naked capitalism

F. Beard says:

Well done, Yves! I am repelled by leagalise but you make it comprehensible.

miranda says:

Just heard the show which led me to this site. This is the first time I’ve heard the forclosure crisis explained so clearly and logically. Really did clear up a lot of misconception I’ve had…thanks, will have to read up on the rest of the info here!

Brian says:

Great show! I muted football for an hour for it. I’m biased by being a regular reader here, but I think that was fairly understandable.

AR says:

I ‘live-blogged’ while listening on iTunes @ 2PM on 88.5-3:

Yves on LeShow 12/5/10 http://www.harryshearer.com/news/le_show/

(I missed the first 5 minutes)

PSAs were never changed to accord w/MERS. But they couldn’t, because this would void REMIC tax status, AAA ratings, and BK remoteness.

MERS’ 2 functions: track MSRs; MERS members are servicers & FC Mills; Also: keep track of who owns the loan, but compliance is voluntary & no penalties if data isn’t inputted. So the ABCD transfers, if even done, weren’t always inputted. Only ~48 employees. EDS handles the database. MERS is almost virtual [of course, to avoid prosecution].

Claim the ‘MERS handshake’ ensures a transfer can’t happen w/out both sides agreeing, but docs have the signature of the same person as VP of both parties (conflict); and also transfers from a BK entity to the forecloser. (using robo-signers).

Investors being hurt by the FCs now (not reported by MSM, that blames deadbeats, saying they deserve FC). In other types of loans, lenders write down (Ch 11) to get at least something, rather than liquidate. A high % of borrowers could repay loan at a reduced rate, but over 70% losses from FCs now, so the mtg could be crammed down by 50% & investor would make money, so obviously the FCs don’t make sense except as the servicers make the money from FC. Investors don’t like to sue, but may have to, to get svcrs to modify.

Dual-track: Servicers gamed HAMP to force people to get delinquent for 90 days. On day 91 they start FC, and by day 120-150 it’s over, meanwhile bank sweet-talks as if they’re getting a mod, while they FC.

Linda Green. Very badly paid robo-signers. Affidavits = sworn testimony. 478 days to FC per WSJ. Banks aren’t FCing quickly due to REO inventory & taxes & maintenance cost. Obama Admin doesn’t want the perception of the right to FC to be questioned by stopping FC. But the slowing is by the banks to game the system. [Yves didn’t mention that fees are piling up during the default period, to be paid to svcr upon FC sale.]

% to investors: Under servicing agreement, svcrs must continue sending $ to investors, so FC stops this, but there’s a conflct. They don’t have to advance once the borrower is toast. Yves says they never set up their software with this equation, determining when the borrower is toast, so they’ve had to keep sending $. This is a big mess.

Media doesn’t cover this: only since robosigning scandal came out has this become widely known; FC-defense lawyers are dismissed, vs. banks which have credibility and media access. Media ignores FC-defense lawyers simply because they don’t make much $$, treats them like ambulance chasers. Eggert, Levitin, in Congr hearings are being taken seriously.

Prognosis: What do we do? Prospective fix can’t work because it’s all state-based ‘dirt law’ & SCOTUS has ruled it’s exempt from federal intervention, which could make more uncertainty if tried. Did securitization made this inter-state? FCs are handled locally. Couldn’t pass anything in this Congress (Shelby beating up on RK Arnold).

Modifications, deep principal mods, are required not 5-yr payment reduction plans. “Borrowers are more motivated to keep the house if they think they’ll have positive equity some day.” [This refutes Terry Edwards of FNMA, who stated (12/1/10 Sente Banking Cte hearing) that Families detach from the home @ 3-4 months of delinquency.] Streamlined principal mods could be done using NACA’s method at their fairs: borrowers sit down w/NACA person & work out a budget, determine what they can afford, then present this to the servicer, doing the job that servicers won’t pay staff to do. We need a template (need pressure on banks) to determine what mod levels are appropriate. Treasury won’t do this due to 2nds. There are enough state AGs on the case (pressuring the banks), that there’s some probability that we might see that as the outcome. Underwater borrowers don’t fight FC. People who fight FC are fighting svcr error or are in BK, & bank is trying to take the house anyway.

Where are the TARP toxic assets: CDOs. Convoluted. Structured so that some people got $ 1st, then when AAA got his all, then next guy would get $ (senior/junior). The riskier bonds weren’t sold (snout, hooves of the pig). CDOs are the unwanted parts, re-tranched, but all was junk, none was AAA. The banks wound up holding these, to game their bonus systems, or just couldn’t sell them. This is a big reason for the banking crisis. German Landesbank & other ‘stuffees’ got some of these junk CDOs: UBS, 2 French banks, Deutsche.

What about the 2nds? FASB change, ZIRP, makes all look better. Some of the CDOs are being unwound, sold in the market. Liquidations being done slowly. 2nds are bigger prob than CDOs.

Resolution? Like in 1980’s-90’s? Unwilling to admit TARP, etc. was wrong, so not likely to now go the Resolution route: separating good & bad assets. Receivership is seen as socialism. Strip out bad assets & find a way to liquidate them over time. Take the better parts of the bank & get it back into private hands w/new management & new board. Fire executives for cause.

Big Bank leaders now have more clout than the S&L guys, need more than 5 senators (Keating). 2nd-biggest contributor (after healthcare) to Congress. Revolving door. Regulators are captured, even the ones who think they are public servants. Geithner thinks he’s doing the right thing, he’s drunk the industry kool-aid & thus is worse than people who are cynical.

Securitization 20 years old, but exploded in 2000 due to Greenspan’s low interest rates & ARMs. Easy consumer credit substituted for living wage. Shoots to the moon starting in 1999. Saving rate ~0. FED rationalized this. Regulatory inattention to irresponsibility taking place (at banks/lenders? or consumers charging stuff?). Aggressive promotion of homeownership helped.

hermanas says:

Outstanding Yves, I closed my eyes and imagined it was the Jim Lehrer news hour, you and Harry created a comprehensible dialoge. Senator Lieberman’s on-air call perfectly illustrated how clueless are representatives are. Do it again.

YY says:

That was truly awesome! By far the best appearance you’ve made in interview format, and the best Harry Shearer show in the serious format that he’s occasionally ventured into.

M. LaRowe says:

Just heard you on NPR here in Ohio and I am so grateful to have been able to listen.

I worked in the mortgage industry for 2 of the giants (1 now taken over by the other) I worked in Post-foreclosure back in the mid 1990′s and then later I was an underwriter working with all those subprime loans back in 1999.

As an underwriter I knew even as the salepeople were calling and saying “buy as much as you can get your hands on” that something fishy was going on. Big money was being tossed about in those days and it didnt really make sense.

We underwriters werent really underwriters- just file checkers making sure the papers were actually in the files we werent even ALLOWED to reject a loan for too high of a DTI ratio etc. I knew there was a ticking bomb in there somewhere and that someplace there must be an economics professor who didnt care much for Alan Greenspan messing with the rates. (I know hindsite and all…) I just didnt know what to do with my theories (at the time that’s all they were). So I didnt do anything but get out of that business.

Fast forward to the present: a very dear person in my life was one of the financially scammed by the Builder/Lender they bought their home from. The became late in their payments and then were TOLD to skip payments so they could get a loan modification by the bank. They did also “lose” their paperwork at least once as you talked about today.

They are in their home still but lost every bit of their equity in the most ruinous loan modification I had ever heard of- they simple took all the fees & costs ($20K) and put it right back into the new loan.

There was a lot of pressure to sign right away and never any suggestion that any of the Obama plan (which we researched to know the details) would ever be a fit. Never. Not one attempt to actually mitigate a potential loss for anyone involved. It never made sense to me until listening to you today.

The borrowers are now back in the same position as before- almost unable to pay and about to slip behind (their position of hardship didnt change just the amount the bank now says they). It is all so incredibly unethical and I would say criminal.

But here the clincher — remember the Supreme Court ruling last January about campaign finances being private and all?

This last election in Ohio (with these new candidates coming on board next month) is tossing out our great Attorney General Cordray(who actually might have been able to take on these banks) and replaced it with a corporate-puppet Republican.

We also (and my neighbor knows him personally) have a new Republican Gov coming on board and he is one of the most heartless cruel money-driven people to ever take office. Mark my words.

Ohio is going to go right down the tubes and frankly plenty of folks are already suffering around here.

Not sure of what the next step is actually but I am saving my money the rainy day I am sure is still coming our way – I sense a storm.

Your talk today showed that you understand all of this so thank you for the many hours of work it must have taken to get the full picture both of the past and present.

Matthew Katz says:

This is an excellent interview, I just ordered your book and am thrilled to find someone else working hard on behalf of the working people who are getting defrauded by these banks left and right. Keep up this very important work!