Administration Acts on Mortgage Fraud Against Military, Yet Denies It Exists Anywhere Else

We have yet another example of media cravenness. You would assume that when official positions presented in the media contradict each other, it would represent an obvious opportunity for reporting, and an intrepid young journalist would take up the task. But since the job of US news outlets is increasingly to distribute propaganda, they manage not to notice.

We’ve had a stenography masquerading as reporting on the results of the recent Foreclosure Task Force “review” of servicer practices. After looking at 2800 severely delinquent loans, it found only some operational shortcomings and no unjustified foreclosures. Given that all that this cross agency effort did was to have tea and cookies with the servicers while reviewing their documents, as opposed to doing any validation of their data, this means the “exam” was a garbage in, garbage out exercise.

Similarly, today the Fed made the similarly ludicrous statement that there were “no wrongful foreclosures” based on a review of a mere 500 loan files. Given that there are 14 major servicers, that means it looked at 36 files on average per servicer. Heck of a job, Brownie!

Aside from the fact that there have been numerous reports of colossal errors that should be impossible in a system with any integrity (homes with no mortgages or where the mortgage had been paid off, where borrowers had been given letters that they had been approved for permanent HAMP mods being foreclosed upon), there are also numerous accounts of servicer-driven foreclosures. As Karl Denninger noted:

We have myriad reports of homeowners who are told to intentionally default by servicers, a clear act of bad faith. We have documented instances of banks breaking into homes that are occupied, an apparent serious state felony. We have documented instances of banks playing games with forced-placed insurance, escrow accounts and similar acts leading to foreclosure.

But the most telling contradiction of the banking regulators’ “nothing to see here” stance is the Administration’s aggressive pursuit of servicing abuses against active duty soldiers. When a Congressional hearing focused on how JP Morgan illegally foreclosed on soldiers, the bank went into overdrive to do damage control. As David Dayen reported:

The big bank went out of their way to fix the problem yesterday, knowing that abusing service members could get you in big trouble in this country, and lead to further scrutiny of their abusive practices. Calling these violations a “painful aberration” on a track record of honoring military families, JPM CEO Jamie Dimon announced:

• New pricing. Under the Servicemembers Civil Relief Act, servicers are required to cap mortgage interest rates for active duty personnel at 6%. JPM will lower that cap to 4%.

• Military modification program. JPM will go beyond HAMP requirements for all personnel who served on active duty going back to 9/11. If the borrower has a second lien with them, they will reduce the interest rate on it to 1%.

• No foreclosures. JPM will not foreclose on any active duty military personnel overseas. Anyone who was wrongly foreclosed upon previously will not only get their home back, but JPM will forgive all remaining home debt. They promise to do that in the future with any other wrongful foreclosure of a military family.

• Donations. JPM will donate 1,000 homes to military and veterans, through a non-profit partner, over the next five years.

• Jobs. They will commit to hiring 100,000 military and veterans over the next ten years. They will also offer a Technology Education certificate for veterans to take free to get technology training for future careers.

• Advisory Council. They’ll form an Advisory Council to determine other ways to help military families. They’re also opening a bunch of Homeownership Centers near military bases to assist families.

Needless to say, this is a PR gambit to the nth degree. But look how incredibly scared JPM is that anyone will look past the abuse of military families. They are going out of their way to burnish and repair their public image on this one, and the goal is to whitewash the fact that they were merely engaging in standard servicer practices of abusing homeowners and illegally foreclosing.

To underscore Dayen’s point, servicers are factories with highly routinized, bad procedures. If you see one abuse reported more than a time or two in the media, like force placed insurance or fee pyramiding, it is not a mistake. It’s policy.

Not surprisingly, JP Morgan appears to have company in the “grinding up servicemen for fun and profit” school of banking. And while the Administration has bent over backwards to protect servicers by disputing any suggestion that they’ve made unwarranted foreclosures, they’ve been fast to saddle up the Department of Justice to investigate over the very same issue,20 probably impermissible foreclosures at Saxon, a servicer owned by Morgan Stanley, because it involved active duty personnel. From the New York Times:

The Justice Department is investigating allegations that a mortgage subsidiary of Morgan Stanley foreclosed on almost two dozen military families from 2006 to 2008 in violation of a longstanding law aimed at preventing such action.

A department spokeswoman confirmed on Friday that the Morgan Stanley unit, Saxon Mortgage Services, is one of several mortgage and lending companies being investigated by its civil rights division. The inquiry is focused on possible violations of a federal law that bars lenders from foreclosing on active-duty service members without a court hearing.

Mark Lake, a Morgan Stanley spokesman, declined on Friday to comment on the investigation. However, in the fine print of a recent regulatory filing, Morgan Stanley disclosed that it was “responding to subpoenas and requests for information” from various government and regulatory agencies concerning, among other issues, its “compliance with the Servicemembers Civil Relief Act,” the law that governs the actions creditors can take against service members on active duty.

This two-tier approach is intriguing: aggressive pursuit of abuses when members of the armed forces are the victims, flat-out denials for the rest of us. Dave Dayen thinks it’s politics, but I wonder if something deeper is at work. The Pentagon has been aggressive in blocking other forms of exploitation of soldiers, such as locating payday lenders near military bases (the Pentagon sought and won interest rate ceiling. My 2007 post on that tussle was “The Pentagon as Financial Regulator.” Maybe that’s an idea we need to entertain more seriously. It seems to be the only body with the authority and firepower to take on the mortgage industrial complex.

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  1. Ronald

    When the military is viewed as the only organization capable of maintaining the sane regulations …

    Kaneda: “Tetsuo!”
    Tetsuo: “Kaneda!”

    … the people will …


    … come to support their olive-fatigued overlords.


    Aren’t we all soldiers, of a sort, fighting the good fight? Perhaps a system of conscription would help spread the …


    … protection services of the greatest mafia in the world!

    Like Starship Troopers. Sometimes you gotta serve to get that citizenship.

    1. Dave of Maryland

      Like hell we serve. We get fake military IDs. They got fake docs, we got fake docs.

      May the better fakes win.

    2. Cedric Regula

      Well, at least now we know how to get a good home loan… do a tour in Afghan first. To be fair to investors whom are over military enlistment age, maybe JPM will issue non-fraudulent RMBS for qualified vets to invest in.

      Combine that with college assistance for a 4 year tour of duty and the cost of education issue is solved for some as well.

      That leaves healthcare and medicare, which wasn’t addressed hardly at all in Starship Troopers. But thankfully, the novel Old Man’s War by John Scalzi does show us a way out of that predicament.

      In a far future world, the Republican healthcare system has been adopted. Earth is in a life and death struggle with a myriad of space aliens for colonizable planets. To encourage recruitment they offer seniors a new bio upgraded body in return for signing a long term contract to fight these space aliens. Since this is rather dangerous and scary work, the bodies are green to make desertion much more difficult. If you live thru your contract, you are placed back into a newly grown normal human body once your tour of duty is over.

      So then I imagine you can get a home loan from JPM, go to college and get a degree in something, get a job at an inter-galactic forces recruiting station, then proceed to save for a more boring retirement by investing in JPM special fraud free mortgage backed securities.

  2. skippy

    Caveat have not read the article, on purpose, save the header.

    I would submit, people with military training, are not those that the establishment would wish to piss off right now….nasty tipping point methinks…and would be very hard too psych-op at this point in time.

    1. ThomasisaPaine

      Skippy you have nailed it. JPM understands that to have a French revolution you need to have some shock troops……what better way to create them than to toss a soldiers family onto the street while they are overseas.

    2. Otter

      Y’all hear of the American Indian Movement and the Black Panthers. Trained in Vietnam curtesy of Mr Johnson and Mr Ho.

  3. Paul Repstock

    By the view of the US government only Bradley Manning Jullian Assange and a few men in Guantanamo are now evil. With those few exceptions the government is doing a fine job of the three bronze monkeys. At this rate ‘The Kims’ will soon be given most favored nation status. After all they are inspirations to any wanting stable governance.

    This story has probably been posted but I haven’t seen it.

  4. financial matters

    The DOD seems to take economic warfare seriously and you might say both foreign and domestic…

    This report was prepared for the DOD Deptmartment of Irregular Warfare Support Progam

    “”Immediate consideration of the issues outlined in this report is vital. Further study is essential and prospective responses must be crafted to address future risks. Finally, there are legitimate questions about the performance of the regulatory regime and Wall Street institutions. Implications that these parties have been complicit or otherwise co-opted cannot be ruled out. Therefore, it is strongly recommended that this study and any task-force response be conducted outside of traditional Washington and Wall Street circles.””

    1. Parvaneh Ferhadi

      Thanks for that link. There is another quote early on which is interesting:
      «Beyond that, this report exposes the fact that these vulnerabilities are subject to exploitation not only by greedy capitalists seeking profit but also by financial terrorists, intent on destroying the American financial system.»

      I don’t necessarily see a difference between greedy capitalists and fiancial terrorists. They may be one and the same.

  5. DownSouth

    Yves said:

    My 2007 post on that tussle was “The Pentagon as Financial Regulator.” Maybe that’s an idea we need to entertain more seriously. It seems to be the only body with the authority and firepower to take on the mortgage industrial complex.

    Any image of U.S. military competence is an illusion, an illusion created quite deliberately, but nevertheless an illusion.

    Andrew Bacevich, in his two books The New American Militarism and The Limits of Power, goes to great lengths to debunk the illusion of military competence.

    “American generalship since the end of the Cold War has seldom risen above the mediocre,” Bacevich writes in The Limits of Power:

    [S]enior officials operate on the implicit assumption that they are immunized from accountability. In May 2007, in a stinging critique of post-9/ll military leadership, Army Lieutenant Colonel Paul Yingling wrote in “Armed Forces Journal” that “a private who loses a rifle suffers far greater consequences than a general who loses a war.”

    In The New American Militarism Bacevich explores in great detail why the false illusion is created. It is all part and parcel of the well-oiled sales pitch [well maybe not so well-oiled, thanks to Bradley Manning and Wikileaks] for the all-consuming security state:

    In war-as-spectacle, appearance could be more important than reality, because appearance often ended up determining reality… To use force was to strike a posture, to manipulate perceptions, or to send a message…

    This image of war transformed derived from—-but also meshed with and seemed to validate—-the technology-hyped mood prevailing during the final decade of the twentieth century.


    In short, by the dawn of the twenty-first century the reigning postulates of technology-as-panacea had knocked away much of the accumulated blood-rust sullying war’s reputation. Thus reimagined—-and amidst widespread assurances that the United States could be expected to retain a monopoly of this new way of war—-armed conflict regained an aesthetic respectability, even palatability, that the literary and artistic interpreters of twentieth-century military cataclysms were thought to have demolished once and for all. In the right circumstances, for the right cause, it now turned out, war could actually offer an attractive option—-cost-effective, humane, even thrilling. Indeed, as the Anglo-American race to Baghdad conclusively demonstrated in the spring of 2003, in the eyes of many, war has once again become a grand pageant, performance art, or a perhaps temporary diversion from the ennui and boring routine of everyday life.


    This new aesthetic has contributed, in turn, to an appreciable boost in the status of military institutions and soldiers themselves, a fourth manifestation of the new American militarism.

    Since the end of the Cold War, opinion polls surveying public attitudes toward national institutions have regularly ranked the armed services first. While confidence in the executive branch, the Congress, the media, and even organized religion is diminishing, confidence in the military continues to climb. Otherwise acutely wary of having their pockets picked, Americans count on men and women in uniform to do the right thing in the right way for the right reasons. Americans fearful that the rest of society may be teetering on the brink of moral collapse console themselves with the thought that the armed services remain a repository of traditional values and old-fashioned virtue. With Americans becoming ever “more individualistic, more self-absorbed, more whiney, in a sense, more of a crybaby nation,” the columnist George Will told midshipmen in the U.S. Naval Academy, it is all the more important for the military to server as a model for the rest of society, preserving values that others might deem “anachronistic.” According to Will, “it is a function of the military to be exemplars.”

    Confidence in the military has found further expression in a tendency to elevate the soldier to the status of national icon, the apotheosis of all that is great and good about contemporary America. The men and women of the armed services, gushed “Newsweek” in the aftermath of Operation Desert Storm, “looked like a Norman Rockwell painting come to life. They were young, confident, and hardworking, and they went about their business with pose and élan.” A writer for “Rolling Stone” reported after a more recent and extended immersion in military life that “the Army was not the awful thing that my [anti-military] father had imagined”; it was instead “the sort of America he always pictured when he explained…his best hopes for the country.” According to the old post-Vietnam-era political correctness, the armed services had been a refuge for louts and mediocrities who probably couldn’t make it in the real world. Now the United States military was “a place where everyone tried their hardest. A place where everybody…looked out for each other. A place where people—-intelligent, talented people—-said honestly that money wasn’t what drove them. A place where people spoke openly about their feelings.” Soldiers, it turned out, were not only more virtuous than the rest of us, but also more sensitive and even happier. Contemplating the GIs advancing on Baghdad in March 2003, the classicist and military historian Victor Davis Hanson saw something more than soldiers in battle. He ascertained “transcendence at work.” According to Hanson, the armed services had “somehow distilled from the rest of us an elite cohort” in which virtues cherished by earlier generations of Americans continued to flourish.

    Soldiers have tended to concur with this evaluation of their own moral superiority. In a 2003 survey of military personnel, “two-thirds [of those polled] said they think military members have higher moral standards than the nation they serve… Once in the military, many said, members are wrapped in a culture that values honor and morality.” Such attitudes leave even some senior officers more than a little uncomfortable. Noting with regret that “the armed forces are no longer representative of the people they serve,” retired admiral Stanley Arthur has expressed concern that “more and more, enlisted as well as officers are beginning to feel that they are special, better than the society they serve.” Such tendencies, concluded Arthur, are “not healthy in an armed force serving a democracy.”

    In public life today, paying homage to those in uniform has become obligatory and the one unforgiveable sin is to be found guilty of failing to “support the troops.” In the realm of partisan politics, the political Right has shown considerable skill in exploiting this dynamic, shamelessly pandering to the military itself and by extension to those members of the public laboring under the misconception, a residue from Vietnam, that the armed services are under siege from a rabidly anti-military Left.

    In The Limits of Power Bacevich concludes:

    The exercise of military power will not enable the United States to evade the predicament to which the crisis of profligacy has given rise. To persist in following that path is to invite inevitable overextension, bankruptcy, and ruin.

    1. financial matters

      Bacevich’s ‘Washington Rules’ is also a great read..

      “”My own education did not commence until I had reached middle age. I had found assurance in conventional wisdom. I began to appreciate that authentic truth is never simple and that any version of truth handed down from on high is inherently suspect. The powerful, I came to see, reveal truth only to the extent that it suits them. Even then, the truths to which they testify come wrapped in a nearly invisible filament of dissembling, deception, and duplicity.

      I came to these obvious points embarrassingly late in life.

      The persistence of ‘washington rules’ has also provided an excuse to avoid serious self-engagement. From this perspective confidence that others accomodate themselves to America’s needs or desires – whether for cheap oil, cheap credit, or cheap consumer goods – has allowed Washington to postpone or ignore problems demanding attention here at home.

      When Americans demonstrate a willingness to engage seriously with others, combined with the courage to engage seriously with themselves, then real education might begin.””


      The DOD like other American institutions is somewhat a reflection of American culture. Some things will be forced on us. As in we seem to be somewhat spectators in some of the recent MENA country upheavals…

    2. DownSouth

      The sort of criticism of the military leveled by Bacevich—-an avowed conservative and devout Catholic—-is not unique to the right. Similar criticisms are also emanating from the left, such as in this interview where Chris Hedges suggested that “to many Americans war has now become sacred, the Pentagon acting as the church, and the soldiers the priests.” “Small wonder then, that there is an appetite for films that portray war as a battle against evil, with courageous American heroes that always win against the odds,” observes Lesley Docksey. Any disparagement or mistreatment of the soldiers is tantamount to blasphemy, a heresy.

      There is of course nothing new about this romanticization and glorification of soldiers. We’ve seen this movie before. As Peter Adam comments in Art of the Third Reich:

      The war was seen as a battle for the salvation of German culture. “In this war, the German Volk fights not only for its material existence, but also for the continuation and security of its culture,” declared Hitler on the occasion of the 1942 exhibition of German art.


      Hundred thousands of soldiers had died in battle. The civilian population was spending night after night in air raid shelters, but art was constantly used to bolster the lie of a victorious Germany.


      An increasing number of war paintings filled the walls of the House of German Art. In them the readiness to fight and to die for the nation was seen as the highest virtue. The soldier was shown mostly as the glorious victor. The horror of war or even death was only rarely portrayed. The National Socialists believed it was not the role of art to augment the anguish of war. It was the task of art to lead people away from reality into an emotional dream world: “The willingness for sacrifice which fills the whole German people is visible in all the works… They are the artistic visualization of a communal experience, the representation of the spiritual attitude of their time.” Paintings that could have given an accurate, realistic picture of social and historical circumstances of a people at war were censored by the leadership. The National Socialists kept the realistic language of painting, but they restricted its range. The artist was encouraged to adopt a polished photographic style but not to use it with conviction. Once more the emptiness that stares us in the eye when we look at almost any of these paintings stems from the artist’s total divorce from reality.


      “Art is the mirror of the soul,” wrote Walter Horn in 1942… “Only a soldier-like character, filled with intense feelings, is able to transmit the experience of war in artistic form.”

      The works of the war artists were more than personal documents; they were the highest artistic expression of an experience which involved the whole nation. “[They] are documents of the German soul. Their content and style are signs of the creative strength, the philosophical [weltanschauliche] attitude and the soldierly spirit…. The ethical and brave ideals of the SS, the highest volkish values, honor and faithfulness, find here their artistic representation. In this way the visitor not only experiences an art exhibition, but conceives a picture of the character of SS.”


      [A]mong the many thousands of works preserved, there is not one single drawing showing the absurdity of war. The picture one gets from these works is of a gentle war, of blonde nurses, comradeship, and friendly faces. It is not a picture of blood and tears, of gangrene and death.

  6. guy baker

    Yves–There are FEDERAL laws protecting members of the military from foreclosure. Clear, easy to understand FEDERAL laws. Plus, offices like Stern’s used fake social security numbers to try to circumvent these laws. On top of that, many Republicans in Congress and their constituents would/do find these legal violations repugnant.

    Contrast that with the situation for the non-military victims of massive foreclosure fraud. STATE laws have been broken. Those laws are harder to understand, vary from state to state, and the victims are more easily cast as deadbeats.

    True – massive federal fraud has been committed by banks that never properly securitized mortgages into trusts, may have knowingly sold mortgages into more than one trust simultaneously, may have simultaneously claimed entire trusts as assets on their books at the same time as their competitors (hint hint check the SEC website and look at the trusts AIG and others claimed on their books in the mid-2007 to early 2010 period and you might find some very interesting anomolies). Plus, the banks clearly avoided paying billions in federal taxes by through improper use of their REMIC status.

    But unless some clever and intrepid lawyer figures out how to sue regulators and/or the IRS for allowing this to happen, the banks are going to get a pass on the most egregious of their offenses. (Another logical strategy for consumer lawyers would be for lawyers to pool info on bad mortgages and start producing studies showing the extent of mortgage fraud and the patterns of abuse, and track the information about specific trusts.)

    In any case, as you’ve written extensively, the deck’s stacked against such legal efforts. Powerhouse bondholders don’t want to canniballize their investments, regulators look forward to their next public-sector perk or private-sector job, private-sector investors are salivating at the possibility of being able to buy huge chunks of bad-debt on the cheap after the assets are indemnified through black-box liquidation in entities like B of A’s “bad bank,” and Obama has been told he’ll destroy the country plus be a one-term president if he doesn’t lay off. Who’s left to take up the case against the banks? A disparate group of under-funded consumer groups and brilliant anti-foreclosure lawyers who aren’t working together to make their case against one of the biggest financial crimes in history.

    As for the banks and their recent efforts to make right on military foreclosures, if they can successfully put their military foreclosure problem to rest now, they rob their detractors of making the clearest legal and public-opinion case against them.

    That’s why the banks are trying to appear to make good on the military foreclosure problem, and that’s why they are trying to do it now. It’s the clearest, easiest case for anti-foreclosure lawyers to make against them. Republicans, and even the Obama administration would have come out on the side of the victims. I’m sure they’ve already told this to the banks, and the banks are scrambling to fix the military foreclosure problem as fast as they can.

  7. Economista Non Grata

    Just remember that the servants of the oligarchs, the administration, the bankers and the media are going to need the armed forces to protect them from the people once the shit hits the fan…!

  8. Norman

    To E. N. G. I would add, don’t count on the warriors, the enlisted ones to be in that group of defending the powers & the sycophants too. The officer corps, probably, but, as with the wars they have supervised, failure is a high mark of their routine.

  9. Justicia

    Well, it’s clear that the civilian authorities are no match for the banksters. As if we needed further proof that our laws are toothless and those charged with enforcing them utterly spineless. They can’t even make a case that Repo 105 transactions violated Sarbanes-Oxley:

    Lehman Probe Stalls; Chance of No Charges
    In recent months, Securities and Exchange Commission officials have grown increasingly doubtful they can prove that Lehman violated U.S. laws by using an accounting maneuver to move as much as $50 billion in assets off its balance sheet, which made it appear that the securities firm had reduced its debt levels.

  10. Tom Hickey

    So now in the US one has to join the military to get financial protection? Otherwise you are fair game? Such a deal.

    1. john

      And thus is citizenship re-defined for the empire. We have arrived at the end of our road to serfdom. Time for a new peasants revolt!

  11. Bobby

    I am very cynical so here goes. The army will name a Division after JPM and it will be the only division in the world on the front lines without food, water, shelter or guns. It will be supported by 1 email terminal. It will also be fully manned by women and men they have mortgages with JPM.

    1. Cedric Regula

      And there will be a merger of Blackstone, Blackrock and Blackwater any day now. Being private and funded by profitable Paper, Black Stone & Rock does pay, feed and arm it’s Blackwater commandos well.

      As a result of stress tests the Federal Reserve recommends that international operations of the firm desist and that the bank holding company lower it’s risk profile by operating domestically. The Firm agrees and announces this will enable them to resume paying dividends to stakeholders sometime in 2017, with the caveat that Dodd-Frank, Basel III and anything what’s her name…the consumer protection lady…has in mind is repealed as well.

      Timothy Geithner announces a public-private partnership and the Blackwater subsidiary is awarded a no-bid contract to assume all loan servicing in all 50 states. The contract includes an incentive bonus to Cut thru the red tape mucking up foreclosure resolution. You keep what you…foreclose on.

      Obama announces the foreclosure game is behind us and the country is ready move on.

  12. Gretchen Danon Hagbank

    The Pentagone is state controlled capitalism, in addition to housing, medical care, food, bodybags it seems appropriate for the oligarchs to reward their most important human cannon foder with a comfortable shack.
    Perhaps the tyrants can extend their consideration of fraud to the drone employees of the American communist system- Raytheon, GD, Lockheed etc.

  13. Ray Phenicie

    Thanks Yves, for keeping us up on this vast topic of mortgage fraud-a google search just brought up ‘about 4080 results’ on a search of this site for the term ‘mortgage fraud’-one busy blogger I’d say!

  14. gordon

    As I think I asked some time ago, if there were to be a military coup in the US, would anybody notice?

  15. nick

    If I were in the military, I would be mightily peeved that JPM et al had only targeted us, and no-one else.

  16. Gregory Bryan

    Instead of reviewing loan files, why doesn’t the task force just do a nexis search of wrongful foreclosures reported in the press as a means of counting and detailing servicer abuses? There’s plenty of fodder in the public domain already – they don’t need to (pretend) to dig into other files.

  17. ChrisPacific

    As happy as I am to hear that at least one segment of the population has access to justice (other than the moneyed financier class, that is) I think the fact that it’s the military means the Banana Republic tag on this one is well deserved.

    At least JPM was not stupid enough to try the “deadbeat borrowers” angle in this case.

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