Bank Disinformation I: PR Machine in Overdrive on Foreclosure Fraud Front

A DC contact warned me last week that the banks were readying a massive pushback on the foreclosure crisis. It went into full swing over the weekend.

Obama, admittedly through his proxy, David Axelrod, threw his weight in behind the banks on Face The Nation:

Q: I guess the first question I would have is does the administration favor some kind of national moratorium on these foreclosures to get this all sorted out?
A: First of all, Bob, it is a serious problem. It’s thrown a lot of uncertainty into the housing market that as you know is already fragile. It’s bad for the housing market and it’s bad for these institutions which is why they’re scrambling now to go back through their documentation for all of this as they should. The president was concerned enough to veto a bill that came to him last Thursday that would have unintentionally made it perhaps easier to make mistakes. so we are concerned. We’re working with these institutions. I’m not sure about a national moratorium because there are, in fact, valid foreclosures that probably should go forward and where the documentation and paperwork is proper. But we are working closely with these institutions to make sure that they expedite the process of going back and reconstructing these and throwing out those that don’t work.
Q: I mean, I guess people are worried about what do you think the impact this is going to have on an economy that’s pretty shaky right now?
A: Look, our hope is is that this moves rapidly and that this gets unwound very, very quickly and that if they can go back, reconstruct their paperwork and what we’ve stressed to them is that they need to expedite that process and work very, very quickly to get it done. we’re going to continue to push for that.

Yves here. The sense of priorities is astonishing. Axelrod repeatedly stresses the need to get “this” resolved quickly. Notice the refusal to use accurate and honest language: at best, these are improprieties, but the more accurate word is fraud.

The emphasis is NOT on doing things correctly but on the need for haste. Yes, there is what amounts to an aside on the need to have “proper” paperwork, but that is more an assertion that some foreclosures aren’t afflicted by doubts over the securitization trust that supposedly owns the note, the borrower IOU, actually having taken the steps to prefect its rights.

And this is simply a variant of the spin the banks have tried since the affidavit mess surfaced: that this is a mere “paperwork” problem. As we commented earlier in the weekend, that’s utter bunk. First, even the supposedly minor manifestation, that of “improper” affidavits, is a fraud on the court. And it hasn’t just been taking place in the 23 judicial foreclosure states; it has also taken place in non-judicial states every time a foreclosure is contested. Second, the banks and their mouthpieces are being disingenuous in implying that they merely need to find the right parties and redo the affidavits. Some states, like South Carolina, are very strict on procedures; they disbar lawyers who screw up residential real estate closings (the logic is if a lawyer can’t handle something that simple, he has no business practicing law). The lawyers involved in providing these bogus affidavits to the court ought to be subject to sanctions; some judges may require cases to be refiled. Not only is this a big operational hassle; there are judges who take the propriety of their court seriously and may not be terribly accommodating when banks try resubmitting affidavits.

And that’s before we get to elephant in the room, namely, the affidavit “improprieties” are a mere symptom of much deeper problems, namely, with the failure of the key parties in the original securitization (the originator, the investment bank packager, and the trustee/custodian) to make sure all the contractually-stipulated steps were taken to make sure the trust actually got possession of the properly-endorsed note and related documentation.

Another bit of bank-defending rubbish was in the Washington Post over the weekend (the intensity of coverage in the WaPo is a function of bank industry efforts to get its message out). Even though the headline wasn’t too awful (“Government had been warned for months about troubles in mortgage servicer industry“), it was a defense of the Administration’s failure to bring servicers to heel. The core argument is Treasury party line; Geithner took exactly the same position in the blogger meeting last August:

In an interview this week, a senior administration official confirmed that the White House and Treasury Department had received warnings that the mortgage industry employed inexperienced staffers to oversee foreclosures, had problems handling documents and communicating with borrowers, and often failed to comply with regulations.

But the government had struggled to address shortcomings in the industry, the official said, because the administration was also seeking the servicers’ help with modifying the home loans of millions of borrowers to help them avoid foreclosure.

In addition, a Treasury official said the federal government’s power to tackle problems in the servicer industry is limited because foreclosure law is largely the domain of states.

Yves here. We are supposed to take this seriously? Any regulator with guts could very quickly make life miserable for the servicers if it wanted to. If they were to threaten investigations on, say, issues where there is clear evidence of servicer problems that really ought to be cleaned up regardless (the gaming of HAMP and other mod programs, plus illegal application of payments to fees first rather than principal and interest, or servicing errors generally are all ripe targets), they would easily unearth a lot of poor practices that could be used to gain leverage over uncooperative banks. And the point would not be even to make the investigations, but to have a staredown with the banks and make it clear that if certain things didn’t happen that were in everyone’s best interest, there would be consequences. This isn’t about lack of leverage, as the Treasury falsely contends, it’s an unwillingness to inconvenience the industry.

And below is the text of a letter making the rounds on the Hill. This is simply dishonest. First, note the complete lack of mention of the foreclosure crisis; this is an effort to divert attention from the real issue, the mess the securitization industry has made of the housing market at pretty much every step of the process, from ginning up bad “spready” loans on purpose to feed demand for CDOs, to deciding to ignore the carefully-devised procedures to make sure the securitization trust complied with all the requirements needed for it to have ownership of the mortgages; to rampant document forgeries and fraud to remedy the procedural failings. Second, it implies that servicers are happy to mod mortgages. Huh? They’ve done it only under duress, and with bribes, um, fees. And even then, most of what they call “mods” are short-term payment catch-up plans which do the servicer more good than the borrower; even the so-called HAMP “permanent” mods are mislabeled; they are five year payment reduction plans; there is nothing “permanent” about them.

So get used to the barrage from the Ministry of Truth; you’ll be subjected to a lot more of the same over the next few weeks.

October 8, 2010

The Honorable XYZ
United States House of Representatives
Washington DC 20515

Dear Representative XYZ,

We are writing to set the record straight on the efforts mortgage servicers are making to assist
at-risk homeowners, as well as to address the issues that are being raised about the processing of documents for mortgages that are in foreclosure.

Foreclosure Document Reviews

As we have said consistently, foreclosure helps no one, and it is the last thing our mortgage servicing companies want to have happen. That is why our members work hard every day with their customers who are behind on their mortgage to try to find a solution that avoids a foreclosure. This effort has produced dramatic positive results for homeowners. Mortgage servicers have completed 1.3 million loan modifications for homeowners thus far in 2010 and more than 3.7 million since 2007.

Unfortunately, there are circumstances when a modification or other potential solution such as a short sale is not possible and foreclosure proceedings must be undertaken. As has always been the case, no change in the terms of the loan will help a homeowner if they don’t have adequate income to make even greatly reduced monthly payments, or if they have no desire to remain in the home. If that is the case, a foreclosure must be pursued by the servicer.

We want to assure you that foreclosure is not initiated by servicers until many months of delinquent payments, after repeated attempts to work with the homeowner, and only when all other foreclosure prevention efforts have failed.

In several states, some mortgage servicers have put final foreclosure sales on hold while they review their document procedures. It is important to note, however, that these are document process reviews; in almost all cases there are no factual disputes about whether the mortgage is delinquent, the amount of the arrears, or whether foreclosure is proper. Indeed, a substantial percentage of foreclosures are uncontested by borrowers. In the overwhelming majority of cases, we believe the facts presented to the courts in foreclosure proceedings about the debt amounts and delinquencies have been accurate.

Servicers should be permitted to complete the review of their document processes that they have already begun. Calls for a blanket national moratorium on all foreclosures are a bad idea and would cause significant harm to communities at risk, the unstable housing market and the fragile economy. A foreclosure moratorium would not change the ultimate outcome for borrowers impacted by this situation.

Distressed Homeowners Are Being Assisted

The foreclosure document and affidavit reviews servicers are conducting are only a part of the on-going efforts being made to help homeowners avoid foreclosure and stay in their homes. Servicers are also continuing to work to assist thousands of homeowners everyday who are behind on their mortgage payments.

These are the facts:

* Mortgage servicers completed 149,000* loan modifications for homeowners in August 2010, including 116,000 proprietary loan modifications and 33,000 Home Affordable Modifications (HAMP.) [*HOPE NOW Alliance October Data report]

* 91% of all proprietary loan modifications in August reduced homeowners’ monthly payments so that the modifications are affordable and sustainable.

* Through August, mortgage servicers completed 1.3 million loan modifications in 2010 and almost 3.7 million since 2007.

* There have been 775,000 completed foreclosure sales through August 2010, compared to 1.3 million loan modifications through August. 2010

* Short sales and deeds-in-lieu are being offered as a dignified alternative to foreclosure for homeowners who have exhausted all their foreclosure prevention options and cannot maintain their mortgage.

* Servicers continue to contact and assist at-risk homeowners in a wide variety of ways. Companies have individual customer assistance centers and participate in face to face outreach events across the nation individually and sponsored by Making Home Affordable and the HOPE NOW Alliance. More than 77,000 homeowners have received assistance at 87 HOPE NOW face-to-face events held all across the country since 2008.

* Homeowners can reach a non-profit counselor at a HUD-Certified counseling agency 24 hours a day, 7 days a week through the 888-995-HOPE Homeowners’ HOPE hotline operated by the Homeownership Preservation Foundation.

* Servicers and Counselors have worked to enhance electronic submission of documents for loan modifications through the new HOPE LoanPort system.

Mortgage servicers continue to help thousands of consumers avoid foreclosure every day. Real progress is being made. The foreclosure document and affidavit review process that servicers are undertaking will clarify the situation significantly.

Attached is a link to the resource sheet for Congressional staff to assist your constituents. We will continue to work with all Members of Congress on mortgage loan inquiries that you receive from your constituents.


Steve Bartlett
President and CEO
The Financial Services Roundtable

John Dalton
Housing Policy Council

John A. Courson
President and Chief Executive Officer
Mortgage Bankers Association

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  1. nilys

    As Calculated Risk pointed out, regardless of whether the paperwork was done correctly, the fact remains that “homeowners” who lost their homes could no longer afford them. What good would this do if this thing dragged on, and these people turned into essentially squatters. If the expectation is that “the banks” must redeem themselves by “giving away” homes in foreclosures to their occupants free or through a reduction in the principal, this would only breed resentment and undermine respect for the system. On the other hand, the foreclosure process must be fixed, otherwise some potential home buyers may choose to stay off the market for the fear of getting a problem home.

    1. Yves Smith Post author

      What about rule of law don’t you understand? There is plenty of evidence that banks have made a lot of errors: servicing errors, multiple banks trying to foreclose on the same house, even cases of clear abuses by servicers (refusing to credit payments even when the borrower has evidence of receipt). This isn’t as black and white as you suggest.

      In addition, you are presuming outcomes must be binary: foreclosure or not. When banks actually owned the loans, mods were routine IF the borrower had a viable income. And not the sort of phony so called “mods” on offer that don’t reduce principal to a meaningful degree. Wilbur Ross, hardly a charity, had had very good success with deep principal mods. And with loss severities in the 70%+ range, a 40% principal reduction would be a clear win-win.

      One regular reader has noticed that every time I put up a foreclosure post, the first comment, suspiciously close to the post time, is always a version of “deadbeat borrower”. He reads enough blogs that he is pretty convinced that NC is being targeted for this sort of message.

      1. DownSouth


        But if it were the banksters on trial, you can bet that corporate shills like nilys and Neil D would be demanding that they be exonerated unless every “t” were crossed and every “i” dotted. Then the rule of law and due process would become of paramount importance.

        This cuts to the heart of the matter—-the double standard the banksters will impose on the American people if they can get away with it. They believe they should be allowed to operate with impunity, but the slightest infraction by one of the little people and it’s off with their head.

        So cowed was their condition, and so long and so hard their experience of what such a man could do to them, within the law and beyond it, that not a voice, or a hand, or even an eye, was raised.
        –Charles Dickens, A Tale of Two Cities

      2. eh

        One regular reader has noticed…

        Oh no! So poor Yves thinks she might be “targeted”!

        Nearly 100% likely to be complete nonsense. And TBH, beneath you Yves, or so I would have thought.

        Suggestion: Just defend your posts. If you feel a comment deserves a counterargument, add one.

        For the record, I have made a couple of ‘deadbeat’ type comments. But I am not ‘targeting’ you. And if a comment of mine has shown up early in a thread, it is just a coincidence.

        What about rule of law don’t you understand?

        What about the disgust felt by some at the spectacle of people, many of whom played a direct role in this mess by knowingly being fraudulent or quasi-fraudlent borrowers, now garnering lots of sympathy — not to mention months and months of free housing — from bloggers like you can’t you understand?

        The only thing that could make it worse would be if you were to constantly refer to “families” and “neighbors” in your posts.

        1. Skippy

          Another consumerist tanty…Jimmy got his free what about me. Try getting the criminal folks that brought all of this upon us, then figure out the little problems like all the Jimmy’s out there.

          Your Country’s of fire, the FIRE brigade started it and won’t put it out till you cough up the money they demand of you and yours. Yet you focus on the guy next door with a smelly BBQ bumming out your consumerist ambiance, talk about misplaced anger.

          Skippy…all that focus on the little guys are front running for the very idiots that set the FIRE in the first place, you do your masters proud.

        2. DownSouth

          eh said: “What about the disgust felt by some at the spectacle of people, many of whom played a direct role in this mess by knowingly being fraudulent or quasi-fraudlent borrowers, now garnering lots of sympathy…”

          Yes, a disgust corporate handmaidens like yourself are quick to inflame and exploit, just so long as it draws attention away from the real perps, that is the banksters. How infinitesimally small the alleged abuses are is of course of no import. It’s a trick that’s as old as the hills—-take a few bad apples and use them to paint an entire group with the face of evil. And it has a name. It’s called “stigmatizing” or “scapegoating.” Racists and homophobes are especially fond of the tactic.

          Just how long do you think it’s going to be before the American people get wise to this blame-the-victim rhetorical strategy?

          1. readerOfTeaLeaves

            FWIW, I thought the letter copied in the post was one of the most hilariously smarmy, unctious pieces of shill that I’ve seen for awhile (and that’s saying something…)

            eh’s comments were just the icing on the cake, in my view ;-)

            I actually find it kind of encouraging that the shills are coming out now. When my kids play their online games, the trolls always start coming out when the dragon is in danger. So my attitude about some of this is: ooooh, the trolls are out! They must be getting worried ;-)

          2. i on the ball patriot

            Regarding the “deadbeat borrower” demonization. It is more a function of drinking the kool aid or selling the kool aid. Some thoughts …

            I believe that the whole globe, not just NC, is being targeted with that divisive “deadbeat borrower” message, and many other similarly divisive messages. The prudent are being pitted against the not so prudent globally. You see evidence of it it everywhere. It IS meant to breed resentment and undermine the system through perpetual conflict so as to throttle the system down globally and increase ‘law enforcement’ control, as those with lesser coping skills act out and give rise to the planned resultant need for ever more law enforcement under the guise of providing “public safety’. It is also meant to deflect from the wealthy elite who orchestrate the top down global machinations.

            Soooo …. Don’t take the bait and fight with each other. Stay focused on the rich scum bags and the fact that they have hijacked your governments away from you.

            This is the war that everyone is so nervous about happening when times get tough. But it has already happened. We are in it! Only it is not one nation state battling against another nation state as in the past. It is instead the global wealthy elite in a stealth war with the masses. Through central bank machinations our governments around the globe, and their militaries and media, have been hijacked. These are intentionally created tough times. Yes! They own the global propaganda mill and they now spin the mortgage machinations. But the corruption in mortgages springs from the same base corruption that created the rolling global, intentionally easy credit bubble debt traps, and, all of their phony baloney counterfeit derivative financial products that have ensnared us all around the entire planet.

            This is all part of an integrated PR campaign that has caused the sea change coarsening in global society in the past forty plus years. Read this bullshit just out about the phony baloney Averages Riksbank Prize (Nobel Prize) in “Economic Sciences”. Its reminiscent of a banana republic medal pinning ceremony where the corrupt generals chests are so heavy with medals that the can hardly stand up.

            Excerpt …

            “Peter Diamond of the Massachusetts Institute of Technology, Dale Mortensen of Northwestern University in Evanston, Ill., and Christopher Pissarides of the London School of Economics and Political Science won the prize for “their analysis of markets with search frictions,” the Royal Swedish Academy of Sciences said in a release announcing its decision on awarding the 2010 Sveriges Riksbank Prize in Economic Sciences offered in memory of Alfred Nobel.”

            And note this emphasis out of all of their bull shit analysis…

            “Their models “help us understand the ways in which unemployment, job vacancies and wages are affected by regulation and economic policy,” the release said. One conclusion noted that higher unemployment benefits give rise to higher unemployment and longer search times.”

            Link …


            Well … of course … there is an obvious solution — cut the unemployment benefits of all of those ‘deadbeat’ unemployed. Sheeeeesh!

            As for the bogus PR on the very intentional mortgage document scam here in scamerica, my local Fox TV spin machine (“We Omit! You Never Know!”) is saying the mortgage mess is no different than when you or I, being in a rush, click the “I Agree” box on a software agreement without reading all of the fine print.

            You know… like we all do it.

            Again … don’t take the bait … focus on the rich scum bags who have hijacked our governments and now try to eliminate us by pitting us one against the other.

            Deception is the strongest political force on the planet.

      3. Ron

        While I applaud your desire to mitigated the foreclosure crisis by reducing the homeowner liability via debt reduction it does not end the deflation cycle hitting overpriced housing states like Calif. We face years of housing deflation caused by 40 years of senseless growth tied to over developing rural farmland into endless housing tracts that fostered new cities built entirely around ugly shopping malls and freeways. These homes were over sized, poorly constructed and located long distanced from large employment centers requiring families to car up in order to live. The residential growth patterns generated significant commercial build outs not only shopping malls but schools and a variety of government infrastructure related structures for city, state and federal government. These are modern boomtowns stretching for hundreds of miles in all directions unraveling as the economic landscape changes exposing the lack of economic reality underpinning their existence.

      4. nilys

        Hi Yves,

        No conspiracy here. It’s just that I am nocturnal like you and am the first one to read your posts. Second, your appeal to the law sound suspicious or at least misguided. It is usually the ruling classes that appeal to the law in order to suppress legitimate grievances of the masses. Third, rallying the masses against the dominance and abuses of the financial elite is fine by me, but foreclosures just do not seem like the right issue over which to get excited.

        1. dowopditty

          This is false. The rule of law is the heart of liberalism and fairness. It simply means that the law governs, not the king or his bankers and oligarchs, and that the same law applies to all.

    2. eh

      …this would only breed resentment and undermine respect for the system.

      Exactly. But Yves is — apparently — too blinded by her bias(es) to see this.

      1. Dick Hertz

        I guess I don’t recall hearing a lot of envy from folks in the Depression when the New Deal established several programs to keep people in their homes, and rather more against the banks, e.g. Woody Guthrie’s career.
        I also don’t recollect a lot of envy at the Resolution Trust Corporation program that cleaned up the last GOP deregulation fiasco and made McCain a nearly-but-not-quite-to-prison crook. There is no shortage of moral scolds under any economic circumstance to be sure.
        There are certainly likely to be some number of people who took advantage of the criminal misfeasance of the bank and mortgage loan industry, but they would never have been able to pursue this moral hazard had not the banks and mortgage mills not thrown caution to the wind. This also doesn’t address the issues with bank agents invading the homes of people who owned their homes outright or were not in foreclosure, leading one to assume that the titular holders of the title do not actually know what they do or do not claim to own and therefore have declared that they are their own law. Where is the concern for law from the moral scold-junior Gekko types then? Crickets.

    3. Jim the Skeptic

      nilys says: “What good would this do if this thing dragged on, and these people turned into essentially squatters.”

      The banks have not felt this need to speedily deal with foreclosures until very recently. See the post and others on that website:

      The gist is that from time to time banks have held off foreclosures. At first they held off because they did not want the bad loans to damage their delicate books. Then they held off so as not to rain on the governments parade and risk some real push for modification of loans.

      But now when it comes to the borrower’s right to “due process”, speed is the imperative!

    4. Tao Jonesing

      Nobody denies that a homeowner in default on his mortgage has a debt he must discharge. Nobody gets a free house.

      That does not mean that anybody is allowed to forge documents to falsely establish a chain of title after the fact in order to secure that debt with the house and then foreclose on it. You’re not allowed to do that, I’m not allowed to do that, and the bank isn’t allowed to do that.

      Why? Because no matter how much revulsion you have for a deadbeat homeowner, defaulting on a contractual obligation is not a crime, but forging documents to defraud the courts is.

      In the absence of a good chain of title, the mortgage debt is unsecured debt, and the holder of the mortgage will have to sue for breach of contract. That’s their remedy, not defrauding the legal system.

    5. Francois T

      Whether X or Y number of homeowners can’t afford the house they’re in now, is, quite frankly, irrelevant here. CR totally missed the point on that one, and I’m not saying this lightly.

      The mortgage industry flouted the law, screwed up all the legal recording and documentation mandated by real estate law in the pursuit of fast and easy profits, securitized tons of mortgages, saw the bottom fall off, and now they have mountains of assets that have lost value. Moreover, a unknown proportion of said assets have seen their ownership rightfully questioned by the courts.

      That raises a very troubling question: Who really owns the note?? That is not an insignificant question, isn’t it?

      The bottom line is this:

      Would you buy a house from a system that cannot guarantee you a clean title??

      That is what’s at stake here.

  2. attempter

    I’m not sure about a national moratorium because there are, in fact, valid foreclosures that probably should go forward and where the documentation and paperwork is proper. But we are working closely with these institutions to make sure that they expedite the process of going back and reconstructing these and throwing out those that don’t work…..

    Look, our hope is is that this moves rapidly and that this gets unwound very, very quickly and that if they can go back, reconstruct their paperwork and what we’ve stressed to them is that they need to expedite that process and work very, very quickly to get it done. we’re going to continue to push for that.

    The stampeding emphasis on speed leapt out at me. That’s obviously from the shock doctrine/disaster capitalist playbook, though I admit that at the moment I’m not sure why they want to inject more of a sense of crisis into this particular mess.

    I get the disparagement of a moratorium – that’s in line with downplaying the significance of this. But I would’ve thought they’d want to calm things down. But the cultism of speed, which they obviously calculated, the deranged rhetoric of centering every sentence on it: “expedite”, “rapidly”, “very,very quickly” (twice for that last one), seems to contradict the assurance that this is no substantive big deal but just a paperwork mess.

    It’s as if they’re desperate to restore business as usual on this before some expected other shoe drops.

    But doesn’t this public rhetoric of desperation contradict the assurance that people should stay calm and confident? The point of shock rhetoric is to kill confidence and drive panic.

    Are they just that incompetent, that they don’t understand that some tactics contradict one another? Nobody’s ever confident when being stampeded.

    If we could assume they knew what they were doing (which I don’t), this sounds like for some reason they’re willing to run the risk of helping to accelerate the next crash.

  3. heavyjetcaptain

    Perhaps the expectation is not to get a home for free. I can’t see that compensating foreclosed homeowners would breed any more resentment or undermine the system any more than the Fed and Treasury continuously bailing out Wall Street banks only to have them pay themselves outrageous bonuses and refuse to write down the principal.

    Would it be right for wrongfully foreclosed homeowners to be compensated simply because the law might technically allow it? I guess you would have to ask yourself whether it is right for the banks to turn around and charge 29.99% interest on the money they are getting for free–simply because they can. The homeowners and their attorneys are suing for damages for the same reason–because they can. I don’t blame them.

  4. Neil D

    I bought a car a couple of years ago and now owe more on it than it is worth. Where’s my loan modification?

    Sound’s silly, doesn’t it?

    1. aet

      People – and banks – who neglect to perfect their security, have no security.
      That’s the way it is, and has always been – why cut the banks any kind of a special deal?
      Banks don’t have the votes that people do. neither.

    2. aet

      – and this ain’t about “cutting slack” to the borroweras – it’s about changing the Laws, after the fact to help out banks.

      So don’t change the subject to “loan modification”.

      1. Neil D

        I was responding to this comment from Ms. Smith…
        In the post:
        “And even then, most of what they call “mods” are short-term payment catch-up plans which do the servicer more good than the borrower…”
        And from her comment to Nilys:
        “When banks actually owned the loans, mods were routine IF the borrower had a viable income.”

        The home title fiasco must be cleaned up, but the suggested way out seems to be government funded refinance of all existing mortgages – presumably at the low current interest rates and with a reduction in principal. While I find this personally distasteful, I recognize the value of such a thing. If (when) we finally get around to doing it, I hope that everyone realizes the horrible precedent we have set.

        In exchange for this bailout of mortgage holders, I want something in return.

        1. An end to the interest deduction.
        2. An end to the property tax deduction on residential real estate.
        3. An end to home equity lines of credit.
        4. An end to cash out refinancing.
        5. Minimum 20% down payments on all residential property.
        6. No loan mods for rental, investment property, or second homes.

        And a whole bunch of other things that will make “owning” a home less desirable. Deal?

        1. CaitlinO

          “The home title fiasco must be cleaned up, but the suggested way out seems to be government funded refinance of all existing mortgages”

          How will funding existing mortgages by the governemnt clear up chain of title problems that happened years ago? That doesn’t even make any sense. The point here is that the chain of title, once broken, is very difficult to repair. It isn’t a funding problem at all although certain transactions related to funding make the underlying issue apparent. Transactions like retiring the note once the mortgage is paid off, refinancing, sale and, yes, foreclosure.

          I see a dawning awareness in the media and in blog posts that this cock up can call all property ownership into question – not just property of the ‘deadbeats.’ Honestly, I think for true change to happen it’s going to take a massive screw-up impacting the prudent, the righteous and self-righteous as negatively as the feckless and unlucky.

          I can’t argue with your points of change, Neil, they’re probably good ideas. Three of them are pretty much in place here in Texas and we count ourselves lucky to have missed the worst of the housing bubble and bust.

          1. readerOfTeaLeaves

            I see a dawning awareness in the media and in blog posts that this cock up can call all property ownership into question – not just property of the ‘deadbeats.’

            In all honesty, it’s taken a long while for this basic point to dawn on my, but I’m leaving an additional comment to highlight it because in my view it is essential to this whole disaster. This may be the one point that ends up (ironically, or otherwise) uniting the progressives and the Tea Partiers.

            The law protects property rights; or at least, that is supposed to be its function.
            I live in Out West, and Property Rights are a huge issue where I live, and always have been — people came here for ‘property’ and in my region, people have been known to threaten each other with guns over the issue of property boundaries.

            Now that we are seeing that the entire system is so mind-bogglingly corrupt that the law is now being used — via fraud, via securitization, via kangaroo court proceedings — to **take** property from people, we are entering a whole new, in my view, more socially disastrous phase.

            The fact that the Obama administration doesn’t seem to grasp this is horrifying. If they’d talk to some sheriffs in rural regions of Washington State (and Idaho), maybe they’d get a clue.

            This is the most dangerous point, in my view.

            And those mortgage bankers and financial services clowns are playing with fire. And I see no evidence that they grasp how insulting and stupid they appear to be; if they had more brains, they’d start producing acts of contrition in a heartbeat.

            Your point about what this whole fraudulent scheme means in terms of property is only just kicking in. Speaking for myself, it took me a long, long time to see how deeply dangerous this is, primarily because of the way that it destabilizes the foundational, core concept of ‘property’.

    3. Skippy

      Neil must we submit everyone to this *after* the fact[s account of these deliberate acts, the bullet casings littering the street_after_the crime.

      1. These loans were designed to blow up, the house bet both ways, firstly the ramping of housing prices, of which when near peak were bet against (some were caught out, believed the time had not come, thought it was a team effort…lol…cough bag holders).

      2. the extension of the game by lowering down payments and other standards critical to determining long term viability of loans, use of substandard subsidiaries to facilitate the scam (layers of deniability added under the pretence of efficiency {technology}, arms length).

      3. the use of these sub par loans to construct secondary investments_as_*prime investments* with accompanying counter party shenanigans and all to the tune of hundreds trillions. Infecting almost every aspect of how we do business, retirement funds, municipal finance, hyper hot flows into growth markets over seas etc.

      4. All for a few to substantiate their huge bonuses having created profit for their respective chain of investors, aided and abetted by massive amounts of monies directed at your various elected officials state and federal to include the judiciary. Plus years nay decades of industry revolving door appointments all premised on the idea of understanding the complex world in which only they could weld.

      5. Many brought into question, sounded the alarm for years but were dismissed as heretics of American free market patriotism (cough neoliberalism). Cubbyholed, hamstrung, setup, threatened, disappeared, dead from their own hands…called traitor.

      Yet after all of this your foucus_is on_the home owners, that still deserve their full day in court and under the full protection it offers both parties in its application. If you rent and find it hard to reconcile the poor judgement others displayed fair enough but, whom do we have to thank for that pleasure, spoon feed consumers or the masters of finance aka the smart guys and gals.

      Cars vs. Houses…shezz, no one buys a car expecting it to appreciate (its not an investment, its a consumable), houses on the other hand have in the recant past been expected to appreciate and are sold as such, to include the RBMS et al.

      Skippy…in combat you take out the heavy weapons first (more killing potential), leaving the small arms secondary. Your foucus on the little players over the big guns in this huge fiasco…is telling.

      1. DownSouth


        That is an absolutely superb comment.

        I just want to reiterate what you were talking about the other day, that none of this happened by accident and that the banksters had to effect what you called “structural” changes in order to pull off the greatest theft in human history.

        Those changes were hard fought, and opposed by defenders of the little people like the late U.S. congressman Henry B. Gonzalez. In Texas the banksters had to push through an amendment to the state constitution in order to do equity loans, something that Gonzalez fought hard and long to prevent. But ultimately, much to our detriment, the banksters prevailed.

        Again, I highly recommend Gonzalez’ paper on the subject, “The Texas Homestead: The Last Bulwark of Liberty,” which he wrote in 1994:

        The Texas Constitution contains many rights and liberties for the protection and benefit of the state’s citizens that reflect the specific influences of events, cultures, and individuals on the development of legal principles and political values in the state. Unique among these treasured liberties is the protection of a person’s homestead from forced sale or foreclosure by creditors. For more than 155 years and across numerous generations, Teans have adamatly supported the principle that the fundamental need for shelter justifiest strict constitutional protection of homes from creditors in all but few situations.

        The cherished home equity protection has been under sustained attack for several years by a group of bankers and other financiers for whom a homestead is nothing more than a type of collateral and anoter source of profit.

        Of course corporate apologists like Neil D want to pretend that none of this history exists.

        1. i on the ball patriot

          DownSouth says: “That is an absolutely superb comment.”

          Agree with you here! See my comments to you above.

          Deception is the strongest political force on the planet.

      2. Neil D

        Hey skippy. First of all, the entire finance and real estate “industry” is full of millions of evil people.

        The reasons I “focus on the little players” are 1)
        Ms Smith and many others are focused on the banksters and 2) despite the entire set up by the con men, ponzi schemers, and banksters, the “little players” still had a chance to avoid disaster but did not. I don’t know why they didn’t but there is some small grain of truth to the saying, “You can’t cheat an honest man.”

        Our friends at Wiki define the game for us quite well.

        “A confidence trick or confidence game is an attempt to defraud a person or group by gaining their confidence. The victim is known as the mark, the trickster is called a confidence man, con man, confidence trickster, or con artist, and any accomplices are known as shills. Confidence men or women exploit characteristics of the human psyche such as greed, both dishonesty and honesty, vanity, compassion, credulity, irresponsibility, and naïveté.”

        And you yourself have provided in your comment the nature of the con when you acknowledged the characteristic they exploited… “houses on the other hand have in the recent past been expected to appreciate and are sold as such.”

        That’s the con. They exploited the home buyers belief that housing prices always rise. If we ignore this critical part of the con we are doomed to repeat it. So put the con men in jail, but take this teaching moment to make sure every American knows that real estate as an investment is a scam. Some call it tough love and some call it hitting bottom. The first step to recovery is admitting you have a problem.

        1. Skippy

          At a time when energy and focus are critical, you diffuse it.

          When faced by a pack of wolfs you are more concerned about their fleas[?], the itch you will have to scratch, all whilst they chew your leg off…really?

          Skippy…you maybe whom you say you are but, all indicators point to a different conclusion. Your distractions in a fire fight would not serve the team well or its chances of survival.

    4. Francois T

      You wouldn’t give a shit about its value if someone landed in your driveway with the repo man informing you that the title on this car wasn’t “clean”, that the car has never really been yours even if you paid your terms on time and that life is tough and the car is being foreclosed in your face.

      Sounds silly doesn’t it?

  5. Kujiranoai

    Yves – well spotted on the point about the first comment always being a “deadbeat borrower” comment. I haven’t done the statistical analysis, but I had noticed the same thing to the extent I had started to wonder whether it was just co-incidence…

  6. Koshem Bos

    There is another facet to misguided “dead beat” borrowers. It assumes that borrowers have to follow the law but servicers are exempt from following the law. The “just go on and foreclose” because the borrower has fallen on hard time no matter if the servicer has the legal right to the house is downright a declaration of all powerful oligarchy that makes its own rules.

    This stand is undemocratic, inhuman and even un-American.

    Obama clearly demonstrates lack of the minutest ability to perform the job of president. By totally ignoring the disstressed borrowers and siding with big money, he abdicates his basic responsibility to the hurt citizen of this country. Politically, especially close to the midterm election, his inability to grasp the opportunity to be independent of the banks is shocking. I am distressed to see that at the worst time the country is experiencing in 70 years, we have a president who seem unable to run a supermarket.

  7. Mindrayge

    What is really disingenuous is the focus on just the notes in foreclosure. Nobody in the media (which makes the bank capture obvious) is asking the banks nor the government the following question: “What are the odds that the ONLY notes that have documentation problems and unclear chains of title and improper or missing assignments would be the ones in default?” The answer is infinitesimally close to zero.

    The truth of the matter is that even current borrowers are likely to be paying the wrong entity (via their servicer) under the law. The only entity with the right to foreclose is the party that is entitled to receive payment. Those people paying the wrong party have been harmed because they didn’t willfully or even accidentally do so, their servicer did willfully.

    There are numerous ways for the Congress and state legislatures to create exceptions and “fix” this for the investors and the banks. But none of those remedies can be accomplished without retroactively harming what could easily be tens of millions of homeowners with mortgages.

    The proper remedy to all of this would likely result in perhaps 10 million borrowers with their mortgage balance outstanding cut in half or better, the investors made whole on their principal investment, and the 6 largest banks (at least) utterly destroyed and in receivership (resolution, or whatever FinReg terms it).

    Thus, we should expect a “fix” that will retroactively harms tens of millions of borrowers. Considering that the US government policy for the past 3 years has been to destroy as many households as necessary to maintain the fictions of the financial system and to protect the top one percent crowd I can’t see any other outcome. All we have to do is look to HAMP (and other HOPE programs) which were designed to mitigate bank losses and allow the banks to build a foreclosure pipeline supported by taxpayers.

    1. Skippy

      “allow the banks to build a foreclosure pipeline supported by taxpayers.”

      Like taking the job as *gas chamber attendant* to prolong ones own life, fully knowing sooner or later it will be your turn…eh.

      Skippy…PO’ed to the max.

    2. Ned Zeppelin

      You nailed it. Based on a random sampling of apples via the Wheel of Foreclosure, it is almost certain the entire barrel of apples are rotten.

      Wonder how all those bankers holding these MBSs as collateral as feeling this morning? Margin call, anyone? How about those synthetic CDOs that used these MBSs as reference securities? How about the trillions in credit default swaps heaped on top of this mess?

  8. Expat

    Yves is right. It’s about rule of law and justice. Those who accept “cutting corners” on foreclosures might be more concerned about constituional rights if they were arrested and sent to prison without trial. What is the police “knew” you guilty? Would you accept fifteen years of being raped in jail without due process because mere technicalities were done away with?

    The entire process was rotten from inception. Wall Street and the entire real estate industry constructed an enormous Ponzi cum-Mafia racket, pocketed trillions, passed on most of the risk, and now complains when they can’t get away with more crime.

    I don’t want to pay for deadbeat homeowners either, but I would rather see half of Wall Street in jail and most shareholders wiped out before I accept that an unemployed father of three be forced out into the street to satisfy the at-any-price greed of Wall Street and Congress.

  9. eh

    …an unemployed father of three be forced out into the street…

    This is exactly the kind of appeal to emotion in this debate that I personally find absolutely disgusting.


    1. DownSouth

      It is a tortuous logic that views the tragic results of the crimes of the banksters as an argument for the continuation of them.

    2. Expat

      I’m sorry, what is so pathetic? That my view of justice and the enforcement of the rule of law does not conform to your personal world view? That I feel sorry for ignorant morons who have been duped by a system which brainwashes them to borrow and buy and then creates a complicated legal tangle of contracts, math, and rules which they can never hope to comprehend? That I dare turn a discussion about finance and legality into a moral discussion as mainly as aside to my main point?

      So, really what the $^&% is so pathetic about what I said?

      1. Jim the Skeptic

        Expat says: “So, really what the $^&% is so pathetic about what I said?”

        The banksters view their fellow human beings as prey. They do not wish to be reminded that they are mistreating a father, they prefer to think of him as a means to an end. The end being their enrichment past any direct need for their survival, to a score which finally allows them to think of themselves as something other than losers.

  10. Mr Damage

    “Obama totally ignoring the distressed borrowers and siding with big money.” This isn’t rocket science, will it be the distressed borrowers or the big money financing Obama’s extravagant post presidential lifestyle?

    Nothing unusual there, the only thing of any meager interest will be how many visionaries still support this type of change you can believe in. Not that they aren’t all crooks and the republicans any better, but he did raise expectations.

    Politics, nothing so absurd as seeing people crying at election wins, a new fox in the hen house. They should be crying all right but they are doing for the wrong reason.

  11. Eric

    Criminal penalties for those who committed crimes. …okay. Civil awards for those who suffered damages from those crimes….okay. But if what Axelrod is suggesting is that borrowers, lenders and future buyers need the notes and the mortgages of securitized loans to be properly organized and that needs to be done on an urgent basis, I agree. I don’t know what the solution is, but I don’t think it is in the national interest that there be significant doubts over this. That it was stupid and lazy to not dot the i’s and cross the t’s is a given. That it was criminal to swear that the i’s were dotted is of course true. But from today forward, we urgently need to get this system functioning properly and it is not going to be acceptable to simply say such and such link in the chain has disappear in the interim months/years, or that the physical document got shredded when an electronic version is available and verifiable.

  12. jerry

    Allow cram downs let the judge decide…banks are not helping people get modifications at ALL…
    If Obama doesn’t help I am DONE with his party !!
    IndyMac Bank is crooked ..just try and get help..they have.. the One West bank name to hide behind now too..

    1. Eric

      Where is the bitterness coming from here? I mean, at the heart of this seems to be a complaint that banks aren’t leaping fast or high enough to help people pay them less than they are owed. And isn’t it obvious that the fastest way to move big mods along would be for the federal government to unambiguously tell all concerned that federal programs are ending and not going to be renewed. When IndyMac really begins to believe that nobody else is going to help straighten out loan A and the alternatives are owning a property $100K under book value of the loan with very substantial on-going costs and maybe being stuck with it for years, or giving the borrower a $50,000 break on the principal then you’ll begin to see some movement. But of course creditors are still hoping/expecting that maybe someone will slip them $95,000 here and so why lose the chance to get the extra $45,000? But do you think folks who own outright, or are current on their payments aren’t going to go berserk if their neighbors get $95,000 to solve a problem that they equally share – that is prices going down? Not to mention renters.

      1. DownSouth

        Eric asks: “But do you think folks who own outright, or are current on their payments aren’t going to go berserk if their neighbors get $95,000 to solve a problem that they equally share – that is prices going down? Not to mention renters.”

        It depends on whether a majority of Americans fall for the banksters’ propaganda campaign or not. In the 1930s the American people rejected the spinmasters’ campaign of truth and historical correctness, used their intelligence and common sense instead, and we got the New Deal instead of fascism. The jury is still out on what’s going to happen in the current situation, because predicting the behavior of large groups, such as the American public, is a fool’s errand.

        In Since Yesterday Frederick Lewis Allen sets out what happened in the 1930s:

        Elsewhere farmers were taking the obvious direct means to stop the tidal wave of mortgage foreclosure sales. All through the prairie country there were quantities of farmers who not only had heavy mortgages on their property but had gone deeply into debt for the purchase of farm machinery or to meet the emergencies of years of falling prices; when their corn and wheat brought to even the most
        industrious of them not enough money to meet their obligations, they lost patience with the laws of bankruptcy. If a man sees a neighbor of his, a formerly successful farmer, a substantial, hardworking citizen with a family, coming out of the office of the referee in bankruptcy stripped of everything but an old team of horses, a wagon, a few dogs and hogs, and a few sticks of
        furniture, he is likely to see red. Marching to the scene of the next foreclosure sale, these farmers would drive off prospective bidders, gather densely about the auctioneer, bid in horses at 25 cents apiece, cows at 10 cents, fat hogs at a nickel–and the next morning would return their purchases to the former owner.

        In a quiet county seat, handbills would appear: “Farmers and workers! Help protect your neighbors from being driven off their property. Now is the time to act. For the past three and a half years we have waited for our masters, who are responsible for the situation, to find a way out. . . . On Friday the property of —- is to be sold at a forced auction at the courthouse. . . . The Farmers Committee has called a mass protest meeting to stop the above-mentioned sale.” And on Friday the trucks would drive up to the courthouse and men by the hundreds, quiet, grim-faced, would fill the corridors outside the sheriff’s office while their leaders demanded that the sale be not held.

        They threatened judges in bankruptcy cases; in one case a mob dragged a judge from his courtroom, beat him, hanged him by the neck till he fainted–and all because he was carrying out the law.

        These farmers were not revolutionists. On the contrary, most of them were by habit conservative men. They were simply striking back in rage at the impersonal forces which had brought them to their present pass.

  13. heavyjetcaptain

    I think the administration wants to get this resolved “very, very quickly” because if the foreclosure news remains in front of the average underwater homeowner for very long, the government is terrified that millions may start consuming less of whatever mindless reality TV show they happen to be watching every day and start looking into the consequences (and benefits) of efficient breach. Corporations have been doing it for years, yet the MSM seems to have done its best to make the average citizen feel like he’s a deadbeat when he plays by the same rules, to wit, if you can legally get away with it, morals should not even enter into the picture. Isn’t that really what our version of capitalism has morphed into–making the maximum return on capital without regard to how it affects human lives?

    Kudos to blogs like this that have become so popular that the MSM can no longer ignore them–especially when the people they interview are hat tipping the bloggers (that says it all).

    1. readerOfTeaLeaves

      I think your point about ‘capitalism’ (at least, the Free Market variety which worships the Efficient Market Hypothesis) is spot on. It has freed too many from any sense of responsibility to the communities or the world in which they live, and left others wrongly assuming that expedience is profitable (short term, it can be… long term, not so much).

      And if you want ‘Exhibit A’ for your argument, I’d note this section of that hilariously preening letter sent by the Mortgage Bankers Assn, the Financial Services Roundtable and the Housing Policy Council:

      As we have said consistently, foreclosure helps no one, and it is the last thing our mortgage servicing companies want to have happen. That is why our members work hard every day with their customers who are behind on their mortgage to try to find a solution that avoids a foreclosure. This effort has produced dramatic positive results for homeowners. [ooohhhh, and if you don’t believe us, let us toss some big numbers at you… wooohooo]…..
      Servicers should be permitted to complete the review of their document processes that they have already begun. Calls for a blanket national moratorium on all foreclosures are a bad idea and would cause significant harm to communities at risk, the unstable housing market and the fragile economy. A foreclosure moratorium would not change the ultimate outcome for borrowers impacted by this situation.

      So here we have no mention whatsoever of WHY these frauds have to ‘work with’ homeowners, only the bleating whine that they work so very, very hard. (Apparently, none of the homeowners ever lift a finger…)

      The part that really makes me seethe is that section where they claim a ‘moratorium’ would be so harmful, especially with a ‘fragile economy’. Not one iota of their role in HOW the economy got to be so ‘fragile’, not one whiff of awareness that they have put municipal governments into budgetary hell because of all their securitization activities, and then they have the gall to *imply* that if the government doesn’t just back off, that Something Bad Might Happen to Your Fragile Economy.

      Frankly, the entire nation — starting with the electeds and the MSM, ought to be howling over the kind of supercilious preening exhibited by this letter.
      The fact that anyone would view it as a ‘legitimate’ document is deeply worrying. Paging Jon Stewart and Stephen Colbert….

  14. Dan

    Skippy doesn’t like the emotional baggage attached to actual people. I suggest that we create a set of acronyms that might make this more palatable. We already have the likes of: CDSs, CDOs, RMBS, MBSs, HAMP. I suggest the following:

    DBHM: “Dead Beat Home Owner” and
    UFOT: “Unemployed Father of Three”

    1. Skippy

      You and yours proudly carry the emotional baggage bequeath to you by the banksters, yet lament their play things.

      Skippy…tortuous logic indeed.

    2. i on the ball patriot

      DORKA … as in you are a DORKA!

      Drunk On Ruinous Kool Aid

      Deception is the strongest political force on the planet

  15. LAS

    This is not the only procedural paperwork or records that banks have lost control over. My family is lately learning that some banks have lost control of knowning who CDs have been left in trust to. While our experience involves a limited sample of 6 big banks, 2 out of the 6 lost records or reported inaccurately as to the beneficiaries. One admitted it had goofed and is striving to rectify its error through further investigation, but the other really hasn’t got the opening paperwork any longer as it is the product of many mergers and doesn’t have all the starting materials from banks it acquired and rolled up into its operations over the years. Savers, not just borrowers, are at risk due to how the banks are performing. Upon death of a saver, this is more of a deal than at first would seem.

  16. John Doe

    The “dead beat” borrowers meme is one that is being pushed on every political and economics blog in comments or posts. Like all memes it has roots in a few maybe well meaning people or maybe from vested interests (i.e. teh banking industry and it’s offshoot industries). But now the meme has taken root in the conservative mindset which will find fault with all individuals while the corporate interests can do no wrong. It’s a religious argument. The religion of Capitalism beats all. Even though banking really has nothing to do with Capitalism especially the way banking is practiced today. So you can expect that every post about the mortgage industry will have a “dead beat” borrowers comment.

    Worse to come I fear is now that this meme has taken hold with a large part of the population will the the ability to change the laws with cover of this population. The laws will change to allow foreclosures to proceed with faulty documentation. MERS will be the new documentation standard. A percentage of ‘illegal’ foreclosures (i.e. taking a home that is fully paid for) will be allowed the same way we allow capital punishment of a few innocent people in the name of justice for all.

    This new documentation standard will be rolled out as a way to never suffer the type of business cycle we have just experienced once again. It doesn’t matter that foreclosure wasn’t the basis for the problem in the first place it was bad derivatives. But we can’t fix the real problem when it comes to the banks. And it will give the banks back the power they lost in the new credit card laws. Who needs a few extra percent when they can just foreclose on a house anytime they want or need.

    You can see this administration already to cave and fold giving the banks anything they want in the way of a new law to fix this mess quickly. Now all the banks need is a willing legislator to write the law and bring it to the floor of Congress. Oh wait it’s an election year. There should be a new crop of eager lawmakers just dieing to have legislation written for them and put in their hands.

  17. Siggy

    If a bank or its agent comes demanding foreclosure, there is this little bit of necessity called standing. The issue is do you own and possess the note that is the focus of the right to foreclose which is actionable by way of the mortgage instrument.

    Now if you can’t demonstrate standing, you’re committing a fraud. All the rest of the argument is noise. What the banks are trying to do is to accomplish foreclosure when they don’t have standing because they have this defaulted asset on their books. Well maybe they do own the loan and maybe they don’t own the loan.

    In that ownership of the loan there is this little problem of recordation. Possession of an assigned note is one thing; but then there is the aspect of real property. Possession is not fully established unless and until there is recordation. And that little task of marching over to the County Courthouse and recording the note and the mortgage was not done. What is created is a hole in the chain of title through which someone may come to usurp title. Just belly up to the bar and say it’s mine!

    Now the cure for all this turmoil is a string of recorded ratifications that establish the chain of possession of the note and the mortgage. If the banks are wise they will be seeking quit claim deeds from each and every prior owner of the note and filing same, being sure that each is is filed and recorded in proper sequence.

    It’s all so simple that it is mind destroying to see all this noise about whether the loan was moral or not. It’s a contract, can’t honor it, get out, mail the keys. Got cancer, three kids and no job, too bad. Want mercy, well maybe, but not on my dime. I’m old, would like to work, but then when I apply; well, you’re simply over qualified. That’s noise too.

    Magna Carta, 300 years of settled contract law, all out the window in the name of making the lives of the banksters a bit smoother, fuggly business that!

  18. Texas Reader

    Mark my words, after this election Congress is going to pass a law that requires MERS be recognized as having legal right to engage in foreclosure actions on behalf of the trustees for the trusts, and/or the servicers, and will make some federal provision regarding securitization so that in all those cases where the notes and/or mortgages were not properly transferred to those trusts there will be x days during which the transfers can be done, with no IRS implications, and overriding New York trust law. We citizens will be told that without this “clean up” the mortgage market in the USA would be destroyed, and it’s “too big to fail.”

    1. Siggy

      Interesting idea from a resident of the States Rights region. I suspect that if such legislation is offerred up, there will be a States Rights Constitutional challenge.

      1. DownSouth


        How strange it is that the safeguards that were originally put into our constitution to thwart the “tyranny of the majority” may now serve to thwart the “tyranny of an oligarchy.”

        According to James Madison, one of the proper remedies to prevent some majority interest or faction from gaining inordinate power is to

        divide the community into so great a number of interests and parties that, in the first place, a majority will not be likely at the same moment to have a common interest separate from that of the whole of the minority, and in the second place, that in case they should have such an interest, they may not be apt to unite in the pursuit of it.

        Thus the federal government is divided into the executive, legislative and judiciary.

        Political power is divided between the federal government and the states.

        And in a diverse nation such as ours, the electorate is divided into myriad economic, religious, racial, ethnic and other groups.

        It’s all a little bit unwieldy, but all this divisiveness does make it difficult for one interest, such as the banksters, to get everybody on the same page.

    2. Jackrabbit

      I don’t think they can do this retroactively. So the question of whether the Note was properly conveyed, and if other reps and warrantees were fulfilled, will remain – as well as the incentive, nay OBLIGATION, of investors to investigate (to recoup hundreds of billions of dollars).

    3. CaitlinO

      I’ve come to the same conclusion. Whether the states choose to fight it with their revenue problems and in light of the big donations from banksters that the governors are likely to receive is the big question mark.

  19. Siggy

    As to dead beat borrowers; I don’t know who they are. What I do see is people who have committed to a contract that they can no longer honor. It may well be that they couldn’t honor the contract the moment they signed the loan agreement and the mortgage/deed of trust. That piece of business is irrelevent. What matters is the contract, if you can’t perform, move out, mail the keys, let the foreclosure process begin. Want a contract modification, ask for it before you default. If you can’t get a modicifcation, move out, mail the keys.

    As to Fannie and Freddie, liquidate em. Ooooh, it’ll stall the economy, it’ll sink the economy. So be it, there is an enormous pile of unservicable debt for which the cure is liquidation by repayment of repudiation. Delaying the cure only makes the problem worse.

    There’s also an enormous supply of unemployed labor. That makes Option Arms, HELOC, MEW etc, all nice little contracts that demand an income stream to be viable and even then the amount of debt service has to be manageable. You cant make the payment, don’t borrow. It’s not complicated, it’s common sense!

    This developing disinformation campaign is the rankest form of cynicism and insult that I can recall. I think it’s time to seriously consider braking up the mega banks.

  20. Texas Reader

    Siggy – thankfully I don’t ever hear any of that “states rights” crap. I’m sure that is partially due to the fact that anyone who’d use that argument is someone I wouldn’t socialize with. Hopefully it’s disappearing with the influx of people from northern states who take jobs here, and with the passing of the more racist generations. A lot has changed in the 20+ years I’ve been here. Can’t remember the last time I heard a snide comment about a Jewish or African American person. There are some ugly comments about “mexicans” but less than you’d think because so many of them are nannies, restaurant workers and lawn care workers who people interact with regularly and appreciate.

    1. Externality

      Ah yes, the inevitable throwing of the race card to obfuscate the issues.

      The “states rights” issue will almost certainly arise this November if California passes Proposition 19, legalizing and taxing marijuana. As someone who worked on Proposition 215, which legalized medical marijuana in California, I remember quite well the heavy handed approach the Clinton administration took (both directly and though multijurisdictional task forces) against medical marijuana advocates, doctors who recommended medical marijuana to patients, patients themselves, etc. Ironically, conservative federal court judges and justices sided with us, while liberal ones voted to expand the power of the federal government. If Californians vote to leave the War on Pot to the feds, there will almost certainly be a very interesting legal battle.

      Throughout the entire process, the Clinton administration and its supporters constantly played the race card against medical marijuana advocates and their allies in the gay and AIDS communities. We were variously accused of wanting to eliminate civil rights protections for minorities, of being every kind of -ist, and of wanting to commit genocide against people of color (PoC) by normalizing drug use within their communities. (Apparently locking disproportionately locking PoC up was not racist.)

  21. acat

    deadbeat borrowers— by that we ARE including the BANKS are we not?

    That the people that were charged(in the good ol days) with deciding on the debt carrying ability of a deadbeat to enter a 30 year deal in this instance gave out free money to anyone that could fog a mirror in order to keep their instant fee and EOY bonus coming in are NOW screaming that the known deadbeats are evil terrorist is too laughable to be taken seriously even as a grade D Halloween howler.

    You shills of that type do realize that once you give up your street cred you don’t get it back and without that…

    Well played.

  22. Matthew

    My apologies, but a little help requested….

    As a Canadian with a very pregnant wife, I’ve missed most of the recent uproar over the U.S. foreclosure issue.

    Specifically what I appear to have missed is the tie-in between the foreclosure moratorium (not sure I understand whether this is a political act to protect voters at election time, or a means to defer write-downs by the banks), the foreclosure frauds that took place, and how that benefits the banks vs taxpayers vs those specifically “underwater on their mortgage”.

    If someone has the patience if you could connect the dots and whom is pushing for what policies at this point, I’d be greatly appreciative.

    1. Jim the Skeptic

      Here is my interpretation of the events.

      In 1984 the personal savings rate was 10.4% and was .5% by 2005. The equity withdrawals from homes was about $56Billon in 1991, rose to $116Billion by 1998 and rose to $577Billion by 2005. You might point out that consumers seem to be under increasing pressure to find funding to maintain their standard of living. It is now generally recognized that during that time, the top 1% income earners benefitted greatly and all the rest of us suffered stagnant wages. Global free trade was the agent of destruction of the middle class and illegal immigration was the agent of destruction of the lowest 10% income earners. The Fed did yeoman’s work in maintaining the semblance of a normal economy by lowering the Fed Funds Rate lower and lower over 25 years until it was finally at about 0%.

      The housing bubble happened because consumers, mortgage brokers, and investment bankers all benefitted. By 2004, 2005, 2006 a huge percentage of home mortgages were refinances. Lower and lower interest rates meant more and more refinances and appraisals ran higher and higher. The investment bankers had contrived new securities based on home mortgages which were thought to be inherently safe. Various entities wrote Credit Default Swaps aka CDS but basically insurance, for these securities. Investors worldwide clamored for the securities with their AAA ratings and the creators of the securities demanded more and more mortgages. The mortgage brokers soon realized that they could sell just about any mortgage and soon, if you could ‘fog a mirror’, you could get a mortgage. And the size of the mortgage would be almost completely unrelated to your income. Many of these were adjustable so even if you could afford the payment initially, you would default after the adjustments. The wizards of Wall Street and their indolent regulators played on, wandering along the cliff of the abyss as though asleep.

      When this bubble burst it unearthed problems with the mortgages. Transferring these mortgages via the publicly set up system had been seen as overly expensive. So MERS was born and with it the old system of public records was almost left behind. New techniques also seem to avoid transferring the Note, indeed it is said that these were sometimes left in the original lender’s warehouse. Assignment of Mortgages were also handled somewhat haphazardly. This all worked, until the latest Mortgage holder tried to foreclose. Borrowers and later some courts wanted to know who actually held the Mortgage and the Note. Lawyers were heard to exclaim that the judge just didn’t understand how the business was done. The borrower’s lawyers kept pushing for ‘due process’ and demanding the appropriate paper work be produced. Finally more and more judges ruled that MERS could not foreclose since they did not hold an interest in the Note. Shortly afterwards it became apparent that even the bankers weren’t all that sure about who owned what. They foreclosed on a home where the homeowner owned it outright with no mortgage whatsoever. Two banks actually foreclosed on the same house. But, slowly but surely more and more banks were being forced to produce the accepted documentation to foreclose.

      Next came a deposition or actual court proceeding where the originator of a notarized affidavit was questioned. The sworn affidavit claimed that the originator had personally reviewed the loan file and that the bank had the right to foreclose. The originator of the affidavit admitted to signing about 10,000 of them per month and admitted that he had not personally reviewed the files. The point of the affidavit was to document the right of the bank to foreclose by a sworn statement subject to perjury and his testimony was documentation of a fraud. At about the same time it became public knowledge that a third party company was offering to produce lost paperwork for a fee. The use of such reproduced documents in a court would seem likely to result in another sort of fraud.

      The OCC, a federal banking regulator, recommended that banks review their procedures. Some banks have halted foreclosures in some states but explain that this is all a technicality though “Due process” is not a technicality.

      Back on 27 April 2010 the US House of Representatives passed a HR 3808 which would have required all courts whether state or federal to accept any notarization which was legal in the state in which it was made, where it related to interstate commerce. The bill was passed in the Senate on 27 September 2010 and it’s passage at about the same time that the foreclosure frauds were becoming public news, caused a furor. It looked like some back door patch for the bankers. The President issued a pocket veto and sent the bill back to the House.

      The banks can proceed with foreclosures where they can prove that they hold the Note by a series of assignments on the Note itself. These assignments must be done according to the Uniform Commercial Code, which may present some problems at this late date. There may also be problems with documenting ownership of the Mortgage. There may also be problems with the securities based on the home mortgages since they may not have been properly funded at creation. Yves is the source of my information in this paragraph and has a much better understanding.

      Defaulting homeowners will eventually lose their homes but banks will find it more expensive to prove their right to foreclose. This may turn prove be an incentive to negotiate a meaningful loan modification.

      Sorry for the length.

      1. Matthew

        Please don’t apologize for being thorough…that was incredibly helpful. :-)

        A couple of follow-up questions if you don’t mind:
        1. You use the term “originator of affadavit”. I’m assuming the intended interpretation for that is “mortgage originator” providing an affadavit (re: right to foreclose)? Or are you actually saying their are affadavit mills specifically for that purpose (God, that is a scary thought)?
        2. In your opinion, it appears like you believe the Foreclosure Moratorium is a necessity as the originators appear to at times be fabricating legal justification for their foreclosures. Is that correct?
        3. With that in mind, in terms of politics, it sounds the bill Obama veto’d would’ve been bank-friendly as it may have eliminated the normal due-process of foreclosure proceedings?

        Have I missed any additional dots I should be connecting?

        Thanks so much in advance again….Cheers, Matthew.

        1. Jim the Skeptic

          1. I am calling the company employee who signs the affidavit, the originator. I guess in most cases that would be the mortgage servicing company’s employee.

          2. No. If the banks need a moratorium to correct their problems then so be it. I don’t see a need for the government to interfere except to demand that the banks obey the law.

          3. Obama’s veto possibly prevented a back door cure for some of the bank’s documentation problems. If he had not vetoed the bill, the banks could have gone to a friendly state and had a notarization law passed which allowed for electronic notarization. Then they could have moved an office there and churned out notarized documentation more quickly. And other states’ courts would have been forced to accept that notary system. With the current notarization system there is a human being responsible for verifying that the signer is who he says he is and that he signed the document himself. Notaries are usually bonded and are subject to penalties. How do you duplicate that electronically?

  23. Eric L. Prentis

    The no-documentation mortgage securitization fraud is one thousand times worse than Bernie Madoff’s swindle. Yet, the banksta pimp in the White House takes the crooks’ side! The US needs a president with at least a modicum of scruples.

  24. Doug Terpstra

    This dire banksters’ emergency reminds me of the saying, “poor planning on your part does not constitute an emergency on mine.”

    The MERS problem has been around for years and widely documented for well over a year:

    This sudden urgency, only when states are standing up to banking fraud and when the adminsistration has steadfastly refused to do, is telling. The dire need to “reconstruct their paperwork”, “expedite that process and work very, very quickly to get it done” shines another light on the twisted priorities of this administration, when all of this fraud, once again, has been painfully evident for a very long time by the crony insiders without a shred of excuse. The banksters have been at this a long time, and the fraud keeps piling up; yet here again Obama wants to carry their water. Unreal.

  25. Jackrabbit

    Re: Deadbeat borrower

    Borrowers can walk away now, and many are so “deadbeat borrower” is a smoke screen. (I think it was the Daily Show that did a piece on the American Mortgage Association walking away from the mortgage on their HQ building in D.C. – hilarious!) And its not just the borrower that has concerns, its the title insurance companies too.

    Yet the biggest issue, it seems, is who owns the Note!!!!!
    The forging of Notes raises real questions about whether the Trust owns the Note or the Bank. So it seems that it is in investors interest to examine the conveyance of the Notes (and other reps and warrantees). If they can make the case that the Notes were not properly conveyed then they may be able to recoup hundreds of billions of dollars.

    1. Jackrabbit

      It seems to me that most, if not all, of these investors are funds (hedge, pension, etc.) that have a fiduciary duty to investigate. (And these funds are also Wall Street’s most prized customers.)

  26. Squeeky Fromm

    Well at least I can understand this a lot better than all that math stuff on Mr. Karl Denninger’s website about squared something or nothers. Which is how I found this place.

    1. They were sooo busy screwing everybody, they messed up their paperwork.

    2. Now, the people they sold the stuff to, want their money.

    3. So somebody, somewhere has to foreclose on the houses.

    4. Which they can’t do, because the paperwork is screwed up.

    5. Sooo, they have to change the law about notarizing stuff to cover up the screwed up paperwork.

    6. But now they have been COLD BUSTED!!!

    If even I can get it, its pretty simple!!!

    Squeeky Fromm
    Girl Reporter

  27. Darby Shaw

    It is incredible isn’t it? Everyone is missing the immediate danger. Consider:

    Tomorrow morning, no bank in the country will fund a loan, nor will any title company issue a policy. With all of this title confusion, that’s a foregone conclusion. So what does that mean?

    It means millions of closings not happening in the next few weeks. It means homeowner living in motels waiting on a closing that’s not going to happen. It means millions of realtors, mortgage brokers, title companies etc. are unemployed overnight. If there is no exchange of services or goods, we will effectively have no housing market by the end of the week. Believe it.

    The amount of litigation about to be unleashed in the coming days will be simply overwhelming. Isn’t it a little suspicious that BOA shut down their wholesale division last week? Google it.

    How will investors react? Imagine how many traders are going to short the market tomorrow. If BOA’s stock dives? And the rest follow? How do you think China will feel considering the are holding trillions of dollars in US Treasury notes?

    Tomorrow will be every interesting to say the least…

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