Tag: banks

What would appear to be the first of many to come across the insolvent West:

A slow steady bleed has turned into a mad dash for cash at Allied Irish Banks. Allied Irish Banks has had to rely on Central Bank funding as customers withdraw $18 billion, a stunning 17 percent of its deposit base. Without Central Bank funding, there would indeed be outright panic.

Of course, this can’t happen in the USA where bank deposits are insured by the FDIC… which happens to be in the red.

BG queries about who actually owns the home:

I am a recent convert to your blog. I enjoy your unconventional, but unfailingly thoughtful, opinions.

Here is something for you to ponder. Assume that the evidence shows that the putative owner of a mortgage is not the actual owner of the mortgage, due to improper transfer procedures in the securitization process, such as a failure to properly endorse and record the necessary transfer documents. The implications for foreclosures may be profound, as you and others have indicated.

But think about this from a different point of view for a minujte. Wouldn’t this logic imply that a nondefaulting homeowner, who has been making all of the payments on his home, has in fact not been paying the proper person? Could the true owner of the mortgage sue the homeowner for not making payments to the true owner? The true owner might want to do this because the banks, servicers and other intermediaries might soon all be broke due to the foreclosure problem.

It does imply that the wrong party has been paid, in fact, this is exactly why multiple banks have been foreclosing on some houses. The problem is that in the case of a broken line of mortgage transference, it is not only difficult to ascertain the true holder of the debt, but in many cases the connection of the debt to the title is cancelled by virtue of the note proving the claim being destroyed in the process of the transfer. In such cases, the debt may still be owed to the “true owner”, but it is no longer secured by the home.

So, to answer the rest of BG’s questions, yes, the true owner of the debt can sue the homeowner but is very unlikely to because he has no claim on the house. The reason it makes no sense for the true debt-holder to sue the homeowner is that a bankruptcy filing on the part of the homeowner will discharge that debt without relinquishing the house.

From the Market Ticker:

“JUDGE CURLEY THE HEAD BK JUDGE IN AZ JUST RULED MINUTES AGO THAT THE BANK OF NEW YORK MELLON MUST PRODUCE THE CUSTODIAL RECORDS IN THEIR VAULT IN A CASE AGAINST AN AZ HOMEOWNER, THEREBY PRODUCING THE NOTE AND ALL OTHER DOCS. THIS IS A TRANSFORMATIONAL DECISION.”

Now we’re cooking. This decision changes literally everything – at least for Arizona. If it spreads, and it probably will, it will change everything period.

If BONY doesn’t have the documentation in their custody, with proper endorsements, then there’s gonna be trouble. You can bet the banks will try to bury notice of this way off the front page, but they’re not going to get away with it.

The key issue here has always been whether the people buying these securities were really buying what they thought they were – and maybe whether they were buying anything at all. If BONY can’t produce the documents because they don’t have them, and cannot prove up ownership of the note with proper endorsements, the lid is going to come off this thing.

Between the insolvency, the fraud, and the mark-to-fantasy, it’s always just been a matter of time before Bank of America, Citibank, Wells Fargo, and JP Morgan Chase go down in spectacular flames. TARP didn’t save them, Quantitative Easing I didn’t save them, Quantitative Easing II isn’t going to save them, and even if the new Republican House can be suckered into passing TARP II as their predecessors were, that wouldn’t save them either. I’ve calculated that at least $3 trillion of the $7 trillion they presently report as assets simply don’t exist. The damage has already been done and it’s time to start trying to staunch the bleeding rather than offering more pointless and costly transfusions.

One of the comments there sums up the entire problem with the US financial system in a nutshell: “Welcome to the failure of fiat wealth… where multiple exclusive claims to underlying real wealth will always become extinguished at some point in time.”

That is the key to understanding debt-deflation right there. Multiple competing claims to the underlying wealth.

Here is an example of the difference between the State perspective on the fraud committed by the mortgage banks and the federal one. Ohio Attorney General Richard Cordray is clearly not buying the “technical error” line of defense:

“The big mortgage servicers and financial firms continue to demonstrate their belief that they do not need to play by the same rules as everyone else who uses our court system. The suggestion by Wells Fargo and its colleagues at several other national firms that they can cure fraudulent testimony by simply refiling new affidavits and continuing to proceed toward foreclosures shows they do not recognize the seriousness of the problem they have created. There is no simple ‘do-over’ for false testimony that will be likely to avoid sanctions and penalties imposed by the courts. Their brazen efforts to minimize their financial exposure by sweeping these problems under the rug are an insult to the justice system in this country. These disclosures by Wells Fargo will now become the focus for a new prong of our on-going investigation.”

That giant crack in the wall keeps growing….

UPDATE: I’m not generally a fan of politicians, but I find that I LIKE this guy. A lot. He appears to be about as focused as The Terminator. Here’s hoping he isn’t merely angling for a revenue-enhancing settlement, but actually intends to pursue the fraud to its core.

It’s amazing how quickly these little “mistakes” and “errors” are popping up now that the lawyers for the fraudulent securities are on the hunt. And so many too!

Wells Fargo admitted Wednesday it made mistakes in the paperwork for thousands of foreclosure cases and promised to fix them. The San Francisco-based bank said it plans to refile documents in 55,000 of the cases by mid-November. The company said not all those cases included errors and didn’t say how many did. Wells Fargo described the mistakes as technical and said it has no plans to halt the foreclosure process.

Oh, well, so long as it’s only 54,999 technical mistakes… meanwhile, the bankers’ little game of ex post facto minimal admission doesn’t appear to be playing well with anyone but the media.

“Mortgage servicers have been reworking investor-owned loans while not seeking amendments on debts they hold themselves, a misstep investors can use to bypass trustees or force them to act, Bill Frey, the head of Greenwich Financial, said at the conference. The four largest U.S. banks, which service a majority of U.S. mortgages, own more than $400 billion of home- equity debt, Goodman said. “We found servicer defaults in 100 percent of the trusts,” Frey said.”

100 percent servicer defaults? Probably just a technical mistake, I’m sure. It will be interesting, of course, to see the attempts to explain away the magic rotating vice-presidency of MERS as yet another technical mistake.

“In the instant action, Ms. Johnson-Seck claims to be: a Vice President of MERS in the March 16, 2009 MERS to INDYMAC assignment; a Vice President of INDYMAC in the May 14, 2009 INDYMAC to ONEWEST assignment; and, a Vice President of ONEWEST in her June 30, 2009-affidavit of merit. Ms. Johnson-Seck must explain to the Court, in her affidavit: her employment history for the past three years; and, why a conflict of interest does not exist in the instant action with her acting as a Vice President of assignor MERS, a Vice President of assignee/assignor INDYMAC, and a Vice President of assignee/plaintiff ONEWEST. Further, Ms. Johnson-Seck must explain: why she was a Vice President of both assignor MERS and assignee DEUTSCHE BANK in a second case before me, Deutsche Bank v Maraj, 18 Misc 3d 1123 (A) (Sup Ct, Kings County 2008); why she was a Vice President of both assignor MERS and assignee INDYMAC in a third case before me, Indymac Bank, FSB, v Bethley, 22 Misc 3d 1119 (A) (Sup Ct, Kings County 2009); and, why she executed an affidavit of merit as a Vice President of DEUTSCHE BANK in a fourth case before me, Deutsche Bank v Harris (Sup Ct, Kings County, Feb. 5, 2008, Index No. 35549/07).”

Now here’s the punchline: “Johnson-Seck admitted she was not employed by MERS and didn’t know who its president was or the location of its headquarters.”

An ostensibly conservative media is still trying to blame borrowers for the multiple frauds that were committed by the banks. And it’s still not working:

Millions of Americans have stopped paying their mortgages, creating a giant paperwork snafu and legal crisis, and yet… Funny how many media accounts begin with that rarest of creatures, a homeowner fully paid up on his mortgage, or better yet a Florida man who paid cash for his house, and who was foreclosed on anyway thanks to a paperwork error by some confused bank. This poor shmuck then is made to symbolize the larger phenomenon when in fact the larger phenomenon is precisely the opposite.

You can’t understand the latest mortgage mess without understanding the powerful appetite to cast borrowers as victims and banks as villains in the housing bubble. This tendency is present in claims that minorities have been especially victimized, that people were sold loans they didn’t understand.

The battle of the narratives is reaching its climax in the robo-signer controversy, with lawyers seizing upon technicalities to let people go on living in homes they’ve stopped paying for.

We hasten to add that technicalities are important; the rule of law is nothing but a profound commitment to honor technicalities. But let’s understand that in the absence of the snafu, we’d have a faster, smoother-working foreclosure process, in which more Americans would more quickly be shoved out into the street in perfect compliance with the law.

It is really remarkable how the self-appointed defense attorneys for the mortgage banks keep dancing desperately around the word FRAUD like wildebeest at a crocodile-infested waterhole. There was no “snafu”. There were no “clerical errors”. There were no “paperwork mistakes”. There was only the mass and ongoing commitment of FRAUD. The loans were FRAUDULENTLY made in the first place. Then the titles were FRAUDULENTLY transferred, after which they were utilized to sell FRAUDULENT securities. When the loans went bad, as many of them were specifically designed to do, the banks then produced FRAUDULENT documents to replace the originals that were either destroyed or showed evidence of the previous FRAUD committed by the bank.

The bankers are the villains here. There is no “elusive search” to be conducted, in fact, there is no debating this! And many, if not most of the defaulting borrowers were one of the many victims of the multiple frauds committed by the villains. The ironic thing is that this disingenuous Wall Street tool complains about politicians having “moved heaven and earth to prop up the self-same banks” when his entire column is yet another feeble attempt to downplay the criminal activity of the banks and shift responsiblity away from them.

Bill Black explains how the mortgage fraud was actually worse than I’d previously described. While I have explained how the foreclosure fraud was the inevitable consequence of the mortgage transfer fraud, there is growing evidence that the banks knew that 100 percent of certain loan categories would default at the time they were making those loans and yet still utilized them as backing for the securities they were selling:

Our call for closing down control frauds and stopping the foreclosure frauds typically meets with three objections. First, it is claimed that while there were some bad apple lenders, much of the fraud was committed by borrowers. Our proposal would let fraudulent borrowers remain in homes to which they are not entitled, punishing the banks that were duped. Second, the biggest banks are too important to foreclose. And third, it is not possible to resolve a “too big to fail” institution.

Let us deal with the “borrower fraud” argument first because it is the area containing the most erroneous assumptions. There was fraud at every step in the home finance food chain: the appraisers were paid to overvalue real estate; mortgage brokers were paid to induce borrowers to accept loan terms they could not possibly afford; loan applications overstated the borrowers’ incomes; speculators lied when they claimed that six different homes were their principal dwelling; mortgage securitizers made false reps and warranties about the quality of the packaged loans; credit ratings agencies were overpaid to overrate the securities sold on to investors; and investment banks stuffed collateralized debt obligations with toxic securities that were handpicked by hedge fund managers to ensure they would self destruct.

That homeowners would default on the nonprime mortgages was a foregone conclusion throughout the industry — indeed, it was the desired outcome. This was something the lending side knew, but which few on the borrowing side could have realized.

Notice that the Federal Reserve has now seen fit to comment upon “reported irregularities in foreclosure practices at a number of large financial institutions” and Helicopter Ben is hewing very closely to the line that contains the most erroneous assumptions. This is to be expected; both national parties and the Fed are going to do everything they can to point fingers at everyone but the responsible parties as long as they can. But they’re not going to be able to get away with it for four reasons.

1) The fraud is too blatant and widespread.
2) The political downside to backing the banks is too severe. Note that even Obama, who has yet to meet an ex-Goldmanite he doesn’t want in his cabinet, didn’t dare to let HR 3808 pass.
3) They ripped off many powerful institutions, both foreign and domestic. As events have shown, they can’t buy off every judge, county clerk, pension fund manager, and attorney general in the country.
4) It’s not a matter of merely federal law. Land title issues are a State matter, not a federal one. Therefore, the power of the pro-bank politicians and government agencies, which is centralized at the national level, is less effective than usual.

UPDATE: But, but, it’s all about the deadbeats! Zerohedge summarizes FDIC head Sheila Bair’s recent comments:

1. LITIGATION FROM SERVICER ISSUES COULD BE `VERY DAMAGING’
2. FORECLOSURE PROBLEMS WILL REQUIRE `GLOBAL SOLUTION’
3. MORE PROBLEMS’ WILL ARISE IN MORTGAGE SERVICING

Now, why would a global solution be required, he asked innocently? Why would litigation be very damaging and to whom? And how can Ms Bair be so certain that more problems will arise?

A county in Kentucky takes the law seriously:

The order requires all foreclosure complaints in Kenton County to be accompanied by an affidavit certifying that the plaintiff is the owner and holder of the note and mortgage and identifying the plaintiff as the original holder or an assignee, trustee, or successor in interest of the original holder. Kenton County foreclosure complaints must also be accompanied by a copy of the note and recorded mortgage with copies of all allonges, endorsements, and assignments necessary to document the chain of title to both the note and the mortgage. The complaint must also include documents establishing the plaintiff as the successor in interest if any merger, change of trustee, or other transfer issue has taken place.

The order is effective for all matters filed in Kenton County on or after November 15.

Naturally, this should present no problem at all for any mortgage banks wishing to foreclose in Kenton County. After all, they are law-abiding institutions who would never conspire to break any state or local laws regarding loan documentation. This is an excellent example of a jurisdiction where the Rule of Law still applies, rather than the Reign of Men who allow certain parties to circumvent the law.

No fast talk, no technological excuses, no judges to look the other way and declare the paperwork unnecessary. Either you have everything in order or you don’t. End of story. That’s exactly the way it should be… and almost never is.