Category Archives: Banking industry

Foreclosure Fraud 101: A Step-By-Step Look at One of the Most Common Fixes for Securitization Fail

We’ve written from time to time that the train wreck in foreclosure-related procedures is the direct result of widespread, possibly pervasive failure to convey borrower IOUs (notes) to securitization trusts as stipulated in the governing documents (the pooling & servicing agreement). Because key actions had to be taken by dates long past, and the contracts that governed these deals are rigid, there isn’t a permissible way to get notes that weren’t conveyed properly to trusts on time there now. So the fix has been document fabrication and forgeries. We thought we’d provide a specific example for reader edification.

Goldman Ex-Prop Traders Flopping on Their Own

John Whitehead is being proven right.

Not-So-Dumb Consumers Shun OCC’s Bogus Foreclosure Reviews

Consumers seem to have wised up to the fact that the Administration is not on their side, particularly as far as housing is concerned.

Bill Black on How the Jumpstart Obama’s Bucket Shops Act is Just Another in a Long Series of Fraud-Promoting Legislation

Yves here. The Washington Post reports tonight that there is some pushback about the decried-by-anyone-who-knows-bupkis-about-securities-markets-and-isn’t-on-take JOBS Ac, which appears to be certain to be signed into law.

Bill Black reminds us that tons of absolutely terrible financial regulation (as in deregulation) over the last 25 years have passed with large margins.

A Qualified Defense of DeMarco, the Administration’s Favorite Scapegoat for Its Failed Housing Policies (Updated)

There’s been an interesting contretemps over an article by Gretchen Morgenson over the weekend, “A Bailout by Another Name.” Morgenson made the hardly-controversial observation that writing down Fannie and Freddie first mortgages without wiping out any relate second is a back door bailout. Remember, this was one of our key objections to the bank-friendly mortgage settlement, that a requirement to write down firsts and only write down related seconds to a degree is a subsidy to banks when if you were to believe the PR, the settlement is supposed to redress past abuses.

Morgenson also defends DeMarco’s refusal to do principal mods on Fannie and Freddie loans, arguing that he is subject to a requirement to preserve taxpayer assets and that the studies on this have been inconclusive. She adds that the focus is again incorrectly on Fannie and Freddie and not the banks. HAMP mods on GSE paper appear to be roughly proportional to their market share of original lending (around 40% before the crisis) when given their much lower default/delinquency rates, you’d expect them to represent a smaller share than they do relative to mods of bank owned and private label securitized loans.

The fact that this article has gotten heated responses from Felix Salmon and Dean Baker appears to be more a function of tribalism of various sorts than about the policy issues at hand.

Victory in Oakland County Transfer Tax Case Paves Way for Other Michigan Suits Against Fannie and Freddie

A few counties have filed litigation against various securitization players (originators, servicers, MERS) for the underpayment of recording fees. Similarly, New York attorney general Eric Schneiderman filed a wide ranging suit against MERS and three banks that used it and settled it for $25 million (it included a mention of $2 billion in unpaid recording fees but we were skeptical of viability of his argument).

However, counties in Michigan have scored an important victory.

Memo Show Corzine Ordered Raiding MF Global Customer Account of $200 Million

We know America is a hopeless kleptocracy, but if Corzine does not go to jail, given the revelation that he approved the raiding of a customer account of $200 million, it means that no one in the officialdom is interested in keeping up the pretense that we have a functioning regulatory and judicial system.

The revelation per Bloomberg:

Europe’s Counterproductive Economic Policies Proceeding as Expected

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Anyone who has been following my European commentary for any length of time will know that I have been running a number of risk themes on Europe due to what I consider to be misguided and one-sided policy which will ultimately be counterproductive.

Bank of America Launches Test “Mortgage to Lease” Program – Should We Be Impressed?

The Wall Street Journal and New York Times have reports on a pilot program at Bank of America to allow homeowners who are likely to default a graceful exit. The Charlotte bank will allow 1000 borrowers in New York, Arizona, and Nevada to turn in the deeds to their houses in return for a one year lease with a two one year renewal options at or below market rates. The program will be only with borrowers invited by the bank, which will target homeowners who are at least two months behind on payments but can demonstrate that they can pay the rent. The Journal cites an example of a Phoenix home with a $250,000 mortgage with payments of $1600 a month. It estimates the rent as $900.

This is clearly a preferable alternative for homeowners to foreclosure. They escape the credit score damage, stress and indignity of the foreclosure process and save moving costs. They are also spared the difficulty of finding a landlord who will accept a tenant with a tarnished payment record. It isn’t clear how the program will handle the usual rental deposit. So what’s not to like?

Mark Ames: The One Percent’s Plan for the Rest of Us – Livestock to be Milked for “Rent”

Yves here. Mark Ames’ post discusses the institutionalization of a regressive policy, that of trying to eke more corporate growth out of extracting more and more out of workers rather than sharing the benefits of productivity gains with them.

Dallas Fed’s Fisher Criticizes Dodd Frank as Not Going Far Enough on TBTF

Ordinarily, pointing out that long-standing critic of too big to fail banks is still unhappy about them would not count as news. But the commentary of Dick Fisher, the head of the Dallas Fed, and that of his research director, executive vice president Harvey Rosneblum, is noteworthy because it stands in contrast to the emerging conventional wisdom inside the Beltway. I was told last week that the prevailing and accurate view of last year, that Dodd Frank didn’t go far enough, is being supplanted by the Jamie Dimon view that’s it’s too intrusive. Note that those aren’t actually inconsistent: effective bank regulation IS intrusive. Banker unhappiness would ordinarily be a good sign, but the crisis perps have taken to howling at any intrusion on their imperial right to profit. And the worst is that third parties take their kvetching seriously.

Why You Should Hate the “Jumpstart Obama’s Bucket Shops” Act

Obama seems determined to roll back the few remaining elements of the New Deal. As we’ve recounted, he’s keen to cut Medicare and Social Security; he said as much in a dinner with leading conservative luminaries shortly after his inauguration. And his JOBS Act, which guts securities law protections on smaller stock offerings, is touted as a way to increase employment by helping to fund smaller businesses. In reality, the only jobs it is likely to create will be due to the resulting explosion in stock scamsters and bucket shop operators.

Debunking the Myth That an SEC Capital Rule Change Helped Cause the Crisis

There is a great post by Bethany McLean at Reuters debunking a major “what caused the crisis” urban legend. Many, including Joe Stiglitz and Alan Blinder, have claimed that an SEC 2004 rule change regarding the leverage of securities firm holding companies allowed the leverage of major investment banks to skyrocket, helping to trigger the crisis. McLean’s article demolishes this idea.

Roger Lowenstein’s Disgraceful Propagandizing via “Bernanke as Hero” Piece

As Winston Churchill pointed out, history is written by the victors. The big end of finance, having won decisively in the global financial crisis, is in the process of rewriting history to suit its liking. The cover story in the current Atlantic by Roger Lowenstein on Ben Bernanke, titled simply, “The Hero,” is a classic example of this type of revisionist history.