,000 for each forgery conviction and $2,000 for each false declaration conviction.

http://www.nakedcapitalism.com/2012/...+capitalism%29

deep-red, right-wing Missouri, of all places??

[boutons_deux]

Faulty Mortgages And Fraudulent Foreclosures Have Cost The Big Banks $72 Billion And Counting

Part of the hesitation on the part of several of the AGs is that a settlement would limit investigations into the extent of the fraud perpetrated by the banks. In the meantime, between shoddy foreclosure and faulty loans, the biggest U.S. banks have already lost $72 billion — with the most losses coming at Bank of America — and are preparing to lose even more:

Costs from faulty mortgages and shoddy foreclosures have topped $72 billion at the biggest U.S. banks as they near a settlement of a 50-state probe into the industry’s practices.

Wells Fargo & Co., Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Ally Financial Inc., the five largest home lenders during the real estate boom, tallied at least $6.78 billion in new costs tied to mortgages during the second half of 2011, according to data compiled by Bloomberg. Bank of America, ranked second among U.S. banks by assets, contributes $41.8 billion of the overall total.

“It’s a colossal failure of basic banking,” said credit analyst David Knutson. “It’s surprised everyone in terms of persistence and longevity and I think it will continue to surprise.”

http://thinkprogress.org/economy/201...closure-costs/

[Winehole23]

deep-red, right-wing Missouri, of all places??

horror of horrors, values voters occasionally have and practice the values they profess.

Bona fides is not just a quaint legal euphemism. Courts normally take the validity of submitted do ents very seriously and so do midwestern voters.

It would actually be more surprising if everybody decided to do nothing; it's encouraging that doesn't appear to be happening.

[boutons_deux]

"values voters"

vote Family, God, Guns, Gays, Hate, Paranoia, Culture Wars, etc, but they vote AGAINST their own financial interests (eg, for Repugs) repeatedly.

[Winehole23]

bully on the Missouri AG, regardless

[boutons_deux]

Financial sector's fraud and theft has been completed successfully, indicating how they can repeat in the future. aka, redistribution of wealth upward. It's The American Way

=========

The Top Twelve Reasons Why You Should Hate the Mortgage Settlement

The mortgage settlement terms have not been released, but more of the details have been leaked:

1. The total for the top five servicers is now touted as $26 billion (annoyingly, the FT is calling it “nearly $40 billion”), but of that, roughly $17 billion is credits for principal modifications, which as we pointed out earlier, can and almost assuredly will come largely from mortgages owned by investors. $3 billion is for refis, and only $5 billion will be in the form of hard cash payments, including $1500 to $2000 per borrower foreclosed on between September 2008 and December 2011.

Banks will be required to modify second liens that sit behind firsts “at least” pari passu, which in practice will mean at most pari passu. So this guarantees banks will also focus on borrowers where they do not have second lien exposure, and this also makes the settlement less helpful to struggling homeowners, since borrowers with both second and first liens default at much higher rates than those without second mortgages. Per the Journal:

“It’s not new money. It’s all soft dollars to the banks,” said Paul Miller, a bank analyst at FBR Capital Markets.

The Times is also subdued:

Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.

2. Schneiderman’s MERS suit survives, and he can add more banks as defendants. It isn’t clear what became of the Biden and Coakley MERS suits, but Biden sounded pretty adamant in past media presentations on preserving that.

3. Nevada’s and Arizona’s suits against Countrywide for violating its past consent decree on mortgage servicing has, in a new Orwellianism, been “folded into” the settlement.

4. The five big players in the settlement have already set aside reserves sufficient for this deal.

Here are the top twelve reasons why this deal stinks:

1. We’ve now set a price for forgeries and fabricating do ents. It’s $2000 per loan. This is a rounding error compared to the chain of le problem these systematic practices were designed to cir vent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the le insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.

2. That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s. Refis of performing loans also reduce income to those very same investors.

3. That $5 billion divided among the big banks wouldn’t even represent a significant quarterly hit. Freddie and Fannie putbacks to the major banks have been running at that level each quarter.

4. That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.

5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. The framework is similar to that of the OCC consent decrees implemented last year, which Adam Levitin and yours truly, among others, decried as regulatory theater.

6. The past history of servicer consent decrees shows the servicers all fail to comply. Why? Servicer records and systems are terrible in the best of times, and their systems and fee structures aren’t set up to handle much in the way of delinquencies. As Tom Adams has pointed out in earlier posts, servicer behavior is predictable when their portfolios are hit with a high level of delinquencies and defaults: they cheat in all sorts of ways to reduce their losses.

7. The cave-in Nevada and Arizona on the Countrywide settlement suit is a special gift for Bank of America, who is by far the worst offender in the chain of le disaster (since, according to sworn testimony of its own employee in Kemp v. Countrywide, Countrywide failed to comply with trust delivery requirements). This move proves that failing to comply with a consent degree has no consequences but will merely be rolled into a new consent degree which will also fail to be enforced. These cases also alleged HAMP violations as consumer fraud violations and could have gotten costly and emboldened other states to file similar suits not just against Countrywide but other servicers, so it was useful to the other banks as well.

8. If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating. It’s a bad idea to settle obvious, widespread wrongdoing on the cheap. You use the stuff that is easy to prove to gather information and secure cooperation on the stuff that is harder to prove. In Missouri and Nevada, the robosigning investigation led to criminal charges against agents of the servicers. But even though these companies were acting at the express direction and approval of the services, no individuals or en ies higher up the food chain will face any sort of meaningful charges.

9. There is plenty of evidence of widespread abuses that appear not to be on the attorney generals’ or media’s radar, such as servicer driven foreclosures and looting of investors’ funds via impermissible and inflated charges. While no serious probe was undertaken, even the limited or peripheral investigations show massive failures (60% of do ents had errors in AGs/Fed’s pathetically small sample). Similarly, the US Trustee’s office found widespread evidence of significant servicer errors in bankruptcy-related filings, such as inflated and bogus fees, and even substantial, completely made up charges. Yet the services and banks will suffer no real consequences for these abuses.

10. A deal on robosiginging serves to cover up the much deeper chain of le problem. And don’t get too excited about the New York, Massachusetts, and Delaware MERS suits. They put pressure on banks to clean up this monstrous mess only if the AGs go through to trial and get tough penalties. The banks will want to settle their way out of that too. And even if these cases do go to trial and produce significant victories for the AGs, they still do not address the problem of failures to transfer notes correctly.

11. Don’t bet on a deus ex machina in terms of the new Federal foreclosure task force to improve this picture much. If you think Schneiderman, as a co-chairman who already has a full time day job in New York, is going to outfox a bunch of DC insiders who are part of the problem, I have a bridge I’d like to sell to you.

12. We’ll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. But the problems will fester and the housing market will continue to suffer. Investors in mortgage-backed securities, who know that services have been screwing them for years, will be hung out to dry and will likely never return to a private MBS market, since the problems won’t ever be fixed. This settlement has not only revealed the residential mortgage market to be too big to fail, but puts it on long term, perhaps permanent, government life support.

As we’ve said before, this settlement is yet another raw demonstration of who wields power in America, and it isn’t you and me. It’s bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.


http://www.nakedcapitalism.com/2012/...+capitalism%29

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TBTFail

TBTJail

TBTPunish

$26B is just a (tax deductible?) cost of doing thieving, fraudulent business. Carry on, nothing to see. No ing way to stop it.

"why do you envy and regret the 1% for their hard-earned wealth?"

--WC

[boutons_deux]

Rep. Eric Cantor Blocked Foreclosure Crisis Fix While Owning a Financial Stake in Mortgage Businesses

Congressman Eric Cantor (R-VA) is managing the House version of the Stock Act. Since it appears unlikely that Cantor will attach Brown’s meaningful amendment, Cantor’s own history of legislating on issues that affect his bank account deserves a renewed look.

Throughout 2009, Cantor helped lead opposition to mortgage cramdown — a no-cost measure to help borrowers negotiate lower interest rates and avoid foreclosure. While Cantor marshaled opposition to these policies, he did not disclose that both his own wealth and his wife’s were connected to the mortgage industry:

–- Cantor invested in several mortgage banks, and owned a portion of a Cantor-family run mortgage company. According to Cantor’s 2009 personal finance disclosure, Cantor owned up to a $500,000 share of a mortgage company called TrustMor run by his brother.

–- While Cantor blocked a fix to the foreclosure crisis, his wife Diane Cantor served as the managing director of a bank with a high foreclosure rate. Diane Cantor at the time worked as a managing director to New York Private Bank & Trust, a major mortgage bank and TARP recipient. SNL Financial later reported that Cantor’s bank was among the top three banks in the mortgage business “with the the greatest percentage of family loans in the foreclosure process.”

In 2009, Eric Cantor also owned a portion of a family debt collection law firm. According to his personal finance disclosure, Cantor owned up to a $100,000 stake in Cantor & Cantor, the debt collection law firm run by his family.

http://www.truth-out.org/rep-eric-ca...usinesses/1328

So Cantor's family runs a Shylockian, shark-y debt collection gang?

[coyotes_geek]

US reaches mortage settlement with banks

Looks like it's a done deal. Pretty crappy one TBH. But at least politicians nationwide will have an ample supply of people who got to refinance an underwater mortgage as a result of this settlement to use as a campaign prop.

[Winehole23]

The deal does little to ease bank investor fears, industry analysts said.


"We believe any initial euphoria over the deal will quickly fade as investors realize the flood of additional mortgage-related litigation that the major banks face," said Guggenheim Partners analyst Jaret Seiberg in a note on Thursday.

[coyotes_geek]

U.S. bank regulators roll fines into mortgage pack

[Winehole23]

The penalties are the result of mortgage servicing problems that burst into public view in 2010 when government agencies began investigating bank foreclosure practices, including the use of "robo-signers" to sign hundreds of unread foreclosure do ents a day.

and tens of thousands overall. this quote gives an idea of how radical the settlement is. each instance of robosigning -- only one of the corrupt practices at issue -- was a felony. this settlement is a settlement for pervasive, systemic fraud. for tens of thousands of felonies.

hard to see, given the lightness of the penalty, where the incentive to straighten up is.

[Winehole23]

but maybe the whole point was to begin rehabilitating the banks officially, before they have paid any price

[coyotes_geek]

Looks to me like the point was to have something done before the next election......

[Winehole23]

that too

[Winehole23]

olly olly oxen free

[Winehole23]

this is totally reminiscent of the way Obama "turned the page" on torture

[Winehole23]

It's time for us all to get over it -- torture, government surveillance, overzealous security enforcement, systematic fraud by banks, whatever. We need to evolve and grow as a country. We can't do that if we keep punishing each other.

[Winehole23]

the page was turned by forgoing any investigation into the extent of (alleged) crimes

[coyotes_geek]

Yep. Just get what money you can out of the banks as fast as you can and dispense it to as many people......errr....voters as you can.

It's a settlement for illegally forclosing on people. Yet the people who actually got illegally foreclosed on only get a $2,000 check and a bunch of people who were not illegally foreclosed on get principal writedowns and refi's? Looks to me like the deal is to write down mortgages at the expense of people who were illegally foreclosed on.