Category Archives: Real estate

Bill Black: Dante’s Divine Comedy – Banksters Edition

Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives

Sixty Minutes’ December 11, 2011 interview of President Obama included a claim by Obama that, unfortunately, did not lead the interviewer to ask the obvious, essential follow-up questions.

I can tell you, just from 40,000 feet, that some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn’t illegal.

Obama did not explain what Wall Street behavior he found least ethical or what unethical Wall Street actions he believed was not illegal. It would have done the world (and Obama) a great service had he been asked these questions. He would not have given a coherent answer because his thinking on these issues has never been coherent. If he had to explain his position he, and the public, would recognize it was indefensible.

I offer the following scale of unethical banker behavior related to fraudulent mortgages and mortgage paper (principally collateralized debt obligations (CDOs)) that is illegal and deserved punishment. I write to prompt the rigorous analytical discussion that is essential to expose and end Obama and Bush’s “Presidential Amnesty for Contributors” (PAC) doctrine.

Michael Olenick: NAR’s Big Miss on Home Sales Underscores Lack of Transparency and Accuracy in Mortgage/Housing Data

By Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha)

The National Association of Realtors (NAR) has announced that their estimates for home sales have been materially incorrect since 2007, and that they plan to restate the number of homes sales downward. Apparently the NAR derives their homes sales information from the Multiple Listing Services, the proprietary “want-ads” real-estate agents use to list houses for sale.

JP Morgan “Greed Washing”: Sponsors Orwellian TV Advertorial to Tout $2 Million of Charity Spending

The New York Times (hat tip Mary B) took note of a seamy JP Morgan effort at brand burnishing:

In a gambit to promote its charitable work — and maybe polish its image, which has suffered since the financial collapse in 2008 — JPMorgan Chase is financing and sponsoring the “American Giving Awards,” which will be televised by NBC on Saturday night. The two-hour show, with Bob Costas as host, will profile recipients of Chase donations, will be book-ended by Chase commercials and will regularly remind viewers that the whole event is “presented by Chase.”…/

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Michael Olenick: Bank of America All In – Calling Moynihan’s Bluff to Bankrupt Countrywide

Yves here. As the headline indicates, the steps taken Bank of America that Michael Olenick describes in this article call into question the idea that Bank of America can shield itself by putting Countrywide into bankruptcy. Note that, some litigants, particularly AIG in its petition in opposition of the proposed $8.5 billion settlement of putback liability on 530 Countrywide trusts, made a persuasive case that Bank of America has operated Countrywide in such a way post acquisition so that it is no longer bankruptcy remote from BofA (that is, you can’t BK Countrywide and deny Countrywide creditors access to BofA assets).

Nevertheless, as attorney and former monoline executive Tom Adams noted by e-mail, the reason Bank of America might want the servicing at BofA rather than Countrywide if Countrywide is put into bankruptcy is probably to avoid a servicing termination event. If the servicer is bankrupt, the trustee or investors could, in theory, terminate them as servicer. This is really only theory, because almost no one (other than BofA) would want to be servicer for these loans, so it would be hard to see it as a driver of the changes Olenick describes.

An interesting related issue is that BofA, like other servicers in this new world of costly and lengthy foreclosures, is at risk of over advancing on mortgages. Servicers advance principal and interest even after a borrower has defaulted and reimburse themselves when the foreclosed property is sold. In theory, they can stop when a loan is clearly irrecoverable. In practice, historically many servicers have kept advancing up to the full principal balance of the loan. With loss severities rising and more borrowers fighting foreclosures, they can incur more costs than the house is worth, but on average, they still recover their advances. But with foreclosure timelines attenuating, legal costs escalating, and foreclosures grinding to a halt in states like Nevada, New York, and New Jersey, where they are now real sanctions for filing questionable foreclosure documentation, servicers face increasing doubts about their ability to recover advances from the proceeds of home sales. I hope the FDIC is watchful enough not to allow deposits to be used to fund servicer advances.

By Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha)

NYT’s James Stewart Runs PR for Compromised SEC Chief Khuzami Against Judge Rakoff on Proposed $285 Million Citi CDO Settlement

Tom Adams, an attorney and former monoline executive, provided considerable input into this post.

There is nothing more useful to people in authority than when a writer with an established brand name does their propagandizing for them.

Harvard Law graduate and Pulitzer Prize winning author James B. Stewart penned a remarkable little piece in the New York Times over the weekend. Titled “Few Avenues for Justice in the Case Against Citi,” it contends that Judge Jed Rakoff’s ruling against a proposed $285 million SEC settlement with Citigroup over a $1 billion CDO (Class V Funding III) that delivered $700 million in losses to investors and $160 million in profits to Citi is misguided. Stewart argues, based on “some reporting,” that the SEC is unlikely to do better in the trial that Rakoff has forced on the agency by nixing the settlement.

We will look at the caliber of Stewart’s “reporting” in due course, since his article reads like dictation from the SEC’s head of enforcement Robert Khuzami (the SEC’s interests are aligned with Citi’s in wanting the settlement to go through). He either did not read or chose to ignore critical information in the underlying complaints, which the Rakoff ruling cites, and he also overlooked relevant cases.

GMAC Mugs Massachusetts for Insisting on the Rule of Law, Suspends Mortgage Lending in the State

This move by GMAC, now Ally, is remarkably brazen. GMAC has effectively said that Massachusetts must hew to its demands of how to deal with foreclosures. It announced it is withdrawing from mortgage lending in the state in an effort to bring it to heel.

GMAC may be in a better position to exercise this sort of threat than other banks, since with their broader business lines, government bodies in the state could retaliate by moving other business (pension funds, cash management, payment services) from them.

This is very similar to the retaliation described in Gretchen Morgenson and Josh Rosner’s Reckless Endangerment, when Georgia had the temerity to try to pass tough lending laws:

Massachusetts Announces First Comprehensive Lawsuit Against Major Banks

The Massachusetts Attorney General has announced a major lawsuit against the biggest banks in the foreclosure game, namely Bank of America, JP Morgan, Citigroup, Wells Fargo, GMAC (now Ally) as well as MERS and its parent MERSCorp.

It seeks accountability for violations in the foreclosure process, including robosiging, initiating foreclosures when they were not entitled to do so, the use of MERS (both a violation of land records requirements and what amounts to unjust enrichment via failure to pay local recording fees) and deceptive practices in foreclosure (as in failing to offer modifications as required by law and would be good for borrowers).

Former Award Winning Chase Banker Describes Predatory Mortgage Lending Practices

Readers need to read today’s op ed by Nicholas Kristof in the New York Times, and pronto. It is a former insider debunking of the idea that borrowers rather than bankers bear primary responsibility for the mortgage crisis.

Michael Olenick: Are Remotely-Processed Mortgage Assignments Another Smoking Gun?

By Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha)

Assignments of mortgages are the legal instruments that transfers ownership of a mortgage from one party to another. In a securitized mortgage, a trust holds thousands of mortgages on behalf of investors. The investors in the various bonds that get cash flows from a single trust expect the trust to be in a position to take advantage of the rights conferred by the mortgages when certain events occur, usually payoff or default.

I used my crowd-sourced online software, www.findthefraud.com, to help categorize 2,500 assignments in Palm Beach County, FL, which were recorded in late 2008 and early 2009. Palm Beach County, like any Florida county, is a high foreclosure state and, thanks to strong public records laws in Florida, serves as a good bellwether about bank business practices both in Florida and around the country.

LPS Foreclosure Fraud Whistleblower Found Dead (Updated)

Nevada notary Tracy Lawrence, who was due to be sentenced today to up to a year in jail for a single count of misdemeanor fraud, went missing from her sentencing hearing today and was found dead.

Dylan Ratigan: To Eric Holder – A Simple Way To Prosecute Bank Crimes

By Dylan Ratigan, MSNBC host and author of the new book Greedy Bastards. Cross posted from DylanRatigan.com

Shahien Nasiripour has a great scoop in the FT – bank regulators have uncovered up to 5000 military families who were foreclosed on illegally by mortgage servicers.

Matt Stoller: Mortgage Servicers – Getting Away with the Perfect Crime?

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller. Cross posted from New Deal 2.0

Without prosecutions, there’s nothing keeping fraud from becoming a standard business practice.

Federal Judge Refuses to Dismiss Bank Break-In Case Against JP Morgan, Lender Processing Services

In the sordid underworld of foreclosure-related reporting, certain stories have started to develop a prototypical feel. Bank Forecloses on Wrong Home. Bank Forecloses on Home with No Mortgage. Bank Refuses Even to Talk About Short Sale. Bank Sends Borrower into HAMP-Created Hall of Mirrors and Forecloses Anyhow.

The problem with stories becoming cliched is that the force of the recognition of the injustice loses some of its punch with repetition. But one type of story still seems to trigger well warranted outrage in the public: Bank Breaks Into House.

Matt Stoller: Nevada Attorney General Catherine Cortez Masto Cracks Open the Financial Crisis

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller.

Learn the name Catherine Cortez Masto, because she just took a big leap in front of every public servant in the country in terms of restoring faith in government. As Nevada AG, she actually indicted someone for blowing up our housing system. Specifically, she handed down 606 counts of felony or gross misdemeanor indictments on robo-signing against two employees of big bank subcontractor Lender Processing Services.

It’s pretty clear from the indictment that these are mid-level employees, one level up supervisors of fraud rather than top CEOs. And yet, even if this were as far as it goes, it would still be a big deal. These would be the only charges served involving the housing crisis and its link with the structurally corrupt securitization chain so far. By itself, these indictments signify that the fraudulent foreclosure game is over for the big mortgage servicers in Nevada, which is the center of the foreclosure epidemic. It says the rule of law matters, in at least one corner of the country.

Michael Olenick: Don’t Buy Mortgage Industry Hype on Mortgage Modifications

By Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha)

The Mortgage Bankers Association (MBA) boasts that its members have modified over five million mortgages over the past few years. As a data analyst focused on patterns of foreclosure fraud, I’ve analyzed tens of millions of pieces of information. I was willing to take the MBA’s claims at face value but, years ago, came to the conclusion that the MBA and their members have a severe credibility gap.

Remember, the reason for advocating mods is that, properly structured, they are a win-win: investors take a lower loss than they would in a foreclosure, the borrower stays in his house, and another real-estate-price-depressing sale is averted.

But this “everyone comes out ahead” is not what I’ve seen. I’ve been able to check modifications, since they are recorded in public records. It quickly became apparent that while theses modifications are, at best, worthless, and more often than not border on an extension of the same predatory practices that resulted in the original mortgages.

These modifications are to mortgages as vultures are to predators, another opportunity to take one last bite out of people trying to keep their homes. Banks are “modifying” lots of loans, but to terms even more favorable to banks.