Ally Financial (the parent company of GMAC Mortgage) expanded their review of their foreclosure processes to all 50 states, the second mortgage servicer to do so after Bank of America. It’s assumed but also a bit unclear whether this means they’re halting evictions or other foreclosure operations, though they provide this statement: “Foreclosure is a very serious matter and only implemented when all other home preservation options have been fully exhausted. We are taking these additional steps to restore confidence in the process, which is critical for the stability of the home and mortgage industry.”
They aren’t restoring confidence in the process for my benefit, or any other yahoo on the Internets. They are trying to solve an incredible problem that puts them at odds with other major institutional players. As I said in my Balloon Juice moonlighting last night, the servicers aren’t pausing their operations to be nice.
Ask yourself what JPM, GMAC and BofA are doing right now. They’ve already imposed said moratorium. The cover story is they’re fixing “technical paperwork errors.” In reality they have to be pretty panicked. BofA made a deal yesterday with a top title insurer to basically eat any losses they incur on houses without clear title. Others are probably trying to do the same. The investors are breathing down their necks to take back the securitized loans, too. The rating agencies are threatening downgrades. This is a cover-up to a bigger cover-up of shitty loan origination and securitization, and no amount of pretending it doesn’t exist will stop the bleeding. So acting like everything hinges on what Obama does about a moratorium is silly. It’s more like what he should do about the aftermath, because a moratorium is already in place for about 25% of the market and it’s a matter of time on the other 75%.
This wouldn’t be as catastrophic if the banks weren’t hoarding substantial amounts of the nation’s wealth to prepare for the fallout, strangling economic recovery. It wasn’t the sign of a healthy industry that the IMF called for more bank bailouts just a week ago. But I’d say the confusion over title ownership in practically every mortgage sold and repackaged over the last five years warrants some kind of a pause to sort things out.
Meanwhile, the talk of “damage” to the US economy is misplaced. That derives from the fraud at the heart of the mortgage process over the past decade, not a temporary pause in foreclosures. I’m so old I can remember the Treasury Department arguing that delaying foreclosures was a good thing because it prevented all the inventory from getting dumped on the market at once and lowering prices. That was in August. Besides, banks could simply dip into their shadow inventory they’ve been keeping off the market if they wanted to maintain current supply without foreclosed properties.
If you want to talk about damage to the economy, it comes from people like this:
In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in “foreclosure expert” jobs with no formal training, a Florida lawyer says.
In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn’t define the word “affidavit.” Others didn’t know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers’ accusations about document fraud.
“The mortgage servicers hired people who would never question authority,” said Peter Ticktin, a Deerfield Beach, Fla., lawyer who is defending 3,000 homeowners in foreclosure cases. As part of his work, Ticktin gathered 150 depositions from bank employees who say they signed foreclosure affidavits without reviewing the documents or ever laying eyes on them — earning them the name “robo-signers.”
You’re talking about a massive, industry-wide corruption of the legal integrity of the foreclosure process and the rule of law, and I don’t think some temporary relief (and to struggling borrowers, it will be relief) should be put on hold while the powers that be think of a way to sweep it under the rug.
The Obama Administration does support the 40-state investigation by Attorneys General into foreclosure fraud, and I certainly support their proposed solution:
A coalition of as many as 40 state attorneys general is expected Wednesday to announce an investigation into the mortgage-servicing industry, an effort some of them hope will pressure financial institutions to rewrite large numbers of troubled loans.
The move comes amid recent allegations that mortgage-servicers, which include units of major banks such as Bank of America Corp., submitted fraudulent documents in thousands of foreclosure proceedings nationwide [...]
The attorneys’ general immediate aim is to determine the scale of the document problems and correct them. But several of them have said that the investigation could force the lenders and servicers to agree to mass loan modifications or principal forgiveness schemes. Other possibilities include financial penalties or changes in mortgage servicing practices.
Lenders and servicers have largely resisted reducing principal on mortgages, instead focusing on interest-rate reductions or term extensions. Banks say they are worried about lawsuits from investors, some of whom could lose money in a principal write down.
Former New Jersey attorney general Peter Harvey, now a trial lawyer in New York, said that a settlement with state attorneys general would likely “to give the banks some cover” to make changes that might otherwise result in lawsuits by investors in mortgage-backed securities.
This is what we need to flush out the system, and it would represent a resolution to the benefit of homeowners, where the banks (and the investors) take the haircut. Maybe the deal can offer the banks part of the upside appreciation. But it has to provide something of value to reduce foreclosures, allow people to pay off their loans, and reset the housing market. This is a moment where they cannot be permitted to wiggle off the hook.




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wow. story is moving so fast, hadn’t even heard that one yet – that’s a whole lotta eatin’ isn’t it ?
belated thanks for the Ratigan/Brad Miller youtube posted yesterday, David. ton of info in that short segment about institutional investors – and I didn’t know the Fannie/Freddie Conservator had been after the Banks for months to produce info
p.s. Miller confirmed your assessment that he’s really on top of this for a critter, I was impressed
1977: Jimmy Carter (D) signs the Community Reinvestment Act, guaranteeing home loans to low-income families
1999: Bill Clinton (D) puts the Community Reinvestment Act on steroids, pushing Fannie Mae and Freddie Mac to increase the number of sub-prime loans.
2003: The White House calls Fannie and Freddie “a systemic risk.” The Bush administration pushes Congress to enact new regulations.
2003: Barney Frank (D-MA) says Fannie & Freddie are “not in a crisis.” He bashes Republicans for crying wolf and calls F&F “financially sound.” Democrats block the Republican-sponsored regulation legislation.
2005: Federal Reserve Chairman Alan Greenspan voices a warning over F&F accounting. “We are placing the total financial system of the future at a substantial risk.”
2005: Sen. Charles Schumer, (D-NY) says “�I think Fannie and Freddie over the years have done an incredibly good job and are an intrinsic part of making America the best-housed people in the world �if you look over the last 20 or whatever years, they’ve done a very, very good job.”
2006: Sen. John McCain (R-AZ) again calls for reform. “For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac � and the sheer magnitude of these companies and the role they play in the marketplace � the GSE’s (Government Sponsored Enterprises) need to be reformed without delay.”
2006: Democrats again block reform legislation.
2008: housing market collapses; Democrats blame the Republicans (again)..
The foreclosure thing is just a technicality. I think I’ve said that before. People who enter into contractual obligations need to fulfill those obligations.
End of story.
Most definitely not the end of the story.
The Community Reinvestment Act does NOT guarantee home loans to low income families. I was in banking for 25 years — left in 2002 when one of the big banks took over the regional bank I worked for and I won’t ever go back into banking — and in the late 1980′s, in addition to other responsibilities I was in charge of the bank’s compliance with the Community Reinvestment Act (CRA).
It required that the banks not refuse to make loans in neighborhoods just because they were low-income areas. (In the past some banks had actually ‘red-lined’ some poor neighborhoods and said they didn’t make loans in those areas even with good borrowers, adequate income, and a home value that supported the loan amount. That is what the CRA was supposed to stop.)
If the borrower met the bank’s credit criteria and the property appraised at a sufficient amount to support the loan, the CRA meant that the bank shouldn’t turn down the loan just because the home was in a particular neighborhood. The bank couldn’t apply more stringent criteria to borrowers in a poor neighborhood than the criteria in more affluent neighborhoods.
The sub-prime lenders may have said they had to make loans to people who couldn’t pay them back because of CRA, but that is completely false. What they did was put people who couldn’t afford the homes in even worse situations, and some mortgage brokers lied about the borrower’s income, and got dishonest appraisers to falsely inflate the value of the home. They certainly weren’t doing low-income families–or anyone else they pulled into the scam — any favors.
They committed fraud on the borrowers and the investors, and the banks played their part….it was all about greed.
Thank you so much for that post. People who cite the Community Reinvestment Act (of 1977!) are getting all their bad information from idiots like Sean Hannity and others who continually cite this law over and over – “They MADE the banks give bad loans!” usually along with a Barney Frank reference.
Thank you for all your great posts on this subject. I bristle every time I see uninformed people as well as those who should know better citing the CRA in reference to the mortgage fraud. The CRA had nothing to do with this.
I was also in charge of loan operations and services at the regional bank, and I have been a commercial underwriter, and back then, I wrote procedures for how notes and collateral had to be handled and no one who wasn’t truly at least a vice president or assistant secretary (with that title conveyed by the board of directors) signed any releases of mortgages. When I signed mortgage releases, I made sure it was legitimate; it was something that we took seriously.
When the big bank bought our bank what I saw was something that has now been carried to the extreme. Each transaction or process was broken down horizontally so that they hired less educated (and cheaper) employees to do individual pieces of a process….which meant more people were ‘just doing their job’ and not looking at how it played into the bigger picture. Now we see how far that concept has been taken by the banks and servicers involved in the fraud….evidenced by the paralegal’s deposition where the employees were told it was just their job to sign the documents.
I would love to do forensic accounting for some of the law firms working on these cases. The banks involved need to be held responsible for what they have done.
I saw a quote today where Jamie Dimon said that he didn’t think they had made mistakes at Chase. When it is done that way systemically, it looks like a lot more than ‘mistakes’….it is fraud. So maybe his statement is correct.
Yes, and as fictional Gordon Gecko said: “Greed is good,” and this allegedly moral nation went along with that – both Ds and Rs. And whining about citizens not fulfilling Main Streets obligations whilst cheering on the lack of a Moral Hazard (as explained once again by Oliver Stone in the guise of Gordon Gecko) for Wall Street and the Banksters is yet another failing on the part of citizens to hold the billionaires accountable whilst doubling down on the poor and the middle class.
Like it or not, we’re all in this now, and we’re all going to suffer, no matter what.
Blaming the “small” people may make some “feel better.” But the problems arise much further up to the top of the Ponzi scheme, and unless that charnal house is cleaned up… well: good luck.
Where did you find your information? It looks like Rush Limbaugh Cut and Paste.
The corruption of underwriting standards occurred across all credit levels not just subprime. This was done to pump the supply of mortgages to satisfy the demand for “AAA” paper which was never really AAA.
To blame CRA is totally bogus.
hahahha, good one: That was in August.
Fannie and Freddie don’t make loans. They guarantee loans. The loans were generated by banks.
Big tell: skip from 1977 to 1999, yielding blameless Republicans.
Not really worth responding to, the man of stannum.
5,6,7: These would be welcome contributions at Seminal, as diaries, and truly deserve standalone treatment (if you haven’t already, in which case my apologies for missing them!)
Let’s not knee jerk on Fannie and Freddie, it’s a (D) cesspool.
Then after wiretapping Elliot Spitzer, New York Attorney General and knowing exactly where he was having an affair, blew up his investigation of this wall street conspiracy. He then used an 1863 law to stop other State Attorney Generals from investigating this fraud.
Sins of omission.
Hey Tinman, you forgot the most critical factor in the equation! What all the analyst new when asking to rate those mortgage backed securities/CDO’s.
http://en.wikipedia.org/wiki/2000s_energy_crisis
“From the mid-1980s to September 2003, the inflation-adjusted price of a barrel of crude oil on NYMEX was generally under $25/barrel. During 2003, the price rose above $30, reached $60 by August 11, 2005, and peaked at $147.30 in July 2008.[1] Commentators attributed these price increases to many factors, including reports from the United States Department of Energy and others showing a decline in petroleum reserves,[2] worries over peak oil,[3] Middle East tension, and oil price speculation.[4]“”
http://upload.wikimedia.org/wikipedia/commons/b/b8/Price_of_oil_(2003-2008).png
Speaking of moral hazards and wealth extraction?
Vsionary:
“The New York Times reports that the administration is negotiating to double the commitments to Fannie and Freddie for a total of $800 billion by December 31, in order to avoid the congressional approval that would be needed after that date. But there currently is no Inspector General exercising independent oversight of these entities. Acting Inspector General Ed Kelly was stripped of his authority earlier this year by the Justice Department, relying on a loophole in a bill Mr. Emanuel cosponsored and pushed through Congress shortly before he left for the White House. This effectively ended Mr. Kelly’s investigation into what happened at Fannie and Freddie.
Since that time, despite multiple warnings by Congress that having no independent Inspector General for a federal agency that oversees $6 trillion in mortgages is a serious oversight, the White House has not appointed one.
We recognize that these are extremely serious accusations, but the stonewalling by Mr. Emanuel and the White House has left us with no other redress. A 2003 report by Freddie Mac’s regulator indicated that Freddie Mac executives had informed the board of their intention to misstate the earnings to insure their own bonuses during the time Mr. Emanuel was a director. But the White House refused to comply with a Freedom of Information Act request from the Chicago Tribune for those board minutes on the grounds that Freddie Mac was a “commercial” entity, even though it was wholly owned by the government at the time the request was made.
If the Treasury approves the $800 billion commitment to Fannie and Freddie by the end of the year, it will mean that under the influence of Rahm Emanuel, the White House is moving a trillion-dollar slush fund into corruption-riddled companies with no oversight in place. This will allow Fannie and Freddie to continue to purchase more toxic assets from banks, acting as a back-door increase of the TARP without congressional approval…
y’all know who.
DDay, the title to this thread is a bit misleading. The text includes no mention of criminal investigations. Will there be a follow-up thread to this?
In a perfect world everyone would fulfill their contractual obligations, but as the man says, you can’t get blood from a stone. The bankers would not have fulfilled their contractual obligations except for the bailouts which we both agree were misguided.
The question is what is the best way out? You believe errant borrowers must feel economic pain much like the parent who says this hurts me more than it hurts you.
Since the banks cannot recover much, if anything, from their borrowers, it makes no sense to foreclose and evict occupants to uphold your vision of economic purity. If foreclosure recouped the bank’s losses it might make sense. Foreclosure increases losses as property values fall and blight hits foreclosed properties. The only sensible move is to reduce the mortgage amount to fair market value. This gives the homeowner lower payments and a chance to make them. If you want fancy, the banks can agree to split the appreciation of property values if and when things turn around. Borrowers pay carrying charges, taxes and insurance and the banks lower the principal amount due. Everyone gets a haircut, but we minimize losses. Mindless foreclosing is just that, mindless.
True enough.
Banks should be totally responsible for the loans they make. F&F put the risk and burden on the taxpayers. Banks privatize profit on their good loans while they socialize their losses through gubmint guarantee programs like FNMA.
“I’m so old I can remember the Treasury Department arguing that delaying foreclosures was a good thing because it prevented all the inventory from getting dumped on the market at once and lowering prices. ”
This is exactly what I have been pointing out. If you are a new-home builder, or a non-”deadbeat” trying to sell an existing home, a moratorium would be a Very Good Thing at a time when prices are already severely depressed. The highest level of investors/paper buyers is the only class which benefits from continuing foreclosures (which tells you where the Administration’s heart is).
Moreover, the solution to missing loan-assignment paperwork in many, many cases – if they want to do it legally – is to execute new documents which refer to other missing documents, with the attending allonges and subordination agreements. This is a perfect negotiating point for the borrower: “You want me to execute new loan docs? Fine, let’s renegotiate the terms reflecting current property values.”
And don’t believe that the originating lenders/bundlers are the only ones with an incentive to renegotiate; the liability for these sloppy securitizations can be spread far and wide, including all the Wall Street law firms who took huge pay-days for doing nothing but generating cookie-cutter closing documents. Even the ultimate CDMO buyers are hugely at fault for their lack of due diligence and closing follow-up. That’s another reason they push for foreclosures to continue – it hides a multitude of sins that nobody in the securitization scam wants exposed.
They ONLY thing that will stop the bankers insatiable greed is a bullet.
tinman1967,
For sure lets blame the democratic Presidents instead of the greedy bankers and speculators…that’s who is to blame….greed and only greed.
The American dream begins and ends with home ownership. Now the American dream has turned into how can we screw the average person so we can get richer beyond anything imagineable..
It isn’t what Bill, or Jimmy did…its the Goldman Sachs, Lehman Bros and those greedy people.
And let’s not forget the Wall Street white-shoe law firms that actually handled all these securitization closings. Jamie Diamond and his ilk are sure to blame them when the shoddy document executions come to light. Malpractice insurers and Name Partners are sweating bullets at this moment… If you represented investors on the buyer’s side of these deals, and gave a nod and a wink to your counterpart at the closings, you better start moving your assets off-shore pronto!
Folks our country is on the line here, we need to quit blaming the D’s or the R’s for everything wrong with it really is bankers, speculators and the lobbiests…those are the ones who own this country. You all need to wake up or learn to talk chinese.
fuckno,
The cesspool is Washington and covers both parties…not just the D’s!
Hillary had the best idea for foreclosures….but you lefties wanted your messiah and now we are in a MESS!
You will not find me disagreeing with that anywhere.
Hillary is cut from the same cloth, stop pissing on your leg.
Now we know why the banks aren’t lending, they’re holding their money in reserve for when the shit REALLY hits the fan.
I r foxnews wachur.
bla blah blabbedy blah blah JIMMY CARTER blah blah BARNEY FRANK blabeddy blah PERSONAL RESPONSIBILITY blah bedee blah blah. So there.
Ok, y’all are getting me worried now, and I don’t know enough about this whole thing to not worry.
Bought condo in 1991. 30 year mortgage. Up-to-date on payments. However, mortgage has gone through several purchases (next-to-most-recent being WaMu!!)
Due to pay off in 10 years. Fully intend on either paying early (in case of windfall) or paying off entirely at the 10 yrs.
I have all the original paperwork that I signed back in the day when I sold my soul to the Devil and signed all those papers.
How can I assure myself that I’m not going to be rudely awakened – tomorrow – next year – 10 years from now – to discover that I not only don’t own my condo, but am being forced out by forged/inaccurate/lost documents?
Don’t you keep a notarized copy of your mortgage agreement in a safe?
1977: Jimmy Carter (D) signs the Community Reinvestment Act, guaranteeing home loans to low-income families
1999: Bill Clinton (D) puts the Community Reinvestment Act on steroids, pushing Fannie Mae and Freddie Mac to increase the number of sub-prime loans.
For 22 years there was no problem, and with a R congress (remember who writes the laws), the system got broken.
Ok tin head?
Get your chain of title and an abstract of title from a title company. That’s a legally binding document.
Do not accept a preliminary title report. That’s an offer of insurance.
so do corporations
Make that “contracting parties” and both of y’all should be happy.
The “problem” is deeper than someone not being able to make a few payments and getting foreclosed on, and tin head knows it (‘tho he likes to spout b.s. and pretend otherwise). The fraud reaches all the way back to the borrowers who lied about their assets/income, to originators of the loans who fudged numbers to get loans approved, to the sponsors of the mortgage note into the RMBS and failed to include the note, to the investors who failed to perform due diligence and ensure that the note was or became present to the servicers of the loans who have generated forged documents and entire files, falsely notarized documents, and failed to properly apply payments, to judges who didn’t bother to notice that the same signatures appeared over and over again in the same file over a period notarized as being years apart and accepted the fraud as legitimate despite the borrowers protests and proof to the contrary.
A thorough investigation of the entire process is called for, IMHO, and NOT to let borrowers off, but to apportion fault where it lies, and to assess who should be penalized by the failure of the system (not “the taxpayers” again!), and IF IT CAN BE REPAIRED, to set the system back on its feet. If it cannot in fact be repaired, then we need to know and figure out what to do at that point.
Letting the Bankers control how this plays out is a short road to discovering that the banks did nothing wrong and the fault lies solely with the borrowers, originators, and servicers.