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Wells Fargo continues to claim no problems with their foreclosure procedures, directly contradicting one of their own Vice Presidents of loan documentation, who admitted to signing 500 foreclosure affidavits a day and not verifying the information on any of them. Wells also claimed that they properly transferred ownership in the securitization process, despite managing a $1.3 billion dollar repurchase reserve which wouldn’t be needed if their claims are true. Bank of America vowed to fight repurchase requests from major institutional investors and the Federal Reserve Bank of New York, and said their underwriting and securitization processes were sound, despite admitting in court that the same mortgage was double- and triple-pledged into different mortgage pools, sold over and over again.
There’s simply no reason to trust the banks when they contradict court documents and statements. It may be that the NY Fed repurchase case amounts to not much more than a bump in the road – Yves Smith makes a compelling case for that. But that’s just one case, with more expected to follow. And underlying all of this is the clear evidence of criminal fraud, which Bill Black keeps hammering.
The things I think are critical and badly underreported are:
1. The astonishing amount of mortgage fraud (literally, millions of cases annually) and how it hyperinflated the bubble and led to the Great Recession.
2. The fact that these mortgage frauds were overwhelmingly due to consciously fraudulent lending practices in which the CEOs of seemingly legitimate entities used accounting tricks as their “weapon of choice” to report higher profits and get bigger bonuses. (George A. Akerlof and Paul R. Romer got it right in the title to their 1993 article: Looting: The Economic Underworld of Bankruptcy for Profit.)
3. The disgraceful lack of prosecutions which has resulted from regulators virtually ending the practice of making criminal referrals and the pathetic March 2007 “partnership” that the FBI entered into with the Mortgage Bankers Association (the trade association of the “perps”) that led the FBI and the Department of Justice to (implicitly) define out of existence fraud by the lenders (and to conceive of them as the “victim” — which they are, but only of their controlling officers). Bush administration attorney general Michael Mukasey in June 2008 notoriously refused to create a national task force against mortgage fraud based on his claim that mortgage fraud was analogous to “white collar street crime.” [...]
5. The massive foreclosure fraud we are seeing now as another “echo” epidemic. To optimize their accounting control fraud, lenders gutted underwriting. That led to “fraud in the inducement” (vis a vis borrowers), endemic documentation problems, and an extraordinary numbers of defaults. The process required tens of thousands of real estate financing personnel to commit fraud on a daily basis as their core function. Some of these people are unemployed, but many are in the industry and are presently engaged in loan servicing. Now that their job is to foreclose on properties, there is no reason to expect that they would suddenly become honest, and they haven’t.
Some people are following up on this in the media (I guess Eliot Spitzer qualifies now). Most aren’t. But you can bet that the institutional investors are well aware of all of this – and given some of today’s developments, law enforcement seems engaged, too. Stephen Gandel asks the right question: will bankers go to jail for this?
Given our third-world legal system, I’m not so sure. If robo-signers go to jail for meeting their job description that’s as much of a whitewash as Lynndie England bearing the brunt of the punishment for torture. The investigation must follow the evidence and go up the chain of command. Ultimately, that’s the only way this will ever stop.
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Prosecutions will never happen.
The technicalities will be cleared away quickly and the foreclosures will go full steam ahead.
Prosecutions will happen; some high-profile mid and lower level sacrificial lambs will be chosen, but the major players and biggest crooks will never see the inside of a cell.
yes. David J Stern is Capo Regime, I want Gotti !
In the past 15 years the banks have stolen from us in three big episodes. The big swipe to our savings and retirement plans, then the mortgage fraud under the radar which we are still dealing with, then they begged for money to save their TBTF arses. We have shoveled billions of dollars into their hands and they are still trying to take more. Like a barbarian pillaging the homes and communities of every town in their path.
It is more than just crime. It is treason. They have done more harm to this country than anything else I can think of at the moment.
The model for Wall Street is the hedge fund manager. They get 2% of the fund as a flat fee and 20% of profits for market manipulations that make a mockery of free market principles. They share in none of the losses, though. If they fail to perform, they still get their 2% and walk away.
Wall Street believes this is a sensible model – bankers should share in the profits and glory of capitalism while being protected from the downside. This is not the kind of competitive marketplace that serves the public interest.
Next time, and there will be a next time, we should let all of these banks fail.
Agreed! They should fail. They have walked away from being banks or mortgage firms, or investment firms and tried to monopolize it all. If they can’t take care of one arm they certainly should not be holding all the entities!
I have to say it again, I knew something was wrong when stocks started falling like rocks, but the funds holding those same companies were flying like a pack of hornets.
Actually that is trillions – when you count the bad paper foisted onto the Fed that taxpayers will eventually have to pay for.
Dylan Ratigan guest (NY State Supreme Court Judge) says NY changed court rules just today – Foreclosure Atty’s must now sign affidavit attesting to accuracy and completion of all docs
As I said here yesterday, I wrote 5 Dkos diaries pre-TARP advocating letting those bastards go under then.
Then the federal government could have chartered a bank with that 700 billion and unlocked the credit market.*
*With the various multipliers banks use 700 billion would amount to many times that amount of lending power.
But who listens to me?
Rep Defazio wanted to do something similar, but nobody listened to him either.
True. They have taken and gotten so much money there is no way in my mind to keep a true accounting.
Michael Mukasey claimed that mortgage fraud was analogous to “white collar street crime.” Servicer fraud (servicers are owned by the banks) behave like Mafia enforcers, using strong-arm tactics and threats to coerce homeowners into forking over, collectively, millions of dollars in bogus fees, or be foreclosed. And the servicers refuse to provide any account of these fees, and in some cases don’t even credit the accounts of those who fork over, but instead demand even more money the next month. The banks are no different from loan sharks.
Let’s explain what the ‘real estate financing personnel’ who ‘committed fraud on a daily basis as their core function’ and who are ‘presently engaged in loan servicing’ are now doing: As Bill Black explained, at the front end these lender employees were tasked with supplying defective mortgages via ‘fraud in the inducement’.
At the back end their ‘core function’ is to see to it that the mortgages default, as intended. This means that the servicers’ number one job is to force borrowers into foreclosure by any means, which includes posting their checks late; paying their taxes late; tacking late fees onto their accounts; crediting payment to the late fees before crediting their mortgage account with what’s left, thus assuring yet another late fee; tacking on insurance, even if it duplicates insurance the homeowner has already purchased; requiring in-house-performed services for yet more unexplained fees; harassing borrowers and threatening them with foreclosure if they fail to pay enormous unenumerated lump sums; etc.
This process of creating born-to-default loans implies a system to ensure massive numbers of defaults. The servicer system treats all customers alike: as prey to be forced into default, using strong-arm tactics. The mem of ‘deadbeat borrowers’ is a bank-created PR stunt meant to hide the truth about the banks’ own plan to force people to fall behind on their mortgages. And it was the banks that crashed the economy, leading to reduced income for millions, and millions more defaults. The housing bubble was the banks’ baby, and when it burst it helped fulfill the banks’ plan of massive defaults, triggering their mega-CDS pay-offs.
Sheesh! I forgot to list the credit card finger on that huge Bank arm. There is no end to the monopoly! Now they will be holding the homes and land of half of America is nobody stops them.
Agree that jail time is necessary. However, The headline is a little misleading, re: the placement of “only”.
which means they criminal fraud in mortgage finance will not end
So you can see what’s coming too.
Bingo!
Remember BP!!!!
I hold on the hope that the rule of law means something other than the rule of banksters.
We may not have a choice but to let them fail, because they took all the money last time. There ain’t no money left to bail them out again. In any case, it’s not going to be pretty.
Love your informative posts, massaccio, but you’re delusional. What rule of law? If you still believe in the rule of law, you’re the only person who does. When Thomas and Scalia are attending secret Koch brothers meetings to plot the overthrow of the government, rule of law is pretty much out the window, an arcane concept from the distant past.
Criminal
Fraud in Mortgage FinanceActivity In Executive Branch Will Only End With Prosecutionshow well did obama do with that headline?
ANSWER: about as well as he’ll do with the banksters.
Oh, so if the law is broken often enough by people powerful enough, that kills the rule of law in all of us? The law is being broken, therefore Law is dead? I respectfully disagree.
Does the rule of law inhere in the mechanisms and paraphernalia of the courts, such as stolen insignia of office that are then used as shields for acting under the color of law, or are those things merely the material manifestations of our lawful intent?
IMO, violations of principles don’t doom the principles, they doom the violators. Or would you also say that gay marriage undermines hetero?
Do we actively “do” our political economy, or does it do us? Obviously, this is a false choice, since it’s an iterative process (like everything else in the world). We make it even as it makes us.
As long as our better principles are alive in any of us, they’re potent and available, if only in seed form. In this regard, maybe you’d agree that we’re eating the seed corn of the rule of Law. Soon enough, there’ll be not a grain to harvest.
It’s a matter of sowing what we reap. The rule of law is only as strong nationally as it is to us individually. Are we going to be OK with getting ripped off as a way of life?
So folks, how many of us are moving our money out of banks?
The bigger question is, do we have choice in the matter? I fear not. The law is only what the SCOTUS says it is. Once Congress absolves the bad guys, once the executive branch refuses to prosecute, and once the SCOTUS rule against the individual, law is dead, except when it benefits the rich and powerful or the government oppressors. Then we’re left with nothing but the rule of bullets, but Americans will never go that route. Too pacified, and too out-gunned. As Randi Rhoades said on her program just a few days ago, “A gun ain’t much good against a Bradley fighting vehicle”. She ought to know, she served in the military.
Check out Obama’s new foreclosure fraud policy on the Huffington Post, the policy of N.O.P. (pronounced nope), NOT OUR PROBLEM!
http://www.huffingtonpost.com/
Prediction: Soetoro will retroactively grant immunity to the big banks to let the foreclosures go ahead unimpeded, and withdraw the pocket veto on the “Let the Big Banks Foreclose at Will” bill after the election.
I liquidated about 70% into precious metals last week. Year’s supply of food, water purifier, tools, generator, etc. Getting ready for the cataclysm.
Criminal Fraud in Mortgage Finance will never be charged against a bank – but lawyers like Stern in Florida are at risk.