Category Archives: Credit markets

Satyajit Das: It’s All Greek to Me!

Yves here. In case you managed to miss it, there is supposedly an agreement for Greece to get €130 billion. But then we learn that Greece will still need more dough if it meets its target of reducing government debt to GDP to 120% by 2020 (and why is debt to GDP of 120% seen as sustainable then when it is not seen as sustainable now? And leaked documents further note that Greece might not meet its targets (duh!) and its debt to GDP could instead by 160% of GDP, which would require bailouts of nearly twice the amount now contemplated. And “discussions” are continuing in Brussels into the early morning, which says this deal is about as done as the US mortgage settlement.

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

The Greek Prime Minister spoke of a choice between “austerity” and “disorder”. He got both, as the Greek Parliament based the European Union (“EU”) agreed to severe budget cuts and outside rioters protested the plan.

Quelle Surprise! Servicers Rip Off Investors as Well as Homeowners

We’ve been giving examples off and on about how servicers scam borrowers. Examples include impermissibly deducting fees before applying payments to interest and principal; force placed insurance, inflated prices on and excessive frequency of broker price opinions, and in altogether too many cases, treating payments that are on time as late. What many observers fail to appreciate is that these are tantamount to scamming investors. If a borrower goes into default, any bogus charges will be deducted from the sale of the house, and hence come out of investors’ hides.

Lisa Epstein of Foreclosure Hamlet is a mortgage document maven and has been looking extensively at investor reports and compared them to court documents and has found serious discrepancies.

Michael Olenick: Shocking Economic Insight – Mass Foreclosures Will Drive Down Home Prices

By Michael Olenick, creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick or read his blog, Seeing Through Data

“A lie told often enough becomes the truth.”
— Vladimir Lenin, adopted and reused by Joseph Goebbels

Every doctor knows the fastest way to stabilize a patient is to kill them, because there is nothing more stable than death. While that solution may be fast and inexpensive it’s also sub-optimal. Yet pundits repeatedly posit the fastest way to end the housing crisis is through mass foreclosures. In a strict sense they’re right, that will achieve stability, though so will other policies calibrated to cause less micro and macroeconomic damage .. and a lot less human suffering.

San Francisco Foreclosure Audit Elicits Predictable Responses from Securitization Mess Deniers

Given the existence of a large and still for the most part very well remunerated mortgage industrial complex, it is not surprising that a investigation done by a mere county that found errors in virtually all the loans in a small sample of foreclosures created a hue and cry.

While state attorney general Kamala Harris remarked that, “The allegations are deeply troubling and, sadly, no surprise to homeowners and law enforcement officials in California,” and Nancy Pelosi wrote to ask Eric Holder to take a look, the securitization problem deniers went to assault mode.

Greece is Out of Time, Again

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.

There is definitely something odd happening in Europe. I can’t quite put my finger on it, so I thought I would list out my musings on the topic and see what I can come up with.

Quelle Surprise! Taxpayers Will Be Paying for Part of Mortgage Settlement

The whole purpose of a settlement is that a party pays damages to rid themselves of liability, and the amount they pay (and “pay” can include the cost of reforming their conduct) is less than what they expect to suffer if they were sued and lost the case (otherwise, it would make more sense for them to fight).

But in the topsy-turvy world of cream for the banks, crumbs for the rest of us, we have, in the words of Scott Simon, head of the mortgage business at bond fund manager Pimco, in an interview with MoneyNews, lots of victims paying for banks’ misdeeds:

Quelle Surprise! San Francisco Assessor Finds Pervasive Fraud in Foreclosure Exam (and Paul Jackson Defends His Meal Tickets Yet Again)

One of our big beefs about the pending mortgage settlement has been the failure of prosecutors and regulators to do anything remotely resembling serious investigations. You don’t settle on known, easy to prove abuses (particularly when you choose not to know their extent) and leave yourself with a grab bag of mainly more difficult to ferret out ones to consider going after later.

We’ve seen repeatedly that small scale investigations in the servicing and foreclosure arena have found widespread problems. So the latest report from San Francisco county should come as no surprise.

HUD’s Donovan Tells Remarkable Whoppers About Settlement to Mortgage Investors

If you are going to lie, it appears the Obama Administration believes there is nothing to be lost by telling a Big Lie.

New York Creates New Foreclosure Courts to Clear Backlog

Given the horrible history of special foreclosure courts in Florida, which as we recounted (see here and here for some past discussions) resulted in a bank-friendly travesty of justice, one has good reason to regard dedicated foreclosure courts with more than a modicum of concern.

The variant that is planned to be implemented in New York appears to be more fair-minded in intent than its Florida cousin. And while it appears unlikely to produce the sort of kangaroo court outcome that occurred there, it is not hard to see that this initiative is likely to fall well short of its objectives.

Philip Pilkington: Pension Provider to British Government – “QE Actually Does Kill Demand!”

By Philip Pilkington, a writer and journalist based in Dublin, Ireland

More pension funds are getting their act together and calling the British government on their dodgy pseudo-stimulative policies. The British pension provider Saga has released an excellent counterargument to the recent round of QE announced by Bank of England governor, Mervyn King (an argument that we have been pushing for some time).

Saga are seething and you would guess that pension recipients are no less enraged because the effects that QE is having on pension funds appears to be quite devastating.

Occupy the SEC’s Comment Letter Objects to Excuses for Watering Down Volcker Rule (#OWS)

Yves here. No one should be surprised that Bloomberg is reporting today that Goldman is aggressively lobbying for a Volcker Rule waiver for its role as a sponsor of and investors in “credit funds.”

By George Bailey, who has worked in senior compliance roles at a Big Firm You’ve Heard Of and is also a member of Occupy the SEC

Today is “Volcker Day” and Paul Volcker was on a tear.

Quelle Surprise! Administration and State Attorneys General Lied, Mortgage Settlement Release Described as “Broad”

North Carolina has posted an executive summary of the foreclosure settlement (hat tip Abigail Field), and it is a a troubling document. The first aspect is the very fact that an executive summary, rather than actual text of an agreement, is what is being released. And it’s not being released for the worst of reasons: the deal has not been finalized. We explained in an earlier post why this is completely outside the pale, and we’ll turn the mike over to Frederick Leatherman for a recap:

Bizarre Department of Justice Disclaimer for Mortgage Settlement Website

Dave Dayen pointed out how peculiar that the mortgage settlement propaganda website, www.nationalmortgagesettlement.com, is a .com and not a .gov. And it turns out the Department of Justice disavows its content (hat tip April Charney):

Marshall Auerback: Greece – A Default is Better Than the Deal on Offer

By Marshall Auerback, a portfolio strategist and hedge fund manager

Pick your poison. In the words of Greek Finance Minister Evangelos Venizelos, the choice facing Greece today in the wake of its deal with the so-called “Troika” (the ECB, IMF, and EU) is “to choose between difficult decisions and decisions even more difficult. We unfortunately have to choose between sacrifice and even greater sacrifices in incomparably more dearly.” Of course, Venizelos implied that failure to accept the latest offer by the Troika is the lesser of two sacrifices. And the markets appeared to agree, selling off on news that the deal struck between the two parties was coming unstuck after weeks of building up expectations of an imminent conclusion.

In our view, the market’s judgment is wrong: an outright default might ultimately prove the better tonic for both Greece and the euro zone.