Tag: banks

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.

Ilana hasn’t given up yet:

UPDATE IV (Oct. 19): STILL ABOUT DEADBEATS. From all the reports so far, FBN’s Gerri Willis’ being the latest, it is as I said. The defaulters owe boatloads of money. The bankers bungled the paper work in a manner that verges on the criminal. The reality, in as much as property rights go, comports with my distillation on this post and the one linked to it, “Financial Paperwork Crisis (No Conspiracy Thinking, Please).”

Here is the evidence of a large-scale conspiracy that Ilana was requesting. Needless to say, there is plenty more that can be presented if necessary, since this doesn’t even involve Bank of America: “In mid-2006, I discovered that over 60 percent of these mortgages purchased and sold were defective,” [Richard M.] Bowen, former chief underwriter for Citigroup’s consumer-lending group testified on April 7 before the Financial Crisis Inquiry Commission created by Congress. “Defective mortgages increased during 2007 to over 80 percent of production.”

I’m still waiting for Ilana to explain how the defects in these “defective mortgages” which made up over 80% of the $1 trillion in mortgages being purchased and sold each year by Citi, have anything to do with “deadbeats”. And at what point does it become irrational to decry “conspiracy thinking” when more and more people within the banking industry are being forced to admit that both the law and the chain of title were intentionally broken literally millions of times? How many billions of dollars in put-back claims must be filed and/or settled before skeptics are compelled to admit that a) there was a large-scale conspiracy to break the law, and b) it is not about deadbeats and the foreclosure fraud is merely a consequence of the preceding mortgage transference fraud?

Moreover, I note that the definition of “conspiracy” is “a combination of persons for a secret, unlawful, or evil purpose.” Note that the conjunction is “or”, not “and”. There was nothing “secret” about what the banks did in creating MERS or securitizing the mortgages; these were matters that explicitly involved public filings as well as expensively tasteful brochures. We can set aside the question of whether what they did was “evil” or not; there is no need to dive into the tangential morass of a morality debate here. But there is no question that what a rather large combination of people in the banking industry are confirmed to have done was “unlawful”. So, to describe the mass mortgage fraud as a genuine and proven conspiracy is correct and it is logically incorrect to make a rhetorical appeal to “Conspiracy Thinking” in order to argue against the observable facts of the matter. There is nothing theoretical about this particular conspiracy when it is already a matter of public record.

One can quite reasonably argue about the eventual economic and political impact of the fallout from the exposure of the conspiracy. Karl Denninger and I think it will be serious and near-term, Mike Shedlock and Calculated Risk believe it will be moderate and play out over time. But at this point, no one informed on the situation can pretend that there was not a large conspiracy to illegally transfer mortgage titles and sell fraudulent securities that preceded the consequent foreclosure-related frauds.

No doubt it’s very satisfying to pontificate about the sanctity of contracts and the moral importance of paying one’s debts when considering the weighty question of whether mortgage bank fraud is outweighs the pecuniary sin of a defaulting homeowner in borrowing more money than they could reasonably afford. They didn’t make the payments, they should lose the house to somebody, right? What does any of this have to do with you? After all, you have always made all of the necessary payments on your mortgage because you are a fine, morally upstanding, and responsible debtor.

Of course, you may look at the matter just a little differently once you discover that not owing money to a bank doesn’t prevent it from home seizing and selling your home. R sent the following email:

Tonight, my girlfriend comes home to her house in Honolulu Hawaii only to find a foreclosure notice and public auction notice on November 19th, at the First District Court of Honolulu Hawaii.

Only problem is that Bank of America posted the notice. And her mortgage is with Wells-Fargo Bank.

And she’s never been served notice at all. Neither has her attorney.

But her home is going up for sale on the 19th of November.. just like that. Perhaps this fraud needs to be known more, just before election day on November 2nd, 2010, because I really believe that most Americans do NOT know what is going on.

Of course, this can’t possibly happen to you. Surely this guy’s girlfriend has somehow done something to justify having her home put up for auction. She’s probably late on her payments to Wells Fargo or perhaps Wells Fargo sold the mortgage to Bank of America and she should have been paying them. Or maybe Hawaii still has some crazy property laws left over from the reign of Queen Liliuokalani. Because everyone knows they can’t do that, and anyhow, your bank is a really good bank, they aren’t like the evil giant banks, and they were so nice and helpful when that last little detail came up before closing. So obviously nothing like this could ever happen to you….

There are four economics blogs which I follow on a regular basis, the Market Ticker, Mish, the Mises Institute, and Calculated Risk. They’re all considerably different, but CR is arguably the most useful in keeping track of the mainstream perspective because he does such a great job of publishing statistical updates and because he subscribes to more conventional economic theory than I do. So, I was curious as to why CR had been paying so little attention to the Great Mortgage Fraud, especially since he places particular importance on the housing sector as an engine for driving an economy out of recession. After reading his first post on the matter which indicated an opinion which appeared to downplay the issue, I shot him an email suggesting that he might not be quite as up on the burning issue du jour as is his usual wont; he was well ahead of the curve on both the housing bubble and the bank failures. So, it was with more than my usual interest that I read his latest post on the subject:

I fully support these investigations, but I’ve downplayed “foreclosure-gate” because I thought the impact on housing and the economy would be minor – depending of course on the length of the foreclosure delays. Many other people disagree with my view – and please remember I’m not always right.

It is important to separate out two other issues. The first is MERS (the “Mortgage Electronic Registration System”). There are many interesting issues with MERS – and plenty of litigation – but my feeling is that the defects are curable, and these issues will have little impact on the economy. Since I think the impact will be minor, once again I’ve mostly been ignoring these issues.

The third issue is repurchase requests based on Reps and Warranties for mortgages. This is an important story for the banks. I’ve been mentioning the increasing push-backs from the GSEs (Fannie and Freddie). That isn’t a new story. The important development today was that several major bond investors are pressuring BofA to repurchase defective mortgages. Although I’ve been following this story, I haven’t mentioned it – and some people think I’ve been “behind the curve”. Could be.

CR is completely correct to note the multiple facets of the situation. Unlike most of those who have minimized the issue or taken the banking industry’s defense line, he clearly recognizes that the issue is not limited to foreclosures and deadbeat borrowers. And his reasoning is perfectly sound, for as he adds in a comment: “I know others think the impact will be huge… I think they are wrong, especially about foreclosure-gate and MERS. The push-backs will take time and I expect the losses will be spread over several years, and just doesn’t seem like a “blowup” event.”

The reason I disagree with CR’s conclusion is three-fold. First, because his econonomic perspective is essentially a mainstream Samuelsonian one, he doesn’t take the economic impact of the continued decline in bank credit into account even though he is the Internet’s primary chronicler of bank failure and the latest FDIC shenanigans. (NB: I use CR as the source for updating my own bank failure spreadsheets.) Not being an Austrian, he is looking at economic indicators that are presently much less dire than credit indicators such as TOTLL and Z1. The economic environment is already precarious, which reduces the probability of the consequences of the mass bank fraud being contained to the financial sector.

Second, I don’t think the security push-backs are going to take time and be spread out over several years because the big banks are not only on the verge of bankruptcy, they are already insolvent. More importantly, all of the counter-parties to whom reimbursement are owed already know this. Therefore, they are not going to be content to wait and see the matter resolved slowly by federal regulators in the manner preferred by the big banks and their managerial staffs because every victim of the grand securities fraud is going to want to be first in line to get their money back lest they not receive anything at all.

And third, the amount of criminal wrongdoing here is far too excessive, far too obvious, and far too jurisdictionally widespread to permit it to be ignored under the banking industry’s usual “get out of prosecution free” card. (There is no other word for it, not when Wachovia got away scot-free after admitting that they laundered billions in Mexican drug money.) While there is no question that the federal agencies are not going to aggressively prosecute a series of frauds that they clearly permitted and even abetted, the same is not true of the agencies of the states whose tax coffers and pension funds were ripped off by the voracious banksters. And the states have more investigators as well as more autonomy than the SEC and other federal agencies. In short, I suspect the situation is beyond Wall Street-owned Washington’s ability to firewall it.

But, we will see. This is a complex matter and intelligent minds can reasonably disagree. If CR is ultimately correct, I won’t hesitate to congratulate him on his perspicacity. But I have to admit, I expect to be congratulating the Market Ticker instead.

Which is why it is totally inexplicable why the New York Fed and PIMCO are now requesting a repurchase of mortgages sold to them by Bank of America. And why the Federal Home Loan Bank of Chicago is suing BOA:

According to a letter to investors from President and CEO of the FHLBC, Matthew Feldman, the securities listed in the complaint totaled more than $4.3 billion and were all rated triple-A when purchased. “We contend that the quality of the loans that comprise the pools of securities cited in today’s complaints was inconsistent with the description in the pre-purchase documents prepared by the underwriters and issuers of the securities,” Feldman wrote.

I suspect it is probably safe to declare that the big Wave Two rally that began in March 2009 and was led by the financial stocks has passed its peak now. This should also mark a surge in USD strength contra nearly everyone’s expectations.

From an anonymous mortgage broker: “There are blatant efforts by several of the giant mortgage-security selling institutions to intentionally “fail to find” the relevant loan documentation. We have seen multiple clients in September and October who either face foreclosure or had been foreclosed and WERE NOT EVEN LATE on their mortgage payments!”

After looking into these serious allegations, I have been reliably informed that these sorts of unfortunate accidents are bound to happen from time to time given how many millions of mortgages are outstanding.  I have no doubt these isolated incidents were mere clerical errors and that the bank(s) involved will be pleased to sort out any mistakes that were made as well as making all appropriate restitutionary actions that are required by the law.  Which, I hasten to note, the mortgage banks totally respect.

In completely unrelated news, I would like to announce that I recently decided to begin accepting blog advertising. The cost for a Sponsored Post begins at €1 million.