Category Archives: Real estate

GSE 2.0 Scare Tactics: False Claim That No Government Guarantee = No Thirty-Year Mortgage

The propaganda strategy for selling the public on the creation of supposedly new improved GSEs is becoming more apparent. Recall that we had an initial skirmish a month ago, when the Center for American Progress published a plan to reform Fannie/Freddie and the housing finance system. It would create an FDIC-like insurance fund to stand behind private Fannie/Freddie like entities that will offer reinsurance with an explicit Federal guarantee on mortgage-backed securities. These new firms can also be controlled by banks.

This plan, which was very similar to ones presented by the Mortgage Bankers Association, the Federal Reserve and the New York Fed, t was clearly an Administration trial balloon; the CAP is the mainstream Democrat think-tank, with close ties to Team Obama. But after the CAP proposal got some resistance, the Treasury’s report, which came later in the month, went the route of presenting three alternatives rather than a specific plan. But we argued at the time that this seeming change was merely a tactical move, to present the Administration as fair brokers in a politically fraught process, and that it still favored what we called the GSE 2.0 plan.

We think the idea of reconstituting the GSEs in somewhat improved form a terrible idea because it preserves the bad incentives of a public/private system and launders housing market subsidies in an inefficient and unaccountable way through the banking industry.

Another County Seeking to Collect Unpaid Recording Fees From MERS

I must confess I get a perverse sense of satisfaction from watching MERS suffering pushback on a variety of fronts. The latest, as we mentioned a few weeks ago, is the prospect of litigation by various local governments asserting the right to the recording fees that the MERS system bypassed.

The press release below is from the Guifford County Register of Deeds in North Carolina. As you can see, he is exploring the county’s options for recouping recording fees he believes that MERS owe to Guifford County, to the tune of $1.3 million (hat tip Lisa Epstein via ForeclosureFraud).

A Straightforward Criminal Case Against Wall Street CEOs and Senior Executives

Various people who ought to know better, such as the New York Times’ Joe Nocera, haven taken to playing up the party line of the banking industry and I am told, the SEC, that we should resign ourselves to letting senior financial services industry members get away with having looted their firms and leaving the rest of us with a very large bill.

It is one thing to point out a sorry reality, that the rich and powerful often get away with abuses while ordinary citizens seldom do. It’s quite another to present it as inevitable. It would be far more productive to isolate what are the key failings in our legal, prosecutorial, and regulatory regime are and demand changes.

The fact that financial fraud cases are often difficult does not mean they are unwinnable. And a prosecutor does not need to prevail in all, or even most, to serve as an effective cop on the beat.

Contrary to prevailing propaganda, there is a fairly straightforward case that could be launched against the CEOs and CFOs of pretty much every US bank with major trading operations.

Satyajit Das: Potemkin Villages – The Truth about Emerging Markets

By Satyajit Das, the author of “Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives”

Martin Gilman (2010) No Precedent, No Plan: Inside Russia’ 1998 Default; MIT Press, Cambridge, Massachusetts

Victor C. Shih (2008) Factions and Finance in China; Cambridge University Press, Cambridge, Massachusetts

Carl E Walter and Fraser J. T. Howie (2010) Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise; John Wiley, Singapore

According to myth, Russian minister Grigory Potyomkin ordered the erection of fake settlements, consisting of hollow facades of villages along the Dnieper River, to impress Empress Catherine II, about the value of her new conquests during her visit to Crimea in 1787. More than two centuries later, emerging market nations have borrowed the strategy. These three books provide insights into the Potemkin-village-like structure of emerging economies.

Megan McArdle Uses Straw Men to Argue Against Principal Mods

Megan McArdle has a post up discussing why she thinks the benefits of principal mods would be “at best small and mixed”.

The problem with her lengthy discussion is that it is rife with straw men.

Before we get to the nitty gritty, I want address two bits of framing at the top which I found troubling. The first was the title, “Principal Write-Downs Still Popular With Wonks”. The “still” suggests that wonks like it even though some, presumably most, yet to be named others don’t. And singling out “wonks” further implies that (aside from homeowners) they may be its only fans.

That is very misleading. Who is in favor of mods? The only people who under normal circumstances ought to have a vote on this matter, namely, the borrowers and the lenders. First mortgage lenders overwhelmingly favor mods to borrowers with who still have a viable income. Why? Do the math:

Dylan Ratigan: Will Washington wake up to Wall Street greed?

It’s good to see more MSM outlets taking up the “why the lack of cases against the big Wall Street firms” theme. Perhaps my cynicism is showing, but Phil Angelides seems to be talking a tougher line than he did when the Financial Crisis Inquiry Commission report was released. Is this simply his response to […]

Big Drop in New Foreclosures?

There has been evidence here and there of a marked fall in new foreclosure filings. Lender Processing Services, which handles more than half of the loans serviced in the US, said its revenues in its Default Services Group were down in the final quarter of the year. Why? Its revenues are tied to initial foreclosure filings, and its were off 33%, no doubt in large measure due to the robo signing scandal. Recall that it led many banks to halt foreclosures (some all over the US, others in judicial foreclosure states only) while they inspected the state of play and scrambled to revamp procedures. Banks piously claimed that they found no problems in the correctness of foreclosure actions and that ex making the changes needed to assure affidavits were proper, they were going to be back to business as usual post haste.

Now we already know that that isn’t the case. Since the robosigning scandal broke, foreclosure activity has been down. RealtyTrac reported that foreclosures in January were up only 1% over December levels, which was down 17% from the year prior.

But RealtyTrac captures every foreclosure filing in that particular report, so it is a mix of new foreclosure filings plus additional filings for foreclosures already underway….

Matt Stoller: AG Tom Miller Negotiating in Secret with Banks Over Whether to Put Bankers in Jail

By Matt Stoller, a fellow at the Roosevelt Institute. His Twitter feed is http://www.twitter.com/matthewstoller. Cross posted from New Deal 2.0

If NFL fans are demanding negotiations be opened up, why are homeowners kept in the dark?

Zach Carter wrote a good piece on homeowners’ demands of the big banks. National People’s Action has coordinated thousands of homeowners in asking for an aggressive settlement with the banks on their handling of foreclosures. Iowa Democratic Attorney General Tom Miller, who is heading the 50-state investigation, is one of their prime targets.

But it’s this video that makes it interesting.

NYT’s Joe Nocera Defends Failure to Bring Wall Street Execs to Justice

Aargh, it is frustrating to see how quickly establishment-serving shallow arguments become conventional wisdom. We get a big dose of this line of thinking from the New York Times’ Joe Nocera in an article titled, “Biggest Fish Face Little Risk of Being Caught.”

Now you can’t disagree with the conclusion: no major banking industry figure is going to be brought to justice. But the explanation he offers is incomplete and misleading, and serves to misdirect the public from more fundamental and more troubling causes.

Sanctimonious Wells Fargo ‘Fesses Up That it Will Probably Pay Fines in Enforcement Actions

Although banks are having to pay fines or make settlements now and again that are grossly inadequate relative to the damage they’ve inflicted on consumers and communities, I thought I’d single out this example.

The reason is simple. Wells Fargo has annoyingly tried to maintain that it is as pure as the driven snow, and has gone as making easily proven misrepresentations in meetings with Congressional staffers in doing so (which makes one wonder how much truth-stretching it has engaged in in communications with investors).

So I must confess to a bit of schadenfreude in reading this Bloomberg story:

Banks Pushing Back Hard on Inadequate Mortgage “Settlement” Trial Balloon

No sooner have the preliminary outlines of an inadequate settlement of mortgage servicing abuses been leaked, but the banking industry is engaged in a full court press to stop it.

The astonishing part is that the banking industry continues to maintain that it really didn’t do anything wrong, all it did was make some technical errors. That so grossly understates the degree of its recklessness and malfeasance as to be beyond relief.

It’s no surprise that the so-called Foreclosure Task Force which spent a mere eight weeks reviewing servicer activities and didn’t find much. The timeframe of its exam assured that it would not verify servicer records and accounts against borrower experience and records. It is almost certain that they also did not look at how servicer software credited payments and charges, when there is widespread evidence of violations of agreements with borrowers and RESPA.

And to the extent they looked at “improprieties” in foreclosure documents, it’s a given that they did not go beyond robosigning, when that is arguably the least significant form of malfeasance. There is ample evidence of fraud to cover for the failure to convey notes to securitization trusts, ranging from the misuse of lost note affidavits to document fabrication (bogus allonges being the most common fix).

In addition, pooling and servicing agreements also have specific provisions as to level and procedures for charging certain fees. Yet studies have determined that a specific servicer will apply the same charges across all borrowers and investors, irrespective of the requirements of particular securitizations. So it’s blindingly obvious that this exam was cursory, looking at one or two points of failure in a slapdash fashion and completely ignoring other issues that are at least as important.

Mortgage Fraud Whitewash: $20 Billion “Get Out of Jail Free” Settlement Floated

American leadership is reliable in one respect: it consistently undershoots my already low expectations.

Or maybe I have it backwards because I keep forgetting who the authorities are really serving, and it clearly isn’t you and me. As we will discuss below, the latest scam is that the banking regulators are finalizing a mortgage “breakdown” settlement, and they’ve evidently decided to let the industry off the hook for a mere $20 billion.

In Saudi Arabia, the royal family has just offered $36 billion worth of concessions in an effort to placate an increasingly unruly public (this appears to be in addition to pledges to spend $400 billion on education, health care, and infrastructure by 2014). This is in a country with a population just under 26 million, including over 5 million non-nationals who presumably aren’t eligible.

Now you can easily pooh pooh this comparison, since Saudi Arabia is an autocratic country desperately throwing around money to buy off dissidents, right? But this is the kind of money a leadership group will shell out when pressed to defend an existing order. And the US was very quick to hand out funds right, left, and center during the financial crisis. It’s continuing to do so now in less obvious ways, by continued life support for the mortgage market through Fannie and Freddie, the Fed’s super low interest rates and QE2, and non-monetary measures, most important its refusal to make any sort of serious investigation into what happened in the crisis and prosecute key actors.

Daniel Pennell: MERS Counsel Calls Me

By Daniel Pennell, a systems expert who has testified before the Virginia House of Representatives on MERS

I wonder if solar flares or something in the ether is prompting officials under attack to have unusually open conversations with people in the opposition. We’ve just had Governor Walker speak to “David Koch”, and I had a mini version of the same experience with MERS’ general counsel, except in my case, I was the recipient of the phone call. But the underlying assumptions of MERS and the Wisconsin executive were similar, in that each is confident of support from powerful allies.

Given that I am a vocal MERS critic, though testimony I have given, opinion pieces I have written and the work on legislation I have done over the last year decrying the legal standing and operational sloppiness of MERS, I was more than a little taken aback to get a call from Richard Anderson of the MERS legal team yesterday.

MERS Endgame Nearing? One County Seeks Over $22 Million for Unpaid Recording Fees

Plank after plank of the mortgage recording company MERS’ business model has come under attack. To date, the results do not look good for the embattled company.

MERS has repeatedly insisted that its operations are legal. It would be more accurate to say that insufficient attention was paid to legal issues when the firm was created and the permissibility of its operations were under the radar and hence in a legal grey area for many years. Now that they have been challenged in court, MERS has had to retreat from many positions it took in public. Despite its protestations that everything it did was kosher, the database firm has now retreated from one of its widespread practices, of allowing foreclosures to be made in the name of MERS, after a number of state supreme courts and Federal bankruptcy courts issued rulings to the contrary.

Not surprisingly, MERS has the look of a company in trouble.

How to Foreclose on Your Bank

This is not a joke.

Various Philadelphia media outlets have told the tale of one Patrick Rogers, who was increasingly unhappy over his inability to get satisfaction from Wells Fargo over fees related to his mortgage, and initiated foreclosure proceedings as a way to get their attention.

Now how exactly could he do that? And is his action a possible template for other frustrated homeowners?