Category Archives: Regulations and regulators

Latest Borrower Trap? Trial Mod Offers With No Permanent Mod Terms

We’ve been focusing on the bigger picture scams in mortgage land, and realized it might be helpful to also provide occasional examples of what is happening on the ground level.

Despite the fact that the Treasury-sponsored mortgage modification program known as HAMP has been roundly decried as a disaster. Not only were too few mods done but banks also lied about program features, including that many borrowers were assured foreclosure efforts were not moving ahead when they were, with the result that quite a few program participants wound up losing their homes.

Given the program’s sorry history, struggling borrowers have good reason to be wary. Lisa Epstein of Foreclosure Hamlet, points out a new wrinkle that she worries may be a harbinger of bad things to come, namely, that HAMP trial mod offers, which once described in some detail what the permanent mod would look like if the borrower made all the trial mod payments and was approved, have suddenly gone silent on the back end terms.

Gillian Tett Exhibits Undue Faith in Data and Models

I hate beating up on Gillian Tett, because even a writer is clever as she is is ultimately no better than her sources, and she seems to be spending too much time with the wrong sort of technocrats.

Fukushima’s Last Resident

Naoto Matsumura is the only person living inside the exclusion zone and he has no electricity or running water. Reader Martha R recommended running this video as a way to commemorate the anniversary of the disaster.

GAO: Almost Half of Bailed Banks Repaid the Government With Money “From Other Federal Programs”

By Matt Stoller, 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

The Government Accountability Office continues its subtle war on the talking point used by Treasury that “TARP made money”.

Chris Cook: The Ghost of Enron Past Explains Oil Market Manipulation

By Chris Cook, former compliance and market supervision director of the International Petroleum Exchange

I outlined in my recent post my view that the oil market price has been inflated by passive investors whose attempts to ‘hedge inflation’ actually ended up causing it, and have allowed oil producers to manipulate and support the oil market price with fund money to the detriment of oil consumers.

But there has always been a missing link – precisely how has this manipulation been achieved?

Bailout Ingrate Bank of America to Impose Monthly Fees on Many “Basic” Checking Account Customers

Of all the big US banks that managed to survive the global financial crisis, Bank of America and Citigroup were the two widely recognized to be at risk of failure in late 2008-early 2009. Sheila Bair, then head of the FDIC, really wanted to replace Citi’s CEO, Vikram Pandit, but settled for forcing the bank to do some pretty serious downsizing and streamlining. By contrast, Bank of America has not only been spared this sort of treatment (save being told it can’t pay dividends until its balance sheet is stronger) but it’s also the biggest beneficiary of the most recent “help the banks” full court press, namely, the mortgage settlement.

So how does Bank of America propose to shore up its equity base? Now that bank stocks have traded up smartly, it might be able to unload some more operations (it did a bit of that when it stock was under stress). But bankers prefer to run behemoths because executive pay is highly correlated with total asset size. And that means it’s a given that BofA has ruled out another way to improve its earnings: cutting manager and executive pay, as the Japanese banks did in their bubble aftermath.

Nah, the path of least resistance is to charge customers more.

Satyajit Das: Pravda The Economist’s Take on Financial Innovation

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)

In the old Soviet Union, Pravda, the official news agency, set the standard for “truth” in reporting. Discriminating readers needed to be adroit in sifting the words to discern the facts that lay beneath. Readers of The Economist’s “Special Report on Financial Innovation” (published on 23 February 2012) would do well to equip themselves with similar skills in disambiguation.

Brace Yourself for Election-Driven Enforcement Theater: Token Roughing Up of Crisis Bad Banksters, While Corzine Gets a Free Pass

It’s bad enough that we are being subjected to relentless propaganda about how housing is just about to turn the corner and the state-Federal mortgage settlement is such a great deal for homeowners. In fact, as we’ve stressed, and bond investors such as Pimco have reiterated, the deal is above all a back door bailout of the banks.

But to add insult to injury, the chump public will be given ~~bread and circuses~~ enforcement theater to distract it from the fact that the banks are getting a sweetheart deal.

Matt Stoller: Wall Street Fixer Rodge Cohen – Big Banks’ Key to American Global Dominance

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.

Sometimes finance executives let slip the way they really feel: that they hold the world in the palm of their hands.

It’s not often that the people in charge admit what is really going on: a global game for political dominance.

Abigail Field: Insider Says Promontory’s OCC Foreclosure Reviews for Wells are Frauds. Brought to You by HUD Sec. Donovan

By Abigail Caplovitz Field, a freelance writer and attorney who blogs at Reality Check

U.S. Housing Secretary Shaun Donovan has embarrassed himself yet again. This time, though, he’s gone in for total humiliation. See, he praised the bank-run Office of the Comptroller of the Currency’s (OCC) foreclosure reviews as an important part of the social justice delivered by the mortgage “settlement“. But thanks to an insider working on an OCC review, we know that process is a sham. Worse, the insider’s story shows that enforcement of the settlement is likely to be similar, which is to say, meaningless. Doesn’t matter how pretty the new servicing standards are if the bankers don’t have to follow them.

Let’s start with Donovan’s sales pitch for the OCC reviews:

Fannie Putting More Dubious New Loans Back to BofA, So BofA Will Stick Them to Freddie Instead

Bloomberg has an article up “BofA Halts Routing New Mortgages to Fannie Mae,” doesn’t put the key issue, which is Bank of America’s continuing shoddy mortgage origination practices, in a sufficiently sharp spotlight.

The piece starts out in a direct-seeming manner:

Occupy the SEC Discusses Volcker Rule on RT

It’s always a pleasant surprise to see a TV program have a long form discussion on a fairly technical topic. Readers should enjoy the RT interview of Caitlin Kline and Alexis Goldstein of Occupy the SEC on its Volcker Rule comments. They discussed the major areas they were concerned with and some loopholes in the draft regulations.

Tom Deutsch of American Securitization Forum Finally Gets His Comeuppance: Pimco and Likely Other Investors Quit

Bloomberg reported a few weeks ago of a rift in the group that supposedly represents the mortgage securitization industry, the American Securitization Forum. We say “supposedly” because the interests of its two main types of members, the sell side, meaning the parties that put together deals, and the buy side, meaning investors, are now directly opposed.

That rift has now escalated to what looks like a fatal schism, as bond king Pimco has quit the ASF over the refusal of the ASF to send a letter voicing investors’ ~~objection to~~ concerns about the pending mortgage settlement. We are told by other investors that Pimco’s departure is likely to herald a wholesale exodus by investors who have long felt their views are not taken seriously by the ASF.

Politico: Schneiderman Caved to Administration Pressure on Mortgage Settlement, Did Not Get Tighter Release for Abandoning Opposition

While this blog has repeatedly pointed out that Tom Miller, the Iowa attorney general and leader of attorneys general in the settlement negotiations, is not the most credible source, the flip side is that the description of the release in the Administration’s own ~~propaganda~~ website strongly suggests that the release of bank liability is broad, rather than narrow, as deal cheerleaders claimed.

If you take this section of an article at Politico, “HUD boss jumps into mortgage melee,” (hat tip reader Deontos) at face value, you can only draw damning conclusions about New York attorney general Eric Schneiderman’s role: