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Quelle Surprise! Cursory Foreclosure Exam Produces Expected Whitewash of Servicer Abuses

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It is really annoying when people, particularly those in positions of power, can’t even be bothered to take the trouble to lie well.

As we noted back in November, in a post titled, “Foreclosure Task Force: Worse Than Stress Tests?“, the officialdom was embarking on yet another hollow exercise in oversight:

Felix Salmon reports on a conversation with departing assistant Treasury Secretary Michael Barr on newly-commenced reviews of the practices of bank servicers.

Barr’s patter might sound convincing to the uninformed. An “11-agency, 8-week review of servicer practices, with hundreds of investigators crawling all over the banks”! Promises to hold miscreants accountable! Banks required to fix what’s broken!

Felix was skeptical, noting that the reviews were effectively a “physician, heal thyself” approach to a part of the banking business that has proven to be unable to change behavior…

In addition, as Felix pointed out, if the exams were to uncover issues that might pose systems risk, the Treasury is certain to reason to minimize them…

This “review” is clearly a Potemkin exercise, yet another stress test-type charade, in which the facade of a serious investigation is used to sell the message that all is well in the banking industry.

We had a longer discussion of the process, as outlined in Barr’s testimony before the Financial Servicer Oversight Council and set forth five reservations, which we discussed at length:

Insufficient staffing and inadequate time

The regulators appear not know what they are doing.

The regulators are not talking to people who know where the dead bodies might lie.

These regulators have history of siding with financial services industry interests.

The process is not transparent

One illustrative tidbit: Barr made much of how much time the task force was going to spend on loan files. Not only are loan files not that informative for many borrowers (a low doc or no doc file will be thin; we were further told in the days of Tanta that the files were often incomplete), but the time allotted to examine each file was so preposterously high as to suggest incompetence or a concerted effort at benchwarming.

Things are playing out even worse than our cynical forecast. It turns out not Treasury, but the most bank friendly regulator, the Office of the Comptroller of the Currency, led this exercise. In Senate Banking Committee hearings today, Walsh did say that the exam found a small number of improper foreclosures and specifically cited those involving military personnel. Funny how the only concrete cases he’s willing to acknowledge are ones that have been the subject of hearings by Congressional committees that have nothing to do with the mortgage industrial complex.

To give you an idea how insulting-to-the-intellgence this is, Walsh in his live testimony said that servicers has standing to foreclose. Really? That sounds like a big whopper, given the large number of decisions to the contrary. And more counter-evidence came via a Bloomberg story today, which reported that a Bank of America unit in Utah that carries out roughy 4000 foreclosures a year is, according to the state attorney general, violating state law. Although this case is still in play, it illustrate the type of obstacles servicers are encountering in various states.

It is also clear that the review missed or chose to ignore critical issues plaguing foreclosures, such as the widespread failure to convey notes to securitization trusts as stipulated in the documents governing securitizations, the pooling & servicing agreement. From Walsh’s written submission:

….the OCC, together with the FRB, the FDIC, and the OTS, undertook an unprecedented project of coordinated horizontal examinations of foreclosure processing at the 149 largest federally regulated mortgage servicers during fourth quarter 2010. In addition, the agencies conducted interagency examinations of MERSCORP and its wholly owned subsidiary, Mortgage Electronic Registration Systems, Inc. (MERS), and Lender Processing Servicers (LPS), which provide significant services to support mortgage servicing and foreclosure processing across the industry.

The primary objective of the examinations was to evaluate the adequacy of controls and
governance over bank foreclosure processes, including compliance with applicable federal and state law. Examiners also evaluated bank self assessments and remedial actions as part of this process, assessed foreclosure operating procedures and controls, interviewed bank staff involved in the preparation of foreclosure documents, and reviewed approximately 2,800 borrower foreclosure cases11 in various stages of foreclosure. Examiners focused on foreclosure policies and procedures, organizational structure and staffing, vendor management including use of third parties, including foreclosure attorneys, quality control and audits, accuracy and appropriateness of foreclosure filings, and loan document control, endorsement, and assignment. When reviewing individual foreclosure files, examiners checked for evidence that servicers were in contact with borrowers and had considered alternate loss mitigation efforts, including loan modifications, in addition to foreclosure.

To ensure consistency in the examinations, the agencies used standardized work programs to guide the assessment and document findings of each institution’s corporate governance process and the individual case review. Specifically, work programs were categorized into the following areas:

 Policies and Procedures—Examiners determined if the policies and procedures in place ensured adequate controls over the foreclosure process and that affidavits, assignments, and other legal documents were properly executed and notarized in accordance with applicable laws, regulations, and contractual requirements.

 Organizational Structure and Staffing—Examiners reviewed the functional unit(s) responsible for foreclosure processes, including staffing levels, qualifications, and training programs.

 Management of Third-Party Service Providers—Examiners reviewed the financial institutions’ governance of key third parties used throughout the foreclosure process.

 Quality Control and Internal Audits—Examiners assessed foreclosure quality control processes. Examiners also reviewed internal and external audit reports, including government-sponsored enterprise (GSE) and investor audits and reviews of foreclosure activities, and institutions’ self-assessments to determine the adequacy of these compliance and risk management functions.

 Compliance with Applicable Laws—Examiners checked compliance with applicable state and local requirements as well as internal controls intended to ensure compliance.

 Loss Mitigation—Examiners determined if servicers were in direct communication with borrowers and whether loss mitigation actions, including loan modifications, were considered as alternatives to foreclosure.

 Critical Documents—Examiners determined whether servicers had control over the critical documents in the foreclosure process, including appropriately endorsed notes, assigned mortgages, and safeguarding of original loan documentation.

 Risk Management—Examiners determined whether institutions appropriately identified financial, reputation, and legal risks, and whether these communicated to the board of directors and senior management.

Can you see what a garbage in, garbage out exercise this was? This is all a limited review of the servicers’ internal records, with no external validation. This process is inherently incapable of capturing numerous abuses flagged in the media and in this and other blogs, including document forgeries (production of allonges to cover for the failure to convey notes correctly), loss or deliberate late application of payments; the application of “junk fees” and impermissible fee pyramiding; notes held at the originator rather than the trust (notice the failure to audit trustees), lack of cross checking of servicer claims re servicing with borrower experiences. The HAMP fiascoes alone, with repeated servicer false claims of document losses, should lead to serious skepticism about servicer claims about the integrity of their internal processes.

And it is also impossible for Walsh’s statement about standing to have any solid foundation without a 50 state review of foreclosure actions as well as a legal analysis of the New York trust theory discussed in Congressional hearings, Congressional Oversight Panel reports and on this blog. There is not evidence that any such review took place in either the original Treasury project description, the Walsh retrospective comments, or the staffing (which would require the involvement of considerable outside resources to even take a stab at the task in a mere eight weeks).

The banking regulators are so obviously corrupt or at best deeply captured that they no longer even do a remotely credible job of covering for their abdication of their role. And until the media starts to call them out on it, it is certain to continue.

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43 comments

  1. financial matters

    Nice ruling here. A major judge just pulled the rug out from under MERS and he completely understands the implications….

    http://www.businessinsider.com/new-yorks-us-bankruptcy-court-rules-merss-business-model-is-illegal-2011-2

    “”"United States Bankruptcy Judge Robert Grossman has ruled that MERS’s business practices are unlawful. He explicitly acknowledged that this ruling sets a precedent that has far-reaching implications for half of the mortgages in this country.”"”

    “”"In the scathing opinion, Judge Grossman variously labeled MERS’s positions as “stunningly inconsistent” with the facts, “absurd, at best”, and “not supported by the law”. The ruling is a complete repudiation of every argument MERS has made about the legality of its procedures.”"”

    “”"The only other hope is that Wall Street can call in its campaign contribution chips and get Congress to retroactively legalize fraud. That is what they do in those dictatorships that protestors are now bringing down in the Middle East. Is Washington willing to take that risk, just to please its Wall Street benefactors?”"”

  2. za

    You can see, they’re simply going to trample centuries of property law in order to conduct a MERS whitewash, and there’s not a damned thing to be done about it.

    I don’t know why I ever bother to get angry anymore. Whatever benefits the banks is what will happen.

  3. olddeadmeat

    It’s sad to say that it may be only the judiciary that can salvage anything from this mess. But they only get to be involved after the train wreck.

    I would really like to see some RICO actions brought against all these players – it sure looks like a criminal conspiracy to me, and gee, wouldn’t it be nice to name some of these bootlicking “regulators” as co-conspirators?

    Just an idle dream….

  4. steelhead23

    OK, It is time to go Egypt on them right freakin now! What is needed is for us to gather in DC, demanding prosecutions, and not go home until we get them. That is what it is going to take – and its high time we did it. Non-violent protest is where its at. Not for a day or two, but as long as it takes. Let’s roll.

  5. financial matters

    Where is this headed??

    I don’t think people will get free homes.

    Banks definitely needed a shot across the bow.. I think the control fraud at the highest levels of management needs to be aggressively prosecuted. And the huge bonuses generated by this fraud should be clawed back. Also I think the Treasury needs to focus more on being homeowner friendly than bank friendly. Some people definitely are way over their heads and need to be foreclosed on. But I think we should be seeing aggressive principal modifications that bring the principal more in line with current market value of the homes. This would definitely improve the situation of millions that are underwater with their equity and get them paying at least something to the banks.

    The banks will be/are essentially insolvent and need to be taken into receivorship. Many of their securitization products are fraudulent and they will be forced to buy them back at much reduced prices. The people they ripped off are major players.. ie pension funds, insurance companies, foreign governments etc. Also they will owe large bills to the IRS for misrepresenting these funds and will owe large fees to county governments to get the properties properly accounted for.

    The money for this should come out of both the shareholders and bond holders of banks losing their investments…

  6. Homeless Dissent

    Compelling Steelhead, but look at how they manhandled McGovern (http://www.justiceonline.org) -

    “As Secretary of State Hillary Clinton gave her speech at George Washington University yesterday condemning governments that arrest protestors and do not allow free expression, 71-year-old Ray McGovern was grabbed from the audience in plain view of her by police and an unidentified official in plain clothes, brutalized and left bleeding in jail.”

    This wasn’t about housing and banks, but there is little separation when one follows the money.

  7. Dave of Maryland

    If it’s not been reported before, we’re back to liar loans, all over again.

    A month ago Chase – my servicer – sent me details of their latest refinance scheme. When I failed to respond, this week they sent me a FedEx Overnight envelope with more details. When I failed to respond to that, yesterday they phoned. With an offer they don’t think I can refuse:

    A full 1% interest rate deduction. No income check (“as long as you make $1.00 a year” – that’s a quote), no appraisal. No fees of any kind. (Enumerated, in writing: No origination, no appraisal, no title insurance, no attorneys, no settlement or closing, no notary, no flood determination, no overnight, no title search, no recording, no tax stamps.)

    All I need to start the process? A pro-forma copy of my 1040, and the relevant page of my homeowners insurance policy.

    Needless to say, when bankers come bearing gifts, it scares me to death.

    Anybody have any idea what’s up?

    1. Karen

      Interesting… the cynic in me wonders if they’ve identified your loan as one on which they probably can’t foreclose.

      If you sign a new loan, then they can process the papers correctly this time and thus trade the old, effectively unsecured, loan for a new secured one.

      Which state do you live in?

      1. Dave of Maryland

        I live in Maryland, which is a non-judicial foreclosure state, if I understand that correctly.

        So far as getting the documentation done right this time, I’ve not seen anything on line that suggests that MERS has been abandoned by the major banks. I presume they’re still blundering along making a mess of property records.

        What terrifies me is that there will be something hidden in the fine print of a 30 year fixed mortgage that will let them jerk the property from me in a year or two, sell it for the going rate, pocket the proceeds & render me & my family homeless.

        I am otherwise puzzled why they are insistent on refinancing. How, exactly, do they make money on this? How, exactly, do they recover the real expenses of the process? (As opposed to their usual inflated fees, of course.) They claim it’s ‘cuz there are all those other fly-by-night refinancing guys out there, but if there are, why should Chase care? They never cared about that before.

        It smells.

        1. Karen

          You definitely want to see everything nailed down in writing (“good faith estimates” not good enough!), and if after your own read-through you think it looks like a good offer, you could hire a real estate lawyer to go over the documents with you (and compare them to your current mortgage), just to make sure.

          If you think mortgage default isn’t likely to be a problem for you (you have a secure job and adequate savings), then lowering your interest rate might be worth doing.

    2. olddeadmeat

      Karen may be on to something. If they offer you something sweet, it may be to cover up a screw-up.

      Do not sign any paperwork the first time they give it to you, especially if they are eager for you to do so.

      Look at the offer, review it carefully and see if you can figure out what they are trying to fix.

      Once you know that, then you know what you may be giving up by taking their offer.

      1. Dave of Maryland

        Don’t know about the GMAC thing. I’m not in foreclosure, I’m current, have always been current, have never missed a payment, have never been late, this going back over three mortgages & ten years.

        So far as covering up a screw-up, that would only come to light if I was in foreclosure & fighting it & maybe winning. That’s not the case. They have no reason to think my mortgage (from December 2005) is any more screwy than the next.

        So far as looking carefully at the offer, that’s the old switcheroo. Been there, done that with equipment lease/purchase. If I go ahead with this (I’m doubtful), the actual contract & a notary will arrive in three weeks. To their surprise, I will take the contract, wave them goodbye, and spend a week going over it, in detail. Only then sign.

        Current mortgage is 6.375, which, traditionally, isn’t too shabby. They’re offering 5.375. I did a bit of Googling & found someone with an identical offer who had a 15 year note at 4.75. Chase offered them 4.0. See it here: http://housingstorm.com/2010/08/jpmorgan-offers-us-a-chance-to-refinance-at-4-with-no-closing-costs-whats-going-on/

        This isn’t dated, it might come from last November when rates briefly got to 3.5. Mish’s response was to take it while you can. I’m still skeptical. Note that they, like me, have a lot of equity in the house. That might be what’s of interest, if the ultimate goal is to steal the place.

        But it tells me the one percent reduction was what they thought I would go for, not what the market might actually be. On my mortgage, 1% is about $130 a month.

        If I hold out, do you suppose they will go to 5, or 4.5 – ? I might just find out.

        1. Cherry Picker

          December 2010? Hmmm, what part of Maryland do you live in, and why have you continued paying? 10Ks Marylanders are either fighting or haven’t sent another penny to the mother fucking bank. Are you for real? What does the interest rate have to do with it? I’d suggest that if you are “wealthy”, it means something different then to someone who is making about 20-50K per anum. (Either way – both “groups” need housing.)
          Not a put down, but if you’re in East Baltimore or some suburb outside of DC, values have plummeted by 30-50%, it’s a bit like the Passover, where some of the existing housing stock was used as a lie/weapon. But in Chevy Chase and Bethesda, where the relatively wealthier/rich folk are, where the alternate universe of property values exists, a different rationale pervades.

    3. Ian

      Dave- I don’t know who owns your mortgage or deed of trust,or who claims to own the note. I would think that your loan kicked out of some database identifying it as problematic as far as clear title, actual securitized trust inclusion,or similar. I am assuming that you will have to sign something to kickstart the process, and when you do, you will be validating the mortgage debt, which is probably unsecured,and may be uncollectible.

      1. Dave of Maryland

        After thinking about it, best I can make out is that Chase is eager to churn mortgages to generate more crappy derivatives they can sell to the usual suckers. There’s lotsa money in that. And there’s also a rush to get the deals done now, before the next financial explosion.

        In an effort to make those derivatives attractive, they’re eager to refinance guys who have large amounts of equity. Chase knows the original purchase price, the amount mortgaged, and the amount remaining. (The guy quoted all three numbers to me.) Easy to make a program spit that out. The final result will be triple-triple-triple AAA junk, but it will still be junk.

        Might be – probably will be – all sorts of “we know better now than we did then” provisions in the new contracts. None of which will favor me, as you point out. But none of which will produce a valid title at the county courthouse. That horse has already bolted. The “mortgage” won’t be a mortgage. It will be an unsecured loan. And even if you don’t lose the farm, those are still plenty nasty to default on.

        So they want me a lot more than I want them. Ball’s in my court. I can afford what I’ve got. I want something under 5%.

        1. AR

          Don’t forget that they can force you into a servicer-induced default and take your house anyway.

          I have friends with a Chase mortgage with only $38k remaining on it. I’ll find out if they’ve gotten one of these offers. They’re not home right now.

          What I still don’t understand is that in all likelihood Chase doesn’t own the notes on these mortgages they’re offering refinancing on, so how does this work, that they can refinance loans out of the blue, but they can’t do loan mods because ‘the investors’ won’t agree to it? Is this a way to steal the loans from the ‘trusts’?

        2. AR

          I spoke with my friends, and they haven’t received one of the new refi offers from Chase. They had received an offer last year @ 4%. I don’t know why they turned it down. Maybe closing costs? I didn’t ask.

    4. chris

      Yeh the probably don’t have your original document and they are trying to figure out how to get you to sign a new loan so they can have some collateral.
      The banks are scamming everyone, they repeatededly say they don’t want more houses but they won’t even restructure loans with qaualified borrowers with the HAMP program.
      The Banks are steam rolling people in mediations, even when people have a lawyer.
      The Hamp program has just created a way for lawyers to collect hudge fees to represent homeowners in mediation and for lawyers to mediate and get more money as mediators when they don’t have their own clients.
      Spoke with someone going through it this week. It is unbelieveable what the banks are doing , what the lawyers are charging to show up for an your and tell you probably nothing will get done. Only 2500……check out the full story here http://financialrealityrevisited.blogspot.com

      1. EMIchael

        All of nefarious things could be true, but there is another explanation. F&F(where they were the investors) had a refinance program for years that was a no doc loan that only required no late payments for 12 consecutive months.

        I am not saying this is the case for Dave, but it could just be an attempt from Chase to make money on a refinance without any of the nefarious reasons given(which I admit could be true.

        Take the savings the lower rate gives you and the cost of the loan on the GFE and figure out if it makes sense.

  8. salesanalyst

    “…in the days of Tanta…”

    Thank you for mentioning her. I got a majority of my mortgage industry education (and more than a few great chuckles!) from her wonderful writing at CR.

    Those days seem like such a long time ago.

  9. Disgusted, depressed & discouraged

    Doesn’t matter how much reality, facts and truth out there, it is same old ‘extend and pretend’ by those in powers including captive regulators.

    The more I read and get educated the more I feel, I am in the minority of readership here and apparently majority are happy with the perception spin and the rising stock market!

    Just SURREAL!

  10. Mary Cochrane

    Servicer’s don’t have Standing to foreclose.

    Wells Fargo Bank NA SERVICER employees of a United States National Bank, pulls out an Assignment when a default event is triggered which will be related to a trust thru which a substitute TRUSTEE will attempt reconveyance of mortgage purchasing bad debt back for bank. WHY? To hide the origination fraud which would otherwise be revealed.

    The OCC has supervisory powers over select duties and ignores unlawful business acts. I can make that statement holding Congressional Inquiry #854370, 1/20/2009, opened by Congressman Rodney Frelinghuysen, still Active thru which the OCC admitted after 18 months later the OCC is without authority to adjudicate the alleged unlawful business matters.

    May 2010 Congressman Rodney Frelinghuysen requested that the FBI investigate.

    Meanwhile, after careful research I found so you will find too, that the origination funding deposited into the Settlement Agent’s account is from the ‘BUYER’ of the promissory note and the SELLER in conveyance of the mortgage is the MASTER SERVICER of the TRUST.

    How hard would it be for every Consumer in foreclosure where the Assignment and legal documents filed with the court can be used to prove the party before the court is without Standing (not the lawful party owned the money).

    Does the copy of the Cashier’s Check Statement of the Funding from the BUYER reveal to the Court that the party before them is without standing as the SELLER of that promissory note! I say yes.

    “It turns out not Treasury, but the most bank friendly regulator, the Office of the Comptroller of the Currency, led this exercise. In Senate Banking Committee hearings today, Walsh did say that the exam found a small number of improper foreclosures and specifically cited those involving military personnel. Funny how the only concrete cases he’s willing to acknowledge are ones that have been the subject of hearings by Congressional committees that have nothing to do with the mortgage industrial complex.”

  11. Mary Cochrane

    Naked Capitalism
    Aurora Advisors are you related to Aurora Capital Group?

    Copyright © 2006, 2007, 2008, 2009 Aurora Advisors Incorporated

    All Rights Reserved

    Aurora Advisors, a management consulting firm, has an eighteen year record of successfully completing a broad array of assignments for sophisticated clients, ranging from Fortune 100 companies, leading international banks, and Forbes 400 families to private equity firms and substantial individual investors. We enable managers and investors to resolve complex, difficult problems quickly and efficiently.

    Our areas of expertise include financial services (hedge funds and alternative investments, wholesale banking, derivatives, asset management, treasury, securities businesses) and corporate finance advisory (industry assessment, valuation, business due diligence, post-merger planning).

    NYS Department of State
    Division of Corporations
    Entity Information
    The information contained in this database is current through February 17, 2011.

    ————————————————————
    Selected Entity Name: AURORA ADVISORS INCORPORATED
    Selected Entity Status Information Current Entity Name: AURORA ADVISORS INCORPORATED
    Initial DOS Filing Date: JULY 01, 1998
    County: NEW YORK
    Jurisdiction: NEW YORK
    Entity Type: DOMESTIC BUSINESS CORPORATION
    Current Entity Status: ACTIVE

    Selected Entity Address Information DOS Process (Address to which DOS will mail process if accepted on behalf of the entity)
    C/O SWEENEY LEV & BLINKOFF
    708 THIRD AVENUE – 14TH FLOOR
    NEW YORK, NEW YORK, 10017
    Registered Agent
    NONE

    Name HistoryFiling Date Name Type Entity Name
    JUL 01, 1998 Actual AURORA ADVISORS INCORPORATED

    Stock Information# of Shares Type of Stock $ Value per Share
    200 No Par Value
    *Stock information is applicable to domestic business

    Registrant
    Office Address Map…
    Aurora Capital Group
    10877 Wilshire Blvd Ste 2100
    Los Angeles, California 90024
    U.S.A.

    Issuer Aftermarket Technoloy Corp
    Filing Agent Merrill Cor-MD

    1. Yves Smith Post author

      No there are a lot of Auroras. This one is Aurora Advisors. I regularly get calls thinking this is a hedge fund.

  12. Mary Cochrane

    Aurora Capital Partners LP, et al. · SC 13G/A · Aftermarket Technology Corp · On 2/17/98 · EX-99.A
    Filed On 2/17/98 · SEC File 5-50227 · Accession Number 898430-98-625
    in this entire Filing.an “object” Search. Show Docs searched and the 1st “hit”.every “hit”.
    Help… Wildcards: ? (any letter), * (many). Logic: for Docs: & (and), | (or); for Text: | (anywhere), “(&)” (near).

    As Of Filer Filing On/For/As Docs:Pgs Issuer Agent

    2/17/98 Aurora Capital Partners LP SC 13G/A 2:41 Aftermarket Technology Corp Donnelley R R & S..05/FA
    Aurora Advisors, Inc.
    Aurora Capital Partners LP
    Aurora Equity Partners L/P
    Aurora Overseas Advisors, Ltd.
    Aurora Overseas Capital Partners L.P.
    Aurora Overseas Equity Partners I/L/P
    General Electric Company
    General Electric Investment Corporation
    Gerald L. Parsky
    Richard K. Roeder
    Richard R. Crowell
    Trustees of General Electric Pension Trust

    ——————————————————————————–

    Amendment to Statement of Beneficial Ownership · Schedule 13G
    Filing Table of Contents
    Document/Exhibit

    EX-99.A Description of Certain Relationships

    EXHIBIT 99
    ———-
    DESCRIPTION OF CERTAIN RELATIONSHIPS

    Aurora Equity Partners L.P. is a Delaware limited partnership (“AEP”).
    The general partner of AEP is Aurora Capital Partners L.P., a Delaware limited
    partnership (“ACP”). The general partner of ACP is Aurora Advisors, Inc., a
    Delaware corporation (“AAI”). Messrs. Crowell, Roeder and Parsky are the sole
    stockholders and directors of AAI, are limited partners of ACP and may be deemed
    to beneficially share ownership of the common stock, par value $.01 per share
    (the “Common Stock”), of Aftermarket Technology Corp. (the “Issuer”)
    beneficially owned by AEP. Aurora Overseas Equity Partners I, L.P. is a Cayman
    Islands exempted limited partnership (“AOEP”). The general partner of AOEP is
    Aurora Overseas Capital Partners L.P., a Cayman Islands exempted limited
    partnership (“AOCP”). The general partner of AOCP is Aurora Overseas Advisors,
    Ltd., a Cayman Islands exempted company (“AOAL”). Messrs. Crowell, Roeder and
    Parsky are the sole stockholders and directors of AOAL, are limited partners of
    AOCP and may be deemed to beneficially share ownership of the Common Stock of
    the Issuer beneficially owned by AOEP. AEP and AOEP are hereinafter referred to
    as the “Aurora Partnerships.”

    Certain stockholders of the Issuer have granted to the Aurora
    Partnerships an irrevocable proxy pursuant to which the Aurora Partnerships can
    vote the shares subject to the proxy in such manner as the Aurora Partnerships
    shall determine in their respective sole and absolute discretion. Each proxy
    terminates upon the transfer of the subject shares.

    With limited exceptions, the Trustees of the General Electric Pension
    Trust (“GEPT”) have irrevocably agreed to vote all shares held by the GEPT in
    such manner as the Aurora Partnerships shall determine, to such extent as its
    fiduciary duties under the Employee Retirement Income Security Act of 1974
    (“ERISA”) shall allow. This provision terminates upon the transfer of such
    shares. General Electric Investment Corporation (“GEIC”) acts as investment
    adviser to GEPT and thus shares in GEPT’s voting and dispositive power. General
    Electric Company (“GE”) reports whenever GEIC, its wholly owned subsidiary,
    reports, although it disclaims beneficial ownership of any and all shares
    beneficially owned by GEIC. GEPT, GEIC and GE are hereinafter referred to as the
    “GE Entities.”

    In light of the relationships shown herein, each of the Aurora
    Partnerships, their respective control persons and the GE Entities hereby agree
    to file this Amendment No. 1 to the Schedule 13G filed on behalf of each of such
    persons on February 14, 1997.

    1. Yves Smith Post author

      No, there are a lot of Auroras. And why would that bunch have any interest in a small management consulting firm? Money managers have no interest in owning management consultants, trust me on that one.

      A lot of databases suck and you really should not trust them, particularly ones that assemble non-public information. I once had all three credit agencies merge my identity with someone at a different address, name with a different middle initial than mine, and a DIFFERENT SOCIAL SECURITY NUMBER. The records all showed 2 SSNs, which meant either one could pull a credit report and establish phony credit in the name of the other, or even use the other’s credit cards (very easy then for big retailers, just give them you name and show an ID, they’d charge it to your store account). I called all the retailers and they were horrified and immediately writing to the credit bureaus to get it fixed. By contrast, the credit bureaus couldn’t give a damn (I did because aside from the risk, the other woman’s credit sucked). It took multiple nastygrams for my attorney to get any action.

  13. Bravo

    Captured regulators, yes indeed. Akin to a flock of chickens courting the favor of a family of foxes guarding the status quo with a legion of lobbyists and congressmen to herd those wayward chickens to their ultimate reward.

  14. steve sharpe

    Yves is entirely correct as usual… A revolution based on the principles of continuous democracy might begin to address the high levels of corruption, fraud, asset tunneling, etc.

  15. Francois T

    Whitewash looks like it is a popular option among America’s powerful. Here is another example (but it only concerns those irrelevant and quaint civil liberties) of any criminal charge was dutifully rendered by a servile federal judge in the Padilla case.

    http://www.salon.com/news/opinion/glenn_greenwald/2011/02/18/justice

    In both instances, we can witness a depressing yet familiar theme; those at the top are immune for the consequences of their actions, no matter how egregious.

    Remind me again where are our Constitution lovers now?

    1. Francois T

      Ask yourself how long will we be able to even discuss financial malfeasance freely when:

      [...] our political officials are Too Important, and engaged in far Too Weighty Matters in Keeping Us Safe, to subject them to the annoyance of the rule of law. It’s much more important to allow them to Fight The Terrorists without restraints than to bother them with claims that they broke the law and violated the rights guaranteed by the U.S. Constitution. That’s the mentality that has resulted in full-scale immunity for both political and now private-sector elites in a whole slew of lawbreaking scandals — from Obama’s refusal to investigate Bush-era crimes or high-level Wall Street criminality to retroactive immunity for lawbreaking telecoms and legal protection for defrauding mortgage banks.

      They’re positioning themselves to be above any law. The next step is obvious: no one can be allowed to even try to make us accountable. Those who try…

  16. Ray L Phenicie

    From the earlier report on this issue, Foreclosure Task Force: Worse Than Stress Tests?

    The intent, as with the ASF, is to create the impression at the same time meaningful probes are on that the supervising adults really do have matters in hand, and therefore there is no reason for the public to worry its head about these matters.

    Searching the news for ‘securitization of mortgages’ and reading a sample of the articles would leave one with a completely different picture of what is going on inside of the securitization process. In fact any clear picture of the securitization mess is simply not to be found except NC and possibly Creditwritedowns.com. Securitization, to this casual observer appears to be an experiment gone really bad. It is something that should have been kept on a very small sale and observed closely before it was let loose on the world.

    But the same thing was done with nuclear power.

  17. nonclassical

    THANK YOU FRANCOISE for bringing it all back to a complete lack of oversight, transparency, accountability by Obama..who PROMISED Americans an entirely different version of reality..

  18. chris lahaie

    I am so disgusted with the entire TBTF banks and the politicians that showing the banks with cash. Bank of America is putting out massive propaganda campaigns claiming they are working with home owners. Apparently it is just a smoke screen because in Nevada they are more willing to take back homes and lose hundreds of thousands of dollars rather than reduce principal or defer balances. It is crazy. I have seen examples of property being underwater by 350000 and rather than work with borrowers that are willing to accept the full balance of a mortgage. So many people were laid off or income was cut here that there are multiple cases where B of A could have restructed loan with out principal reduction and used a defferal of part of the balance and collect it when the house was sold. The banks are being completely illogical when they could be getting income at a lower rate by extending the mortgage placing a portion of the loan on the end. They would rather continue to drive home prices down, move people of of their homes and take on management costs and upkeep of empty property rather than give help to prperty owners.

  19. Ray L Phenicie

    What I meant to say in relation to my post above, (note to self-never post anything after 10pm)is that this whole mess shows how the administrations of Bush and then Obama, (Mr. Obama-Bush)were unwilling to enforce the rules that are on the books because of a connection
    with
    the big campaign supporters inside of the financial sector.
    These campaign contributions are nothing more than bribes and both Mr. Bush and Mr. Obama performed will for the conglomeration of thugs who set them up in office. This whole scenario of bust and boom in our recent past is a result of the thuggish style of government that has become the norm since say, oh, maybe around 1976 -preceded by the greatest trickster known to American history, Richard Nixon.

    However Congress has a long history or complacency as well; for that one would need to go back to the abnegation of its duty that Congress suffered in the rushed attempts to overcome the huge problems set up by another era of boom and bust that ran from the railroad failures of the 1870′s to the swelter of speculation that ramped up to the Great Depression of the 1930′s.

    Seems the financial sector and big business in this country (and elsewhere) have a regular habit of sacking this country from time to time by turning everybody upside down and shaking them down for all of their loose change.

  20. Ray L Phenicie

    I guess I am somewhat obsessed with this topic.
    Could someone correct me if I am wrong on this aspect of the securitization process –
    When the homeowner does in fact default on the mortgage (in other words a genuine default not the fakey claims made by the service industyr), are not the servicers required to pass the payments made on the Principle and Interest over to the trustees? Seems to me I saw this on one of the connected links here but I can’t find it now.

    If this is indeed the case, then there would be a perverse motivation to never have the paperwork correct (having signatures actually run down to the courthouse where the actual deed is housed) so there would be a lot of weasley wiggle room in the whole process the would benefit the perps.

    1. Ray L Phenicie

      I just found what I was looking for here

      The real problem for servicers is not just a desire to make more money but their almost total inability to comply with HAMP. The problem with the HAMP plan is that it fails to take into account the normal obligations of servicers under their respective Pooling and Servicing Agreements. In most cases, a servicer is obligated to advance to the Trustee for the securitized mortgage trust the monthly principal and interest payments for every loan that has defaulted. This can be a massive monthly financial obligation. Most servicers are not allowed to recover these “P & I Advances” until the property is foreclosed and then sold as Real Estate Owned (REO). More importantly, HAMP forces mortgage servicers to act as “full-document” mortgage loan originators. Most mortgage servicers have no experience, training or knowledge about how to originate a mortgage loan. Yet, this is exactly what HAMP is asking them to do. The $1,000 HAMP modification fee and the annual $1,000 success for performance HAMP fees do not even begin to cover the expenses the servicers must incur in order to fully comply with the HAMP “origination” rules. As a result, the so-called “financial incentives” for servicers to modify loans are totally unrealistic and fail to take into account how this system really functions.

      1. AR

        I keep thinking about servicer behavior as well.

        First, think about the fact that the banks aren’t big on making money the old-fashioned way, a little bit at a time over a long period of time. They prefer making lots of fast money via fees, jiggered books and bonuses. So think about how the servicers, under the PSAs only make a fraction of a percent per performing loan, but mega-fees on defaulted loans. Why would they keep accurate books when keeping sloppy books makes it easier force loans ito default and start jacking up the fees?

        Yves says the PSAs were not rewritten for the current crop of MBS, to take into account the present situation in which large numbers of subprime and other equivalent types of risky mortgages were sold into the trusts, thus the burden of having to make remittances on more than the usual percentage of defaulting loans. But that can’t really be a burden, because the banks intentionally induce defaults, knowing they have to continue remitting those missed payments out of their own accounts, or do they? Is it possible that the remittances are really coming out of the investors’ own purchase money, and are meant to hide the fact that the trusts are actually empty, and the mortgages sold multiple times into different trusts. We’ve already learned that that was done, so there had to be a plan to remit money from somewhere to make up the payments due on those doppelgangers.

        The banks have insisted that they couldn’t modify loans because the investors wouldn’t agree to it. But we know from numerous cases now that the banks never even asked the investors. Is that because they would have had to ask investors in more than one trust, because the loan had been sold more than once? What if one trust said no, and another one said yes, go ahead and modify the loan? But the loan schedules for the trusts don’t even list the loans by address or borrower name, only by zipcode. Is that done to disguise the fact of the multiple sales of the same mortgage? If they were listed by address and borrower, then anyone could find out that a particular mortgage had been sold into more than one trust by checking the SEC filings. I don’t think the servicers could contact the trusts about particular mortgages for this reason.

        So, how do the servicers make their money back? At foreclosure sale. They set a minimum bid in the amount of the remaining ‘balance’ of the loan, which is often highly manipulated, padded with thousands of dollars in bogus fees. In whose name do they file the foreclosure? MERS? The servicer’s name? It varies, and some have even attempted to foreclose in the name of a fictitious trust. Many Fannie loans are initiated in the name of the servicer parent bank, or other bank, not even the trustee bank. Why? It’s my theory that when the houses are sold that the trusts never see any sale proceeds at all. The bank jiggers the books to retain the full sale price. In many cases there are no bidders, and the bank ‘buys’ the house via a ‘credit bid’ which is just a bookkeeping entry in the amount of the remaining mortgage ‘balance’. How can they afford to do that? They take that amount out of the MBS, is my guess, or several trusts that supposedly owned, collectively, the same mortgage. Or Fannie had already bought the MBS it was in and pays the bank. There’s also the Indymac/OneWest/FDIC scam: http://www.youtube.com/user/fiercefreeleancer

        Every aspect of the mortgage servicing industry favors foreclosure for maximum profit. This entire housing bubble and rip-off securitization scam was not intended to earn slow money over 30 years. It was always intended to make quick pay-outs, like Magnetar. The flurry of foreclosures is part of the plan for quick money, before another shoe drops and it all blows up somehow. This is a bust-out of the US middle class.

        p.s. Treasury admitted at the 8/22/10 blogger meeting that it created HAMP intentionally to space out foreclosures, not to modify loans.

  21. Just Money

    Remove all your money from the banks. Pay all your bills in cash. Jzoin a credit union for those out out town bills.

    Sell your house to pay off your mortgage or walk away if your under water.

    Get out of debt!

    Remove ever penny from your retirement find a hardship reason. Invest instead in local businesses. Lock in a long term lease and get a discount for paying a few years in advance. Try and find a home or land owner that owns outright and offer them a land sale contract. Do not pay them interest rather offer them a sliding scale payment tied to inflation. Pay as mmuch down ehile leaving 6 month of cash reserves

    Join a CSA and check out their fanancial statement and if it is`sound, offer several year up front to lock in your food prices. Buy as much food that you can store. Food prices will inflate. Find a job closer to home or work from home. Get off the grid, install geothermal, solar, hydro and biomass energy.
    Don’t buy any food that comes in a box.

    Basicly get out of evil money and invest long term in local supplier to become sustainable and inflation proof.

    Trade in Federal Reserve notes for JUST MONEY try 10% to diversify risk this money is backed by food so you investment will tract food prices. As we grow and deversify by making loans to other small businesses the you could invest more if your in Maryland.

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