10/19/2011 archive

The latest proposal to come from of the State Attorney Generals investigating mortgage and foreclosure fraud is just a another band-aid on a hemorrhage that lets the banks off and does nothing to help homeowners who are underwater on their mortgage or behind in their payments. It appears that this is just a ploy to bring the California Attorney General “back into the fold.” Diana Olick, CNBC Real Estate Reporter, has tis analysis:

As first reported by the Wall Street Journal, the AG’s are proposing a refinance plan for underwater borrowers, trying to get banks to bring down interest rates on mortgages for those who owe far more than their homes are presently worth; that’s around 10.9 million borrowers, according to CoreLogic, but sources say it wouldn’t be all of them. It would, “target a finite number of borrowers who are current on their mortgages,” according to my source.

My source then went on to explain that this is a plan previously pushed by the California state attorney general, who has dropped out of the negotiations over issues surrounding banks’ release from future liability (the California AG did not comment in the WSJ article but claimed they had not seen said proposal). New York and Massachusetts have done the same. Apparently this could, “bring California back to the table,” says my source, because the California AG finds it, “intriguing.”

Ms. Olick also points out that this is the same plan that the Obama administration has proposed for Fannie Mae and Freddie Mac. The plan will only affect about 20% of homeowners with bank mortgages. While it would give some, who can afford the loans, a little extra cash, it doesn’t “change the fact that these folks still have no hope of seeing their home equity again any time soon, and it doesn’t address the greater ills of today’s housing market that are keeping true recovery at bay.”

David Dayen at FDL expounds further:

But wait! This is supposed to be a penalty on the banks. Is it a penalty on the banks when an eligible borrower with a bank-owned loan refinances? No, that’s just an option that the borrower has. Extending that option is supposed to be a penalty for committing systemic fraud on state courts? I don’t necessarily mind the Fannie/Freddie plan as a source of potential stimulus. I don’t consider it a penalty. And when you’re talking about 20% of the market, tops (and not all of those loans are underwater, so this is smaller), the benefits are miniscule (sic).

They’re just grabbing at straws to try and get a flawed settlement across the line that the remaining AGs can hold a press conference about. And economic stimulus, not accountability, is the main goal. Keep in mind that anything that leads to a round of sped-up foreclosures will not aid the housing market. It will bring prices down, just as a function of supply and demand. This will bring borrowers more underwater. So the idea that there’s a tension between the rule of law and helping people presumes that the only thing standing between America and a recovery is Kamala Harris and Eric Schneiderman. That’s just not true. There are tools at the disposal of the relevant regulators right now to foster recoery (sic), they’re just not choosing to do it.

Delaware Attorney General Beau Biden spoke with MSNBC’s Dylan Ratigan about fight to investigate the banks.

The biggest problem that is the gorilla in the room is chain of title. In a detailed article that is well worth the read, Yves Smith at naked capitalism:

And as we anticipated, the inducement that had led the Miller camp to hope it might clinch a deal is a juicy release. From Reuters:

   Originally, the states were only considering immunity for shortcuts taken during mortgage servicing and foreclosures, including the so-called “robo-signing” of documents to evict people behind on their mortgages.

   In recent days, the state attorneys general agreed to release major banks from claims that they made legal errors when first originating the loans, such as approving loans for borrowers without verifying any income, according to two people familiar with the talks.

   In exchange, banks would agree to refinance mortgages for borrowers who are current on their payments but owe more than their homes are currently worth, the sources said.

This is very troubling. Investors should be up in arms. Any release the banks get here is worth multiples of what the banks will pay for this (note that because investors are conservative creatures and have ongoing relationships with banks, having attorneys general pave the way is particularly important for them).

The failure to verify income is the tip of the iceberg of origination abuses. The most serious is chain of title, where the banks promised to investors to take a series of steps to convey the mortgages properly to the securitization trusts within a stipulated time frame. For reasons we’ve explained in gory detail in earlier posts, retroactive fixes or waivers simply won’t work. That is why the banks have resorted to widespread forgeries and document fabrication.

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

Wednesday is Ladies’ Day.

Katrina vanden Heuvel: The Silence of the Elites

Nero’s fiddling while Rome burned may be nothing compared to the folly of Washington and Wall Street’s inaction while the world economy teeters on the verge of global depression. No wonder the Occupy Wall Street demonstrators have spread across the world. By raising a din, they might wake folks up.

Last week, yet another filibuster by Republican senators blocked even a debate on President Obama’s jobs bill, which is already modest in the extreme. More than half of the bill would simply avoid making things worse – extending the payroll tax cut and unemployment insurance, and trying to limit layoffs of teachers and police officers next year. Without the extensions, the cuts in government spending and hikes in taxes would reduce an estimated 2 percent of GDP from growth next year – at a time when the economy is already near a standstill.

Daphne Eviatar: Underwear Bomber’s Plea Underscores Law Enforcement’s Key Role Fighting Terrorism

In the days after the so-called “underwear bomber” tried to take down a plane over Detroit on Christmas 2009, critics of the Obama adminstration were all over the national news decrying the decision to read the would-be bomber his Miranda rights and try him in a U.S. federal court.

When Umar Farouk Abdulmutallab pleaded guilty last week to the attempted murder of 289 passengers on Northwest Airlines Flight 253 over Detroit, those critics were noticeably silent.

That’s likely because the guilty plea, coming just one day after the start of his trial, underscores the point many of us have been making for years now: U.S. federal courts are the most effective place to try terrorism suspects.

Late Monday night police entered the park to take down the medical tent which is the only tent in the park despite Mayor Bloomberg’s characterization of Liberty Park as a tent city. The Rev. Jesse Jackson was present and participating in the park when the police arrived. Kevin Gosztola at FDL has the account of what happened:

Just before midnight, NYPD officers moved in on the southwest corner of Liberty Park, the site of Occupy Wall Street for the past month, to take down and confiscate a medical tent that had been erected during the day. A commotion immediately erupted in this section of the park. Occupiers rushed over and a human chain around the tent was formed. And, Rev. Jesse Jackson suddenly appeared to help the occupiers defend the medical tent from being forcibly removed.

Rev. Jackson told the occupiers, “I am not visiting, I’m participating.” When asked to link arms and help the occupiers defend the tent, he linked arms with them. They stood their ground and were able to convince the NYPD to back down.

Rev. Jackson was a guest on Countdown with Keith Olbermann

Marine Sgt. Shamar Thomas who stood up to 30 cops shaming their actions and those of their colleagues appeared for an extended inter view with Keith Olbermann.

As hundreds of “Occupy Wall Street” protesters marched to the Manhattan District Attorney’s office to demand prosecution of alleged police brutality in the handling of protest crowds over the past month, sources said a police officer who was seen on video using pepper spray on a protester last month violated city guidelines.

Deputy Inspector Anthony Bologna, seen above, was seen using pepper spray on a crowd during a demonstration on September 24.

According to sources, an NYPD investigation has found that Bologna violated the department’s rules on pepper spray use, and he will lose 10 paid vacation days.

Bologna can challenge the ruling, according to sources, and can have an administrative trial.

Protesters Storm Governor’s Award Ceremony

Meanwhile, after 6 p.m. other protesters began to swarm a West Village event where former Governor Mario Cuomo was scheduled to a present a “Changer of the Year Award” from the online news site The Huffington Post to his son, Governor Andrew Cuomo.

The protesters called Andrew Cuomo “Governor 1 Percent” and objected to how the governor has not extended the so-called “millionaires’ tax,” allowing for the state’s wealthiest residents to pay fewer taxes starting next year.

Demonstrators wanted the governor to speak directly to them, but it is still unknown if he will address the protesters. Their numbers at the Hudson Street event have also decreased.

Protesters are also rallying against Sotheby’s auction house over a union dispute, and the group plans on holding a vigil at Lincoln Center.

The Granny Peace Brigade is also protesting the the Koch brothers’ involvement in the center and their funding of several Republican issues.

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

October 19 is the 292nd day of the year (293rd in leap years) in the Gregorian calendar. There are 73 days remaining until the end of the year.

On this day in 1781, hopelessly trapped at Yorktown, Virginia, British General Lord Cornwallis surrenders 8,000 British soldiers and seamen to a larger Franco-American force, effectively bringing an end to the American Revolution.

The Siege of Yorktown or Battle of Yorktown in 1781 was a decisive victory by combined assault of American forces led by General George Washington and French forces led by the Comte de Rochambeau over a British Army commanded by Lieutenant General Lord Cornwallis. It proved to be the last major land battle of the American Revolutionary War  in North America, as the surrender of Cornwallis’s army prompted the British government eventually to negotiate an end to the conflict.

In 1780, 5,500 French soldiers landed in Rhode Island to assist their American allies in operations against British-controlled New York City. Following the arrival of dispatches from France that included the possibility of support from the French West Indies fleet of the Comte de Grasse, Washington and Rochambeau decided to ask de Grasse for assistance either in besieging New York, or in military operations against a British army operating in Virginia. On the advice of Rochambeau, de Grasse informed them of his intent to sail to the Chesapeake Bay, where Cornwallis had taken command of the army. Cornwallis, at first given confusing orders by his superior officer, Henry Clinton, was eventually ordered to make a defensible deep-water port, which he began to do at Yorktown, Virginia. Cornwallis‘s movements in Virginia were shadowed by a Continental Army force led by the Marquis de Lafayette.

The French and American armies united north of New York City during the summer of 1781. When word of de Grasse‘s decision arrived, the combined armies began moving south toward Virginia, engaging in tactics of deception to lead the British to believe a siege of New York was planned. De Grasse sailed from the West Indies and arrived at the Chesapeake Bay at the end of August, bringing additional troops and providing a naval blockade of Yorktown. He was transporting 500,000 silver pesos collected from the citizens of Havana, Cuba, to fund supplies for the siege and payroll for the Continental Army. While in Santo Domingo, de Grasse met with Francisco Saavedra de Sangronis, an agent of Carlos III of Spain. De Grasse had planned to leave several of his warships in Santo Domingo. Saavedra promised the assistance of the Spanish navy to protect the French merchant fleet, enabling de Grasse to sail north with all of his warships. In the beginning of September, he defeated a British fleet led by Sir Thomas Graves that came to relieve Cornwallis at the Battle of the Chesapeake. As a result of this victory, de Grasse blocked any escape by sea for Cornwallis. By late September Washington and Rochambeau arrived, and the army and naval forces completely surrounded Cornwallis.

After initial preparations, the Americans and French built their first parallel and began the bombardment. With the British defense weakened, Washington on October 14, 1781 sent two columns to attack the last major remaining British outer defenses. A French column took redoubt #9 and an American column redoubt #10. With these defenses taken, the allies were able to finish their second parallel. With the American artillery closer and more intense than ever, the British situation began to deteriorate rapidly and Cornwallis asked for capitulation terms on the 17th. After two days of negotiation, the surrender ceremony took place on the 19th, with Cornwallis being absent since he claimed to be ill. With the capture of over 8,000 British soldiers, negotiations between the United States and Great Britain began, resulting in the Treaty of Paris in 1783.