Tag: Mortgage Fraud

From Glen Ford at the Black Agenda Report

President Obama must fire Federal Housing Finance Agency acting director Ed DeMarco because he “has flatly refused to do any kind of principal reduction for the millions of ‘underwater’ homeowners that are suffering, that are drowning in debt because of how the banks crashed the economy,” said Tracy Van Slyke, co-director of New Bottom Line. The coalition of faith-based and community organizations demand a “minimum of $300 billion in principal reduction.” Van Slyke claims New Bottom Line and other Occupy Wall Street-related efforts have “moved the administration far along from where they were. We have moved the dial.”

The Obama administration has repeatedly refused to spend moneys a set aside for distressed homeowners and communities. Why? Because banks have refused to cooperate with such programs, fearing that intervention in the housing market “would threaten to upset the bankers’ carefully calibrated market manipulations.” They would rather continue rigging the game. “The banks have been carefully dribbling out houses for sale, attempting to artificially stabilize prices with the goal of pumping up another bubble.”

The Obama administration’s failure to spend almost any of the $7.6 billion in TARP housing money set aside for the neediest regions of the country seems counterintuitive [..]

The Hardest Hit Fund was specifically targeted to homeowners in areas most seriously impacted by unemployment and falling home values – a formula tailor made for Black and Latino communities devastated by massive foreclosures and layoffs. [..]

The problem was, Obama’s people resisted putting the program into effect. [..]

The problem begins at the top. Obama has consistently protected bankers’ rights to deal with homeowners as they please.

AS reported in the Washington Post: Fannie Mae had seen benefits to lowering some home loans, documents indicate:

Officials at government-backed mortgage giant Fannie Mae concluded years ago that the company could “reduce its losses substantially” by lowering loan amounts for some troubled borrowers, according to internal documents cited Tuesday by the top Democrat on the House oversight committee.

The new insights into Fannie Mae’s analyses about the potential benefits of so-called principal reduction surfaced in a letter from Rep. Elijah E. Cummings (D-Md.) to Edward J. DeMarco, the acting director of the independent agency that oversees Fannie Mae and Freddie Mac.

Since being appointed head of the Federal Housing Finance Agency (FHFA) in 2009, DeMarco has refused to allow Fannie and Freddie to write down loan balances, in part because he worries that some homeowners would stop paying their mortgages to get relief, ultimately costing taxpayers more money. He has been steadfast in his disapproval in recent months despite growing pressure from Obama administration officials and House Democrats to allow principal reductions.

Those “internal documents” led to accusations that DeMarco, a Republican career public servant appointed by Obama to head the FHFA, withheld information from Congress about the findings:

“This just adds to the pile of evidence that calls into question how sincere DeMarco is about treating this issue seriously,” said Ian Kim, director of campaigns for Rebuild the Dream, a progressive advocacy group that has been urging a principal reduction program.

Supporters of principal reduction argue that it would reduce foreclosures by lowering the monthly payments for underwater homeowners and giving them hope they would one day have more equity in their homes.

Opponents counter that reducing the principal on mortgages owned or backed by Fannie and Freddie could increase their losses and encourage homeowners who are making payments to fall behind in order to lower their debt.

The new documents contradict DeMarco’s congressional testimony in November that analyses by Fannie and Freddie concluded that other forms of homeowner assistance were less costly to taxpayers, the lawmakers said. [..]

The failure to launch a principal reduction program “was not merely a missed opportunity, but a conscious choice that appears to have been based on ideology rather than Fannie Mae’s own data and analyses,” the lawmakers said.

It’s time for DeMarco to go and the Obama administration to stop protecting the bankers who won’t support him ever.

85 days and counting since President Obama announced in his State of the Union speech the formation of the Residential Mortgage Backed Securities Working Group (RMBS) co-chaired by NY State Attorney General Eric Schneiderman and it is still a toothless entity that has so office space, phones and has yet to be staffed. The New york Daily News noticed, suggesting that Schneiderman should quit this fraud:

[..]calls to the Justice Department’s switchboard requesting to be connected with the working group produced the answer, “I really don’t know where to send you.” After being transferred to the attorney general’s office and asking for a phone number for the working group, the answer was, “I’m not aware of one.”

The promises of the President have led to little or no concrete action.

In fact, the new Residential Mortgage Backed Securities Working Group was the sixth such entity formed since the start of the financial crisis in 2009. The grand total of staff working for all of the previous five groups was one, according to a surprised Schneiderman. In Washington, where staffs grow like cherry blossoms, this is a remarkable occurrence.

We are led to conclude that Donovan was right. The settlement and working group – taken together – were a coup: a public relations coup for the White House and the banks. The media hailed the resolution for a few days and then turned their attention to other topics and controversies.

But for 12 million American homeowners, collectively $700 billion under water, this was just another in a long series of sham transactions.

Schneiderman, who has acted boldly and honorably, should distance himself from this cynical arrangement. He should resign and go back to working effectively with fellow attorneys general in Delaware, Massachusetts and Nevada.

They are much more likely to create the kind of culture of accountability in the financial community that will protect U.S. families from the next real estate scam.

According to a Reuter’s report, the office space has been located:

   The task force includes the Justice Department, the SEC, the FBI and the Department of Housing and Urban Development, among others. It is charged with investigating the pooling and sale of home loans that contributed to the financial crisis.

   While the group faced some skepticism, considering the crisis began nearly five years ago, there are signs it is serious about bringing cases.

   The co-chairs meet formally every week and talk almost every day to coordinate on “a range of investigations,” a Justice Department official said, on condition of anonymity.

   About 50 staff members are working on the effort, and the task force has identified separate office space in Washington and will move some personnel there, the official said.

   The Justice Department last month posted a one-year position of full-time coordinator for the working group who could help manage discovery and coordinate investigations, according to the job posting.

Yves Smith at naked capitalism agrees that Schneiderman has been had by the Obama administration:

It was pretty obvious Schneiderman had been had. Obama tellingly did not mention his name in the SOTU. Schneiderman was only a co-chairman of the effort and would still stay on in his day job as state AG, begging the question of how much time he would be able to spend on the task force. His co-chairman is Lanny Breuer from the missing-in-action Department of Justice. And most important, no one on the committee was head of an agency, again demonstrating that this wasn’t a top Administration priority.

However, she disagrees with the Daily News assessment of Schniederman acting “boldly and honorably” and that he can go back to working with the other attorneys general:

Schneiderman’s actions were neither bold nor honorable. Not surprisingly, his effort at a star turn in the national media has not led to favorable poll results for him in New York. And the Daily News offers a fantasy as an alternative. There is no “going back.” The attorneys general gave up their best legal theories, and with it, their ability to protect the integrity of title, for grossly inadequate compensation and a photo opportunity.

It would be better if we were proven wrong, but Schneiderman entered into an obvious Faustian pact. He’s not getting his soul or his reputation back.

Meanwhile as reported by Think Progress,

A recent report showed that mortgage foreclosure scams have spiked 60 percent in 2012, while the nation’s biggest banks continue to sit upon a slew of fraudulent mortgage documents. A recent investigation of foreclosures in San Francisco found that nearly all of them had legal problems or suspicious documents, prompting the city council to suggest a foreclosure moratorium.

I supported Eric Schneiderman in his run for NY state AG in hopes he would carry on the legacy of Eliot Spitzer as the “sheriff of Wall St.” I was wrong, he sold out for whatever reasons, as did NY’s current governor Andrew Cuomo. In the article by Matt Stoller at naked capitalism, (a good analysis of NY AG Schneiderman), the comments about Clinton, Obama, Democrats and the alleged 2 party system would get them all banned from certain pro Obama/”Democratic” web sites.

Just a sample:

“Yeah, when ya get promoted from shaved ape and get sworn in as a human being, one of the things you do have to sign up for is the Torture Convention. This is true of everyone. Commit torture, condone torture, acquiesce to torture, and you are, in the technical legal terminology, hostis humani generis, enemy of all mankind. So in what parallel universe could notional “good Democrats” exist in a party whose leader, Barack Obama, openly violated Articles 12 and 16 of The Convention Against Torture?”

“It is quite amazing how the left-most Democrats on economic issues, like Schneiderman and Elizabeth Warren, casually support massive war crimes.

Look what Schneiderman and Warren support: massive secret wars in over 100 countries, drones that kill far more innocent than targets, cluster bombs, assassination lists, obscene rules of engagement that allow for the targeting of civilians, proxy wars, massive media manipulation and propaganda, and legalized torture.

The Democrats have surpassed even the Nazi party in their extremism!

Right now, in fact, the Democrats are aiding and abetting a criminal act of aggression against Syria (even down to the level of NGOs like MoveOn and Avaaz possibly supporting terrorism).”

“But…but…if Obama isn’t re-elected, then Mitt Romney will, uh… he’ll, uh… well, I guess he’ll do exactly the same things. But he’ll be a Republican, you see!”

The comments about Bill Clinton are equally scathing;

And what exactly did Clinton accomplish ? Repeal Glass-Steagall ? Undo the New Deal ? Start a private debt bubble that led to our current depression ?

But getting back to Schneiderman. He sold out, crossed over to the dark side. He went from being a hero to being a sellout. He’s got nuthin.

Don’t forget Clinton negotiated a deal to cut Social Security, which was only stopped by the Lewinsky scandal.

You forgot….in addition to eliminating Glass Steagall, Clinton also passed that wonderful “job creator” NAFTA…..remember?

But wait! That’s not all! From Slick Willie-for the same low, low bribe – you also got the Telecom Act, aka Rupert Murdoch Monopoly Act. And for a limited time, while supplies last, lobbyists will pay all your shipping and handling charges.

According to Common Cause: “…the Telecom Act failed to serve the public and did not deliver on its promise of more competition, more diversity, lower prices, more jobs and a booming economy.

“Instead, the public got more media concentration, less diversity, and higher prices.

“Over 10 years … cable rates have surged by about 50 percent, and local phone rates went up more than 20 percent.”

As WEB Dubois said in 1956 when he announced, I will not vote “:

In 1956, I shall not go to the polls. I have not registered. I believe that democracy has so far disappeared in the United States that no “two evils” exist. There is but one evil party with two names, and it will be elected despite all I can do or say. There is no third party.

I am nearly to that point. If there is no other choice but evil. I will not vote.

The more the experts and analysts look into the Foreclosure Agreement the more reasons are found to hate it and why, to Yves Smith‘s descriptive word, it “sucks”:

Not only are the banks getting away with fraud they are still going to be allowed to systemically overcharge homeowners and wrongly take their homes.

Remember that the Administration also trumpeted that enforcement would be tough, even as Abigail Field has shown that idea to be a joke. For instance, the servicing standards allow for the astonishing concept of an acceptable error rate. Banks aren’t permitted to make errors with your checking account and ding you an accidental $10,000 and get away with it. But with people’s most important asset, their homes, servicers are allowed a certain level of reportable errors, and many of them can be serious as far as borrowers are concerned.[..]

She also points out that wrongful foreclosures at a 1% rate are acceptable. Procedures around real estate are deliberate because any error of this magnitude has devastating consequences. But this new provision means that 1%, or over 33,000 erroneous foreclosures since 2008 would be perfectly OK as far as the authorities are concerned.

Field also points out in a separate post that this deal is in no way done. Key points remain to be resolved, in particular, how the Monitor will supervise the pact. That’s a huge item, and leaving it unresolved shifts the power to the banks (if you don’t believe me, I refer you to what is happening to Dodd Frank).

Field also wonders “how did all our meaningful law enforcers do this deal?:

I hate the term Too Big To Fail because it’s a loaded premise presented as fact. But looking at the weasel parentheticals, maybe we should start asking if the banks as too big to be competent. I mean, why do the banks need a ‘hey, we tried but didn’t have enough time to stop the sale’ exemption? If the B.O.Bs (bailed out bankers) want their lawyer or trustee to call off a foreclosure sale, all they need is two things: a) to contact their agent and b) have a competent agent.

What does “took appropriate steps to stop the sale” mean, anyway? Does it mean that someone at the bank left a message or two with foreclosure counsel? If the B.O.B.s made a real effort to stop the sale but their agents did it anyway, why isn’t that the B.O.B’s fault for having incompetent agents? Doesn’t giving the B.O.B. a pass remove any incentive to have competent (and thus more expensive) agents?

Wrongfully selling someone’s home should be a strict liability issue. Strict liability is, well, strict: no one cares what you were trying to do, what your intentions were, what you did or didn’t do. Did the harm happen? Then you’re responsible.

Before you give me any, hey, let’s be reasonable here, a business needs to operate and we’re so big some mistakes will happen, remember what we are talking about: homes; property rights; land records; fundamental fairness. How can the B.O.Bs be held to any standard other than strict liability when it comes to wrongfully selling a home?

Neil Barofsky, the former Special US Treasury Department Inspector General for the Troubled Asset Relief Program (TARP) and Matthew Stoller, a fellow at the Roosevelt Institute give a good overview of why this settlement really “sucks”

There is no accountability, no punishment for what has to be the largest fraud ever perpetrated in this country.  

Who could have possibly thought that by giving the banks a pass on foreclosure fraud with the 49 state agreement that there would be an increase in foreclosures? That prediction came from Mark Vitner, an economist with Wells Fargo:

“The immediate results are not going to be all that pleasant,” said Mark Vitner, an economist with Wells Fargo. His bank is one of the biggest lenders in Florida as well as a participant in the settlement. “The amount of foreclosures will actually increase and there will be some additional downward pressure on home prices.”

And foreclosures are on the rise in half of the major metro areas:

February foreclosure activity in the 26 states with a judicial foreclosure process increased 2 percent from January and was up 24 percent from February 2011, while activity in the 24 states with a non-judicial foreclosure process decreased 5 percent from January and was down 23 percent from February 2011.

Half of largest metro areas post annual increases in foreclosure activity

Ten of the nation’s 20 largest metro areas by population documented year-over-year increases in foreclosure activity in February, led by the Florida cities of Tampa (64 percent increase) and Miami (53 percent increase).

The 10 metro areas with increases were all on the East Coast or in the Midwest, while most of the metro areas with year-over-year decreases in foreclosure activity were in the West, led by Seattle (59 percent decrease) and Phoenix (43 percent decrease).

The metro areas with the highest foreclosure rates among the 20 largest were Riverside-San Bernardino in California (one in 166 housing units), Atlanta (one in 244), Phoenix (one in 259), Miami (one in 264) and Chicago (one in 302).

Meanwhile robosigning has still not stopped. Matt Stoller at naked capitalism found according to the HUD Inspector General Report Well Fargo is still using it:

At the time of our review, affidavits continued to be processed by these same signers, who may not have been qualified, and these signers may not have adequately verified certain figures because they accessed a computer screen of data showing a compilation of figures instead of verifying the data against the information through review of the books and records kept in the regular course of business by the institution.

Stollers reaction deserves repeating:

I’m sorry, but WHAT THE $&*@!?!?  I’m so glad Eric Holder has cut a deal with Al Capone while Capone is still on a shooting spree.  And note, this isn’t just robosigning, this is potentially overcharging homeowners with junk fees and just generally not verifying accurate data on who owes what to whom.  There really is no lesson here except “crime pays”.

And they are still stealing homes.

Along with the Foreclosure Settlement documents it was agreed that the Housing and Urban Development Inspector General report was also released. The New York Times review of the report noted that, contrary to the denial by the banks, top bank managers were responsible for the criminal conduct:

   Managers at major banks ignored widespread errors in the foreclosure process, in some cases instructing employees to adopt make-believe titles and speed documents through the system despite internal objections, according to a wide-ranging review by federal investigators.

   The banks have largely focused the blame for mistakes on low-level employees, attributing many of the problems to the surge in the volume of foreclosures after the housing market collapsed and the economy weakened in 2008.

   But the report concludes that managers were aware of the problems and did nothing to correct them. The shortcuts were directed by managers in some cases, according to the report, which is by the inspector general of the Department of Housing and Urban Development […]

   “I believe the reports we just released will leave the reader asking one question – how could so many people have participated in this misconduct?” David Montoya, the inspector general of the housing department, said in a statement. “The answer – simple greed.”

Ben Hallman at The Huffington Post observed that the report fell short because of stonewalling by the banks lawyers who blocked interviews with but a handful of employees:

Though the report describes a pattern of misconduct that appears widespread, it fails to quantify the damage to homeowners or, ultimately, how many home loans were affected. It also clearly reflects the frustration that investigators felt in conducting the review. Even as negotiators for the banks were fighting to win the best possible deal, their lawyers were stonewalling other government investigators trying to ascertain the scope of the “robo-signing” abuses.

Wells Fargo provided a list of 14 affidavit signers and notaries — but then stalled while the bank’s own attorneys interviewed them first. The bank then tried to restrict access to just five of those employees. The reason? “Wells Fargo told us we could not interview the others because they had reported questionable affidavit signing or notarizing practices when it interviewed them,” the report says. [..]

Bank of America only permitted its employees to be interviewed after the Department of Justice intervened and compelled the testimony through a civil investigation demand. Even so, the review was hindered, the report says.  [..]

The investigation into Citigroup’s mortgage division was “significantly hindered” by the bank’s lack of records. Citigroup simply did not have a mechanism for tracking how many foreclosure documents were signed.

Both JPMorgan Chase and Ally Financial refused to provide access to some employees or documents or otherwise impeded the investigation, according to the report.

Hallman also noted some of what was uncovered by investigators:

Wells Fargo employees testified that they signed up to 600 documents a day without attempting to verify whether any of the information was correct. [..] The bank also relied on low-paid, unskilled workers to do the reviews: a former pizza restaurant worker, department store cashier, and a daycare worker, to name a few.

A vice president at Bank of America testified that she only checked foreclosure documents for formatting and spelling errors. Employees in India supposedly verified judgment figures in foreclosure documents, but none of the U.S. employees interviewed by the inspector general could explain how that process was supposed to work. One former employee described signing 12 to 18 inch stacks of documents without review.

Employees at Wells Fargo and Bank of America testified that they complained about the pace and lack of care given to reviews, but instead of relief, were told to sign even faster. One Bank of America notary said his target was set at 75 to 80 documents an hour, and he was evaluated on whether he met that target. One notary even notarized her own signature on a few documents.

Abuses at the other banks — JPMorgan Chase, Citigroup and Ally Financial — appear just as pervasive. Citi, for example, routinely hired law firms that “robo-signed” documents. An exhibit included with the report shows eight different versions of one attorney’s signature — all apparently signed by different people.

In signing off on this 49 state agreement the banks did not have to admit to any wrongdoing despite the damning evidence of fraud that was directed by top management. No other sanctions beyond a few billion dollars and certainly no criminal prosecutions. If I were Bernie Madoff, I’d be really pissed.

The Foreclosure Fraud Settlement documents were filed in federal court and released to the public. There is a lot to wade through but the intrepid David Dayen at FDL News Desk breaks them down in a series of four articles that highlight just how easy these banks are getting off and what they are getting away with. Some of it will really make your blood boil:

Foreclosure Fraud Settlement Docs (I): Ally’s Side Deal

What accounts for this? Probably this little nugget buried in a Reuters article on the settlement:

  Some banks negotiated separate requirements.

   Ally Financial, for example, negotiated a steep discount on the fine part of its settlement, based on an inability to pay it, according to people familiar with the matter.

   It was expected to pay some $250 million, but the Justice Department cut it to around $110 million, these people said.

   In exchange, it committed to solicit all borrowers in its own loan portfolios and to offer to cut principal for delinquent borrowers down to 105 percent of the home’s value. It also offered to refinance underwater borrowers who are current on their payments.

Gee, I didn’t know that federal and state civil penalties had a “pay what you can” quality to them. [..]

About those state funds: there is nothing to stop state AGs from using them in any way they see fit. Note the weasel words in this language (which I’ve bolded):

Each State Attorney General shall designate the uses of the funds set forth in the attached Exhibit B-1. To the extent practicable, such funds shall be used for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts or practices and to compensate the States for costs resulting from the alleged unlawful conduct of the Defendants.

   No more than ten percent of the aggregate amount paid to the State Parties under this paragraph 1(b) may be designated as a civil penalty, fine, or similar payment. The remainder of the payments is intended to remediate the harms to the States and their communities resulting from the alleged unlawful conduct of the Defendant and to facilitate the implementation of the Borrower Payment Fund and consumer relief.

You have that strong word “shall” competing with “to the extent practicable.” And indeed, several states have already made clear that they will be diverting much of the settlement into their state budgets. More make it clear in the settlement docs, more on that later.

Foreclosure Fraud Settlement Docs (II): Giving Homes to Charity as a Penalty

Another part of the document explains that any modification under any government housing program can qualify under the settlement credits:

   Eligible modifications include any modification that is made on or after Servicer’s Start Date, including:

   i. Write-offs made to allow for refinancing under the FHA Short Refinance Program;

   ii. Modifications under the Making Home Affordable Program (including the Home Affordable Modification Program (“HAMP”) Tier 1 or Tier 2) or the Housing Finance Agency Hardest Hit Fund (“HFA Hardest Hit Fund”) (or any other federal program) where principal is forgiven, except to the extent that state or federal funds paid to Servicer in its capacity as an investor are the source of a Servicer’s credit claim.

   iii. Modifications under other proprietary or other government modification programs, provided that such modifications meet the guidelines set forth herein.

Presumably those programs weren’t all going to shut down. So banks doing what they’ve been doing, meeting the minimum requirements of those other programs, will help them complete the settlement requirements.

Foreclosure Fraud Settlement Docs (III): “Internal Review Group”

Page E-3 details the “internal review group”:

   Servicer will designate an internal quality control group that is independent from the line of business whose performance is being measured (the “Internal Review Group”) to perform compliance reviews each calendar quarter (“Quarter”) in accordance with the terms and conditions of the Work Plan (the “Compliance Reviews”) and satisfaction of the Consumer Relief Requirements after the (A) end of each calendar year (and, in the discretion of the Servicer, any Quarter) and (B) earlier of the Servicer assertion that it has satisfied its obligations thereunder and the third anniversary of the Start Date (the “Satisfaction Review”). For the purposes of this provision, a group that is independent from the line of business shall be one that does not perform operational work on mortgage servicing, and ultimately reports to a Chief Risk Officer, Chief Audit Executive, Chief Compliance Officer, or another employee or manager who has no direct operational responsibility for mortgage servicing.

So the bank can take their own employees out of another part of the bank and have them conduct a quarterly review, which then gets passed to the monitors and becomes the initial basis for enforcement. Even if you believe these will be “independent” internal reviews, we’ve seen with the OCC foreclosure reviews that those independent reviewers paid for and hired by the banks typically write bank-friendly reports. In fact, a later note indicates that “The Internal Review Group may include non-employee consultants or contractors working at Servicer’s direction.”

Foreclosure Fraud Settlement Docs (IV): Association of Mortgage Investors Planning to Challenge in Court

At any rate, if there’s one group who does not agree with HUD that investors won’t end up footing the bill for a substantial portion of the settlement, it’s… the Association of Mortgage Investors. The trade group representing investors in mortgage-backed securities fully believes they will be on the hook for losses, and so they will challenge the settlement in federal court.

   As the federal court reviews the final settlement, AMI asks that the following changes be made on behalf of all investors:

   Transparency. The NPV (net present value) model incorporated into the settlement must consider all of a borrower’s debts, be national in scope, transparent, and publicly disclosed; the NPV model must be developed by an independent third-party. An incorrect NPV model likely will lead to further re-defaults and further harm distressed homeowners.

   Monetary Cap to Protect Public Institutions. As intended, the settlement causes financial loss to the abusers (the bank servicers and their affiliates). Unfortunately, the settlement is expected to also draw billions of dollars from those not a party to the settlement, including public institutions, unions, and individual investors. It places first and second lien priority in conflict with its original construct thereby increasing future homeowner mortgage credit costs. It is unfair to settle claims against the robosigners with other people’s funds. While we request that it not be done, at a minimum we request that a meaningful cap be placed on the dollar amount of the settlement satisfied by innocent parties. Again, restitution should come from those who are settling these claims, and

   Public Reporting. We ask that the settlement Administrator be required to make reports public and available on a monthly basis, reporting progress on clearly defined benchmarks and detailing on both a dollar and percentage basis whether the mortgages modified are owned by the mortgage servicers or the general public.

Over at naked capitalism, Yves Smith points out The Legal Lie at the Heart of the $8.5 Billion Bank of America and Federal/State Mortgage Settlements

HUD Secretary Donovan, the propagandist in chief for the Federal/state mortgage pact, has claimed he has investor approval to do the mortgage modifications that are a significant portion of the value of the settlement. We’ll eventually see what is actually in the settlement, but the early PR was that “no less than $10 billion” of the $25 billion headline total was to come from principal reductions. Modifications of mortgages not owned by banks, meaning in securitized trusts, are counted only 50% and before Donovan realized he was committing a faux pas, he said he expected 85% of the mods to be from securitizations, so that means $17 billion. [..]

But what about this investor approval that Donovan says he has? He has told both journalists and mortgage investors directly that the bulk of the mods will come from Countrywide deals and he has consent via the $8.5 billion Bank of America/Bank of New York settlement. Huh? First, it seems more that a bit cheeky to rely on a major piece of a program via a deal that has not yet gone through (the Bank of America settlement was removed to Federal court and has now been sent back to state court, and there will be discovery in the state court process, so approval is not imminent).

But second and more important, investors approved nothing. Bank of New York is trying to act well outside its authority as trustee for the 530 Countrywide trusts in the settlement. It’s tantamount to having a friend that you gave a medical power of attorney claim that it gave him the authority to sell your car and write checks on your account.

The terms of Countrywide PSAs vary, but all appear to restrict mods. The prohibitions varied by credit quality of the deal. Alt-A and early vintage (2004 and earlier) deals often barred mods completely; subprime and later vintage deals generally allowed for a higher limit on mods, with 5% the top amount across these deals. The idea was that some mods were expected in the dreckier mortgage pools. Nevertheless, all of them, as well as the few that had no caps, also required Bank of America to buy the modified loans back at par. That is something the battered Charlotte bank would be very keen to avoid doing.

This comment by Synoia sums it all up pretty nicely:

The Banks won’t be held accountable

The Banks won’t fix their past behavior

The Banks won’t change their behavior

The Banks won’t stop bribing our politicians

The Banks won’t stop gouging consumers

The Banks won’t tell the truth about any facet of their business

The Banks won’t stop taking enormous risks with other people’s money

The Banks won’t stop paying their worthless executives too much money

Need one continue?

And this settlement won’t change a thing.

Thank you, President Obama

In October of 2010, New York State’s Chief Judge Jonathan Lippman became deeply concerned about the big banks lax handling of mortgage documents and several lenders and servicers who had hired staff who did not properly review files or submitted false statements to evict delinquent borrowers. Consequently to curb the illegal practice and preserve the integrity of the court foreclosure laws, Judge Lippman ordered that lawyers handling the foreclosures be held accountable for the paperwork:

Chief Judge Lippman said, “We cannot allow the courts in New York State to stand by idly and be party to what we now know is a deeply flawed process, especially when that process involves basic human needs – such as a family home – during this period of economic crisis. This new filing requirement will play a vital role in ensuring that the documents judges rely on will be thoroughly examined, accurate, and error-free before any judge is asked to take the drastic step of foreclosure.”

Under the new requirement, plaintiff’s counsel in foreclosure matters must submit the affirmation at one of several stages. In new cases, the affirmation must accompany the Request for Judicial Intervention. In pending cases, the affirmation must be submitted with either the proposed order of reference or the proposed judgment of foreclosure. In cases where a foreclosure judgment has been entered but the property has not yet been sold at auction, the affirmation must be submitted to the court referee, and a copy filed with the court, five business days before the scheduled auction. Counsel is also obligated to file an amended version of the affidavit if new facts emerge after the initial filing.

Since the announcement of the Foreclosure Fraud “Settlement”, Judge Lippman has once again ordered a solution that may well reduce the number of fraudulent foreclosures, at least in New York State, by setting up a series special courts to handle the cases:

The new program is to start in Queens this spring and then expand around the city and to nearby suburbs, court officials said. The officials said that under the program, judges would take over the running of some settlement conferences from court attorneys, who lack the power to impose punishments. State law requires that bank representatives “be fully authorized to dispose of the case,” but enforcement of that requirement has been sporadic.

The officials said the plan would include court supervision of the collection of required documents to try to avoid delays and would seek to shorten the time some foreclosure cases linger in the courts to several months from up to two years.

Courts would also work to assure that homeowners who cannot afford lawyers are represented, though some lawyers who handle such cases questioned whether that goal was realistic.

There are still some hurdles, such as immediate funding for lawyers to represent homeowners until the funds from the settlement are release. A spokesperson for Gov. Andrew Cuomo said “negotiations with the Legislature were likely to find money for the legal agencies in the meantime.”

It good to see that judiciary is stepping in when prosecutors drop the ball, thanks to commonsense jurist like Jonathan Lippman.

Both Yves Smith at naked capitalism and David Dayen at FDL New Desk highlighted this part of an article penned by Glenn Thrush at Politico:

   Schneiderman, whose Lower Manhattan office overlooks Zuccotti Park where the Occupy movement began, felt like he was being strong-armed by Donovan and wasn’t shy about sharing his dissatisfaction. In late August, The New York Times reported that Schneiderman had come “under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices.”

   That did it for [HUD Secretary Shuan] Donovan, according to people close to him. Worried that the settlement was in danger of falling apart, he woke up at 5 a.m. the next morning and sketched the outline of what would emerge as the final compromise plan.

   A bit later he called Schneiderman, who immediately began re-arguing his case for holding banks accountable.

   Donovan stopped him: “Look, hear me out, I want to get past this,” he said, and proposed creating a special panel to probe wrongdoing by banks, to be co-chaired by Schneiderman. He also promised to limit the scope of any releases granted to the banks and rewrote his draft.

   Miller, who clashed with Schneiderman over the releases, said Donovan didn’t make many changes but was artful enough to sell it as a compromise to the New York attorney general, who wanted to seal the deal.

   “Essentially what Shaun did was let Eric take credit for shaping the release,” Miller said, “credit that wasn’t factually correct.”

Dayen points out, quite accurately, that with Schneiderman on board with the settlement deal the opposition to it fell apart:

Whether you believe in Eric Schneiderman’s ability to deliver a legitimate investigation on mortgage securitization fraud or not, you have to admit that the united front on opposition to a settlement on foreclosure fraud collapsed the moment that he agreed to helm that federal investigatory task force. He immediately separated “pre-bubble” and “post-bubble” conduct, allowing for a settlement on the latter while he joined the investigation on the former. And eventually, every other AG on the Democratic side fell in line, as they didn’t have New York as an anchor to stay out of a settlement.

That’s just what happened. And now we have HUD Secretary Shaun Donovan and Iowa AG Tom Miller, head of the executive committee that settled on foreclosure fraud, clowning Schneiderman on the record, saying that he got next to nothing in exchange for his holdout.

As Yves Smith notes “you can draw some damning conclusions conclusions about New York attorney general Eric Schneiderman’s role.”

Unless Schneiderman has been promised something bigger by Obama, US AG, he should walk away from this farce and, if he still can, withdraw his support of this “bait and switch” settlement that hasn’t been settled.

But I have a feeling, he’s accepted a bigger bribe and signing onto this bank bailout will assure his easy confirmation. (Just speculating that Obama will get a 2nd term.)

Everything old is new again and the people that should be paying the price for the housing crash are again going to profit from the further pain of the 11 million people left behind by the Foreclosure Fraud Settlement.

Some Wall Street investors made money as the mortgage market boomed; others profited when it fell apart.

Having reaped big gains during both of those turns, Greg Lippmann, a former star trader at Deutsche Bank, is now catching the next upswing: buying the same securities built from mortgages that he bet against before the financial crisis erupted.

Mr. Lippmann is joined by other big-money investors – mutual funds like Fidelity as well as hedge funds – in riding a wave of interest in the same complex loan pools that nearly washed away the financial system.

The attraction is the price. Some mortgage bonds are so cheap that even in the worst forecasts, with home prices falling as much as 10 percent and foreclosures rising, investors say they can still make money. [..]

Yet the tide could turn again and wipe out investors. Chief among the risks is Europe: the Continent’s banks still hold a significant amount of United States mortgage securities, and if they are forced to sell assets, it could wreak havoc on the market.

Washington is a question mark, too. If banks have to pay for loans they issued under dubious circumstances, it would be a home run for investors, who could receive full payment for a mortgage in a security they bought at a discount. But if borrowers whose houses are worth less than their mortgages are able to reduce their principals on a large scale, bond investors could suffer because the securities would be worth even less than they paid. [..]

As for Mr. Lippmann, his reputation has made it both easier and more difficult to get commitments from investors. Some are impressed by his well-publicized bet against the mortgage market; others are turned off by his high profile in an industry known for secrecy and discretion.

LibreMax, made up of several members of Mr. Lippmann’s team from Deutsche Bank, has raised more than $1 billion in a little over a year. His performance has been relatively strong during a period of market turmoil – up 2 percent last year and a little more than 6 percent since launching.

What Yves Smith said:

The Times is quoting Greg Lippmann, the patient zero of subprime? If the SEC investigation of Deutsche Bank were remotely serious, Lippmann would be in serious trouble. What Greg Zuckerman and Michael Lewis have written about them in their books on subprime shorts alone is grist for a good civil suit. And even worse, the headline implies that there is a market for newly issued non-governemnt guaranteed bonds (wrong, that’s dead) when this is about speculation in vintage subprime.

The funniest bit is that the Times is acting as if the fact that Lippmann is talking up the market is a tip of sorts. As one of my buddies pointed out long ago, what you worry about when an investor talks up his book is not that he is trying to get more people in to raise the price, but he is trying to get more people in so he can complete his exit.

History may be repeating itself, again